高露潔 (CL) 2010 Q3 法說會逐字稿

Good day, everyone.

Welcome to the Colgate-Palmolive Company third quarter 2010 earnings conference call.

Today's call is being recorded and is being simulcast live at www.colgate.com.

Just as a reminder, there may be a slight delay before the question-and-answer sessions begins due to the web simulcast.

At this time for opening remarks I would like to turn the call over to the Vice President of Investor Relations, Ms.

Bina Thompson.

Please go ahead.

Good morning, and welcome everybody.

With me is Ian Cook, President and CEO, Steve Patrick, CFO, Dennis Hickey, Corporate Controller, and Elaine Paik, Treasurer.

This conference call call include forward-looking statements.

And these statements are made on the basis of our views and assumptions at this time, and are not guarantees of future performance.

Actual events and results may differ materially from these statements.

For information about certain factors that could cause such differences, investors should consult our most recent annual report on form 10-K filed with the Securities and Exchange Commission, and available on our website, including the information set forth under the caption "Risk Factors" and "Cautionary Statements on Forward-Looking Statements."

We will discuss our results and outlook, excluding the one-time charge of $271 million related to the transition to hyperinflationary accounting in Venezuela as of the 1st of January 2010.

We will also discuss organic sale's growth, excluding foreign exchange, acquisitions and divestitures.

A full reconciliation with the corresponding GAAP measures is included in the press release and is posted on the Investors Relations page of the website at www.colgate.com.

So we'll be glad to answer any questions you may have including or excluding these items as you wish.

We're pleased the third quarter exhibited solid performance, reflecting the successful implementation of our financial strategy well known to you all.

Our gross profit margin increased and we reduced the overhead expenses.

This provided funds to increase our advertising, both absolutely and as a percent of sales, to grow the top line, while at the same time increasing our profitability.

This was particularly pleasing given the macro economic challenges we faced in the more developed regions of the world, coupled with ongoing competitive activity in all of our markets.

Importantly, our market shares in many key countries around the world are strong and growing, up in the majority of our categories, including toothpaste, toothbrushes and mouthwash.

You will hear more about specific share performance as we review the regions in more detail.

As you know, relevant innovation is key.

We continue to launch new products across categories, across a range of price points, to appeal to all consumers.

Our global launch of Colgate Sensitive Pro-Relief continues to do well.

As of the end of this quarter, it is now being sold in markets that represent 75% of the sensitivity market worldwide.

As well as a strong P&L, our balance sheet is solid.

Our strong cash position has allowed us to increase our dividend this year, as well as to continue with the share repurchase program, both of which provide a good return to our shareholders.

So, let's turn to the divisions for more specifics, starting with North America.

Business in this region remains solid.

We continue to launch new products across categories and have an exciting pipeline slated for the first quarter of next year.

As you know, this quarter we are in the midst of a relaunch of our Colgate Total toothpaste line.

This is being accompanied by strong media and trade support.

The relaunch with innovative packaging incorporates very impactual integrative marketing campaign and in-store activity across all retailers.

Our Max Fresh line, which is particularly relevant with the Hispanic consumer, we'll see increased focus on key Hispanic accounts in the fourth quarter.

Our manual toothbrush shares continue to do well, up 150 basis points on a year-to-date basis, to over 30%.

The Colgate 360-degree franchise is doing well, buoyed by the ActiFlex line launched earlier this year.

And we continue to build trial and repeat for our on the go toothbrush, Colgate Wisp.

Other encouraging signs in US business is that private label growth appears to be flattening, and we see consumer reverting to branded products.

As you know, private label in toothpastes is virtually non-existent and we see the trends in other categories improving.

We've just launched Colgate Sensitive Pro-Relief in Canada.

While it's early days, results are particularly encouraging.

In three weeks we've achieved 80% distribution, a process which could normally take closer to three months.

Acceptance on the part of the trade and profession has been excellent, and we've started to see replenishment orders.

So, looking ahead in North America, buying growth is expected to be solid in the fourth quarter, up mid single digits, and should be up mid single digits for the full year, as well.

Organic sales are expected to be up low single digits for the fourth quarter and full year.

Operating profits is expected to decline modestly for the fourth quarter, but should be up mid-single digit for the full year, up both absolutely and as a percent to sales.

Turning then to Europe.

The macro economic situation in Europe continues to be challenging.

As you know, in the UK are implementing posterity measures, and the general climate in the (inaudible) country is very depressed.

As we told you last quarter, private label continues to make in-roads in the Home Care categories, and growth in all our categories is sluggish.

But despite this, our market shares are up in the important categories of toothpaste, toothbrushes and mouthwash.

And this has been due to the consistent introduction of the innovative new products, many of which are premium priced.

Our launch in Colgate Sensitive Pro-Relief in this region continues to drive incremental share.

In France, our overall toothpaste market share is up 70 basis points on a year-to-date basis, with our sensitivity product at a 1.2% share.

In Greece, our overall share is at a record 47% on a year-to-date basis, up almost four full points, with the most recent share at 48.9%.

And Colgate Sensitive Pro-Relief leads the sensitivity segment with almost eight points of share.

In the UK Colgate Sensitive Pro-Relief is at 2.6% year-to-date, with the most recent share at 3.4%.

, and we've narrowed the gap with our leading competitor almost 13 points, to about 10.5%.

In the companies where GABA is strong, we've launched a sensitivity product under the Elmex name, which uses the same break-through technology.

While only in markets since August, we've gained distribution very quickly and trade and professional reception is strong.

Our manual toothbrush share was up 70 basis points on a year-to-date basis, to 19.9% with the most recent read at 20% in the UK.

Our share increased three full percentage points behind launches as the premium price 360 ActiFlex.

In Italy both the Colgate and GABA brands drove our share almost half a point, and in Germany we gained share behind both the premium and mid-tier segments.

In mouthwash our share was up a full point, with increases from both Colgate and GABA brands.

Germany launched a new mouthwash under our very successful Meritol name, targeted particularly for those suffering from bad breath.

Our market share there is up 60 basis points on a year-to-date basis, to 21.7%, with a most recent read of 23.6% as a result of the successful recent launch.

Looking ahead, volume in Europe is expected to be up modestly for the fourth quarter and full year, with organic sales down modestly for the same period.

Operating profit is expected to decline double-digits for the fourth quarter and should be essentially flat for the full year on a dollar basis, but increasing as a percent to sales.

Latin America -- Business across Latin America remains solid with good market share performance.

Our regional market shares are up in toothpaste, toothbrushes, mouthwash, bar soaps and deodorants, and we are maintaining our leadership position in the fabric conditioners and dish washing liquids.

In the toothpaste category, the shares are up in virtually every country.

Our excellent toothpaste share performance in Brazil was referenced in the press release.

Both Colgate Total and our Colgate Sensitive business are performing well in that market, where Colgate Total is up over two points on a year-to-date basis.

The launch of Colgate Sensitive Pro-Relief has met with success and helped drive our professional recommendations for sensitivity toothpaste to a leadership position.

In Mexico, despite heightened competitive activity, our toothpaste share is still well over 80% and has increased sequentially for the last three periods, while our main competitor has lost share.

Colgate Total in Mexico is at a record of 17.6%.

With the launch of Colgate Sensitive Pro-Relief, we've established the one number position in sensitivity in drugstores.

Our regional toothbrush share is up almost a full point year-over-year.

In Mexico, despite aggressive competitive promotions, our share is up over two points to over 41%, a new record.

And in Brazil, as well, heightened competitive activity has not affected our share, which is at a leading 30% of the market in the most recent period, and up almost half a point on a year-to-date basis.

Our mouthwash business is very strong, as well -- up almost a full point on a year-to-date basis with firmly established number one positions in Brazil and Argentina.

While we are the number two player in the region overall, our excellent performance has narrowed the gap with the number one competitor from almost 30 points in 2007, to 15 points year-to-date in 2010.

Both the Palmolive and Protex brands have helped lift our number one regional bar soap position almost a full point year-to-date.

In addition to new products, the implementation of a hand washing campaign modeled after modeled after our Bright Smile's Bright Futures Oral Care program has contributed to our success in this category.

Continued innovation in the underarm category is critical, and a number of new products have driven our regional share up by half a point.

Men's Speed Stick Extreme, Waterproof and Stain Guard, and Lady Speed Stick Waterproof Professional Protection and Depil.

Looking ahead, volume in Latin America is expected to be up slightly in the fourth quarter, with full year growth in the low to mid single digits.

Organic sales are projected to be up mid single digit for the fourth quarter, and high single digit for the full year.

Operating profit is expected to decline in the fourth quarter, after a very strong increase in the year ago quarter, but should be up as a percent to sales.

And for the full year, operating profit is expected to decline modestly on a dollar basis, and as a percent to sales.

Turning then to greater Asia-Africa.

The strong momentum continues across the region.

Testament to the growth offered by many of these markets.

Most of the countries economies are quite buoyant and categories are showing continued good growth.

Our regional toothpaste share was up 70 basis point to almost 40%.

In China, our share is now at 32.5%, up 80 basis points year-over-year.

We have launched Colgate Sensitive Pro-Relief in key cities, where it now has a full point of share.

We referenced our strong share performance in India in the press release, now solidly over 50% at 51.1% of the market.

In Russia, we are maintaining our leadership position of almost 33%.

And in Singapore, one of our lead markets for the launch of Colgate Sensitive Pro-Relief, a little over a year ago, we continue to see benefits from that new product, with overall shares at almost 69%.

Across the region, we enjoyed the number one position in toothbrushes.

Our year-to-date share is up 40 basis point, to 36.2%.

India increased toothbrush shares 180 basis points, to almost 40% as we relaunched our popular Zig Zag toothbrush in the value segment.

In Russia, super premium new products drove our market share up 230 basis point to 51.7%.

In Turkey, Colgate 360 contributed to a 510 basis point increase, almost 24% of that market.

In the mouthwash category, we increased our share in every subsidiary.

In China we have a 30 share, with the most recent period at 33.4%.

Ongoing new product launches, supported by media and effective in-store activity, have driven the success across the region.

So, looking ahead, volume in greater Asia-Africa is expected to grow double digits for the fourth quarter and full year, with organic sales increasing double digit for both periods, as well.

Operating profit is expected to grow high single digit for the fourth quarter and double digit for the full year, up absolutely and as a percent of sales.

Turning then to Hill's.

Our business at Hill's is slowly improving.

Although volume was modestly down for the full quarter, worldwide, volume in Europe was positive, and we saw volume increasing in the US at the end of the quarter.

Indication that is our right pricing and right sizing initiatives are working.

Another encouraging data point is that unit consumption at the large format retailers here in the US was up for the most recent one-, four-, 13- and 26-week periods, and volume was up on a one- and four-week basis, boding well for the business going forward.

We told you last quarter about the launch of Science Diet Healthy Mobility here in the US.

This product is doing very well and drawing new consumers to the Hill's brand.

Shipments are above forecast and customer feedback has been very positive.

Media support and in-store activity have helped drive these results.

We also told you about the launch in Europe of Science Plan Vet Essentials, a product sold only through the veterinarian.

This has been very well received and has driven our overall market share.

As a result of this launch, our vet recommendations have increased, as well.

Our launch of Toy Breed Science Diet in Japan has done well, and our 3.6% share is ahead of all other brands in this segment.

A recently announced innovation here in the US is the Hill's Prescription Diet Therapeutic Weight Reduction program, available only through veterinary clinics for obese or obese-prone dogs.

Think of it as the Jenny Craig for dog's, with pre-measured food in biscuit packs.

Pet owners are also provided with ongoing support in the form of a therapeutic weight reduction guide providing instructions and tips.

Support is also available online.

Looking ahead, volume at Hill's is expected to be even with last year for the fourth quarter and modestly down for the full year.

Organic sales are expected to decline modestly in the fourth quarter, down low single digits for the full year.

Operating profit is expected to be flat for the fourth quarter, but up as a percent to sales, and full year operating profit should be up modestly, both absolutely, and as a percent to sales.

So, in summary, we're pleased with our results.

We have a proven strategy that has worked over the years to deliver profitable volume growth and increasing market shares.

As noted in the press release, while we are still in our global budgeting process for 2011, we are planning to continue to strengthen our volume and market share next year.

Driven by many new and existing Colgate products supported by increased advertising.

Colgate people around the world are working hard to help them deliver these solid results and we look forward to sharing our further progress with you as we go forward.

So, now, Dana, I would like to turn it over to the q-and-a

Thank you.

Today's question-and-answer session will be conducted electronically for the telephone audience.

(Operator Instructions)

We will take our first question from Ali Dibadj with Bernstein.

Just wanted your perspective.

It is kind of a good four or five months ago that we talked about extra investments by competitors.

At that time you were hopeful that the skirmishes wouldn't actually happen.

In fact, you believed that you could defend if they did and maintain double digit EPS growth for -- forever, at least until next year.

Now that is no longer to case?

Would you like to get underneath that, if you would.

What specifically has changed?

Do you have confidence now that you can really grow your EPS even mid single digits, given what you see out there from a competitor perspective and defend, or even a consumer perspective, and defend?

How long have you budgeted for, and/or how long do you think this investment by some your competitors will last?

What products or countries specifically?

Just really trying to get underneath that dynamic, if you could, please.

Yes.

Ali.

A broad question, indeed.

If you look at it sequentially for us, I think in the second quarter of this year, we started talking about the heightened promotional activity and the fact that we had responded to it, and that we were going to continue assuming that would be the new normal for the back half of this year.

And that despite that, we reaffirmed the notion of double-digit earnings per share growth for 2010.

Yes, in terms of the longer term, our objective is a sustainable double-digit earnings per share growth.

But fairly constantly across the third quarter -- and you and I had this discussion, as well -- the position we took was that as we began our 2011 budgeting process for the year 2011, we would weigh what we were seeing around the world and what we were planning to do with our own businesses and make the right determination by the business.

As we have guided for 2011 in the third -- 2010 , I am sorry -- in if the third quarter of last year, we thought it was appropriate to give out preliminary thinking while our budget process is not finished.

And that is that, with the competitive environment we see, with the initiatives we have to build on what we still view as a strong business, we have the opportunity to strengthen and accelerate the top line growth in 2011, with our innovation stream supported by increased trial generating advertising, and that is the way we are thinking about 2011.

And so, that is the way we are approaching it,

Can you give us a sense of where exactly it is happening, in terms of competitive increases.

Well, we haven't finished our budgeting process.

But we will be focusing on continuing to build our market shares in brands and geographies important to us.

But I wouldn't be for specific than that at this stage.

How about temporarily?

How long do you think something like this lasts?

We are talking about the 2011 budget.

Okay.

Thanks.

Our next question comes from the line of Wendy Nicholson with Citi Investment Research.

My question has to do with a longer term outlook.

You have been historically one of the most consistent double-digit, low teen, earnings growth companies out there.

But as you think about the competitive environment and how -- you look at something like Latin America where the volume growth, even exVenezuela, doesn't seem to be looking as good as it used to be -- is there a chance that there needs to be a change in your long term growth analgarhythm?

So that maybe we're looking at permanently high single digit earnings growth, as opposed to reverting back to double digits in 2012 and beyond?

I guess, Wendy, we don't take that view.

I think as we have revisited our strategic planning process, which leads into our budget process for 2011, and without any conceit, I think we feel that the strategic initiatives we have are sound and can continue to guide the company going forward.

We feel the category choices we have made are sound in terms of the inherent growth rates over time, and profitability over time, in those categories.

And we think our geographic diversity positions us well over the medium term.

What we are seeing, I think, in 2010 , is a heightened activity from some competitors who are perhaps recovering from a slower than traditional performance.

And we are meeting that in 2010 , and we have initiatives of our own in 2011 that we want to drive hard.

And I am sure, in response to question, we will come back and talk about market shares around the world.

The market shares are good.

So, we think we are making an investment of choice in order to accelerate the top line, in order to continue to build our brands, and market share, and we are viewing this as we go into it, as a 2011 focus.

And we will revisit, in the context of our strategic plan in 2012 budget, those out years.

But we do not believe that there is a structural change going

And just as a follow-up to that -- As you think about the -- I know it is early in the budgeting process -- but as you think about 2011, with all the new products you are launching, does it sound like the pressure on margin is going to come primarily from stepped up advertising?

Or do you anticipate more promotions and price off, which would then pressure your growth margin?

We are focusing always on trying to build our brands.

We have said before, that when we think about marketing and building trial and awareness, we prefer to use what you might call traditional advertising.

That said, we have been building in-store shopper marketing activity, which comes in the gross to net calculation, particularly in those parts of the world that are responsive to that from a consumer point of view, and that would be more the developed world.

So, as we plan going forward, it will be a mixture between commercial activity at retail, as part of an intentional strategy.

And it will be what you might call the more traditional advertising and promotion, the media and the sampling below the line.

All right.

Thanks.

Our next question comes from the line of Joe Altobello, of Oppenheimer & Co.

Thanks and good morning.

Hey, Joe.

First question about the "new normal" you referenced earlier.

It sounds like you are talking about 2011 specifically, but you guys have not really starved your brands.

Your advertising spending year-to-date is close to 11%.

And it's sort of the average over the last five years.

Yet you put up pretty good volume growth during most of that period.

As you look beyond 2011, is there a chance that now, companies in the space have to spend beyond 10% or 11% on advertising to really drive the mid single digit volume growth?

I guess the way I would answer, Joe -- first of all, my comment on the "new normal" to a certain extent was related to 2010.

We were simply saying on the last call that we weren't changing our view on the back half of the year based on remarks made by some that maybe their pricing activity would be easing.

My sense is, and our strong view is, we want to take the choiceful opportunity in 2011 to accelerate our top line and further strengthen our brands.

In order to do that, we are prepared to, and want to, increase our advertising.

And, with the backdrop of the competitive activity we are seeing.

If you are projecting forward, what one could foresee happening is that maybe the pricing intensity will lessen over time.

And advertising in that 11% plus area is a quite healthy level of advertising.

Okay.

Great.

Thank you.

Our we'll go next to Bill Chappell with SunTrust.

Good morning.

Hi, Bill.

Looking to next year's guidance, I want to kind of understand if any impact comes from higher commodity costs?

And specifically thinking of the Hill's business.

This corn and soy are spiking, while you are looking to lower or right-size prices.

If you can give us some color on the commodity outlook, as well?

Thanks.

Again, that is early in our process, Bill.

But let me take this opportunity to do what we traditionally do, and give you the roll forward on our gross profit for the third quarter of this year.

Because it allows me to step into the point for next year.

If you looked at third quarter last year, gross profit, it was 59.2%.

We have a headwind of material prices of 1.8%, and we have funding the growth savings -- that funding the growth program -- of around 2%, which gets you the 20 basis points and the increased gross margin.

Now, if you move forward to 2011 -- and I stress early days in our process -- but as we are looking at it across all of our businesses, including Hill's, we are seeing a range of headwind that could be in the 3.5% to 6% zone.

And we are very, very focused on our funding the growth savings for 2011 as an ability to handle those commodities prices.

And that we think at this stage we can do.

Our next question comes from the line of Doug Lane with Jefferies and Company.

Can you talk broadly about the M&A environment, and any interest heightened or lessened these days in looking at the acquisitions?

Well, I don't think I will go as broad as the environment.

Let me just talk about our philosophy and thinking on that topic.

We view M&A obviously as a strategic activity.

When we talk about the growth of our company, we don't say for any planning period that the growth is going to be driven by a bolt on acquisition.

We, rather, talk about our philosophy.

And our philosophy is -- we want to buy to strategically strengthen priority categories for us.

So, categories of interest would be Oral Care, pet nutrition and Personal Care.

You are unlikely to see us as a buyer in the Home Care space.

And I guess the bookend to that thinking is we are very disciplined in our financial calculations for an acquisition and we strive, as they say, not to pay too much.

And that has seen us in the past, you may recall, when Pfizer sold their OTC business, not seek to buy all of that business, just to get Listerine, because we thought that would have been imprudent.

If I pointed to GABA and Tom's of Maine, our two most recent acquisitions, they are both out pacing the acquisition plan that we justified to our board to make the acquisition.

So, the headline would be we remain interested in the right strategic acquisition at the right price, but we are not reliant on it in our planning for the sustainable growth of the company.

Okay.

Thank you.

We will go next to Bill Schmitz with Deutsche Bank.

Hi.

Can you talk about the category of growth rates?

And do you think it is macro, or do you think it's self-fulfilling?

So do you think it's driven by some of this pricing and promotional activity, or do you think it's more macro driven?

And then the other question, part and parcel with that, is there a good time in history when both (inaudible) and (inaudible) have been so aggressive with both innovation and spending?

Well let's talk about the categories.

As we said on the last call, we continue to see now what we saw then.

And that is, that is the emerging markets around the world are growing high single digits on a value basis.

And the categories in the developed world are growing low single digits, with the US ahead of Europe.

As to whether or not that's macros or self-fulfilling, it is a bit chicken and the egg.

There is low growth environments, deflationary pressure, partly retail, consumer and partly competitive, but that's the spread around the world, and that is what we are looking at going forward, we believe.

When you come to the competitive pace of activity, Glaxo has always been a healthy competitor in the Oral Care space.

Maybe more headline attention now, given our activity on Sensitive Pro-Relief, but there has always been intensity from them.

And in the case of Procter & Gamble, it is limited to the markets that we talk about every time we are on the call.

In fact, why don't I use that as sort of a jumping off point to talk about some of those markets and give you the headline market shares around the world.

If I start with the bricks, our share in Brazil approaching 71%.

And that up against the second and third multinational competitors, one at about 3% share, and the other at about 14%.

Russia, as Bina said, we continue to hold a leadership -- a strong leadership position -- twice the level of our nearest competitor, who is declining on a year-to-date basis.

India -- Our share is up, as Bina said.

China -- Our market share is up.

And the nearest multinational competitor is down a point.

And Mexico -- The market share is running around 83%, with the nearest multinational competitor around 11% or 11.5%.

And the more near end trends favorable to us.

I could show you that on toothbrushes around all of those markets, where we continue to make favorable progress.

So, I would say -- Glaxco Smith Kline situation, as before, and Procter & Gamble, the new markets that we have talked about before, and kind of results I have just taken you through.

Is Mexico getting better share-wise?

I think that was one of the few places, I think, my data showed, you have been losing shares?

It sounds more recently it is getting better?

The Nielson scan data shows that it is getting better.

And remember, Bill, we have seen these things before.

I have often said our 85%, 86%, can drift down to 81%, 82% and their 8% to 9% can drift up to 13%, 14%.

And then there is a cycle to these events.

Pleasingly the near end market shares show the share on their side weakening as our share strengthens.

Obviously we will continue to be attentive to what we are doing in the market.

I was actually just down there in the past several week, as I was in Russia and India, and feel quite comfortable with the programs they have in place.

Great.

Thank you very much.

Sure.

Our next question comes from the line of Jason Gere with RBC Capital Markets.

Good morning.

Hi, Jason.

I want to talk about the gross margins.

At the height of the restructuring, 75 to 125 basis points.

If I just heard you are commentary correct, you're saying some of the commodity pressures will be offset by the funding and growth.

The the question is two-fold.

One, can you talk about the role of pricing next year, which has also been obviously an important driver of organic sales in the past years.?

And two, can you put it in the context of bigger cost saving initiatives?

Is there anything under way -- not talking about all of 2004 -- but is there something -- more acceleration in the cost saving front that will help you still drive the gross margins and get toward that 65% long term goal?

Thanks.

When we were working our way through the restructuring process, you will remember we took up our more historical gross margin annual expansion range from 50 to 100 basis points to 75 to 125 basis points.

If you go back to history, when commodity prices are agin' ya, we have tended to say that we will be in the low end of the 50 to 100 basis points range, and when commodity prices are with you, we would tend to be at the higher end of that range, in a world without a restructuring.

So, as we think gross margin going forward, that is how I think we should think about it for 2011.

Pricing, again, if you take out the extraordinary years of 2008 and 2009, the contribution of price on a global basis has tended be in the half a percent to 1.5% range, and again, while early days, I think as we think about 2011, we should think about it in those terms.

And to your final point -- Always, we are considering opportunities we have, linked as we are by SAP around the world now, to regionalize or globalize process, organization, structure and sourcing.

We talked on the last call about the opening of the European business service center in Warsaw, and how we are running the back office of 27 operations through that hub, bringing savings, benefit and better quality, more efficient to the reporting and, to the extent we can, identify more of those.

And we are aggressively pursuing them in that overhead area, we will most certainly be executing them, working them through the P&L as we can, for 2011.

No question.

And some of the initiative that we have under way obviously contributed to the 20 basis points gain that we got in reduced overdue in this quarter.

So, you're right, Jason, a strong area of focus, on top of our more traditional gross margin oriented initiatives.

Our next question comes from the line of Mark Astrachan with Stifel Nicolaus.

One follow up and one other question.

On the gross margin, can you give a sense of what you are anticipating for oil prices for next year, compared to the $85 number that you used for this year?

We are in the $80 to $85 range.

Great.

Then, just in terms of consumer spending level in the US and Europe, in particular -- Can you give us a sense of what you are seeing there in terms of what the spending is looking like?

Then, relatedly, are you seeing any benefit from this push toward more trade spending in terms of volumes?

Or other sort of things you can give us to say, "Hey, this is actually starting to really work for us?"

Well, let's talk about the consumer.

I think true around the world, but particularly true in the developed world, the consumer is looking for value.

And as we have said before, value is not price necessarily.

And, therefore, I think our and other people's job as marketers, is to continue to create an innovation stream that, while offering innovation at all price points, has the ability to have consumers pay a higher price, and want to pay a higher price, and believe they get the right value from a superior product.

That, for example, is exactly the strategy that is playing out with Colgate Sensitive Pro-Relief.

A clinically proven benefit of instant and long lasting relief, a super premium price and the consumer thinks that price is worth paying for the benefit they are getting.

As we see the consumer behavior translated into purchasing, we tend to see them staying with the same brand.

So, if they are buying our Colgate Total, which is a premium priced product, they continue to buy Colgate Total.

Bina talked about some of the shares in Mexico, for example, strengthening, even though it is a premium business.

What we are seeing more of is the consumer changing the way she is shopping.

And we are seeing the discount club and mass merchandise retailers getting more of the consumer's business.

And also, interestingly, in the US, the drug or the small Mom and Pop stores getting the business -- usually the larger stores at the beginning of the payday cycle, and the smaller stores at the end of the payday cycle.

So, that is kind of the consumer's behavior.

Stays with brands, private label going down, as Bina said in the US, particularly on Personal Care and Oral Care categories.

But buys in different places and is seeking value.

So, that is the shape of the consumer.

Thank you.

Our next question comes from the line of Lauren Lieberman of Barclays Capital.

Thanks a lot.

A couple of things.

First, I want to follow-up -- when you went through the moving pieces for gross margin.

You call that raw materials and funding the growth.

What were the numbers for pricing, promotion mix and other components?

Pricing was no contribution to margin this quarter.

Okay.

Then, same follow-up.

You mentioned that you expected for next year for there to be a raw material cost headwind of 3.5% to 6%.

Is that basically 350 to 600 basis points to gross margins or --

That is a year-on-year percentage increase in our raw material purchases.

Okay.

So, and that is purely on raw materials?

Because when you talked about gross margins and then moving pieces in the past, my understanding is that currency plays into that raw material piece.

So this is excluding any offset from benefits of currency?

Yes.

Our current thinking, Lauren, is it is not going to be such an effect next year.

We are thinking that impact is going to be similar to what it was this year.

So, you can take the 3.5% to 6% as basically the percentage increase on this year.

Dollar cost for buying all of our raw and packing materials.

Okay.

Great.

And then, the other thing was, when you talk through market growth and saying that emerging markets are growing high single digits, developed low single.

You said that was value, right?

It wasn't --

Yes.

Okay.

So if I put those two together, that would suggest aggregate category growth for where you compete should be maybe in the 4% to 5% range, but your organic this quarter was 3%?

So can you talk a little bit where shares aren't so positive?

Nearly 3% to 4% in terms of the category growth.

Nearer 3% to 4%.

Okay.

That is all categories everywhere around the world.

So, that is all categories.

Okay.

And is that consistent with what you -- where you felt categories were in the second quarter?

Yes.

Okay.

One more thing, actually.

Was Latin America -- last quarter you'd helped us out by giving a sense of how much Venezuela contributed to pricing and detracted from volume in the quarter.

Could you do the same this quarter?

Let me say, Lauren, I read your note.

You are right.

If you look at the third quarter volume without Venezuela, it is sequentially modestly down for Latin America compared to the second quarter.

Which is what you were deducing, I guess.

Okay.

The comment I would make, though, is that sequentially Mexico and Brazil, second to third, are up.

And the impact in Latin America specific to this quarter was the impact of the timing of promotional activity, specifically in Columbia.

Okay.

Perfect.

Thank you so much.

Our next question comes from the line of John San Marco with Janney Montgomery.

What does your preliminary 2011 plan assumed for trade spend?

As a follow-up on that -- because I am not sure I am clear on this if you addressed it -- But, particularly in the context of the positive commentary you made around private label competition, do you view today's heightened level and the heightened level from the last couple of quarters as a structural shift in the amount of trade spend it takes to support your products?

Or, is it reasonable to assume there will be some positive normalization?

It is difficult to answer that question with precision, John, but as I said earlier -- if we talk trade spending in two parts now.

One is strict price promotion.

The other may be shopper marketing activity at retail, which includes merchandising and display activity.

My bet is that over time we will see the price promotion ease.

Now, when to call that is a difficult thing to do.

And as we said on the second quarter call, we have not assumed that for the balance of this year.

But, the other part of trade spending, which is related to shopper marketing initiatives based on a marketing strategy and an insight to drive brand engagement at the retail level, is actually, in our view, a good strategic investment, with a good ROI.

Not just in terms of the impact on category and brand volume and share at retail level, but in terms of building the equity, particularly in those more challenged North America and European environments.

It is completing the job at brand engagement at retail level and not all of it is price related.

That is helpful.

One last follow-up -- So the price promotion piece of the what you broadly view as trade expenditures, you said you weren't assuming any abatement for the rest of 2010.

What about in 2011?

Do you think will it be negative at the margin?

Positive at the margin?

Or just sort of more of the same?

Frankly, John, I haven't completed the process.

That really is one where than listening to the general chatter at 60,000 feet, we prefer to go through it country by country, and understand the data of what exactly is going on in Thailand versus Ecuador versus Denmark.

So, I'll take a pass on that.

And we will surely answer it once we have been through our budget process on the next call.

Our next question comes from the line of Victoria Collin with Atlantic Equities.

I wonder if I can ask a quick question on share buybacks for 2011.

Should we be looking at these -- I know it may be too early -- but should we be looking at these to be at the similar level of the $1.8 billion to $1.9 billion that you guided for full year 2010?

Or will we see it step back a little bit more, in line with the historic $1 billion rate that you were buying shares.

We are talking preliminarily, here, and we're talking in a world where all other things are unchanged, which is to say we don't just buy an acquisition that seems realizable.

Our preliminary thinking would be that 2011 would be around the same level as 2010.

Okay.

That is great.

Thank you.

Sure.

Our next question comes from the line of Alec Patterson with RCM Investments.

Hi, Alex.

First of all, just quickly, the toothpaste market shares in the third quarter in the US -- could you speak to what they were year-over-year?

And then I was wanting to get a better handle on your productivity initiatives, both overhead, management and funding the growth for next year.

You talked about funding growth, for example, offsetting the commodity cost outlook, which -- If I took the numbers and plugged them into the gross margin, you are implying roughly about 200 to 300 basis points of commodity cost pressure next year.

So, you're expecting roughly that same amount on funding the growth as an offset?

Alec, if we look at this quarter, we've got 210 basis points of gross margin on our funding the growth.

So the answer is yes?

I guess, yes.

I guess, yes.

Okay.

Great.

And the market share question?

Yes.

I actually have it by months.

Not broken down by quarter, just because I don't.

If you look at all outlet shares in the US, we are about neck and neck with our leading competitor, in the mid 30 area.

If you track the months, the latest period is consistent with that, at about exactly the same level at the year-to-date.

The prior month was slightly lower by a point or two based on the introductory activity behind their whitening product, their 3-D whitening product, which, indeed, got off to a very good start.

And, of course, as Bina mentioned on the call, we are now at work in terms of that relaunch with Colgate Total, with our innovation activity coming back in the fourth quarter.

So, year-to-date, about even.

And if I take the months of the third quarter, because I don't have the entire month, July and September at about the same level, August slightly lower.

I'm sorry.

Are you saying the market shares are flat year-over-year and --?

No.

Our market share is modestly down year-on-year, largely related to the incursion of Glaxo.

So our market share in total is about a point down.

Got it.

Thank you.

Okay.

Our next question comes from the line of Chris Ferrara with Bank of America.

Can you give me one quick clarification on the raw materials thing.

I know you said a 3.5% to 6% increase in dollar cost of what you are buying.

So, how do I think about that relative to -- your sales are going to increase, too, so if your sales are up 3.5% to 6%, and your raw material buys are up 3.5% to 6% -- In the percentage of sale's basis, those aren't going up?

Or is that 3.5% to 6% an inflation number on top of just the notable volume increase, would you say?

We do it in constant volume.

That helps.

One other clarification, I guess.

If your pricing is going the be in the range of plus 0.5% to plus 1.5% in 201, as you have seen historically, despite the fact you probably are going to grow next year's earnings about half the rate that you would normally grow, and part of that is going to be increased levels of promotion?

Where else might pricing be coming through?

Does it get back to that commodities inflation?

You know, in terms of our focus, the focus for for us would be on A&P.

So the extent that we can hold our pricing -- and remember, we haven't been through the process yet in that half to one and a half point range, terrific.

If we don't believe we can't in terms of the plan, then that won't be the contribution from price.

But our orientation is to try and put as much of our investment spending on A&P to drive the trial of the new product flow that we have.

Okay.

Thank you.

Okay.

Our next question comes from the line of Andrew Sawyer, of Goldman Sachs.

Thanks a lot, guys.

I was wondering if I can get a little color on Oral Care versus Personal and Home Care.

At least in the US data, we have seen Oral Care hold up reasonable well, but things like Palmolive and some of the deodorant businesses have been more pressured.

Is that something you are seeing more globally?

I was wondering if you can give more context around your 3% organic sales growth -- was Oral Care substantially more than that?

And how have those relative trends behaved?

Let me try to give you global data on that.

Sorry.

I couldn't see for looking.

We can talk anything we want, Andrew.

Let me get third quarter and maybe let's talk organic growth for the year, the quarter.

That works.

You can mail the sheet to me, if you want, too.

No.

I can read okay here every now and then.

What you see in terms of the organic growth is Oral Care strong mid single digits.

Personal Care, mid single digits.

And in Home Care, low single digits.

So, that is the profile.

Frankly, that's the profile it's been for quite a while, because obviously we put more of our effort behind the Personal Care categories.

As you know from our strategy.

So, our Oral Care business, as you say -- and these are global numbers by the way.

I am not talking US now.

So, that has been pretty consistent.

Pretty consistent around the world market by market.

If you focus in on the US, the one competitive spot beyond Oral Care in the US business has been the stepped-up activity in dish liquid.

And you know what that has been.

The introduction of a new brand to compete in that space.

Our market share is down about a point.

And we have responded with sizing and pricing actions that are under way.

And we have three new, strong pieces of innovation coming early in 2011, only one of which I will talk about, which is a dish liquid that provides a germ-killing benefit, actually on the plates themselves, for superior hygiene, which we think is a strong idea.

Retail reaction has been good, and we will be driving that business aggressively as we get into the New Year.

Otherwise the US profile is pretty much like the rest of world.

A quick one on the dish side -- when you say "sizing," I know you guys have done a concentration this year, are you reversing that back out because it didn't work?

No, the concentration will stay.

The sizing will change.

Okay.

Thanks a lot.

Our next question comes from the line of Nik Modi with UBS.

Good morning, everyone.

Hi Nik.

In categories where you have seen bigger competitors come in with increased intensity -- What have you seen to the actual category growth rate?

Maybe you can give Brazil as an example if you have the numbers in front of you.

The second question is, most of your penetration in Oral Care is primarily in brush and toothpaste.

I guess there is also a lot of white space for Colgate to attack.

Any thoughts about getting into the other areas of Oral Care?

Frankly, the growth numbers in the category are still in those high single digits.

You are either shifting people between brands, (inaudible) bringing new people into a category or increasing their per capita consumption tends to have an evenness to it.

You may get period-to-period shift, but on an annual basis, the growth rates are still in the zone that I mentioned to you.

In terms of segments we are not in where we can drive performance and growth, you know, of course, that if you go around the world and look at the segments in Oral Care, toothpaste is by far and away the single biggest segment, followed by toothbrushes, then third would be mouth rinse.

And, of course, you know from some of Bina's remarks and comments that we have made before, that we have, for the last several years, had a very strong focus -- and still do have a very strong focus -- on driving both that category, which is in many countries growing double-digit consistently, and, of course, building our market share at the same time.

And mouth rinse shares both the growth and the gross margin characteristics that we so like in Oral Care.

So, I guess the third territory that we would stake out is the international mouthwash market.

Great.

Thank you very much.

And our next question comes from the line of Connie Maneaty with BMO Capital Markets.

Hi.

A simple question.

What is your all outlet market share in the US in toothpaste, including Wal-Mart, Dollar Store -- ?

All outlet is between 35 and 36.

Great.

Thanks.

Our next question comes from the line of Linda Bolton-Weiser with Caris & Company.

I was curious on the topic of M&A -- Would you have considered Alberto Culver, putting aside valuation, just as strategy, would that have been something that would have fit into -- Alberto Culver with hair care and skin care?

We did not consider Alberto Culver, Linda.

So, no.

Can you explain why it wouldn't have fit?

I am not sure it helps to go there.

It is a Personal Care category that doesn't fit within our strategic frame.

Okay.

Thanks.

Our next question comes from the line of John Faucher with JPMorgan Chase & Co.

Yes.

Thanks.

Taking a look at the Latin America business, you talked about the volumes being sort of flattish.

The question is, you've talked over the past couple of years as we've had this raw material and FX volatility about the play book related to pricing, and here is what you do when you get this type of volatility.

Looking at the results over the past couple of quarters, is there any change to the play book?

Is there something that played out differently than you would have anticipated as we have seen the volumes go closer to flattish?

The other question that goes along with that would be, maybe one of the reasons why you have had the strategy you have had is because you guys give earnings guidance on a dollar basis as opposed to an FX, neutral basis.

Have you given thought given some of the volatility to changing how you end up guiding?

To the second question, we debate options often.

We have elected thus far not to change the way we guide.

We are a diverse, global, company, and therefore we guide the way we guide in terms of the dollar performance as it actually is.

In terms of Latin America relative to the play book, no, I would say our thinking relative to the play book has not changed.

The principal weight on the Latin America this year has been Venezuela playing out.

Got it.

Okay.

Thank you.

Our next question comes from the line of John Anderson with William Blair.

Good morning, everyone.

Could you provide a quick update on the resizing and repricing of the Hill's business?

Have the new sizes made it to the retail shelf?

And it sounds like we should expect volume to be flat in the fourth quarter, but should we get back to more of a historical trend in the mid single digits as we move into 2011?

Thank you.

Yes.

The short answer is yes.

The sizing and pricing is in place.

As Bina said, we have seen volume -- reported volume -- dollar-weighted volume -- increase in Europe.

And in the US we have for the past six months seen units increase.

And for the last couple of reporting periods, seen that convert into volume growth.

So, we believe the mechanical fix that needed to be made is both made and is effective at retail.

As we said on the last call -- and to your point -- modest, nearly flat volume this quarter.

Expectation for flat next, and a return to volume growth in 2011.

As we have said on previous calls, that has a lot to do with the innovation stream that we are now bringing to bear on the Hill's.

Bina mentioned some of them.

And there are several others that have not yet been announced publicly.

Therefore, I will refrain.

But the move now is, having fixed the base, we are now moving to a stepped-up innovation flow, supported by trial building, marketing activity, and we are hopeful of turning back to good, sustainable volume growth in 2011.

Thanks a lot.

Sure.

And the final question today will be from Alice Longley with Buckingham Research.

Hi, Alice.

I slipped in.

I'm trying to get at the price mix question, the price question that other people have asked.

You are saying you are determined to get your volume accelerating in 2011.

Do you also feel determined to have your organic sale's growth accelerate in 2011?

Yes, Alice, absolutely.

You know, part of our intention here is setting ourselves the target of returning to the pace of organic growth that we have seen in the not too distant past.

Yes.

Which was what?

Which was a strong, mid single digits.

So, you are determined to get back to 4 to 7?

Something like that?

That is a good spread, Alice.

Yes.

Okay.

Do you think you can do that in 2011?

Well, that is what our preliminary budget planning is taking us to.

We will work through the budget process and put the plans together as necessary to do that.

That is our intention, yes.

Okay.

And then, my other question is on mix.

Which I know you put into volume.

Dollar weighted volume, yes.

Yes.

Is mix -- can you talk about what is happening with mix?

Is it continuing to be positive in Oral Care through these difficult times?

Then the second part of that question is, if it is positive in Oral Care, is it positive, neutral or negative for you overall, considering what might be happening in Home Care?

That is a very broad question.

I guess my only way of answering it would be to say that we continue to see in Oral Care the premium price and margin accretive variance lead the growth of that business, which would be a way of saying yes, that certainly from a portfolio mix would be favorable.

Beyond that, I really don't have the data on the top of my head to answer.

Well, within Home Care, are you seeing a downward shift in mix?

Mix is less of an issue in Home Care, because the portfolio tends to be more homogenous from a margin point of view.

Okay thank you.

Thank you very much, guys.

Thanks to all Colgate people around the world who make it happen and talk to you in the New Year.

That does conclude today's presentation.

We thank you for your participation.