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01/31/2022

Colgate-Palmolive Streamlining Supply Chain, Boosting Ad Spend

Lisa Johnston
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Colgate Palmolive
Colgate-Palmolive is investing in brand building, including increasing advertising spend across oral care, pet nutrition, skin health and other categories.

Colgate-Palmolive is implementing a global productivity program to streamline operations and its supply chain, expecting to execute the majority of it this year.  

As it prepares for what’s anticipated to be yet another volatile year, the company is also increasing investments in both advertising spend and capacity for certain categories to sustain volume growth amid price increases and category growth — as well as launching a predictive tool for dentists in support of a teeth-whitening product.  

Addressing the somewhat rarity of a one-year program, president and CEO Noel Wallace described it as focused, noting in an investors’ call that in addition to optimizing operations, the company also wants to examine its structure as a way to accelerate growth momentum.

“It allowed us to really fine-tune where we wanted to focus and allowed us to do that in the 12-month period,” he said. “And we think that’s ultimately right for the business to ensure that we don’t have ongoing distractions across the organization, and we get on with trying to accomplish what we’ve set out to do for the year and into ‘23.”

[See also: Colgate-Palmolive Reducing Energy Use in Product Packaging Facilities]

The program is anticipated to result in annualized pre-tax savings of $90 million to $110 million through resource allocation, operational efficiencies, and supply chain streamlining. And as with many consumer goods companies, Colgate-Palmolive is also mitigating increased logistics and input costs by raising prices across all categories in North America in Q1 and Q2, as well as optimizing trade spend.

“This program, along with the pricing and funding the growth, should allow us to exit this inflationary cycle with more levers to drive growth and profitability and keep our strategy on track,” said Wallace.

Colgate-Palmolive reported a net sales increase of 2% and organic sales increase of 3% for the fourth quarter. Full-year 2021 net sales grew 6% while organic sales grew 4.5%.

Its flourishing Hill’s Pet Nutrition business had yet another strong quarter, recording 12% net sales growth and 13% organic sales growth. Both brick-and-mortar and e-commerce drove sales in the U.S., and the company expects another strong year for the pet business as it scales digital learnings throughout the organization.

And as the  No. 37 consumer goods company readies for yet another unpredictable year, Wallace pointed to the progress they’ve made in their digital transformation.

“We’ve seen a lot of great progress as we’ve restructured our innovation groups around the world towards breakthrough and transformational innovation and the benefits we’re seeing coming out of that,” he said, “and we decided we really wanted to accelerate that transformation and make sure that we get that savings into the business as quickly as possible — as well as the benefits of how we structure ourselves to be more agile and faster to market, the benefits we get out of increased resources in the digital space, as well as the innovation.”

Colgate-Palmolive’s transition to a new innovation strategy is also directly impacting growth in oral care and pet nutrition, as well as its China e-commerce rebound.

[See also: Colgate’s One Giant Leap For R&D]

Looking ahead, the company is investing in brand building, including increasing advertising spend across oral care, pet nutrition, skin health, and other categories to maintain volume growth while raising prices.

It’s also investing in incremental capacity for growth: “Our need to build capacity across the business, mostly in pet nutrition, shows that the rebound in organic sales growth is real and one we expect to continue,” he noted.

Colgate-Palmolive is also preparing to launch a predictive tool in U.S. dental clinics that leverages 3D scanner technology to display personalized results for consumers in support of its Colgate Optic White Professional teeth-whitening product.

As part of this, dentists have access to the software through a new 3Shape Unite digital dentistry in-clinic app, where they can provide patients with scans showing a simulation of the predicted treatment outcome, including interactive before-and-after photos.  

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