Colgate-Palmolive Company (NYSE:CL) 2022 Barclays Global Consumer Staples Conference September 7, 2022 11:30 AM ET
Company Participants
Noel Wallace – CEO
Conference Call Participants
Lauren Lieberman – Barclays
Lauren Lieberman
So, next up, we’re pleased to welcome back to our conference, Colgate CEO, Noel Wallace. Noel is going to start off with some prepared remarks, and then I’ll join him back on stage for a brief Q&A. So, with that, Noel, the stage is yours.
Noel Wallace
Thank you, Lauren. Well, I can tell how excited it is to be back here in person, no one telling me I’m on mute, my ability to reacquaint myself with a lot of the investors in our company and old friends, which is wonderful to see. Just our Safe Harbor statement as a reminder to everyone. So, kids going back to school the last two weeks, it’s an anxious time for children as they reacquaint themselves with old friends and make new acquaintances, and we tapped into that insight to really figure out what a smile can do on that first day of school. So, let me run that spot for you to give you a sense for what that’s all about, what the Colgate smile can be. Great campaign that we’re running. That was our Latin America campaign. They were running that all around the world to really build the brand around optimism and the power of a Colgate smile, which has done very well in terms of building the brand, particularly in a tough retail and consumer environment.
So, let me talk about some of messages here, pretty straightforward. We’re executing against our strategy that we outlined three years ago. That strategy is driving consistent growth, topline growth, 14 consecutive quarters within our guidance. That growth is across all categories and all of our six divisions. And importantly, that growth is balanced between price and volume. And I think underscoring a lot of the growth mindset changes that we put in place around three years ago. To drive that growth, we have really transformed how we work as an organization and the capabilities that we have built across the organization. We’ve talked a lot about that over the last two years. I’m going to spend some time talking about how we’re scaling those capabilities and some of the output that we’re getting from that across the enterprise. And importantly, part of our key growth strategy is sustained investment behind our brands, that campaign you just saw, to continue to resonate with consumers and build the strength of the equity. We’re using our cash very prudently in terms of how we invest behind our business. I’ll take you through some of our capital structure and strategies as well. And importantly, you’re going to see a significant investment in our people, tying back again to the capabilities that we’re trying to establish across the organization in terms of working very differently in the environment that we find ourselves in.
Four key areas to talk about today. I’ll talk about our focus portfolio, spend a little time giving you a little context on why we find that the composition of our category is so attractive, particularly in the current difficult consumer environment. How we’re scaling those capabilities, I’ve talked about building over the last couple of years, and importantly, some of the results that we’re seeing from that. Driving productivity, obviously heightened inflation, particularly over the last 18 months, foreign exchange moving particularly in the last quarter, how we’re driving productivity across the entire enterprise with our Funding the Growth, our revenue growth management, and our recent productivity initiative. And importantly, for investors, how we’re thinking about using our strong cash flow to continue to reinvest in the business and drive shareholder value. And then, I’ll just repeat very quickly what we talked about in terms of our second quarter call. Tightened focus, this is a story you’ve heard for many years around the company in terms of how we focus on our four core categories. That’s oral care, pet nutrition, personal care, and home care. These are attractive core categories. As I mentioned, they’re growing consistently and sequentially across our business. These are our sales over the last three years, all categories growing across all divisions. Importantly, driven by strong brand penetration. You see the number one positions we have in toothpaste, manual toothbrush, vet clinics for our Hill’s business, obviously, liquid hand soap, and the strong number two positions we have in mouthwash, bar soap, liquid body cleansing, fabric, and dishwashing.
Let’s talk about these categories in a little bit more detail and why we think they’re so attractive, particularly in the current environment. Everyday usage is an important aspect and characteristics to the categories that we choose to compete in. this chart is from the US, and you see our categories boxed there in red. Roughly 75% of our categories are used every day by consumers. So, they’re non-discretionary, so to speak. We get the repeat purchase. We get consumers coming into the franchise day in and day out. Sun protection, as you can see at the bottom, obviously a new category for us, but we all know the importance of using sunscreen, and particularly the awareness of skin cancer has increased and heightened over the years. We continue to see great growth potential for that business as well. The other interesting aspect we get a lot of questions, what’s happening with the consumer? Are we seeing trade down, the impact of private label around the world? And the following chart is quite descriptive of what’s happening, at least in our categories. So, if you see the top end of this chart, these are the categories in which we compete in across our North America business. You see the level of private label is very low on average, about 5% or below. Those are the numbers in black. Immediately adjacent to those numbers is the growth of private label year-to-date in the categories in which we compete. You can see quite a few of those categories are actually down. That, again, I think speaks to the need for trusted brands, particularly in the categories where we operate. At the bottom of the chart, our non-Colgate categories. These are obviously HPC categories where we don’t compete. So, a good position relative to the interaction with private label. Again, it requires us to continue to build the strength of our brands, and I’ll talk a little bit about how science and technology is playing into that moving forward.
Recommendation is an important part of how we look at our portfolio of categories that we compete in. We look to build strong science and technology behind our R&D and how we bring new products to the market. That science and technology leads to strong clinical support, and that clinical support ultimately leads to strong endorsement from the profession, whether it be dentist and oral care, whether it be vets and pet nutrition, or whether it be dermatologists or estheticians in our skin health business. Some of the engagement process that we’ve used around the world in order to drive endorsement levels are on this chart, but you see it as an important part of building block of our strategy and how we think about driving trusted brands, how we think about creating stickiness with our brands. And importantly, as we look at an opportunity to drive premiumization, strong professionally-endorsed brands always command a premium in the market and obviously drive more consumer loyalty longer term. Again, I think a good example of how we’re thinking about tying that business together. Interestingly, last year, we’ve established a whole entire organization in New York now that’s centrally driven simply to look at the profession and how we’re sharing best practices across our categories, how we’re building recommendation levels, how we go to market and sell in certain markets across the world, and taking those expertise and really driving the synergies across the three segments where it’s most relevant.
So, I talked a lot about scaling capabilities, and this is really repositioning our company to think very differently around how we go to market and the skillsets required to win in the current environments. So, I’m going to spend some time digging into this a little bit more deeply. I’ve talked about building those over the last couple of years, but now we’re really in the phase of scaling those across the enterprise. It starts with, again, science-led core and premium, and ultimately breakthrough and transformational innovation, and I’ll talk about how that’s coming together now. Science-led innovation, again, is the backbone of our company. You’ve heard us for years and years and years talk about the clinical security of our oral care franchises. We’re taking all of that, obviously, into skin health and how we think about our science-led activity in skin health. And likewise, for the last 45 years since we’ve owned the Hill’s brand, very much built on the profession and the clinical superiority of our nutritional recipes.
The first example I’ll show you is an example from the US, which is our whitening strategy that we have built now for the better part of five years. The most recent launch is Optic White Pro series. This is a toothpaste with the highest level of peroxide that we have in any of our toothpaste, which is at 5% now. That takes a significant amount of technology and innovation in order to stabilize peroxide at those levels in a toothpaste. You can obviously see the significant growth, incremental growth it’s driven to the franchise. It’s also been launched at a significant premium to the existing franchise, and again, helping us continue to grow share in a space, and particularly the premium space where we are under-indexed.
Another great example is Hill’s prescription diet, Derm Complete. Again, a real breakthrough in science. This is a nutrition that manages both food and environmental allergies for dogs. A lot of clinical substantiation and work went into this over the years. The interesting part about how we brought this to market was we bought technology – a wearable technology to use in our clinical substantiation. So, think Fitbit for dogs. And for those dogs that have allergies, a lot of the allergies and scratching happens at night when you don’t know it’s happening. A lot of that scratching happens if you’re at the office or out of the house. We’re not – we were able, I mean, to substantiate exactly how much scratching decreased with our diets, and that allowed us to make strong clinical claims and gain the endorsement of the profession. So, again, a great way to tie together some science and technology to drive a key indication and a real superior product for pets that have that specific issue.
Skin health, another one we have a highly cosmetic and efficacious business. Number one brand recommended by dermatologists in the US for sun care. We’ve now taken and tried to expand that consumption into a portable product, which is a stick. This would be the first stick in our franchise. We spent the better part of a year developing the technology to get the same level of cosmetic elegance into a stick, non-residue and highly efficacious with a mineral sunscreen. That was no easy task, but again, we spent the time because we knew at the end of the day, the derms that are going to recommend our product, needed to have that same level of high standard.
The other aspect is obviously our core business. We have significant core businesses around the world. That is the bulk of our business today. We’ve talked about we need to innovate behind the core, continue to bring value orientation to that franchise. I’m going to share an example here from Sorriso in Brazil. That’s the number two brand in the market behind Colgate. We hadn’t innovated and brought real upgrades to that franchise in many, many years. We needed to get the brand back to its core positioning, which was based on Brazilian heritage. We spent some time making sure that we had upgraded those formulas, allowed us at the same time to take pricing in the market, and you can see the result has been 120 bps of share growth. So, let me share that campaign to just give you a flavor for some of the thought that went into that relaunch. I am told that is Brazilian funk. I believe it. It’s obviously that was the core idea with a local music that was very popular in Brazil at the time.
Move on to prescription diet. Our Hill’s business, as you know, is divided in two. We have a wellness business, which is Science Diet. You’re quite familiar with that relaunch that we executed about three years ago. We’re now in the midst of relaunching the other 50% of our business, which is the prescription diet, which is sold through vets. Here’s a way that we’ve completely redesigned the packaging, taking very much a digital-first approach to this business, thinking about how this package will be executed digitally, and making sure that it resonates with consumers and drives optimized search. We optimize the product itself, and obviously using a lot of digital tools to better educate the vets on the clinical superiority of our products, and more importantly, allow them to educate the pet parents on the efficacy of these products and the recommendations that are required to continue to improve the therapeutic penetration of nutrition.
7,500 miles across the world, we’ve got a big fabric softener business in South Africa. We don’t talk a lot about our fabric softening business, but we’re in the midst of thinking about that quite differently in terms of upgrading our core businesses to ensure that we have new and relevant concepts to the consumers. Here’s a great relaunch for our Sta-Soft business there, where we’ve upgraded all the formulations. We’ve concentrated the product, which provides superior fragrance delivery to consumers. And most importantly, it provides a significant sustainability impact in the marketplace, both to consumers, as well as our retailers. And you can see there, again, by upgrading your core businesses, it allows you to take more pricing. Here it’s 150 index of this line to our current baseline business today.
Moving on to digital and eCommerce and data analytics. This has fundamentally been the biggest change for the company over the last three years, and we’ve done it through a whole myriad of different initiatives that we think are really going to help resonate and substantiate our superiority in this space over the long term, which is ultimately our goal. It’s a never-ending journey. I mean, we have found that the digital space continues to change. You have to establish the fundamentals in your company, widespread across all the organization in order to do that effectively. We’ve done that through enterprise-wide digital tools. We’ve brought in significant amount of people from the outside, which is a change for Colgate. We’ve spent considerable money in terms of training and development to upscale all of our employees across the company. I frequently tell our teams; you have to understand the digital world that we live in to connect the dots and effectively do your job. And now, we’re in the midst of really sharing best practices across the organization in order to scale these capabilities and drive further growth for the enterprise.
So, in terms of implementing best practices, we have a lot – very different maturity levels of digital sophistication for our categories. Our most advanced business today, which has been on a journey – the digital journey for the better part of 10 years is the Hill’s pet nutrition business. our most advanced eCommerce business in the world for toothpaste is in China. It’s making sure that we’re taking those skills and that knowhow and really scaling the learning really, really quickly. If you remember Colgate of the old, we were able to take products and roll them across the world really, really quickly. That was a differentiating factor for us, is the scale and distribution that we had around the world. We’re taking that same idea now to digital, to ensure we’re sharing best practices and getting out at the forefront of how the digital consumer is evolving and how the digital retail is evolving in different markets around the world.
We do that through digital summits. You see the 1P data that Hill’s has been so good at. We’re sharing their thoughts around the world on how to manage CRMs in 1P. China, as I mentioned, premiumization has been a key for their success in eCommerce, and doing it very differently. Europe has done a fantastic job across the union there to think about search differently and optimize our web search and the consumer experience associated with our web search. A lot of this is centrally driven and obviously scaled as quickly as we can. Ultimately, it’s about building brand experience planning. And this is really the change of marketing for the company to not think about channel marketing, but thinking about the consumer journey and the omnichannel environment that they operate in today, and making sure that we interrupt that journey with our messaging to drive purchase.
Some of the results, obviously topline, our eCommerce business continues to grow really well. Again, eCommerce has not tracked in our market shares. This has been a fundamental change for us over the last three years to really accelerate our eCommerce share, which we see as the fastest growing channel in most of the categories in which we compete. China has been the fastest and most deepest penetrated online business in the world today for toothpaste. And we put a strategy in place to change our go-to-market in China three years ago to be very digital first. And we’re the fastest growing online business in the toothpaste category in China. And that’s quite a feat when you think we compete against over 75 brands in China. So, we think we’ve done a great job in really integrating the expertise and the knowledge, and then ultimately showcasing that around the world to drive other businesses.
Media buying is a real skill. We had obviously partnered with our media agencies to do that effectively. We’re bringing a lot more of that in-house to think about how to optimize media, particularly around programmatic. We’re able to measure and scorecard ourself really, really closely now. Scorecards are a new way of looking at the business, particularly in the digital world. Every day, your marketing teams and commercial teams should be looking at scorecards. They’re going to be red some days. They’re going to be green some days, and they’re going to be yellow some days. But how they act upon that learning, is ultimately going to drive the continuous improvement, and ultimately the ROI that we look to measure on everything we do from a digital standpoint.
16,000 Colgate people, as I mentioned earlier, trained in digital. We have extensive programs on digital media, extensive programs on digital marketing, extensive programs now in data analytics. The key is we want the entire organization to grasp the importance of this in order to drive the transformation that’s required to be a key player in the future. The other aspect of capabilities, we’ve talked about this for quite some time, is revenue growth management, and it couldn’t be a more important time to really upgrade your skillsets in this space, given the significant raw material inflation that we’ve seen over the last couple of years, and more recently, obviously the movements in foreign exchange, particularly against the Euro.
So, I’m going to share with you a unique example where we’re combining, I think, a lot of the digital prowess that we put into the enterprise, and combining that with how we take promotions to market. So, here’s a unique promotion that we did with pet specialty, where we looked at very specific specialty formulations, urinary weight as an example, and we built a promotion against these using CRM data, and the results were absolutely terrific. What you can see is we reduced the duration of the promotion, so the cost in market by 50%. We reduced the deal depth associated with that promotion by 25%, and it was all because we were using digital media across a whole series of facets with CRM data, partnering with our retailers in order to drive increased shipments there at 24%, and consumption ultimately at 25%. So, again, really thinking about how to combine our media expertise with our promotional expertise and revenue growth management to drive better ROI for our trade partners and for ourselves.
ESG, another very centrally-driven initiative. If you haven’t taken a look at our sustainability report, please do. We’ve done a lot of work. It requires resource. It requires time. It requires important choices to do things that are not only right for the environment, but likewise right for our shareholders. A couple of areas I’m going to talk about, obviously we have published our TCFD and SASB reports. Those are significant undertaking to do across the enterprise, and we’re very proud of the results and the documentation that we put forth into the marketplace, which opens up a lot more transparency, and more importantly, I think, motivates our organization to continue to deliver against our 2025 and 2030 aspirations. We took the lead, as you know, to launch the first recyclable toothpaste tube in toothpaste as the most penetrated brand in the world. We felt a responsibility to do that. Initially, it has obviously been an on-cost to our business, but we think fundamental to get the industry to convert over to recyclable tubes, and be sure that Colgate is leading the way to make that connection with consumers, and ensure that our trade partners understand that we are bringing a unique benefit to the market. Here’s an example on Colgate Total, where we’ve had the recyclability logo to our tubes. A lot more education is required in the market. The industry is converting. And so, we think the steps that we take have absolutely driven the market to have the right behavior.
Another one that’s probably my two favorite programs at Colgate, these are our social impact programs. With our Bright Smiles, Bright Future, we will have educated 1.4 billion children by the end of ‘22 in aggregate on how to brush their teeth from an early age. Those habits resonate with consumers, stay with them for the rest of their life, and connects them to the Colgate brand, but more importantly, have a significant social impact in the communities where we work today and where we operate around the world. The other one is our Hill’s Food, Shelter & Love program, where we’re very involved in pet adoption around the country. We just went through that program over the last couple months, where we have significant adoptions over year improving. And more importantly, each pet owner who comes home with a new pet, leaves with a bag of Science Diet as well. So, a great way to build the brand and have an impact on society.
So, importantly, with the incredible cost inflation, we’ve been laser focused on our productivity initiatives as a company, and making sure that we’re leveraging our cash in the most efficient way possible. I’m going to take you through a couple of details on that. You know our Funding the Growth program. This is part of our DNA and part of the culture of our company. We do that really well across the P&L. We have strong visibility already to where we see the Funding the Growth opportunities for next year, particularly given the heightened cost environment that we’ve seen this year. We were proactive in announcing our global productivity initiative last year. As you know, it’s a $90 million to $110 million annualized savings moving through the P&L, which will ultimately give us further leverage. And it’s important to talk about that leverage ex-logistics, which have obviously been a real headwind. If you look at just our overhead costs, over the last six months, we’ve reduced our overhead costs by 70 basis points. So, as we sustain good topline growth and the consistency of that topline, as we see over the longer-term raw materials become more benign, we should expect to see more leverage moving through our P&L, and likewise allowing us to sustain the advertising levels that are so important to strengthen our brands.
In terms of cash, with a high ROIC, as you know Colgate to have, it’s really important how we think about investing back behind our business. We’ve increased our capital expenditures to fund capacity, particularly on Hill’s. We’re putting more of our cash into productivity and ESG initiatives in order to drive sustainable growth long-term. You’re familiar with the acquisitions that we made, one that closed at the end of last year early first quarter on the wet capacity for the Hill’s business, which is the fastest growing segment part of the dog food category today. And more importantly, the three recent acquisitions that we just announced pending regulatory approval. This was an important change in how we think about using our cash. This was really important to fund a business that was – quite frankly, was needing capacity to ultimately deliver against the incredible growth we’re seeing behind that business, but using our balance sheet very, very wisely. It would have taken us two and a half years to build this capacity. We have a relationship with this manufacturer, Red Collar. We understand their assets. We understand their people and their processes. So, we were able to bring that manufacturing on much, much sooner and unlock the capacity associated with that. In addition, we were able to do that far cheaper than it would’ve been if we had built it as a greenfield site. So, I think a very clever way to use our knowhow, and importantly, our balance sheet to unlock growth to the Hill’s business moving forward. Returning cash to shareholders, obviously an important part. I love this chart, 127 years. That’s 1895 for those of you doing the math in your heads that we started paying a dividend. We’ve increased that dividend for the last 59 years, and we’ve returned over $30 billion cash to shareholders, an important part of the sustainability of our business, and the importance of ensuring that we give back to shareholders. You see the dividend CAGR there at 5% over the last 10 years.
So, a quick reminder on what we said on the Q2 call. As you know, we don’t update or reaffirm our guidance in between the quarters of the call. So, I wanted to remind everyone what we said there. Our sales were up 5.5%. Organic sales up 9%, which is the highest quarterly growth we’ve had since the fourth quarter of 2008. Obviously, since we announced, we’ve seen foreign, exchange, particularly the dollar, strengthening quite a bit in that period. A great chart to show the consistency back into the business, which is an important hallmark of what we want to be as a company. And you see 14 consecutive quarters within or above our long-term guidance of 3% to 5%. Organic sales growth, again, the composition of that was very important to the strategy and the turnaround across all of our divisions and across all four of our categories. Important to call out that in the second quarter, our oral care and our pet nutrition business was up double-digit, which was an important KPI for us as we continue to invest aggressively behind those two businesses. And that translated obviously into good market share growth, which we’ve seen continue to build with the standard data that you all have access to here in the US. In terms of guidance, maintained our sales guidance of 1% to 4% at that point. We raised our organic sales growth for the second time this year to 5% to 7%. Gross profit margin expected to be down on the year in the current environment. And advertising expected to be up on a dollar basis and roughly flat as a percentage of sales. And as we said on the Q2 call, the base business EPS expected to be down mid-single digits.
So, overall, strategy is working, well focused against attractive core categories that are growing, and we believe have sustainability in the current environment. We are leveraging very importantly the way we work very differently across the enterprise and building capabilities that we think are scalable and allow us to scale those quickly around the 200 markets where we compete across the world. And we’re obviously investing to build the strength of the brands in the business for our shareholders, investing carefully with our balance sheet, keeping it obviously the discipline historically that we’ve had. And most importantly, putting our money behind our people, which would deliver the long-term success for the company. So, with that, Lauren, I’ll turn it over to you for the Q&A
Question-And-Answer Session
Q – Lauren Lieberman
Okay. I had used my time. So, first thing I want to talk about, you mentioned premiumization a few times and some of the progress that you’ve made through innovation, and what you’ve been able to achieve. I thought the South Africa example is a very new one. But particularly oral care is global category leader. The fact that you were indexed below the category average was a key point of discussion several years ago. So, what kind of progress have you made on that front on where you stand versus category averages?
Noel Wallace
Yes. Again, we felt that as we saw the therapeutic and the premium segment growing, obviously over the last three to five years, we were under-indexed in that space. So, we’ve done a couple of things. We were more or less at around an 86, 87 index to the market. Just for context, the reason why our index is so low is we have these huge core businesses around the world, and those core businesses are typically at the entry or mid-priced level. We were under-indexed on the therapeutic side. And so, we needed to ensure that we continue to launch innovation that was going to drive our science-based benefits at a higher price point. You saw the example of whitening. You’ve seen us take the Meridol and Helmex business very tactically and strategically to certain markets around the world, which sells at a significant premium. And that has allowed us to move that index from roughly 86, 87 to about 90 today. Now, remember, you have core inflation in the categories in which we compete. So, this is our measures. We feel we’re making the right progress, and we feel more importantly today that we have the right balance between our super premium and our base business to deal with the current consumer environment, which we think will be highly challenging over the next couple of quarters.
Lauren Lieberman
Okay. Now, is there anything that you’re doing in particular merchandising-wise or messaging-wise to emphasize the full piano of pricing that you’ve got in the portfolio? Or is it the shelves are there and the consumer finds what’s right for them?
Noel Wallace
No, absolutely. I mean, if you take revenue growth management, I mean, we’ve – obviously, your mind might go to price pack architecture. It might go to promotional effects in this. We’ve really tried to build skillsets into the commercial organization on how to think about managing the portfolio in order to reduce elasticity. And so, there’s a lot of language that goes into packaging. We’ve done a lot of core relaunches with our manufacturing now running much more efficiently, allows us to do things in the manufacturing facilities to upgrade our products and drive new messaging to the consumer. The super concentrates is a good example of that, where you get more washes than you historically would, with an improved performance. So, I think it’s a balance of all the aspects that we’re doing, both on the innovation side, as well as the revenue growth management, in order to make sure we have messages that resonate with consumers and with the trade, quite frankly.
Lauren Lieberman
Okay. Just talking about North America for a moment, there’s been a real change in momentum in that business of late. What are some of the foundational elements that you’ve put into place? I know there’s been some supply chain improvements, but separate from that, kind more foundational changes that are supporting the momentum.
Noel Wallace
It comes back to core adjacencies channels and making sure that they – one, they have the processes in place to execute against our strategy. We brought in quite a few people into our North America organization over the last couple of years, people that have brought a different mindset to how we want to execute in that business against the core Colgate strategy. A big piece of that turnaround, in my view, again, the capabilities. You don’t see a lot of that. You see it obviously in the results of the company, but you don’t see it in the day to day. And there’s a massive amount of sophistication that goes into running a digital enterprise and being sure that you’re reacting to the inputs of data and acting upon those, and creating trust with your retailers that you can run their omnichannel business, and that’s what our retailers are requiring.
It’s no longer a brick-and-mortar business. It’s an omnichannel, and consumers have myriad of different choices on how they want to shop your categories, and we need to understand that and bring that knowledge to the trade. And more importantly, use that as competitive advantage to drive consumers into our franchises. And we’ve seen a lot of that happen over the last six months in the US. Clearly, we were not executing as we historically had in the US, and our execution, particularly our supply chain and some of the issues we had with our global supply chain, which I continue to believe is best-in-class relative to cost, we have some of the limitations associated with that as the supply chain had all the disruptions over the last 15 months. Those are behind us. I will say, the supply chain continues to be very challenging, but if you take just our service levels in the US, we’re back to best-in-class and being recognized by our retailers for that.
Lauren Lieberman
Okay, great. Now in that vein, I know without commenting on guidance, because you don’t update intra-quarter, but is there anything sort of in the external environment that’s gotten more challenging, or on the flip side, has improved since we all last spoke in July, or end of July, sorry.
Noel Wallace
I mentioned it in the prepared remarks. Obviously, foreign exchange has moved very significantly over the last two to three months, and particularly the strength of the dollar against the Euro and some of the other currencies where we compete, and you have your algorithms. You can see that pretty clearly in your data. The other aspect, no change, I’ll reiterate what we said on the second quarter. We saw $1.3 billion of costs in the P&L. That was up from $1.2 billion previously. So, we added $100 million of incremental costs into the P&L, which we talked about on the call. Just to remind everyone, we said most of that cost would come in the second quarter, with the balance coming in the third quarter, and that’s exactly where things have unfolded. And then other than that, no real changes. From a consumer standpoint, I would say the consumer environment and pricing environment is constructive. I know there are a lot of questions around elasticity. And to this – today, we have not seen a major change in elasticity versus our assumptions. Again, I think this plays to, one, our innovation strategy. Two, it plays to the value orientation in bringing science-led products to drive real differentiation in the market. And most importantly, the skillsets that we have across the enterprise now around revenue growth management, are meaningfully improved.
Lauren Lieberman
Okay. Another topic the last day and a half has just been retailers, how they’re managing inventory. So, just checking in, what are you seeing on that front? Has there been any change across your categories?
Noel Wallace
Yes. I’ll make some general statements on that. Overall, through August, we have not seen meaningful changes relative to the inventory. The exception to that would be Amazon. And that’s pretty public knowledge as Amazon looked to close a lot of their warehouses that they had built during COVID where they needed the capacity, and they pulled those warehouses out of their footprint. We have seen inventories come down, and that’s been quite pervasive across all categories. So, they haven’t chosen one specific category to go after. They’ve chosen all the categories, at least in the short term. Across the rest of the trade, we haven’t seen any meaningful change. But again, those decisions, we don’t necessarily get a lot of foreshadowing to. We do manage very, very closely our inventories. I mean, we know to the day, how many days inventory we have in Walmart, and we manage it to the – by the day and by the category. But that’s not to say they can decide at some point they need to reduce inventories across the entire enterprise in order to meet their financial goals. So, right now, we feel pretty good about where we are. We’re watching it very closely, and we’ll see where things go.
Lauren Lieberman
Okay, great. We are out of time, but thank you so much. Thanks for being here again.
Noel Wallace
Very welcome.
Lauren Lieberman
Thanks for the presentation.
Noel Wallace
Thanks, everyone.
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