Paying attention to conference calls is crucial. That's because they provide some good insight on your favorite companies. While they only happen four times per year, they are worth their weight in gold.
The most recent Colgate-Palmolive (NYSE:CL)call, held July 31, was particularly interesting. Management did a nice job of filling us in on the market positions of many of its products. The first four quotes come from Bina Thompson, senior vice president of investor relations. The last is a neat little gem from CEO Ian Cook. So without further ado, here are five things you need to know from the consumer goods company's second-quarter call.
No. 1: Colgate-Palmolive is attacking the fastest-growing toothpaste segment in the U.S.
So looking ahead, our latest toothpaste innovation here in the U.S. is Colgate enamel health toothpaste. The enamel strengthening segment is the fastest-growing in the toothpaste category, with 54% of consumers concerned about enamel. This new product replenishes natural calcium and other minerals back into weakened enamel, filling in rough spots while at the same time, polishing the enamel surface so germs are less likely to stick on the teeth. The formula has an active fluoride system, along with gentle on enamel silica and the product comes in two variants, whitening and sensitivity relief. In addition, the impact for packaging is interactive with a touch-and-feel demo showing [acid softened] rough enamel and healthy smooth enamel. So as you would imagine, we have a very robust integrated marketing campaign planned, including television, print, public relations, professional, digital, social, mobile and in-store activities.
Aside from the nifty commentary on how this product is supposed to work, I like how management plans to market the toothpaste. Packaging that can reach the consumer on a different level works exceptionally well. In time, this item could be a big hit for the company.
No. 2: Sales are going well in Latin America
In the personal care category, we've increased our underarm share in Mexico as a result of new products such as Men's and Lady Speed Stick stress. We're now the leader in bar soaps across Latin America with Protex and Palmolive holding the No. 1 and 2 positions, respectively.
Latin America accounts for roughly 27% of Colgate-Palmolive's sales. While its oral care segment achieved record high market shares in Chile, Peru, and Puerto Rico, you also have to be impressed with what's going on in personal care. Aside from deodorants, soaps such as Royal Jelly, Palmolive Naturals, and Protex Omega 3 helped to drive volume growth.
No. 3: Product innovation is constant
Of course, more innovation is planned for the second half of this year. We will continue to roll out Colgate Maximum Cavity Protection with Sugar Acid Neutralizer toothpaste. In China, we'll be launching Colgate Tea Health toothpaste, which provides refreshing breath with a pleasant Longjing tea flavor. Longjing is a popular and premium type of tea in China, which is associated with multiple types of benefits, including healthy teeth and refreshing breath.
In Russia, consumers believe in the power of natural ingredients and traditional recipes to improve oral health. Accordingly, we're launching the Colgate Natural Extracts toothbrush, containing pine tree bristles, with premium differentiated and impactful packaging designed to stand out on shelf.
More new products are planned for the second half of this year as well. We'll continue the rollout of Colgate Max White One Optic. Whitening is the second-biggest segment in toothpaste in Europe and we hold the No. 1 position.
Companies that rely on consumer brands must consistently refresh some of their product offerings. That's because certain lines become tired and are replaced by cheaper generic alternatives in a customer's basket. Obviously, tea is a big deal in China, so what better way to connect to the consumer than to make a tea toothpaste? While that concept might not fly in the U.S., my bet is that it will do exceptionally well abroad.
No. 4: Hill's Pet Nutrition is doing well despite headwinds
Hill's business continues to be solid. General softness in the pet superstores has been affecting us and others as well here in the U.S. However, we're encouraged by our continued stream of innovation, which we expect to drive growth going forward. Our rollout of Hill's Ideal Balance continues to meet with success. Here in the U.S., our share of the naturals category continues to grow. And in addition to the regular Ideal Balance, we launched Ideal Balance Slim & Healthy in the second quarter for both dogs and cats. Support activities included features and coupon brochure handouts, brand ambassador coupons and nutritional consultant coupons.
Hill's is the brand behind Science Diet and Ideal Balance for pets. It's a pretty big chunk of Colgate-Palmolive's business, accounting for 13% of sales, or roughly $500 million per quarter. Unfortunately, specialty pet retailers such as PetSmart and Petco haven't exactly been lighting it up. For example, sales at PetSmart were up only 1.4% last quarter. The natural pet food category is particularly exciting, as you'll hear some in the industry talk about the increased humanization of pets.
No. 5: CEO Ian Cook sums up the company's overall strategy
Our market shares around the world continue to be strong and accelerating in Mexico and the U.S., two particular geographies that we were focusing on since the beginning of the year. And our innovation pipeline is deep and rich, not just for the balance of 2014 but into 2015 as well. We continue to feel that the strategy we have been deploying for several years, a strategy that focuses on building brands with our consumers, creating innovation that drives growth, maintaining the efficiency and effectiveness that funds that growth and developing a cadre of leadership to continue to manage the company, continue to be the right strategy, as does our execution on the fundamentals of our business around the world.
There are two things of note. The first involves how crucial the U.S. and Mexico are to the business. North America and Latin America accounted for about 45% of Colgate-Palmolive's sales in the most recent quarter. So it's good to see business moving in the right direction. The second is how succinctly Cook breaks down his strategy. To me, this speaks to a razor-sharp focus, which is critical for a consumer goods company of this size. I also liked the blurb about management developing its people, most of whom are probably on the ground floor turning the cranks of this massive machine.
Foolish final words
To sum up, management seems to be intensely focused on what makes the company tick. It knows where it's headed, and Colgate-Palmolive is doing a nice job building the business in North America, specifically the personal hygiene segment in Mexico. It realizes the importance of product innovation and is taking the necessary steps to refresh its product line. When you think of Colgate-Palmolive, you might discount the importance of its pet segment, but you shouldn't: it's a key part that is performing well.
Ultimately, management seems to have all the basics covered. Now it's all about execution. How well the company executes will determine the rate of return for shareholders.