Kimberly-Clark Corporation (KMB) Q2 2018 Earnings Conference Call Transcript

Kimberly Clark Corporation (KMB 5.51%)
Q2 2018 Earnings Conference Call
July 23, 2018, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for your patience in holding. We now have your presenters in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of this morning's presentation, we will open the floor for your questions. At that time, instructions will be given as to the procedures to follow if you'd like to ask an audio question It is now my pleasure to introduce today's first presenter, Mr. Paul Alexander.

Paul Alexander -- Vice President, Investor Relations

Thank you and good morning, everyone. Welcome to Kimberly Clark's second quarter earnings conference call. Here with me today are Tom Falk, Chairman and CEO, Mike Hsu, President and Chief Operating Officer and Maria Henry, our CFO. Here's the agenda for the call. Maria will begin with a review of second-quarter results. After that, Mike will provide his perspectives on our results and the outlook for the full year. We'll finish with Q&A with Tom, Mike, and Maria. As usual, we have a presentation of today's materials in the investor's section of our website.

Now, as a reminder, we will be making forward-looking statements today. Please see the risk factors section of our latest annual report on Form 10-K for further discussion of forward-looking statements. Lastly, we'll also be referring to adjusted results and outlook. Both exclude certain items described in this morning's news release. The release has further information about these adjustments and reconciliations to comparable GAAP financial measures. And now, I'll turn it over to Maria.

Maria Henry -- Senior Vice President & Chief Financial Officer

Thanks, Paul. Good morning, everyone. Thanks for joining the call. I'll start with the headlines for the quarter. Organic sales were even year-on-year as growth in international markets was offset by lower sales in North America. Margins and operating profit were impacted by significant commodity inflation. Helping to offset those headwinds, we delivered strong cost savings and reduced overhead spending, and our adjusted earnings per share were up 7%. And finally, we're on track with our restructuring program. Moving on to the details of our results, starting with sales, our second quarter net sales were $4.6 billion. That's up 1% year-on-year with a one point benefit from currency rates. Organic sales were even with the year-ago. Mix improved by 1% while volumes fell less than 1% and net selling prices were down slightly. On profitability, second quarter adjusted gross margin was 33.4% down 270 basis points year-on-year.

Second quarter adjusted operating margin was 16.8%, down 100 basis points. Commodities were a drag of $200 million in the quarter, primarily due to higher pulp costs and secondarily, inflation in other raw materials. We're now expecting that full-year commodity cost inflation will be between $675 and $775 million. On average, that's $250 million more than we assumed in April and $375 million more than what we planned in our original plan in January. While commodities are higher than expected, our teams continue to do a great job delivering cost savings and tightly managing overhead and discretionary spending. We achieved $110 million of forced cost savings in the quarter, and we're now targeting $425 to $450 million of savings for the year. That's $25 to $50 million higher than our original target including more value from negotiated raw material contracts. In addition, we delivered $40 million of cost savings from our restructuring program.

We're accelerating actions where feasible, and we now expect full-year savings between $100 and $120 million. That's $50 million higher than our original target. In addition to the restructuring, we continued to reduce overhead costs. In total, between the line spending declined by 180 basis points as a percent of net sales. All in all, adjusted operating profit was down 5%. On the bottom line, second quarter adjusted earnings per share were $1.59, up 7% year-on-year. That included about seven points of earnings growth from a lower tax rate along with benefits from lower interest expense and share accounts. We expect our full-year adjusted effective tax rate will be at the low-end of our 23% to 26% target range. Let's turn to cash flow and capital efficiency. Cash provided by operations in the second quarter was $787 million compared to $825 million in the year-ago quarter. This decrease was in line with our expectations, and it includes cash restructuring payments and the benefit of lower taxes.

We continue to allocate capital in shareholder-friendly ways. Dividends and share repurchases totaled approximately $575 million in the second quarter, and we continue to expect the full-year amount will total $2.1 to $2.3 billion. Looking at our segment results in personal care, organic sales were down 1%. Net selling prices declined 2% while product mix improved one point. Overall personal care operating margins remain healthy at 20.4%, although down 50 basis points year-on-year. In consumer tissue, organic sales fell 1%. Volumes decreased 3% while net selling prices increased about 2%, and product mix improved slightly. Consumer tissue operating margins of 14.1% were down 260 basis points. Significantly higher pulp costs and lower volumes were partially offset by cost savings, lower overhead spending, as well as favorable selling prices and product mix. In our K-C Professional business, organic sales grew 2% with gains in all major geographies.

Volumes in product mix, each increased 1%. K-C Professional operating margins of 19.2% were down 80 basis points compared to a strong year-ago quarter. Results were impacted by commodity inflation, partially offset by cost savings and benefits from topline growth. In summary, our second quarter results were impacted by a difficult environment, particularly with significant commodity inflation. Nonetheless, we're achieving strong cost savings. We're making good early progress with our restructuring program. And we continue to allocate capital in shareholder-friendly ways. With that, I'll turn the call over to Mike.

Michael Hsu -- President, Chief Operating Officer & Director

Thanks, Maria. Good morning, everyone. Today, I'm gonna focus my comments on organic sales, pricing, and our full-year outlook. As Maria just mentioned, organic sales were even in the quarter. That said, organic sales were up 1% year-to-date which is right in line with our full-year target. Let me spend a few minutes on our three main growth priorities for 2018. Our first priority is to strengthen and grow our core businesses. In North American consumer products, following a strong first quarter, organic sales were down 2% in the second quarter. Halfway through the year, which is a better indicator in our performance because of some changes in our promotional shipments, volume is up 2%, and organic sales were even year-on-year. Our year-to-date market shares were up or even year-on-year in five of eight product categories. We've launched a number of innovations and are supporting our brands with strong marketing and promotion programs.

Overall, these initiatives are on track with our expectations. In our K-C Professional business, second quarter organic sales were up 2% in North America with volume growth in all major product categories. K-C Professional organic sales increased 3% in developing and emerging markets, led by Asia Pacific. In developed markets outside North America, organic sales rose 1%. In South Korea, while our diaper business continues to be impacted by a lower birth rate, our other brands are growing nicely. Now let me turn to our second key priority which is to accelerate personal care growth in developing and emerging markets. Second quarter organic sales for these businesses were even year-on-year. In China, organic sales were down about 10%. Competitive promotion activity in the diaper market has increased, and we are responding appropriately. During the second quarter, we launched our upgraded Huggies premium diaper.

And this quarter, we're rolling out an improved premium diaper pant. We continue to be optimistic about these innovation, although, in the near-term, we do expect marketing conditions will remain challenging. In Brazil, organic sales were up mid-single digits compared to a high-single-digit decline in the base period. Volumes were up slightly despite a modest impact from the countrywide transportation strike. Pricing has now turned positive following the increases we've implemented this year. In Argentina, organic sales were up mid-single digits. Price realization continues to be positive while volumes for us in the category are down which reflects the typical economic conditions. In Eastern Europe, organic sales increased double-digits for the third consecutive quarter. Volumes rose double-digits on both Huggies and Kotex behind innovations, strong marketing programs, and continued expansion outside of Russia. In terms of our market positions, trends are positive in most of these key markets.

Shares are up in Brazil, Argentina, and Eastern Europe, but down in China diapers. Regarding our third growth priority which is to further build digital e-commerce capabilities, we continue to make good progress. Our digital marketing programs, joint customer business plans, and investments in tools are producing good results. Online sales continue to grow at healthy double-digit rates so far this year. Now let me switch to the topic of selling prices. In April, I outlined several of our actions to improve net realized revenue. That included sheet count reductions in North American bath tissue, price increases in Latin America and other international markets, and initiatives globally in K-C Professional. These actions are broadly on track, and our pricing trends are improving. Net selling prices have gone from being down 2% in the fourth quarter last year to down 1% in the first quarter this year and down about half a point in the second quarter.

We expect overall pricing on the second half to turn moderately positive, mostly because of the actions we've taken in the first six months of the year. We will also be lapping elevated promotion activity in North America, especially in the fourth quarter. Still, given the headwinds we've faced, it's clear that we need more pricing. As a result, our businesses around the world, including North America are closely evaluating further opportunities to increase net selling prices. We anticipate that nearly all the impact from any potential actions would start to show up in our results next year. Now let me turn to our outlook. Clearly, the near-term environment has become more challenging, and we are responding by aggressively reducing costs and increasing selling prices. At the same time, we continue to execute our long-term strategies to deliver balanced and profitable growth. We continue to innovate, support our brands with category-building marketing campaigns, pursue targeted growth initiatives, and improve key capabilities.

We also continue to focus on sustainable cost reductions while we implement our global restructuring to make our company even stronger for the long haul. In terms of our specific targets for the year, on the top line, we continue to target organic sales growth of approximately 1%. On the other hand, the outlook on foreign currency has gotten considerably worse since April. We now expect currencies will have a neutral to 1% negative impact on our net sales. Three months ago, we expected a 1% to 2% positive impact. On the bottom line, we're now targeting full-year 2018 adjusted earnings per share of $660 to $680. Our previous outlook was $690 to $720. To put that reduction in perspective, we're now expecting that commodities and currencies will be a combined year-on-year operating profit headwind of about 20% to 25%. Our original plan for the year included a net drag in the high-single digits to low-double digit range.

We expect to offset approximately half the additional headwinds with more benefits from pricing, cost savings, and spending reductions. In summary, we are aggressively managing our business to benefit near-term results in a challenging environment. At the same time, we're executing our long-term strategies to create sustainable shareholder value. That wraps up our prepared remarks, and now we'll begin to take your questions.

Questions and Answers:

Operator

Thank you, ladies and gentlemen. At this time, the floor is now open for your questions. If you would like to ask a question, you may do so now by pressing * 1 on your touchtone phones. If at any time, you need to remove yourself from the questioning queue or your question has been answered, press * 2. Again, press * 1 to ask a question now. Our first question comes from Ali Dibadj with Bernstein.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Morning, Ali.

Ali Dibadj -- Bernstein -- Analyst

Hey, guys. So, I have a few questions here. One is you mentioned a couple times in the release and in your prepared remarks about marketing spend being helped, whether it be on the gross to net or just pure advertising spend. Can you talk about where you are in marketing spend at this point? Obviously, the cynic in me says you need to cut marketing spend to make your bottom line numbers. Can you just give us some comfort there, please?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'll start, and then Mike can build on. I would say broadly if you look at our advertising and promotion spend in the quarter, it was pretty similar to the full-year average for 2017. So, it was down a bit from the prior year second quarter. And the thing that you're maybe not able to see is we are cutting non-working pretty substantially and reinvesting those savings. And so, if we look at our plan for the year, embedded in our guidance is relatively flat marketing spend. So, we're not cutting marketing spend broadly to make the number. Mike, maybe you wanna build on that.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah. Actually, Maria and I were just huddling on it earlier. And if you go line by line, all of our working lines are actually up versus the plan. It's the non-working numbers that are down significantly. And maybe to give you a little background, Ali, is when we went through our global restructuring planning, obviously taking a hard look at all lines of non-labor was an important initiative for us. And we just found that there was a lot better ways to manage our non-working spend or get more efficient in terms of how we produce our copy or our promotional programs around the world. And you can imagine the inefficiency that might exist when you have these marketing initiatives distributed around the world. So, we pulled some back, and we're really just getting out of some of the non-productive spend.

Ali Dibadj -- Bernstein -- Analyst

Okay. And that's helpful. And then the corollary to that is obviously brand power and pricing. And you put a very helpful slide. Thank you, Mike. I think you went through it on page 20 in the presentation just around selling prices. I'm worried about pricing. You guys probably know this from some of our last discussions and some of the pieces that we've written. What gives you confidence that you'll be able to take the pricing that you laid out, that you're not gonna be promoting it back, that the competitor environment's gonna allow you to take pricing in different parts of the world? I think that's a big controversy for the whole sector but certainly for you.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah, no. I'll tell you, we know we gotta show you. So, it's been a while since we've had commodities cost at this kind of level. We were going back through history. If you look at 2008, 2009, 2010, 2008 and 2010 both had commodity cost hits that were about in the range that we're in. I think in 2008, we took two price increases. 2009 was a recession, so we gave some of it back. 2010, we took another round of price increases. We came out of it with higher margins than we started. So, it takes us a while to get price. And so, we do suffer during the period of time while we're getting that embedded in the market. But we feel confident that with a commodity cost hit at this level, that the cost structure from most of our competitors is similar and that there will be a more broad-scaled price. But I don't know, Mike, if there's anything else you wanna add to that one.

Michael Hsu -- President, Chief Operating Officer & Director

Well, I guess the addition, Ali is that we have taken some pricing actions around the world this year. And we have progressed there. And so, that's one piece. Second, as Tom mentioned, when you have a commodity impact as large and significant as it is right now, I think our customers understand that. And we do have to recover and improve our net revenue realization. And so, we are gonna take the appropriate actions. And we've seen maybe some evidence in the markets and various markets that would show maybe that 1) the promotion intensity in markets is easing a bit. And second, we have seen some early indications of some pricing moves by competitors.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. So, we're not leading it everywhere.

Ali Dibadj -- Bernstein -- Analyst

Okay. And then just related to that, my last question is around the implications of that on EBIT because although you try to recover some of the commodity cost, it doesn't seem like you're able to recover as much as you'd like. And so, the pressure on EBIT obviously is very obvious and very clear here. And if you could comment on your EBIT trajectory, certainly in the context as well as what a lot of folks look at Q4 which is returning cash to shareholders, how should we think about the EBIT pressure you're facing and the challenging environment that you're facing in the context also of the sustainability of your even payout ratio and your share repurchases?

Maria Henry -- Senior Vice President & Chief Financial Officer

Sure, Ali. I'll take that. We gave a range on share repurchases of $700 to $900 million for the year, and we're still tracking to do that. And you know what the dividend is. We do expect that our leverage will be up slightly as we come out of this year, versus where it was when we started into the year. And so, if you put all those things together, I think we're still tracking to what we said on shareholder returns which in total would be $2.1 to $2.3 billion for the year.

Ali Dibadj -- Bernstein -- Analyst

Okay. Thanks.

Michael Hsu -- President, Chief Operating Officer & Director

Thanks, Ali.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks, Ali.

Operator

Our next question comes from Steve Powers with the Deutsche Bank.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Morning, Steve.

Stephen Powers -- Deutsche Bank -- Analyst

Good morning. Thanks. So, could we just pick up on that pricing theme? Because you sounded very confident in your response to Ali's question about your ability to push through price. But at the same time, we obviously haven't seen it in the first half. I think the call for modestly higher pricing in the back half doesn't sound that ambitious. And if I just go back to those benchmarks you just talked about, 2008, '09, '10, it just seemed like the pricing came through. Although it wasn't immediate, it did come through a lot more quickly and more robustly than I think we're seeing this cycle. So, what's different? How much of the pricing pressure that at least I perceive you to be having right now if you agree, is temporary versus something that might be more structural in your categories?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'll let Mike elaborate on that. I would say it's probably fair to say that it may take a bit longer to get price, particularly, if you're gonna take price through either package count or sheet count. There's some supply chain implications to that. Doing it in the middle of a big restructuring, we probably had some other people focused on other things. But it probably takes us a bit longer to get price in the market. Typically with your retailers, you're three to six months out on promotion plans as well. So, I'd say that's probably a fair push. But Mike, maybe there's some other color you wanna add to that.

Michael Hsu -- President, Chief Operating Officer & Director

Yes. Steve, we've taken some actions here today in most markets including North America. I would say that they were not at the level because I think the commodity impact was, as we said earlier, far higher than what we were expecting to get at the beginning of the year. So, at this point, we're looking at another round of pricing. And I would say a couple big changes. We've made pretty good progress this year in a business like North America consumer tissue. Our pricing is up two points in Q2 after being flat in Q1. And that's all an artifact of the desheets that we've bundled with our product improvement there.

And you might have seen -- you can probably see in the numbers in personal care, we've lagged a bit. Our pricing was still down a bit in Q2. Part of that is also an artifact that we wanted to support our innovation on Huggies this year and in adult care. And we're doing that pretty well. That said, we also had some pretty strong promotion plans that were locked at the end of last year that we plan on adjusting and using, promoting depth and frequency as we go through the balance of the year.

Stephen Powers -- Deutsche Bank -- Analyst

Yeah. So, on the one hand, I get it. And I get that the cost pressure's building. And I guess just asking for your feedback on this. It feels like competitively, the categories, especially personal care and baby care that you're in are super important to the retailer right now. They're very focused on winning that consumer. And so, there's a lot of pressure from them to keep prices low. They're pushing on private label. Your biggest competitor I think definitely wants to win in what, for them, is one of their biggest, if not their biggest profitable categories. So, it feels like there are things that are, especially in personal care, that structurally are gonna make pricing more difficult, not only in the back half of this year but for the foreseeable future. Do you agree? Or am I overdoing it?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Well, I think it depends on the market. I'd say the thesis isn't wrong, although that hasn't changed all that much. Baby care has always been an important category for our retailers for a long, long time. And they wanna be competitive. I think our customers, they understand industry price changes when the commodity cost ships. They just wanna be advantaged somehow. And so, that's what we have to work with as we implement it. The good news is as you look at private label shares and personal care broadly, they haven't moved very much. In fact, if anything, they're down a tick in diapers which is positive as we've driven innovation. And that's helped us on the mix front a bit.

Stephen Powers -- Deutsche Bank -- Analyst

Great. Okay. One question on another topic if I could which is on the savings side. And I look at the SG&A reductions, and especially appreciating your comments to Ali about not cutting into working media, it just feels like the cuts that you've been making not only this year but over the past, really three years or so are pretty aggressive when it comes to that overhead or non-working part of SG&A. So, I guess the question is just where are you sourcing them from? How much of this is belt-tightening that once you get a little bit of relief, you might have to put back into the business? Can you sustain this level of cutting? Because when I look out to next year, it just feels like that source of profit growth or inflation offset may not be there for you, and I'm just looking for some help to bridge that gap. Thanks.

Maria Henry -- Senior Vice President & Chief Financial Officer

Yeah. Sure. We have a number of things going on the between the lines spending front. You saw in our results in the second quarter that we delivered $40 million of savings from our restructuring program. And 80% of that fell between the lines, so below gross margin. And that certainly has helped our ratios in the second quarter. Beyond that, we have been very tightly managing discretionary overhead spend. And you saw that come through our results really starting in the second half of last year. And those are things like T&E, meeting expense, all of those types of activities. We really have our whole workforce focused on taking out either unnecessary or less valuable types of spend so that we can protect the investments that we're making behind growth.

Your question on is it sustainable, I'm not gonna say that the second quarter rate is gonna be the rate every quarter, but you know that from our guidance on the restructuring program that over the next couple of years, we will continue to work the cost structure hard. We've got $500 to $550 million of savings associated with that program. And probably a third of that is gonna accrue to the SG&A part of our P&L. The area where you're seeing the biggest reductions when you look at where is it between the lines is really in the general and administrative side of the house. And that is, as I said, working the discretionary hard, working the restructuring hard, where we're looking to take work out of the system and leveraging various productivity programs. So, we're hard at it. And our goal is really to fundamentally lower the cost structure of the business and continue to invest behind our brands to grow the top line.

Stephen Powers -- Deutsche Bank -- Analyst

Okay. Well, so far, so good. Thank you very much.

Michael Hsu -- President, Chief Operating Officer & Director

Thanks.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks, Steve.

Operator

Our next question comes from Olivia Tong with the Bank of America.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Hey, Olivia.

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

Hi. How are you?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Pretty good.

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

Good. I actually wanna ask more about the go forward beyond this year because clearly, there's been a lot of focus around the growing and growing challenges across many [inaudible], not just you guys building their price, consumers willing to pay for premium priced products overall. And I was just hoping you could give us some color on how you view your ability to hit your long-term algorithms going forward and what you need to change to get there. We talked about cutting in the non-working spending, but is there more investment necessary in other parts, more marketing in the working areas? Because right now, it seems like given what's happened already in the first half of the year that it would be pretty tough to get to your long-term expectations for next [inaudible]

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. Olivia, the quality of the line wasn't very good. So, I think I heard most of the question. It was really questioning how do we get back to our long-term growth algorithm and when are you gonna see signs of progress and what changes do we have to make to get there. Is that a good summary of the question?

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

Yup. You got it.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Okay. So, I'll start, but then I'll let Mike pile on. And we've talked about some of the factors of the lower birth rate in some markets, some of the things that are going on in Latin America where we've seen double-digit unit volume declines. And places like Argentina have made the headwinds a little stiffer. Places like Korea where the birthrate's down 9% in our second largest diaper market obviously aren't helping. On the other hand, we do see the best for baby as a powerful instinct all over the world which is driving more premium products in places like the US and in places like China. And we've got a robust innovation pipeline that we're investing behind, and we'll use that across our portfolio to drive that. But Mike, maybe you can comment a little bit more on that.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah. Olivia, we're very bullish on our categories. Obviously, we'll need some help from the categories in some of the markets to get back to that algorithm. But I think the big plans that we have that we believe can help us grow is 1) in our core markets, are big markets, we believe there's still a big opportunity to elevate our categories. We know there's a big value consumer, and there's also big swaths of premium consumers. And part of the opportunity for us is we believe we make the best products in the world. But we still think there's plenty of opportunity to improve the fundamental performance across some pretty innovative dimensions that we're working on.

And so, we still think there's an opportunity to elevate the category and also bring more consumers into the category in big, developed markets. And then there's obviously large and significant potential in developing and emerging markets, as I've said multiple times. China's our largest market today, but it's gonna be a multiple of what it is today in the coming years. And then we've got India and other markets to build as well. Obviously, we can say all that. We've got plans that we're working on to accelerate our growth, but we've gotta show you. And we know that.

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

The color's very helpful. And I guess just a follow-up. One thing about developed markets in the US, it sounds like those discussions have started. Maybe can you give a little bit of color as to what transpired? Or has anything changed in terms of your plans? Because you talked about pricing by reducing package count, but price obviously worsened in Q2. And the track channel data that we've seen so far would imply that promotional levels are still pretty high. And then in China, you talked about innovation and new product rollouts and stabilization in pricing. But it doesn't seem like that's -- given the competitive challenges, it doesn't seem that that's transpired the way that you had anticipated.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah, it has not. But I'll come back to China. Yeah. North America. One is there have been some pricing moves, some down counts competitively. We've desheeted in our bath tissue product. And in some categories, we have started dialing back the promotional depth and frequency and have additional plans to do more. We have had some discussions with our customers about this. I think they also see in fixed consumption categories, the way to grow the category long-term is to elevate it or to create more value added in the category. And so, we're not just talking -- for us, our strategy is not just to raise price indiscriminately. It's to create more value-added in our products that people would be willing to pay more for. So, that's a little bit on North America. I think China I think has been a market that, in my mind, been one of the most premium markets in the world. It is under a little bit of pricing pressure.

We've launched a terrific new product, this 5D core that delivers thinness, flexibility, breathability in ways that are superior to, in our belief, any other major manufacturer in China today. That said, I think we got off to a good start, but those results have been muted because pricing has come down in the most recent quarter about double-digits overall in the market. And in some cases, we have matched on as we've rolled this out. and that's muted our impact a little bit. So, China right now, we expect it to be a bit challenging because it remains the single largest opportunity that we have on the board to grow. All our competitors see that same opportunity, and they're going for it too. But we're in China to win for the long haul. We've got a great team that knows how to make winning products and knows how to operate within a lean cost structure that delivers the margins that we need.

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

Got it. Thank you very much.

Operator

Our next question comes from Bonnie Herzog with Wells Fargo.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Hey, Bonnie.

Bonnie Herzog -- Wells Fargo -- Analyst

All right. Thank you. Good morning. Hi. I wanted to go back on consumer tissue business and drill down a little bit further. You guys took some pricing in the quarter. It was up 2%, yet your volumes were down 3% on a somewhat easy comp. So, I'd like to first hear your thoughts on price elasticity and then maybe how your elasticity is changing in this environment. And then second, in thinking about the strong volume you guys reported in that segment in Q1, how much loading occurred that might also have contributed to the weaker volume in Q2?

Thomas Falk -- Executive Chairman & Chief Executive Officer

So, Bonnie, I'll start. And then I'll hand it over to Mike. I'd say we typically don't load and customers really don't wanna load tissue anyway. It's a very high cube. And so, been a strong promotional counter in the first quarter that sold through. And then the second thing -- and Mike will give you a little bit more color. On the second quarter, whenever you do a desheet, you see negative volume and positive price. And so, if your customers were ordering 100 cases before, it's got fewer sheets in it.

So, you're gonna show less volume. And yeah, there's some inventory decline in both the customer and consumer. We typically don't try to measure that or call that out, but it's not unusual to see some softer volume in a desheet or a down count environment. And so, that's something just to watch for and know that it exists. It's not an elasticity issue. It's just a fact of life that there's fewer standard units in each case that we ship. And so, as we look at consumer tissue for the first half, we're more or less on track with the plan. Our shares are stable, and we've had positive organic growth. But Mike, I don't know if there's anything else you'd add to that.

Michael Hsu -- President, Chief Operating Officer & Director

No, just picking on a few numbers, Bonnie. Our Q2 organic was down four. And most of that was due to that shift in promotional timing that Tom talked about. Just to refresh your memory, back in Q1, I think our volume was up in North American consumer tissue 9%. And we said at the time that that is not the run rate of the business. So, it was a big shift. It wasn't a load. It was more volume that sold through in Q1 that was in Q2 of last year. So, that's one big change. And as Tom said, year-to-date, our sales are up one which is in line with our plan. The additional thing I'll tell you is our innovations in family care this year are off to a very good start. Kleenex Wet Wipes doing very well at launch.

I think it's already -- at the velocity rate it is, it's the largest wipe in the marketplace right now. Cottonelle Wavy Ripple is selling very well, performing very well, and getting great customer feedback. It's a consumer preferred product. And if you exclude some of the promotional shifts, the base velocity is up mid-single digits. So, we're pretty excited about the new items we have. We are getting some price realization in the family care business and looking forward to more.

Bonnie Herzog -- Wells Fargo -- Analyst

Okay. That's helpful. And then I just wanted to go back to China with a follow-up question. I was actually in the market a few months ago, and it seems there's a perception from the Chinese consumer that the quality of your key competitor's brands is actually perceived to be better. But a lot of times, they're priced more attractively. So, I'd love to hear your perspective on this and then what changes you may be implementing to improve your positioning in that market. You touched on some innovation that you're bringing into the marketplace, but just wondering if more needs to be done there. Thanks.

Michael Hsu -- President, Chief Operating Officer & Director

Yup. Yes. Definitely, there's more that needs to be done. But I think we're off to a good start this year. The team has done a great job rolling out the new diaper, tier five diaper that came out at the end of the first quarter, beginning of the second quarter. And then also, we're rolling out a similar diaper pant that's also significantly preferred. I think there's that perception out there -- our testing would show a strong preference versus all the multinational competitors with our new product. And so, I think the team has responded to the consumer perception over the data, and they've developed a winning product. Part of the challenge of the China market right now though is people are being very aggressive on price. And we are in this for the long haul, and so right now, we are matching on price. Although, we don't wanna win on price. And we wanna return to winning on product quality and brand positioning. And those are things that we're driving in the market as well.

Bonnie Herzog -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

Our next question comes from Dara Mohsenian with Morgan Stanley.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Morning.

Dara Mohsenian -- Morgan Stanley -- Analyst

Hey. Good morning, guys. So, Maria, I just wanted to follow up on Steve's question earlier. You talked about what's driving some of the cost savings this year and in the back half of last year. But I'm wondering as we look out, is there any type of hangover when we look out to 2019 in terms of are some of these cutbacks more temporary in areas like discretionary travel, etc instead of compensation that ramp back up in 2019? I know you'll be hesitant to speak to '19, but the question is more the 2018 cost savings. How much of that is more discretionary and belt-tightening that may have to come back as you look out to 2019? Thanks.

Maria Henry -- Senior Vice President & Chief Financial Officer

Sure. I think there's a number of factors that will affect what our SG&A rates are within any given quarter. What we're fundamentally trying to do is run our company on a lower cost structure. So, finding new ways of working that don't require us to spend as much money on lower value-added activities. And that's something that we're hitting hard in the restructuring. In terms of the non-restructuring reduction in discretionary spend, clearly, we're not on our target for the year as you see in what's happening in the macro environment and our guidance range adjustment. So, we do have a comp benefit this year that will hopefully not repeat next year. But for the most part, the changes that we're making in the business are structural. Now the timing of those changes is gonna vary quarter to quarter. So, let me give you an example. We talked about the fact that in our restructuring program, we've accelerated certain actions which is why we increased our restructuring savings number by $50 million within 2018.

We are through our voluntary severance program. And so, we've had a lot of employees leave the business. The restructuring program and the savings that we've given is actually a net number. So, I would say that we're probably a little ahead on the excess and a little bit lagging on the add-backs in the business. So, we may have some timing shift there around headcount. That'll play itself out through the year. And I think overall, the fact that our savings number has accelerated for 2018 is a good thing, and it's showing the hard work that the teams are doing to really help us offset some of the headwinds that we're seeing in this year. But overall, the goal here is to fundamentally lower the cost structure of the business. And that's what that restructuring program is all about.

Dara Mohsenian -- Morgan Stanley -- Analyst

Okay. That's helpful. And then I wanted to return to the pricing front in personal care. I guess it sounds like it's more business as usual in the back half of the year in terms of some typical pricing actions, depth and frequency, etc. It doesn't sound like there's been a big change in mindset around pricing. And I'm just trying to understand that, given if you look over the last year, it looks like the combined impact of pricing and input cost in personal care is $200 million. It's a big number. So, I guess just help me understand why it's not a bigger focus. Is it just the competitive environment that's really limiting your ability? Does that competitive environment change going forward? And as we think about your own internal pricing actions, are these significant actions? Or is it more -- can you recover a lot of what you lost? Or is it more moderate given the competitive environment?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'll start and then let Mike build. I guess if we gave you the impression it was business as usual, that was probably the wrong impression. And we typically run the business assuming we're not gonna get much price in a relatively stable commodity environment and that we can compete on innovation and execution. And this kind of commodity cost environment, we're looking to get price in lots of places. And some places, it takes longer than others, but looking at it through lots of different vehicles, whether that be price, count, promotion, trying to pull all these levers. And so, I'd say the team is heavily focused on that while not trying to take their eye off the ball and execute on the innovation plan and getting the right winning products on the marketplace.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah. Just to add, I think last year, personal care -- at least let's talk diapers in the US. I think the promotional environment had gotten more intense. And I think at this point in time, on this call last year, we were saying we were saying we were gonna plan to where our plans become a little more competitive in the marketplace. And that meant more depth and more frequency. I think there has been a significant change this year. and I think the market has, in my mind, maybe normalized back to where it historically has been in terms of promotional intensity. So, part of what I was saying is on the promotion side or the trade planning side, we're adjusting our price points to maybe back to where they had been historically for us. That's one part. And then second, we're evaluating additional opportunities for pricing because we are taking some pretty significant increases to our input costs in the personal care business as well. And we feel like we need to make some moves there as well.

Dara Mohsenian -- Morgan Stanley -- Analyst

Okay. Thanks.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks, Dara.

Operator

Our next question comes from Lauren Lieberman with Barclays.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Morning, Lauren.

Lauren Lieberman -- Barclays -- Analyst

Hey. So, I just wanted to go to the performance in D&E markets, personal care [audio cuts out]

Thomas Falk -- Executive Chairman & Chief Executive Officer

Oops, we lost you, Lauren.

Lauren Lieberman -- Barclays -- Analyst

Tom?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yup. We got you now.

Lauren Lieberman -- Barclays -- Analyst

You got me now? Okay. Hold on. Let me put down my headset and see if this works. Okay. Sorry. So, I was just looking at the organic performance in D&E markets in personal care. So, organic growth overall was flat this quarter, but when, in the script, you went through some of the markets -- China down 10%, but everything else, the big, chunky things, Brazil, up mid-single digits, Argentina, mid-singles, Eastern Europe, up doubles. I'm having trouble figuring how that all squares to the business being flat in the quarter. So, what other markets maybe, if there were other markets that were particularly weak -- what am I missing to tie out to D&E having decelerated again, both sequentially and on a two-year stack?

Because I look forward -- I think that's the thing that probably three or -- now we're probably four quarters into D&E markets not improving in a way that I might have expect, even just based on the comparisons. So, that's a piece of the puzzle I'd love a little help understanding, both dynamics in the quarter and how it is that things get better from here.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I think maybe Mike or Paul could give you a little bit more detail. I think probably the only other big piece that you're missing is the rest of Latin America was relatively soft. And that was a trend from the first quarter. There's some positive signs. And we could go through the litany of what's going on in the Caribbean with recovery from hurricane or in Central America with issues going on in Nicaragua. There's some political upheaval in some of those spots that are part of it. And other parts of it, there's a little bit more competitive activity. But that's probably the biggest one. And then the relative size of China is the other factor. That's a pretty big number, and the other ones aren't as big to offset it.

Paul Alexander -- Vice President, Investor Relations

Yeah. And Lauren, if you looked at Q2 versus Q1, you would see that Latin American total was pretty similar to a similar performance. Argentina was a bit softer. Brazil was pretty similar. And China was softer.

Lauren Lieberman -- Barclays -- Analyst

Okay. So, on the go forward look, what are the pieces as you're thinking through what gets better? You've had this big product launch in China. This is challenged by the pricing environment. Is Latin America just a hope for macro-stability? Just a little bit of help on how things go from here in some of these markets where -- it's one of your big focuses for 2018 is accelerating personal care and D&E.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah. Lauren, 1) I think some of the underlying performance I think we feel very good about. And as I mentioned, in Brazil, I think our market shares are up about three points in diapers and two in fem care. Similarly, in Eastern Europe, up a couple share points in diapers and fem care. So, I think some of the fundamentals of the things that the teams are working on in terms of improving our value proposition or improving our offering, particularly both in the value tiers and the premium tiers, I think is working pretty well. I think part of the challenges we gotta work through is China is a challenging market right now with some of the pricing environment.

And we're gonna need to work through that. And as Tom mentioned, it's a pretty significant piece of our business. Year-to-date overall in D&E, we're up about 1%. And I think our developed markets are a little bit ahead. And maybe D&E's a little bit behind. And so, in our call for the year, our best call right now is probably the second half looks a little bit like the first half in D&E for the balance of this year. But we do think -- we've got share moving in the right direction in most major markets in D&E, and we're working on the right things.

Lauren Lieberman -- Barclays -- Analyst

Okay. And then if we could talk a little bit about profitability in consumer tissue. So, understand the cost pressures we're seeing are primarily hitting this business more than any other. But 14% margins I think is the lowest we've seen in probably five to six years now. So, as you think about the long-term structural profitability for consumer tissues -- so, once you've got the pricing in that you feel is appropriate, you've mentioned low margin exits in your restructuring plans plus some things that had been rumored in the press in terms of Europe. What do you think is the long-term run rate for margins in consumer tissue? Is it high-teens? Is it low- to mid-teens? This 14% jumps off the page a bit versus where we had seen the business get to over the last five years.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. It's a good question. Lauren, you and I have been around long enough that you and I remember high-single-digit margins.

Lauren Lieberman -- Barclays -- Analyst

Tom, don't remind everyone. Don't remind them how long I've been doing this.

Thomas Falk -- Executive Chairman & Chief Executive Officer

And so, when you go through a pulp price spike like this where it's $1,200.00 plus a ton, that business is gonna take it, and it takes a little while to get price, especially if you're gonna do it through sheet count. And so, the good news is that the low point is a lot higher than the prior cycle. And so, what we're hopefully doing is shifting that range up over time by improving the mix, by improving the innovation, by improving the cost structure. And if we can continue to do that, I think we'll be in that, hopefully, mid-teens to upper-teens across the cycle. And we were up in the 18 plus range not long ago.

The good news was that in this kind of commodity cost cycle, you look at the KCP margins at 19 plus, and that shows you what's possible in a tissue heavy business. And then you still see personal care hanging in at north of 20 in a fairly stiff commodity headwind. So, we know we got some work to do in tissue. We gotta get some revenue realization. There's obviously some cost savings that will come from the restructuring. And yeah. So, that's a focus for us as we go through the balance of the year and into next year.

Lauren Lieberman -- Barclays -- Analyst

And what, if anything, do you think has changed from a consumer or competitive standpoint in consumer tissues say, today versus the last cycle? So, let's point to the 2008 cycle where margins got to sub-8% at the lows, I think. So, in terms of consumer demand, openness and prevalence of private label, the things that everyone's worried about, how much do you think has actually changed? Has the threat gotten worse? Have shares really changed in this 10-year period? Because I think that context would be helpful too.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'd say private labels shares have generally increased. And if you go back, I think we looked at some data from 2012 or something like that. And I think it's up five or six points in towels in the US. Our share's flat, which we don't have a huge towel share. So, it's not like we've been the big donor. And bath shares I think are up five in that period. And I think we're down a point or two.

So, if you look at Europe, you generally see private label shares up. So, I think the thing that's probably changed for us is we maybe have a healthier portfolio. We went through the tissue restructuring since the last time that we talked that helped exit some less profitable business. And so, we've continued to work that part of the portfolio. We've mix shifted more of our capacity in emerging markets, especially into the more premium tiers and been choiceful about where we expand that business. And so, I think we're trying to manage it to get growth where we can get profitable growth and to get margin where we should get margin. And overall, I'm not satisfied with where we are, but I'm pleased with the progress that we've made.

Lauren Lieberman -- Barclays -- Analyst

Okay. Thanks so much. I really appreciate it.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks.

Michael Hsu -- President, Chief Operating Officer & Director

Thanks, Lauren.

Operator

Our next question comes from Jason English with Goldman Sachs.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Hey, Jason.

Jason English -- Goldman Sachs -- Analyst

Hey. Good morning, folks. Thank you for allowing me to ask a question. I guess I wanna dig deeper on the dynamics on the dynamics in a couple of your core markets. And why don't we start with China? This persistent price competition the market, is there any way for you to unpack it and give us a bead or give us your sense of how much is due to maybe tariff changes in the market, how much is due to just an aggressive stance from your major Japanese and US competitors, and how much is due to just the broader proliferation the market? And on the proliferation point, it's something I think you've highlighted in the past. And there's been some question about how much the proliferary products could actually stick and endure and whether or not there could be a shakeup on the horizon that could make things a bit easier. I'd love an update on the thought process around that and what you're seeing in the market.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'll start again, and I'll let Mike build it. First of all, I don't think any of it's related to tariff discussions. So, all the products that we make and that we sell in China are for the most part made in China. There's a bit that we import from Korea, but there's -- we don't import or export anything out of the US. We also make all the products for the US market in the US market. So, it's not a big issue really for either of those. On the competitive front, I think everybody thinks the other guy started the fight, usually. What I would also say is when you have one competitor like us launching some big innovation, if you don't have any innovation, sometimes you compete on price. And China is a big growth opportunity for everybody. And no one wants to get left behind. And so, it's also a big e-commerce market. Probably half of our business is in e-commerce.

There's a little bit more price transparency there. And you also have the e-tailers competing with each other to try to win in this category. So, that also can make the pricing a bit more competitive. And so, as Mike said, it's the biggest diaper category in the world. It's not our biggest diaper market yet, but it will be one day. And everybody else sees that as well. And we're up for the challenge, but it's gonna be a volatile, exciting place to operate for a while.

Michael Hsu -- President, Chief Operating Officer & Director

Yeah. Jason, I probably would do a better job answering this question after this week. I'm flying out to Shanghai this afternoon, so I'll be able to let you know more. But I would tell you my sense is hey, there's been some traction from some local players who have picked up a pretty nice chunk of share over the last couple years or maybe over the last 18 months or so. And I think some of the prices are in response to that growth. And some of the major manufacturers don't wanna let that share grow. Our response has been to outmatch them on product quality and innovation which is why we had the big push we had this year with our 5D core. That said, the market has moved.

And so, we want to be competitive in the marketplace, and we are going to be competitive on price as well. So, I think that's a little bit of what's going on. I think long-term, the right strategy for China is to create more value added. It's a market where the consumer has demonstrated they're willing to get what's best for baby. And that market is, in my mind right now, the most premium market that we have in our business system. And I think there's still more potential to create more value-added going forward.

Thomas Falk -- Executive Chairman & Chief Executive Officer

And while we've had some price cutting, the prices in China are quite attractive relative to other markets as well.

Jason English -- Goldman Sachs -- Analyst

Thank you. That's helpful. And then a couple quick questions on North America. North America's been challenging. I know we've got a subdued birthrate. We've also had brick and mortar retailers investing pretty aggressively and presumably pushing pressure back upstream to defend against e-commerce. If we look at the Nielsen data, it looks like brick and mortar seems to be winning that battle. The growth in diapers and training pants combined is surprising to see there. So, a couple related questions. 1) Are you seeing that channel shift to online stall out? Or if not, what's driving that brick and mortar growth? And B) I know that a lot of the investment came last year with at least one major retailer restaging private label and pushing hard on price beginning in August of last year. Do you think we found a floor that we can soon anniversary on some of that retailer price investment? Or should we expect just another leg on top of it?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. that's a complex set of questions. I guess I would say we tend to look at our all-outlet share data which includes e-commerce and club and the other things that aren't in Nielsen and don't spend a lot of time slicing and dicing on Nielsen data. So, I don't know that I'd necessarily be the correct person to answer that. I would say broadly, I haven't seen any indication of slowdown in e-commerce trends. And so, that continues to be a popular place for Mom to wanna shop. And as it relates to private label, broadly, we haven't seen much movement in private label shares in our all-outlet data on diapers. And so, while there has been some activity by some retailers in that space, it hasn't moved the needle overall with the consumer. And you are seeing still some uptick in the super premium end of the segment which has been a positive mix for us and others in the category. But Mike, I don't know if there's anything else you wanna add to that.

Michael Hsu -- President, Chief Operating Officer & Director

No. The good news, Jason, is I think the headline in maybe the diaper category is that the overall megacategory for the last quarter was up one. And that's a big change from where it was this time last year which was down five. And I think part of that is -- I think when we saw the deflation in the category last year, I think certainly, we didn't like that. And I think maybe it raises some concerns with our customers as well. So, I think that's one piece of very good news.

With regard to the channel, we don't try to pick winners. Our strategy is to support all of our customers and tailor our tactics in market with them to support their strategies. And so, our e-commerce business both in pure play and through bricks and mortar is up pretty significantly. And I know both sides of that are very focused on it. And we're supporting them in different ways but with the same objective. We're trying to serve our customers and consumers in the way that they wanna be served.

Jason English -- Goldman Sachs -- Analyst

Very good. Thanks a lot, guys. I'll pass it on.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks, Jason.

Operator

Our next question comes from Andrea Teixeira with JP Morgan.

Andrea Teixeira -- JP Morgan -- Analyst

Hi. Thank you. So, I was hoping if you can elaborate more on the force and the restructuring program. So, you added some incremental cost cuts to guidance. So, can you elaborate on your R&D levels? So, I was hoping you can describe a little bit more if those cuts include R&D from what you discussed that your working marketing spend is flat, but in terms of R&D, how you can look at this going forward. And what are the areas specifically -- we spoke a little bit about T&E and also travel. But what are the areas that you became more optimistic against [inaudible] So, two questions, part of one. R&D and then areas that you see incremental cost cuts opportunities.

Maria Henry -- Senior Vice President & Chief Financial Officer

Sure. Well, you've got it right that we've got two significant cost programs in both force and in our restructuring program. Let me talk about force to start with. We had a good quarter in the second quarter. We were up compared to the first quarter. And with what we see through the remainder of the year, we were able to take our outlook up for the savings that we expect to generate from that program for the year. We're seeing savings across all four legs of that force program which includes productivity, and it includes product cost optimization and driving down spending across our facilities as well as savings that we achieve from negotiating lower material prices. And when you have an inflation spike, the discounts that we've negotiated are worth more. And so, we expect to have a good year on the force cost savings front. On the restructuring program, I talked about the fact that we've accelerated some of the activities that we planned to take.

And that's good news because the teams are being aggressive in getting the work behind us. And that's yielding more savings for 2018. On the R&D side, I'd say two things. 1) R&D is covered in our restructuring program, and that has to do with really driving efficiency and effectiveness of our R&D spend and our R&D program that we have. So, our R&D is an area that's very important to us. Innovation is a key plank in our growth strategy. What we're looking to do is become more efficient in the R&D spend that we have behind those innovation programs. So, R&D is part of the restructuring program. The other thing I'd say is the third piece on the cost savings that I talked about is a reduction in discretionary spend. And that's across the board.

That's hitting all areas of our business. And that would include the money that we spend in the R&D organizations on discretionary items. But I would emphasize, similar to what Mike said earlier, we are not reducing the fundamental investment in our business. And we've got a big innovation agenda, both in 2018 and in the future. And so, R&D is a critical area, and any reductions there would either come from the benefits on the restructuring program or the benefits with the discretionary cost cuts that are affecting all lines of the P&L.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. And maybe I'll just pile onto that. Each member of our leadership team had responsibility for one of the functional areas as part of the restructuring program. So, Mike did the customer and sales organization. Maria had finance and IT. I had R&E. And so, my goal was to come out of the restructuring with better R&E capability than we had going into it and the right people in the right place with the right capabilities to drive our business even faster with better innovation. And so, we will spend a little bit less, but we will have better innovation capability when we have this fully bedded down.

Andrea Teixeira -- JP Morgan -- Analyst

Yeah. That's helpful. But in terms of the percentage of the products that are new, they're coming -- a percentage of sales or products which are less than two years old, is that coming down because of this adjustment that you're making at this point? I think it's probably natural that it's coming down from where your organic growth is going too. Or is that something that you're not concerned?

Thomas Falk -- Executive Chairman & Chief Executive Officer

We track innovation as part of our compensation goals. We looked at three-year rolling, and we look at year one. And if you look at how we're tracking for our innovation goals this year, we're on track with our year one. So, a lot of the innovation that we're going into the market, we're supporting at the right level. We expect to deliver that. Some of the three-year rolling looks a little behind in places like Argentina where the categories have declined dramatically. Or innovation that you launched, obviously, if the consumer doesn't have the money to buy it, you're gonna underperform. But it's not far off track. And so, I'd say broadly on the innovation front, we're hitting. We gotta make sure we're getting the base volume at the right level.

Andrea Teixeira -- JP Morgan -- Analyst

All right. Thank you.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thank you.

Operator

Our next question comes from Ali Dibadj with Bernstein.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Hey, Ali.

Ali Dibadj -- Bernstein -- Analyst

Hey, guys. Thanks for the follow-up. I was wondering what you guys think in terms of any more potential for structural change within your company. Clearly, getting out of most diapers in Europe. And obviously, there's been some discussion about Europe overall being tough. Can you talk a little bit about how often you revisit those types of ideas and whether it'd be a surprise to us to see more structural change, whether that be Europe, whether that be breaking up personal care versus not, some of these topics we've revisited but the environment seems a little bit different now than it used to be?

Thomas Falk -- Executive Chairman & Chief Executive Officer

Well, No. 1, we're in the middle of a big restructuring. So, we've got structural change going on at the company. And as you guys know, we've been good stewards of the portfolio over time. And I would expect that to continue. It's not something you look at every year, but we look at it from time to time. And in the meantime, we're focusing on executing the restructuring plan flawlessly and getting price in the market. And we've got plenty on our plate to handle for the near-term, anyway.

Ali Dibadj -- Bernstein -- Analyst

So, in the time to time, is this one of those times that you're looking at it portfolio-wise?

Thomas Falk -- Executive Chairman & Chief Executive Officer

I wouldn't say unusually so. Not particularly. We're beating around the bush as to whether I'll comment on the Reuters story. And you know our answer will be no comment just because we don't comment on rumors.

Ali Dibadj -- Bernstein -- Analyst

No, I'm just trying to get a sense of what your cadence is and what your process is to make some of those decisions.

Thomas Falk -- Executive Chairman & Chief Executive Officer

It isn't as rigid as that. It's a periodic look at the portfolio. And I'd say broadly, we're pretty happy with the major segments that we're in, and I think we've got the right portfolio. That doesn't mean that we don't look to finetune things from time to time.

Ali Dibadj -- Bernstein -- Analyst

Okay. And then separate question, following up a little bit on e-commerce which was touched on a few times lightly. Can you talk a little bit about how you guys think about your market share in the US specifically, e-commerce? Where do you think you are? Are you still behind? We certainly see you showing up more than you used to. What did you do to get there? Just an update would be helpful.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. I'd say e-commerce broadly is an important strategy. And I'll let Mike add some detail. And there's some markets where we're ahead and some markets where we were behind and caught up, and there's other markets that we were a little behind, and we're catching up. And so, you've got that across the business. There's other markets that haven't emerged yet where we're monitoring and working with early adopter partners just to see how it's gonna shake out. And so, in the US in particular, we were behind. We're catching up. I'd say we'd still say that's the case. Overall, I think our total share on e-commerce in the US is about fair share. But it should be higher than fair share because there's less private label in e-commerce. But Mike, I don't know if there's anything else you wanna add about what else you guys are doing specifically to drive it.

Michael Hsu -- President, Chief Operating Officer & Director

No. E-commerce and then more broadly our digital strategy is a big opportunity for us still. And I know we've been experiencing pretty good growth more recently. If you think about the big e-commerce markets, Korea, we're I think three or four times the size of the next largest brand in our categories. And so, we're ahead there. We're ahead in China. I think the area in North America we'd say overall, we're fair share across all of our categories but a little bit behind in the baby and child care category. And we're gaining ground fast, and we're improving our performance there. But the broader thing is I think if you look at our category and you think about how our consumers behave in the category, Ali, it's a very high ring, annual purchases.

They're using the products every day, and it's high frequency. And so, we believe we have a different opportunity that's unique I think for a lot of CBG brands which is to create a different relationship with our consumer of which e-commerce can be a part. But the digital opportunity is even bigger for us in terms of how do we build a different one on one relationship. And so, we're excited about the growth we're seeing, but that's not our entire strategy there.

Thomas Falk -- Executive Chairman & Chief Executive Officer

And I think broadly, we're trying to just be present wherever Mom wants to shop. And it's not any more complicated than that.

Ali Dibadj -- Bernstein -- Analyst

Okay. Thanks for taking my second set of questions.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks, Ali.

Operator

Our next question comes from Kevin Grundy with Jefferies.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Hey, Kevin.

Kevin Grundy -- Jefferies -- Analyst

Hey. Thanks for fitting me in. Good morning, guys. I'll be brief. Quick clarification on China in the quarter, down 10% organically. What was the price mix and volume composition of that? And then a broader strategic question on private label which has been touched on in the past. I think it's less than 5% of the company's sales. Strategically, do you think the board would get to a point where that becomes a bigger emphasis philosophically? Are you opposed to that becoming much bigger than 5% of sales? Would you be comfortable if it reaches 10% or even greater than that over time? And just to help us think about that, can you talk about the margin and return differential for that part of the business? Thanks for those.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. So, maybe I'll start with the private label question first, and then we'll come back to the first question. And I guess I'd say this. We typically are doing private label with very few people and doing it in areas where we think it advantages our overall relationship. And so, to that extent, I think that would continue to be the lens that we look at it through to decide what we wanted to do from that standpoint. And I'd say that's probably where you'd say you're gonna go with it. Mike, I don't know if you wanna come back to the --

Michael Hsu -- President, Chief Operating Officer & Director

Okay. Yeah. In China, the pricing -- we're low-double digits down on price in China. I think our mix was a little favorable. And so, that does reflect the competitive environment that we talked about. The overall pricing category came down -- I don't know what the right term is, Paul. Mid-double digits. And it's a little bit more than what we came down.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Yeah. And then the other mix in China total is our fem care business was up strong double-digits in the quarter. So, that blunted some of the price and volume hit in diapers.

Kevin Grundy -- Jefferies -- Analyst

Okay. Thank you, guys. Good luck.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Thanks.

Operator

At this time, we have no other questioners in the queue.

Paul Alexander -- Vice President, Investor Relations

All right. Thanks for the questions this morning. And we'll wrap up with a comment from Tom.

Thomas Falk -- Executive Chairman & Chief Executive Officer

Well, once again, challenging environment. And you can count on us to do the best job we can of delivering results in a challenging environment. And we appreciate your support of Kimberly Clark. Thanks for dialing in today.

Michael Hsu -- President, Chief Operating Officer & Director

Thank you.

Operator

Ladies and gentlemen, that concludes this morning's presentation. You may disconnect your phone lines. And thank you for joining us this morning.

 

Duration: 72 minutes

Call participants:

Paul Alexander -- Vice President, Investor Relations

Maria Henry -- Senior Vice President & Chief Financial Officer

Michael Hsu -- President, Chief Operating Officer & Director

Thomas Falk -- Executive Chairman & Chief Executive Officer

Ali Dibadj -- Bernstein -- Analyst

Stephen Powers -- Deutsche Bank -- Analyst

Olivia Tong -- Bank of America/Merrill Lynch -- Analyst

Bonnie Herzog -- Wells Fargo -- Analyst

Dara Mohsenian -- Morgan Stanley -- Analyst

Lauren Lieberman -- Barclays -- Analyst

Jason English -- Goldman Sachs -- Analyst

Andrea Teixeira -- JP Morgan -- Analyst

Kevin Grundy -- Jefferies -- Analyst

More KMB analysis

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.