Good morning, and welcome to Procter and Gamble's Quarter End Conference Call. Today's event is being recorded for replay. This discussion will include a number of forward looking statements. If you will refer to P&G's most recent 10 ks, 10 Q and 8 ks reports, you will see a discussion of factors that could cause the company's actual results to differ materially from these projections. As required by Regulation G, Procter and Gamble needs to make you aware that during the discussion, the company will make a number of references to non GAAP and other financial measures.
Procter and Gamble believes these measures provide investors with useful perspective on underlying business trends and has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non GAAP financial measures. Now I will turn the call over to P&G's Chairman of the Board, President and Chief Executive Officer, David Taylor.
Good morning, everyone, and thank you for joining us. Last evening, we announced that I will retire as CEO on November 1st And John Moeller was elected as the incoming CEO. I will remain as Executive Chair of the Board. We also announced that Shailesh Jhajurakar These moves have been thoughtfully planned And provide P and G with highly capable and experienced leadership going forward. I truly have full confidence and strongly support these changes.
John, you know well, he has a distinguished track record throughout his 33 year career with P&G, including more than 12 years as CFO. More recently, John added responsibility as Vice Chairman and then Chief Operating Officer with P and L responsibility and ownership for our enterprise markets. In my nearly 6 years as CEO, I've had the benefit of partnering with John and an outstanding global leadership team to integrate a comprehensive set of strategies to guide our choices and priorities. Now if you go back, in 2012, John led the initial work to make productivity an an integral part of P&G's business. Our team doubled down on this strategy when we announced our 2nd 5 year $10,000,000,000 cost savings program in 2017.
Today, productivity is built into our operating model and is an ongoing part of our strategy in every We worked together for several years to focus the company's portfolio on faster growing more profitable daily use categories Where products solve problems and performance drives consumer brand choice. The team largely completed this work with the divestiture of several fashion driven beauty categories in 2016. This strategy continues to guide our disciplined approach to managing our category And brand portfolio. At the CAGNY Conference in 2016, we first discussed the test we were doing on a new approach to our organization design. We refined and formalized the plans and announced the new focused market and enterprise market design at our November 2018 Analyst Day.
Our objective was to create a more engaged, agile and accountable organization, which is exactly what we've done. In April 2017, we first discussed our work to If there were any doubts about the importance of consistently delivering irresistible superiority, Our results over the last few years should have put those to bed. And finally, in 2018, we first talked about the need to lead disruption in our highly dynamic and competitive industry. We continue to drive disruption in innovation, brand building, Digitization, supply chain transformation and with our citizenship and ESG efforts. Over several years through many challenges, Our organization responded brilliantly as we integrated each element of the strategy, building momentum that is evident in our results in the past 3 fiscal years.
The team fully embraced the idea that we must be willing to change anything and everything needed to win. The only things we will not change are our purpose, Values and principles and our commitment to winning. This has been especially evident during the continuing COVID crisis Where the organization has demonstrated tremendous agility to meet the needs of consumers, while ensuring the safety of our employees And supporting communities around the world to deal with the impacts of this crisis. Do all of it, delivering results that should delight owners And do it in a way that makes us proud to be P&G'ers. Put simply, our strategies are working, our team is outstanding, I could not be more confident in the next generation of leadership that will take the reins of P and G later this year.
Now I'll turn it over to Andre Shelton, Chief Financial Officer, To lead us through the fiscal year 2021 Q4 and year end earnings announcement. Andre?
Thank you, David. Good morning, everyone. Joining David and me on the call today are John Moller, Vice Chairman, Chief Operating Officer and John Chevalier, Senior Vice President, Investor Relations. I'll start with an overview of company results for fiscal 2021 Q4, and David will add perspective on our immediate priorities and strategic focus areas. We'll close with guidance for fiscal 'twenty two and then take your questions.
Fiscal 2021 was another very strong year. Our focus on superiority and strong investment in the business, funded with strong productivity improvements and cost savings, drove market growth and in turn strong sales, Share, earnings and cash results leading to balanced growth and value creation. Organic sales for the fiscal year grew more than 6%, Up more than 12% on a 2 year stack. Growth was broad based across business units with each of our 10 product categories growing or holding organic sales. Home care up high teens, oral care up double digits, skin and personal care up high single digits, Grooming, Fabric Care, Feminine Care, Hair Care and Personal Healthcare Organic Sales, each up mid single digits.
Family Care grew low singles, Baby Care was in line with prior year. We delivered strong results in our 2 largest and most Profitable markets annualizing strong base periods. Organic sales were up 8% in the U. S. And 12% in Greater China for the fiscal year.
Focus markets grew 7% for the year. Enterprise markets were up 5% despite significant market growth impacts from the pandemic. E commerce sales were up 35% for the year at over $10,000,000,000 in sales representing 14% of company total. Global aggregate market share increased 50 basis points, 33 of our top 50 category country combinations Held or grew share for the fiscal year. All outlet value share in the U.
S. Improved through the year, Growing from 33% over the past 12 months to 33.5% for the past 6 months to 34% over the past quarter, One of the highest absolute value shares in the last 20 years. Consumers are increasingly choosing P and G Brands. We translated the strong top line growth into strong earnings and cash results. Core earnings per share grew 11% for the year.
Currency neutral core EPS was also up 11%. Within this, core gross margin expanded 20 basis points, up 60 basis points excluding currency impacts. Core operating margin grew 80 basis points, up 130 points excluding currency impacts. Productivity improvements helped operating margin by 2.50 basis points, enabling strong reinvestment in marketing programs. Advertising was at 10.8 percent of sales, an increase of more than 40 basis points.
Adjusted free cash flow productivity was 107%. We increased our dividend by 10% and returned $19,000,000,000 of value to share owners, dollars 8,000,000,000 in dividends and $11,000,000,000 in share repurchase. Moving on to the April June quarter, organic sales grew 4%, volume pricing and mix Each contributed more than one point to top line growth. Growth rates by market reflected the volatility in shipments in the base period. Organic sales were down 1% in the U.
S. However, this is still 18% growth on a 2 year stack. Recall that in the April June Last year, organic sales were up 19% in the U. S, 13 points above tracked channel sales as we work to restock depleted trade inventories. Organic sales in Greater China were up 5%, also comping a strong base period.
On a 2 year stack, Greater China up 19%. Focus markets were up 2%, Enterprise markets were up 14% in the quarter. Strong market share trends with aggregate global value share up 70 basis points. All out the share in the U. S.
Increased 260 basis points for the quarter to 34.1%. On the bottom line, core earnings per share were $1.13 down 3% versus prior year, down 4% on a currency neutral basis, Mainly due to gross margin pressure from higher input costs as we had anticipated. Core gross margin decreased 260 basis points, Currency neutral core gross margin also down 260 points. This includes 220 basis points impact from higher commodity and freight costs, Nearly $400,000,000 in just this quarter. We also saw a sharp headwind from mix of 2 10 basis points, mainly geographic mix impacts.
Recall that in our Q4 last year, the U. S. And China accounted for more than 100% of organic sales growth. In this year's Q4, Enterprise Markets lead the growth. Core operating margin decreased 230 basis Points currency neutral core operating margin declined 210 basis points.
Productivity improvements were 3 20 basis point help to the quarter. Adjusted free cash flow in the quarter was 117%. In summary, we exceeded each of our going in targets for the year, organic sales growth, core EPS growth, free cash flow productivity and cash return to shareholders. Our team has operated with excellent discipline in a challenging and volatile environment. And with that, I'll pass it back to David.
Thanks, Andre.
As I said at the outset, our team has done some outstanding work over the last 18 months We We said we would double down to serve consumers and that's exactly what our team has done. As we continue to manage the crisis, we'll remain focused On the three priorities that have been guiding our near term actions and choices. 1st is ensuring the health and safety of our P and G colleagues around the world. 2nd, maximizing the availability of our products to help people and their families with their cleaning, health and hygiene needs and third priority, Supporting the communities, relief agencies and people who are on the front lines of this global pandemic. The strategic choices I outlined earlier are the foundation for balanced Top and bottom line growth and long term value creation.
A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance In these performance driven categories, we've raised the bar in all aspects of superiority product, Package, brand communication, retail execution and value. Superior offerings delivered with superior execution drive market growth. I'd like to share just a few examples. First, in our oral care business, superior offerings are driving market growth across forms. Last summer, we launched Oral B.
Io PowerBrush, which offers an irresistible consumer brushing experience. The value of this superior performance is evident to the consumers Even with the premium price, P and G's global value share in the brush segment is up more than 2.5 points over the past year and the U. S. PowerBrush category is up nearly 14 points since the innovation launched with IO contributing more than half of the category growth. We recently launched the next breakthrough in teeth whitening.
Crest Whitening emulsions create a micro thin layer of concentrated peroxide droplets, Enabling consumers to move beyond occasion based whitening to a product that can be used up to 4 times per day with no rinsing or brushing needed. This innovation is a leading contributor to our more than 20% organic sales growth of our tooth whitening business in fiscal 2021 And it's driving 2 thirds of U. S. Whitening category growth. In personal healthcare, NyQuil and DayQuil Honey launched last summer offering a great tasting formula while also delivering powerful relief.
NyQuil Honey is the number one new item in the U. S. Respiratory market Our VIX share is up 90 basis points over the past 12 months. Despite the soft market due to the very weak coughcold season, When consumers are shopping in the category, they're increasingly choosing Vicks. For some consumers, the environmental aspects of our product offering Taking on increased importance in their assessment of superiority.
We are offering superior performing products or products that are more sustainable And educating consumers on the benefits of those products with superior brand communication. I'll switch to Fabric Care. Here Tide and Aerial are innovating to extend their superior cleaning performance advantages while encouraging consumers to reduce their carbon footprint. Ariel's new campaign, Every Degree Makes a Difference, advocates lower washing temperatures. Up to 60% of laundry's carbon footprint comes from heating the water in the washing machine.
Lowering the wash temperature is the single most We can do to reduce the environmental impact of laundry. To achieve our goals, we continue to innovate to ensure superior fabric cleaning performance in cold water, And we utilize superior communication to educate the consumer on the benefits. This innovation has helped contribute to Global Fabric Care's And our European Safe Care business, we're driving superiority across all 5 vectors And improving sustainability along the way, we're moving to a plastic free packaging on eraser systems, simplifying our lineup, Improving on shelf fundamentals and improving margin for our retail partners. This innovation contributed to mid single digit organic sales growth And our European grooming business in fiscal 2021 with market share up one point. Good business results and good for the environment.
This packaging innovation will save the equivalent of 85,000,000 water bottles per year when it's fully launched around the world. More important than one example is the common theme of superior innovation and execution that drives market growth. Leading category growth builds business for our retail partners and mathematically builds market share for P&G. We've made investments to strengthen the long term health and competitiveness of our brands and will continue to invest to extend our margin of advantage And quality of execution, improving options for consumers around the world. The strategic need for investment to contribute to strengthen the long term health and competitiveness of our brands, the short term need to manage through the crisis and ongoing need to drive balanced top and bottom line growth, including margin expansion, Underscore the importance of ongoing productivity.
We're driving cost savings and cash productivity in all facets of our business. In cost of goods, we're delivering flexible formulations that can allow us to change between ingredients to lower cost or create supply chain flexibility, While ensuring no impact on consumer preference for our brands, we're optimizing plastic bottle designs to reduce the amount of plastics we use while also lowering costs. We're improving the efficiency and effectiveness of our advertising investments, bringing some media planning work in house to achieve greater We're also enabling us to place ads with greater precision based on more granular analytics to reduce waste and increase effectiveness. No area of cost is left untouched. We've given more authority and accountability to the business units to decide how to balance the need for more resources in some areas The business with the opportunities for savings in other areas.
They need to make the choices that are best for their business as they work to deliver balanced top and bottom line growth. Our success in our highly competitive industry also requires agility that comes with the mindset of constructive disruption. A willingness to change, adapt and create new trends and technologies that will shape our industry for the future. In the current environment, That agility and constructive disruption mindset are even more important. Our organizational structure yields a more empowered, Agile and accountable organization with little overlap or redundancy, flowing to meet new demands, seamlessly supporting each other To deliver against our priorities around the world, these strategic choices on portfolio superiority, productivity and constructive disruption And organizational structure and culture are not independent strategies.
They reinforce and build on each other. When executed well, they grow markets, Which in turn grows share, sales and profit. These strategies were delivering strong results before the crisis, have served us well during the crisis, And they will serve us well on the other end of this crisis. We're confident they remain the right strategic choices as we move through and beyond the pandemic. We delivered strong results in fiscal 'twenty one in a very challenging environment.
While we're pleased with these results and the overall strength of our business, The external environment continues to be volatile and difficult to predict, and our eyes are wide open to the many challenges we face. We compete in product categories against highly capable, multinational and local competitors. Raw material and transport freight costs have risen sharply. Increased social unrest and economic distress in many parts of the world are putting pressure on local GDP growth, and the pandemic continues to create risk With these challenges, there are also opportunities as we emerge from the pandemic. The relevance of our categories in consumers' lives likely remains elevated.
We will serve what will likely become a forever altered cleaning, health and focus for consumers who use our products daily or multiple times each day. There may be a continued increased focus on home, more time at home, More meals at home with related consumption impacts. The importance of noticeably superior performance potentially grows. There is potential for increased preference for established reputable brands that solve newly framed problems better than alternatives, potentially less Potential for a lasting shift to e commerce, both e tailers and omni channel. Our experience to date makes believe we are generally well positioned in this environment.
We're discovering lower cost ways of working with fewer resources. Today's necessity giving rise to the productivity inventions of tomorrow. New digital tools are being brought to the forefront, Providing another productivity driver on the factory floor, in our labs and in our office environment. Our business exhibited strong momentum well before the crisis. We strengthened our position further during the crisis and we believe P and G is well positioned to serve the heightened needs and new behaviors of consumers And our retail and distributor partners post crisis.
We have the right strategies. We have the right portfolio. We have the right organization structure. We have a team of 100,000 employees focused on executing to delight consumers, win with customers and deliver balanced growth and value creation. With that, I'll hand it back to Andre to outline our guidance for fiscal 2022.
Andre?
As David said, We will undoubtedly experience more volatility as we move through the crisis. Quarterly results will be heavily influenced by top line volatility embedded in base period results, Along with the realities of current year cost pressures and continued effects of the global pandemic. Input costs have risen sharply. Current spot prices for materials such as resins, chemicals and other ingredients are up anywhere from 30% to 200% versus April 2020. Most of the material cost increases occurred in this calendar year and will disproportionately affect the first of fiscal 2022.
Based on current spot prices, we estimate a $1,800,000,000 after tax commodity cost And the demand for drivers and trucks and diesel fuel prices are up 35% so far in the calendar. We currently expect freight and transportation costs to be an incremental $100,000,000 after tax headwind in fiscal 'twenty 2. We will offset a portion of these higher costs with price increases, but there is a lag between the time when costs begin to rise And when pricing is implemented to provide an offset. As discussed last quarter, our baby care, feminine care End adult incontinence businesses have announced increases in the U. S.
That will go into effect in mid September. Earlier this year, we executed a significant product upgrade on our Japan liquid aerial detergent coupled with a 35% price increase. In U. S. Fabric Care, we recently announced the list price increase on Tide Simply, Chia and Era Liquid Detergents effective in September.
In U. S. Home care, we've announced double digit price increases across all product forms of the Swiffer brand. These increases are effective mid September. We have announced price increases in many Central Eastern European Markets to offset a portion of recent currency impacts.
In Latin America, we've taken a cumulative high single digit price increase across our business over the past 12 months. We are analyzing input costs and foreign exchange rate impacts in other categories and markets, and we are assessing the need for additional pricing moves. When opportunities allow, we will close couple price increases with new product innovations, adding value for consumers along the way. We believe this is a temporary bottom line rough patch to grow through, not a reason to reduce investment in the business And not a reason to redesign a strategy that has been working well before and during the COVID crisis. Our guidance ranges for fiscal 'twenty two incorporate these dynamics.
We expect organic sales growth in the range of 2% to 4%. The high end of this range assumes global markets continue growing at about 3% or so, and P and G continues to grow above market level. The low end of this range assumes deceleration in global markets to 2% or lower with P and G growth at or above underlying markets. This range also reflects the strong organic sales growth more than 8% that we delivered in the first half of fiscal 'twenty one. Given this base period dynamic, we expect organic sales growth We are confident that we will be able to deliver on the back half of fiscal 'twenty two versus the front half.
On the bottom line, we expect core earnings per share growth in the range of 3% to 6 This outlook includes headwinds of approximately $1,900,000,000 from after tax from commodity costs and freight, As I mentioned earlier, with a modest offset of around $100,000,000 after tax from foreign exchange rate benefits. The combined impact of materials, freight and FX is approximately a $0.70 per share headwind to EPS or a 12% point headwind to EPS growth in fiscal 'twenty two. Considering the cost challenge is weighted heavily towards the front half of the year, Earnings growth is expected to be much stronger in the back half of fiscal 'twenty two. We are targeting adjusted free cash productivity of 90% starting the year. We expect to pay over $8,000,000,000 in dividends And to repurchase between $7,000,000,000 $9,000,000,000 of common stock, combined a plan to return $15,000,000,000 to $17,000,000,000 of cash Shareowners this fiscal year.
This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, Significant currency weakness, commodity cost increases, additional geopolitical disruption, major production stoppages All store closures are not anticipated within this guidance range. Now back to David for closing comments.
Thanks, Andre. Our business exhibited strong momentum well before the COVID crisis. We strengthened our position further during the crisis, and we believe P and G is well positioned to grow through and beyond crisis. We will manage what is likely to be a volatile near term consistent with the strategy we've outlined many times and against The immediate priorities of ensuring employee health and safety, maximizing availability of our products to serve cleaning, health and hygiene needs and helping Society overcome the COVID challenges that still exist in many parts of the world. We'll continue to step forward toward our opportunities, not back.
We remain committed to our strategies and fully invested in our business. We remain committed to driving productivity improvements to fund investment Now we'd be happy to take your questions.
Your first question comes from the line of Lauren Lieberman with Barclays.
Over the last several years and sort of thought process on the amount of spending necessary kind of going forward. So I And also relevant to the succession plans announced last night. So you've delivered $2,000,000,000 in media spending efficiencies over 5 years, Right. And then marketing reinvestment this quarter was way stronger than we had expected. I think it was up 170 basis points on top of a 270 basis point investment last year.
So one, how much is really left to go for on that efficiency side of the equation? 2, as you think about incremental reinvestment, there's so much funding in the base from the past 2 years. How are you thinking about that for fiscal 'twenty 2? And then finally, I've been asked a few times over e mail just CFO becoming a CEO, should the marketers be worried? I'd love to hear everyone's perspective.
Thank you.
Okay. Let me start with the last part first and then Andre can hit some of That's the marketing spending numbers, but first, no, the marketer should not be worried. The marketer should feel wonderful and that we've got a senior leadership It is maintaining a high degree of consistency and you all know John very, very well. He has supported these investments in media to the extent they grow the market And grow market share and are helping drive awareness and trial of superior products and brands, that's a good thing. It's about creating value, not reducing or increasing one element of cost.
And John has been very engaged with me and the leadership team In these decisions, the other thing about our organization structure, we leave it to the sector CEOs and the enterprise leader To decide how much to invest in their businesses. This is not a decision we make at the headquarters. It's a decision made by each one of the business leaders, and we hold them accountable To create the top and bottom line growth in cash generation for their business. And I think the results for the last 3 years speak for themselves. And so they actually should feel very good as do I that the leadership of the company and the organization structure is working very well.
And I'll give one comment on the marketing spending efficiency, then Andre can add some additional comments. We have increased meaningfully The investment in marketing, but we have also increased the rate of meaningful innovation that grows the market. So one of the key parts As you have to help consumers understand what the product is, how to use it, and then help drive awareness and trial. And these investments have done that. It's evidenced, again, in the top line growth.
You recall very well, if you go back 4 or 5 years ago, our average growth was about 2%. We moved up the past 4 years, past 5 years, we have averaged 4% in the last 3 years, 6%. And we have got the strongest share growth we have seen in many years, Which tells me the combination of the superiority strategy and the brilliant execution by our people is really working and we'll continue to invest Behind both brands that are winning and invest to make sure we get the trial. Andre, any comments on the specific numbers?
Look, I think we've increased our ad spending year over year in fiscal 'twenty one versus 'twenty by 850,000,000. And As David said, superior communication is a core element of our superiority framework, and we've not reached the point of diminishing return on those investments. We also do believe that there is significant Productivity improvement still within the media spend. When you think about shift into digital media, improved targeting capability With 1st party audiences or 3rd party audiences, an ability to Sharpen our focus even on TV audiences with our own data. So there continues to be a significant Leverage in terms of direct media spend efficiencies that we can create to improve quantity of reach and quality of reach.
In the indirect space, we're also striving to continue to improve production costs, agency structures. So you'll see us continue to work in that direction, Mostly to reinvest in superiority and superior communication.
And your next question will come from the line of Steve Powers with Deutsche Bank.
Great. Thanks and good morning and congrats to you both this morning, John and David. It feels like the business is Being passed off was great momentum. So again, congrats to you both. I guess my question, I think it's probably a question for Andre mostly.
Andre, I think you said that China was up 5% in the quarter. I don't know if you provided a U. S. Growth rate in the quarter, but And I'm thinking the question really is that as you said, both those businesses had very difficult comps in the year ago quarter. Those difficult comparisons continue in the first half of 'twenty two.
So I just in terms of the makeup of growth First half, second half, geographically, is there anything to call out there? Do you feel like the U. S. Can stay positive in the first half? Just anything to call out in terms of the context of growth by geography?
Thank you.
Yes, very good. So, U. S. Quarter 4 growth was minus 1%. If you look on a 2 year stack basis, that's 18%.
Last year's quarter 4 was 19% growth, and the strong growth in last year's quarter was mainly driven at About 13 points, I believe, by restocking retailer inventories after strong consumption. So In comparison, minus 1% on a 19% base. The U. S. Consumption, I think, We believe at this point in time, we'll return to normal levels.
Most importantly, we see our shares at record levels in the U. S. Our brands are continuing to strive. We're gaining share across categories. Our retail partnerships are strong, And we have very strong innovation programs hitting in the U.
S. So we remain confident, but I think you're rightfully cautious in terms of base period effects, Especially in the first half. On the China side, we expect the market to continue to grow mid singles. Our mantra is to grow ahead of that. And I would tell you the same thing I told you for the U.
S. We feel good about the strength of our brands. In China, we feel good about our go to market capabilities and we'll continue to invest in innovation and supporting those innovations in the market. Same comment, considering base period is going to be prudent for China and the entire Focus Markets environment.
Your next question comes from the line of Dara Mohsenian with Morgan Stanley.
Hey, guys. So just taking a step back, now that we've got a full quarter in the books where You've cycled a period where COVID was unfortunately with us and the leadership change going forward. I was just hoping you could review maybe some of the more enduring consumer changes that you see post COVID, Again, from a consumer perspective and how you think P and G is positioned relative to those changes. And Regarding the CEO change down the road, any sort of tweaks in strategy here Or areas of just increased emphasis either in that post COVID environment or with the change in leadership? Thanks.
A couple of comments about the consumer changes that we think are enduring and then certainly Andre or John can jump in with some comments as well. We do believe that the health cleaning and the hygiene brands will continue to play an increased role. There's a statistic that I saw a while back that pre pandemic about 5% of people work from home and then post pandemic estimated 20%. I don't know what the number will be, but certainly there's a significant number of people They will be in home more than they were pre pandemic. That bodes well for us.
I believe the strength of our brands and actually the shift toward trusted brands We'll likely last a good while. We've had meaningful increased household penetration on some of our brands as there was a stock up and then people got exposed to the I think that will have a lingering positive impact. So you've got both more people at home, they'll take the U. S. Especially, More occasions at home, you've got a shift toward trusted brands and the role that the health plan and hygiene plays.
We'll anniversary some tough We're having some of the strongest share progress they've had in every one of those categories in absolute share is higher than they were Pre pandemic, with the exception of Family Care that had a supply issue for the first part, just couldn't supply because of the increased demand and they're growing share in the Q4. So we've got good momentum. Consumers continue to vote for trusted superior performing brands And I think those consumer habit changes will likely last.
What I'd say maybe, I think our portfolio positions us well. There were many categories that did not benefit from COVID tailwinds in our portfolio when you think about adult incontinence, Deodorants, shave care, some of the tooth whitening that we see coming back. Personal healthcare had a Very low coughcold season with everyone wearing masks and our professional business certainly that serves hotels and restaurants did not do well. So as mobility increases, those businesses pick up, and we see that as a positive going forward, obviously. Geographically, many of the markets we operate in, specifically the enterprise markets, never did see a benefit In terms of consumption from COVID as consumers and retailers were impacted by the crisis.
So hopefully, as these markets work Through the pandemic that will also provide a tailwind from a geographic standpoint.
And relative to the Question on strategic changes as we go forward. We will always be responsive to Consumers and customers whose needs will continue to evolve over time. I don't foresee that leading to any major change in the strategies that The team has been executing with excellence. But again, we will continue to be very attentive to and responsive
Great. Thanks. And your next question will come from the line of Wendy Nicholson with Citi.
Hi. My first question actually, David, sort of before you go, one of the categories that seems to sort of be, I
don't want
to say persistently weak, but kind of lagging in terms of sustained global market share improvements is baby care. And I know the last 12 months have been really funny. You've actually had some market share recovery because they were depressed last year given supply issues. But still just Sort of in totality, baby care just looks to be such a competitive marketplace. I think Kimberly sounded more aggressive and more optimistic about their market share positions, you've obviously got less of fragmentation in the category with more organic all natural players sort of trying to gain traction.
So can you kind of give us a state of the union on Baby Care in particular, where you think Procter is, why you think it's been sort of a stubborn business for you in terms of being able to really make progress, especially in China, That would be great. Thank you.
Sure, happy to. First, it has been a challenging category for several years. And as we We're very open several years ago. It would take time because the technical changes we needed to make to deliver product superiority. And we continue to make those changes, but I'm actually very encouraged by the progress they've made.
Our focus markets grew top line and profits last year. All in profits increased. Global Baby Care made progress. Our North America business especially Was plus 3%, the highest it's been in 6 years. We're leading the category growth.
We actually have strong share growth now in North America. Most recent period, it's up a point or more. Our superiority metric, which is really important, back several years ago was 25%, which is unacceptable. It's up to 60% rising and we will continue to be investing to again delight consumers. But with North America doing better, Europe returned to growth for the first time in 6 years.
You're right, it's been challenging both the birth rate, but returned to growth, Expanded the margins, we addressed some of the challenges we had in our enterprise markets. John and his team did a great job there, working to make sure we had Profitable businesses and adjusting the business model and supply systems where need be. So you look across those and then This shift toward fast growth segments, our wipes business was up 10%, our pants business was up 12%, We doubled our Bedwetters segment growth to 12% behind the successful NINJAMMA's launch. So there's a number of things going well. We still have much work to do, We understand that.
Baby care does take time, but this was the best year we've had in 6 years and the trends are positive. We're now playing in fast growing segments And the product superiority is getting better each year. So, I become more optimistic on baby care each year. I think the leader and their team are doing a really nice job recognizing that this is a mid- to long term game and they're continuing to make the right investments.
Our next question will come from Javier Escalante with Evercore ISI.
Hi, good morning, everyone, and congratulations to David and John from Robert and I. Well deserved. My question has to do with your plan to offset The increases in raw material, the $1,900,000,000 hit. And if you could split the pricing versus savings, How much you're going to eat in terms of not taking pricing? How much is pricing?
And if you could help us understand What is happening geographically? We have a good feel of the U. S. We do not about Western Europe, In particular, both 2 of your competitors, Colgate and Unilever, reported negative pricing in Western Europe, Which is surprising, and I think that we've already been talking about deflation. So if you can talk about Pricing in general and what's leading this deflation?
Is the consumer? Is the retailer? Is the competitive dynamic? Thank you.
I'll give one quick comment and turn it to Andre. We have many tools to deal with the commodity cost increase. And one thing that is very clear is that hits everybody. That hits local brands, international brands equally and in many ways, more severely if you don't have scaled supply systems And the buying power that a company like P and G does where we work collaboratively with our suppliers. So we've got the tools that include innovation, which I think is the strongest I've seen it in years.
We have certainly pricing, but we have a very active productivity program. So we've got the tools. If you get into specifics for Europe and others, I'm going to turn it Andre to get into. But again, I think we're well positioned to deal with it and we have our eyes wide open that it's going to be meaningful, especially in some of the categories that have some of the that have some of the increased amounts of raw materials that have been hit the most. Andre, you want to give any specific comments about Europe?
What I would say is similar to what David mentioned, I think productivity is going to be a core driver of the offsets that we will continue to focus on. The commodity pressures that we're seeing, as you have heard, are broad based in the industry, and therefore, the same pressures exist in the market around the world. In terms of pricing, we've mentioned that we've taken and announced pricing in Central and Eastern European Markets. We've announced pricing in the U. S, which you referenced, and we've also have taken Opportunities around the world, and we are encouraged, I think, by our ability to execute pricing in the markets where we have announced.
But I cannot comment on any additional pricing that we might or might not take. Again, that is within the discretion of the sector leaders And we'll come out as we see fit.
All right. Next question will be from the line of Kevin Grundy with Jefferies.
Great. Thanks. Good morning, everyone, and congratulations To David and John. Broader portfolio question, just to kind of pull back a little bit. So really beyond fiscal 'twenty two and it relates Specifically around strategic priorities and where you see the greatest opportunities to accelerate profitable growth.
So John, understanding your comments That the strategies in deep working is just going to be sort of a continuation and execution against that. David, you talked about what the company has done with respect to productivity, structure, culture, innovation, and I think there's sort of general recognition among the investment community. You look at the market share momentum It is a strategy that's clearly working. But that being said, as you look across your geographies, your categories and your Cost structure, I would like to get your perspective on the areas where you see the greatest opportunity to accelerate growth and maximize profitability. And John, how you intend to prioritize those?
Thank you.
Yes. I'll give a comment and I'll turn it to John. First, there are many opportunities, but it starts right here in the U. S. It's our largest market.
We declared several years ago, the U. S. Is a growth market. We don't have any markets that aren't growth markets. It's our job to create the innovation that drives the growth, and I think it's best illustrated by the U.
S. We are averaging 1% to 2%, And we've moved to mid singles and certainly the last 2 years we've been in high singles and it has driven by the innovation and the communication, just that you are well aware of. There have been some categories that we have been open about. We added the Merck International business to our healthcare and that has done very well and you have seen the growth recently In our healthcare business, that remains an interesting segment. You've seen some bolt on acquisitions in the Beauty Care business.
Again, that remains an interesting business as well. And each of the sector leaders has the opportunity to evaluate whether they see bolt on acquisitions or acquisitions It would be helpful. The core though is most important, driving the core in the focused markets and then continuing to have Smart growth and value creations in the enterprise markets is working, and I believe that's the right strategy. I'll turn it to John to offer any comments about how he's thinking about the future, but we've worked together on these and been very aligned that it starts with delivering the core and seeing market growth Is a key responsibility of each category.
Kevin, I really like and you've heard me talk about Before, each of the categories that we've decided to play in as we've focused and strengthened our portfolio. And I Firmly believe that they all have opportunity to grow and to create value. And you're seeing that in the results That Andre described, for example, there's very broad progress that's occurring across those businesses. Similarly from a geographic standpoint, what people would view as mature markets have significant growth potential that exists within them. You've seen the results in the U.
S. If you look at Category development outside of the U. S. On average is 20% of U. S.
Levels. So there's significant opportunity across geographies to continue to develop these categories to grow markets and increase consumption. And historically, while we probably felt that way for the focus markets, we were a little bit concerned about what kind of future the enterprise markets held for us, but the team there has made significant progress in the last couple of years in dramatically increasing The structural profitability of those businesses, so they are investment grade and we can take advantage of the population income growth that will occur in those markets and do so in a very profitable value accretive way. We exited last year With one country in the well over 100 countries in the enterprise markets losing any money, So the majority are contributing positively to the company's top line and bottom line. So I don't want to in any way backhand the question, but I really do believe that we have opportunities for growth and value creation Each of our categories and broadly across the global geography.
And then it becomes Executing the strategy that we've all talked about a number of times and that as Andre mentioned, we will continue to double down on Stepping forward, not back.
Your next question will be from the line of Mark Astrachan with Stifel.
Thanks and good morning everybody. I wanted to ask about thoughts on sustainability of EBIT margin expansion that we've seen in recent years. I get the comments about Roughly three points or so, if my math is right, have input commodity cost headwinds for 'twenty two. So I guess broader picture 'twenty one sounds like you're saying that's a base think it can obviously expand over time in a normalized world, I guess, maybe you could just talk a bit about how holistically you're thinking about that. And Yes, maybe drilling in a little bit as well.
Looking at segments, most of the where the strongest rate of expansion has come from household products, Whether it's a household care or a fabric or baby, etcetera. So how sustainable is that? What can you do there to further improve? And just as I said broadly, kind of how are you thinking about margins? Thank you.
So, I think, as David explained and John explained, we're very pleased with the categories we're operating in. I think they all offer continued growth opportunity. If you think about Either growing the market via innovation with the examples that David mentioned earlier, if you think about trading consumers up into premium propositions would have superior profitability in terms of penny profit for us. If you, for example, liquid Fabric enhancers household penetration in the U. S.
Is only 37% and only 52% of those households Use the fabric enhancer with every load. So there's tons of runway when you think about beads, those numbers are even lower. Those propositions are accretive to our portfolio, are accretive to our margin and we'll continue to focus on those, and they provide a good source for future growth, Both top and bottom line. Productivity is another key lever that still has enormous runway Across the balance sheet and across the P and L, our supply chain continues to have Significant opportunity in terms of synchronization, but also every innovation that we bring basically creates a new cost S curve that we can then optimize from. We talked about media and advertising spend as a significant source of profitability of future profitability growth and productivity.
And I would add go to market, specifically in terms of go to market logistics, but also go to market spend as a source. So We feel confident in our ability to deliver even with cost headwinds, which is reflected in our guidance for next year. And we do believe there's enough levers in the portfolio, from trade up to usage expansion, to be able to continue to do so.
There's a some of you have heard me talk about this before, but there's a chart that I Share with our leadership team whenever we're together that highlights the importance We need to do both to dependably deliver top third shareholder return over reasonable periods of time. So that will continue to be the focus and the emphasis.
Having said that,
Margin as a metric has many issues associated with The first being, I can't put margin in a bank, I can't return margin to share owners. What matters most is what Andre referred to, which is Penny profit and overall profit and profitability. And we've got to make sure that we keep our eyes firmly On that, as we work to grow the top line.
Next question will come from the line of Andrea Teixeira with JPMorgan.
Good morning and congrats To all of you, in particular, David, and thanks for your leadership and congrats to John and Shailesh. I have a question on the beauty and follow-up Beauty and follow-up on baby care. What are you expecting for fiscal 2022 in terms of recovering skincare in Japan and China For both SK II and Olay. And for Baby, David, your comments of improvement most recently, are you putting And a question now for John. More money behind innovation this fall, curious to because Pampers Pure was a good launch, but Seems that core Pampers is still lagging.
And a clarification on the $1,900,000,000 headwind for fiscal 2022, Are you embedding that commodities and transportation costs will stabilize or decline? Or have you conservatively assumed that these cost pressures will linger at current levels, Given understandably a wide EPS range that you gave.
Let me start with a couple of those here. There are quite a few questions there. So help me if we don't answer each one of them. 1st, you mentioned our beauty business and specifically SK II. I'm very pleased if I just Take SK II as an example, you would expect it to get hit very, very hard because of travel retail virtually stopping in Asia and it's certainly a huge channel.
But the team pivoted amazingly well and was able to actually grow the business. Last year, the business was up double digits, Up 13%. So SK II is actually healthy and continues to grow nicely, because the consumption that did not happen in tribal retail happened in the home market. And then there was the duty free area in Hainan Province that did a really nice job making sure that the brand was both available and had the innovation and communication to win. So SK II is healthy and I expect I don't know when Travel Retail will resume.
You can take UroGas. It looks like it's going to be a while. But the good news is at the strong growth that we're seeing already, we're not dependent on that. That will be could be a help if and when it opens up Anytime soon. More broadly, the skin and personal care business had a strong year last year as did the overall beauty business.
So again, I feel very good about the business. How strong it grows next year will be dependent again on many of the factors that we've already mentioned. While there's meaningful cost headwinds, the innovation that both hair care, skin and personal care Has launched and will be launching, I feel very good about. So both businesses had strong years on the top and bottom line, and I feel good about those. Baby Care, I made a number of comments earlier, so I'm not sure what else would be helpful.
Yes, we are very committed to the category. The innovation coming We'll continue to come. We're on a multiyear innovation program. Certainly, part of it has hit the market, and you see that improvement in Percent superiority from 25% to 60%. We'll continue to work to move that up significantly.
We also recognize that for many consumers in many markets, the premiumization is critically important in these high growth areas. And that allows us to Offset some of the challenges that you're well aware of on the birth rate and still grow the category and grow share and create value. And Baby Care did create value This year is a very strong year, strong improvement. So all these businesses to me have meaningful upside, And especially the beauty business has very good momentum and baby care is accelerating. So I feel good about both.
And Andrea, to answer your question on the commodity exposure and trade exposure, we are forecasting a spot. So we assume that spot prices will sustain throughout the year. So we don't expect an easing of these commodity pressures within the guidance that we've given.
Okay. Next question will be from Chris Carey with Wells Fargo Securities.
Hi, good morning. So just two specific questions, and I'll keep it brief. So just on grooming, volumes up for the first time in a while on a fiscal year, pricing as well. Have we turned the corner in the business? I'm also conscious there could be some cyclical recovery with return to office.
Any perspective on just where you think the business sits on this recovery curve and if that's by geography Or price here, any perspective would be helpful. And then just one quick follow-up on SK II. I noticed that in the press release you talked about Pricing, premiumization, but not volume, is it safe to assume It's been more driven by price of late and not volume. So any clarification there would be helpful. Thanks so much.
No, it's actually very balanced volume and pricing, but let me take 1 and then we can give the specific numbers. First on grooming. Grooming had a very strong year. They grew mid singles digits on the top and double digit on the bottom. Importantly, they grew share almost every segment across whether it was male shave, female shave, appliance, all of those making very good progress, Which contributed to the strong growth.
And as you rightfully said, as people return to working outside the home, I think that will benefit the category. And what the team has done, which I think is very strong and very important going for the future, we're no longer a wet shave business. We're truly a grooming business With growth in wet shave dry shave, which we call appliances, we're also growing in many of the new areas like IPL, the intense pulse light area, all of those to me give me confidence. And it's in new segments as well. We have innovation come on King C Gillette, which helps people with facial hair.
So it's a broader portfolio, Innovation across all those different forms and segments and it's leading to mid singles top and double digit bottom. So that's The strongest year we've had in many, many years in grooming and the reason it's strong should continue because it's innovation driven, consumer driven.
And on SK II, what David said is certainly right. Growth is very strong, 13% as David mentioned, For the fiscal year, about 35% for quarter 4, the pricing taken was mid single. So by far, there's a significant volume component to it As the team shifted consumption into Hainan, which is a big part of the offset to travel retail reduction. So Again, the growth on SK II is both volume and pricemix driven.
Your next question will be from the line of Peter Grom with UBS.
Hey, good morning, everyone. And David and John, I want to offer my congratulations As well. So I guess I just wanted to ask about the business momentum and growth from here. And I mean, The quarterly performance and what we can see in the data is very impressive. So congrats on that.
And I know the health of the brand is very strong. But Sheryl, like how much more room do you have on the share side? Because a lot of your competitors are really implementing a similar playbook and attempting to innovate with superiority as well. So Just like any comments on the relative outperformance from here would be really helpful. Thanks.
I won't speculate too much on the relative outperformance. What I can say is the strength of just what you said. The brands are strong And the measures we use, which I think are really important, our superiority metrics are relative to the best competitor in each brand, in each country. So it pushes us To maintain and try to extend the advantage we have, now we have full respect for our competitors. And you're right, we have very strong growth in both North America, Europe and Latin America, and in those markets, we'll see what happens next year.
But if this Share growth has been now sustained in North America for 3 years and in Europe for 3 years. So the focused markets are performing very well. And as John mentioned, we have very strong progress in the enterprise markets. We are mid singles with double digit growth in a very, very difficult environment. So That gives me confidence we are at least well positioned.
But the other thing is very real. You have to earn it every day. And so our teams understand That our competitors are refocusing and those that lost share will come back with their innovations and investments. And it's our job to go earn But it's very clear that's what they're accountable to deliver. And based on the last 3 years, I've got confidence they'll continue.
And just a reminder, How you gain share? How we gain share is very important in the answer to this question. And David has talked many times in our discussion this morning, as has Andre, about our intent To
be a
disproportionate driver of market growth. The math that falls out of that creates share growth, But the notion that we're taking business from competitors and it's only a matter of time and that's not how we look at things. Our job is to be constantly expanding this pie, constantly expanding the number of households that we serve. And if we do that, well, there's no reason, that growth shouldn't be sustainable.
We'll next go to Bill Chappell with Truist Securities.
Thanks. Good morning. I'm not one who typically says congratulations on these type of calls, but I just want to take a step. David, The retirement couldn't be more deserved. Looking back 6 years ago in terms of where the company was and especially where investor sentiment was, It's remarkable that where we are today.
And John, knowing you for a decade plus and how integral you've been in kind of the turnaround, I mean, you are, think most people would agree on the call, Mr. P&G. So well deserved and I applaud the Board and everyone for So with that, moving on to the actual question. Kind of on trade promotion, as we look back, with the pandemic, trade promotion dropped off. It's not coming back kind of to full extent as you would expect as you're taking pricing and what have you.
And I'm just kind of want to understand if If you think this is kind of a permanent change, if we've kind of made a shift back to where marketing and innovation really Take the lead in terms of investment dollars and trade promotion never really kind of goes back to where it was pre pandemic levels or if you do see it starting to Creep back into pre pandemic levels. Any thoughts there would be appreciated. Thank you.
So I'll just offer a couple of thoughts. First, thank you for the kind words. The organization deserves a ton of credit and the total leadership team, but I appreciate your comments on me and very much agree on your comments on John. In terms of trade promotion, certainly it's in our best interest to bring to our retail partners programs that build their business and build their margin. I do believe, as you said, that can best be done by innovation and market growing plans.
And there's roles they play with us market growth and helps consumers find the brands that they're most apt to use. We work with retail partners around the world and the ones we partner with best, success is They grow, the market grows, the margin grows, and that we help them do it, we get rewarded. So we will continue with that certainly objective. Certainly, our eyes are wide open. I expect from a very low base, we will see an increase in trade spending.
Do I believe it will go all the way back to what it was before? I think many retailers are very interested in finding smart ways and they have the same pressures that we do with the commodity costs. They need as well as we to find ways to create value. So I'm hopeful that we'll see Some thoughtful change in promotion strategy that is more value creating for the market.
Yes. And then to add a few numbers to David's statements, quarter 4 in the U. S, we saw trade promotions Volume sold on deal back to 27%, which was in line with quarter 3, but it's still below pre pandemic levels, which was around 33%. So We're certainly getting back to a more normalized level in quarter 4.
All right. And your final question will come from the line of Jonathan Feeney with Consumer Edge.
Thanks very much. And let me add my congratulations, David John, no one better.
A quick one and then a little
bit more involved one, please. The quick one, does the point guidance You gave us on cost headwinds and ForEx benefits, does that include hedging, current or anticipated? And then second, maybe a little more in follow-up one is we've had a lot of discussions with consumer staples leaders in the past really 2 weeks about The state of retailer inventory, and that's largely a U. S. Question, but it seems all over the board, a lot of retailers are seeing better foot traffic, certain retailers, Certain channels have had unprecedented volume that stuck around and there's a little bit of a mentality of maybe taking on more inventory and shipping Maybe not matching up with measured takeaway, not only in the U.
S, but other places. And I think it cuts both ways. So I know there's a lot To that question, but anything you could say about retailer inventories, where you think that is and you have to say your big markets, say your focus markets, Where you stand and how that plays into your guidance for 'twenty two? Your thoughts about that, how that plays in? I'd appreciate it.
Thank you.
I'll let Andre comment on the hedging question in just a second. The way I think about the retailers approach to their business, I don't really think about it through an inventory lens so much as I think about it through a desire To maintain dependability of supply and those manufacturers that can Offer that assurance, are often being rewarded with increased shelf space and increased focus on the part of Our retail partners, there's a small amount of inventory build, but that's not really the focus. The focus is on how do we ensure supply and maintain the satisfaction of our shoppers. And that's a very fertile place For us to play. With regard to hedging, Andre?
So, yes, the short answer is that $1,900,000,000 that we've communicated is the net
Very good. Thank you very much. I think that concludes the call. We very much appreciate your engagement. P and G has got strong momentum.
We've got a strong leadership, leadership team and organization, and we will continue to work Aggressively to deliver strong results and value for our shareholders. Thank you all for your support and your comments today.