Colgate-Palmolive is accelerating its digital transformation across the enterprise in part by leveraging the capabilities it’s developed within the growing Hill’s Pet Nutrition business, as well as in China and other markets.
Colgate-Palmolive has often pointed to Hill’s as a success story when it comes to both digital innovation and sharing learnings of its capabilities. Last year, the company revealed it had used Hill’s for an inaugural e-commerce-first packaging redesign and later leveraged these learnings for its Colgate, personal care, and home care packaging.
“The digital work that Hill’s is doing is the best-in-class for us as a company. … They built that business with a digital-first mindset,” said Noel Wallace, Colgate-Palmolive president/CEO, in a call with investors last month. He noted that Hill’s is now taking digital into thematic advertising as its expands brand penetration and awareness, which he conceded remain low.
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Colgate-Palmolive reported year-over-year net sales growth of 5.5% in its most recent quarter, while organic sales grew 9%. When broken out, net sales for the Hill's Pet Nutrition business grew 14.5%, and organic sales grew 18%. Hill’s accounts for 20% of Colgate-Palmolive’s sales, and while it’s benefitted from a sharp increase in pet adoption during the pandemic, the company expects continued long-term benefits because “pet owners are going to continue to feed their pets,” Wallace pointed out.
Nearly one in five U.S. households acquired a cat or dog during the March 2020 to May 2021 period, according to the American Society for the Prevention of Cruelty to Animals, or around 23 million American households. The American Pet Products Association reported that Americans spent $123.6 billion on their pets in 2021, up from $103.6 billion in 2020 — including $50 billion on pet food and treats.
To meet this demand, Colgate-Palmolive is investing in Hill’s capacity and intends to purchase three dry pet food manufacturing plants in the U.S. from Red Collar Pet Foods for $700 million. These plants are in addition to the one Hill’s is building in Kansas — scheduled to go online next year — and the canned pet food plant it acquired in Italy in April.
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“The strategies that we have deployed on Hill’s are the same strategies we have deployed across all of our categories,” said Wallace. “And the learning that we have had from Hill’s … they have been much more at the forefront on digital and online. … That knowledge transfer has been terrific and shared across the world relative to how we are thinking about the business.”
In addition to Hill’s, Colgate-Palmolive is also building capacity for its recyclable toothpaste tube, currently rolling out globally. In the U.S., the recyclable tube will initially be produced and visibly marketed for select products, with the transition of the rest of the Colgate toothpaste line to be completed by 2023.
The company also sees further opportunities in premiumization, particularly in China. Colgate-Palmolive’s largest e-commerce business in oral care is in China, which Wallace said is being fueled by premium innovation and personalized marketing.