Revenue Radar: Colgate-Palmolive brushes off headwinds
Colgate-Palmolive Company delivered another quarter of strong performance in Q3 2024, demonstrating continued momentum in its growth strategy through balanced volume and pricing gains. The consumer products giant raised its full-year guidance on the back of robust results, marking its sixth consecutive quarter of delivering gross margin expansion alongside growth in operating profit, net income and earnings per share.
“Our strong results this quarter and year to date add to our confidence that we are executing the right strategies to deliver on our updated 2024 organic sales and Base Business earnings growth expectations, drive cash flow and generate consistent, compounded earnings per share growth,” said Noel Wallace, Chairman, President and Chief Executive Officer.
Colgate-Palmolive published its financial results on October 25, 2024.
Key Financial Highlights:
- Net sales increased 2.4% to $5.03 billion
- Organic sales grew 6.8%
- Gross profit margin expanded 260 basis points to 61.1% (GAAP)
- Operating profit increased:
- 4% on a GAAP basis
- 5% on a Base Business basis
- Earnings per share:
- GAAP EPS up 5% to $0.90
- Base Business EPS up 6% to $0.91
- Advertising investment increased 16% year-over-year
- Operating cash flow up 9% year to date
- Free cash flow before dividends grew 17% year to date
Regional Performance
Colgate-Palmolive saw broad-based growth across most regions, with every operating division delivering positive volume growth for the second consecutive quarter.
Latin America remained a standout performer, delivering 14.2% organic sales growth despite a 17.4% foreign exchange headwind. The division achieved its sixth consecutive quarter of volume growth, up 3.3% against a difficult prior year comparison of 5.4%. The management remarks note that “Volume growth in Mexico in the quarter was impacted by political and economic uncertainty, but trends have stabilized and remain positive.”
Europe demonstrated robust performance with 8.0% net sales growth and 6.3% organic sales growth. Volume growth of 4.1% was achieved across all hubs and categories. The success of premium innovations like elmex Sensitivity + Gum toothpaste has driven share gains in the sensitivity segment.
Asia Pacific delivered 6.3% net sales growth and 6.1% organic sales growth. Volume growth of 6.5% was the division’s strongest quarterly result since Q1 2021, led by strong performance in India, Greater China, and South Pacific. Management noted that high-single-digit growth in toothpaste volumes drove regional performance.
North America faced challenges, with net sales declining 2.1% and organic sales down 1.9%. While volume grew 1.2%, pricing was negative at -3.2%. According to the management remarks, “The division saw a roughly 1% negative impact on volume growth in the quarter across our core oral care, personal care and home care categories due to shipment timing from Q3 to Q4.”
Market Share and Brand Performance
Colgate-Palmolive maintained its dominant global market positions, with toothpaste market share at 41.6% year to date and manual toothbrush share at 32.3% year to date. The company’s strategic focus on premiumization and innovation has driven share gains across multiple regions.
In Latin America, where premiumisation efforts have been particularly successful, toothpaste value share increased by 90 basis points year to date. Notably, 80 basis points of this increase came from premium offerings, demonstrating successful execution of the company’s premium portfolio strategy. The relaunch of Colgate Total in the region featured a “new breakthrough, clinically proven formula that helps consumers prevent common oral health problems before they start,” according to management remarks. This relaunch, supported by new packaging and increased brand investment, has accelerated the company’s premiumization strategy in the region.
In the whitening segment, the company has seen significant market share gains:
- Colgate Brand achieved share gains of: • +50 basis points in the whitening segment • +70 basis points in premium whitening • +260 basis points in ultra premium whitening • +270 basis points in professional whitening • +170 basis points in total whitening (Source: Earnings presentation, based on Worldview data through August 2024)
In India, the relaunch of Colgate MaxFresh has shown strong results, with management noting it as “the fastest growing core sub-brand in India.” The new formula is now being rolled out in the Philippines and Vietnam, demonstrating the company’s ability to successfully scale regional innovations.
In Brazil, the elmex brand has gained significant traction in the premium segment, becoming “the fastest growing brand in drugstores in Brazil in the toothpaste sensitivity segment,” according to the earnings presentation.
“As we discussed in September at the Barclays Global Consumer Conference, we are focused on driving brand health and household penetration, which is enabling us to deliver balanced organic sales growth through innovation, marketing support and improved capabilities. We delivered another quarter of both volume and pricing growth, with organic sales growth in five of six divisions.”
This strong market share performance reflects the company’s successful execution of its strategy to:
- Build household penetration across brands
- Drive premium innovation
- Increase marketing support
- Expand presence across multiple price points
- Scale successful innovations across regions
Innovation and Growth Initiatives
Colgate-Palmolive’s innovation strategy in Q3 2024 demonstrated a balanced approach across premium and core segments, with significant advancements in product technology and formulation. The company’s R&D efforts focused on delivering meaningful consumer benefits while addressing specific market needs.
The next generation Optic White Overnight Pen exemplifies the company’s approach to premium innovation. Moving beyond basic whitening capabilities, this new iteration solves specific consumer pain points through automatic dosing and an advanced brush applicator design. The product maintains its professional-grade hydrogen peroxide formulation while significantly improving the user experience.
In Latin America, the Colgate Total Active Prevention launch represents a shift in how the company approaches oral health solutions. Rather than focusing solely on treatment, this clinically proven formulation emphasizes prevention of oral health issues, marking a strategic evolution in how Colgate positions its core offerings.
The company’s innovation extended beyond oral care, with significant developments in its personal care portfolio. EltaMD’s new sunscreen introduction tackles a long-standing market gap with its Invisible Blend Technology. This patent-pending formulation specifically addresses the needs of consumers with deeper skin tones, demonstrating how technical innovation can serve specific consumer segments.
In the home care category, Colgate-Palmolive’s focus on sustainability drove the development of the new Fabuloso concentrated formula. This innovation delivers twice the cleaning power while addressing environmental concerns through a 50% reduction in plastic packaging. The development showcases how the company is integrating environmental responsibility into its core product development process.
These innovations are backed by significant increases in R&D investment and advertising support, reflecting Colgate-Palmolive’s commitment to driving growth through meaningful product advancement rather than incremental changes.
Margin Analysis and Cost Management
Gross profit margin expansion was driven by multiple factors:
- Pricing contributed 110 basis points
- Funding-the-growth initiatives delivered 270 basis points
- Raw materials impact (including forex) was negative 150 basis points
- Mix contributed positively by 40 basis points
The company increased advertising investment by 16% year-over-year, following a 23% increase in the prior year quarter, demonstrating continued commitment to brand building and innovation support.
Updated Outlook and Guidance:
Colgate-Palmolive’s strong third quarter performance has led management to take a more optimistic view of the full year 2024. The company revised its growth projections upward, reflecting increased confidence in its business momentum and execution capabilities. Net sales growth expectations were refined to 3-5%, up from the previous range of 2-5%, while accounting for an anticipated mid-single-digit negative impact from foreign exchange rates.
The outlook for organic growth shows particular strength, with management now expecting 7-8% growth compared to the previous guidance of 6-8%. This upward revision is supported by the company’s continued success in implementing pricing strategies and achieving volume growth across most markets.
On the earnings front, base business EPS growth projections have been raised to 10-11%, a notable improvement from the previous range of 8-11%. This enhanced outlook reflects the company’s success in expanding margins and managing costs effectively throughout the year.
Looking at the cost environment, management anticipates facing moderate headwinds from raw and packaging materials in 2024. These pressures are expected to stem primarily from transactional foreign exchange impacts rather than underlying commodity costs. However, the company’s robust funding-the-growth program continues to deliver substantial savings, which management expects will more than compensate for these increased costs. Additionally, the company’s revenue growth management initiatives have proven effective in maintaining pricing power while protecting volume growth.
The guidance notably excludes potential impacts from any additional pricing actions that might be necessary in response to significant currency devaluation in Argentina, indicating management’s prudent approach to forecasting in volatile markets.
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