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Colgate Palmolive cited expanding digital capabilities as a primary driver of its business as the company reported 8.5% organic sales growth for the fourth quarter of 2022.
The maker of Softsoap and Speed Stick reported in fourth quarter earnings that ecommerce now accounts for 14% of its business, rising 300 basis points on the year in 2022. The CPG also increased investment in advertising and digital transformation that is extending across the business.
“We continue to see strong growth throughout the year, and importantly, in the most important markets around the world, we continue to see strong share growth,” CEO Noel Wallace told analysts. “So, overall, we feel a lot of the work that we put into our digital transformation has paid out quite nicely in the consumption that we are seeing across the board. Whether that’s our skin business, whether that’s our U.S. oral care business or our Hill’s business, we are performing quite well, and we are sharing those capabilities very nicely across the enterprise.”
The brand’s story is an example of how innovation can start in one department of a business, and extend beyond it. The company took skillsets and capabilities developed inside the team at Hill’s Pet Nutrition and extended it to other brands.
“We are using those benefits to grow our ecommerce business, both on a share basis and a topline basis,” Wallace said.
Like all of retail, ecommerce requires navigating not just consumer demand and marketing, but also the actions taken by ecommerce platforms.
Colgate Palmolive saw an inventory drawdown at the large U.S. ecommerce platforms for its PCA Skincare and Elta brands.
“The big online retailers took significant inventory out of the system in the fourth quarter. These are very high priced items, as you are well aware, and they felt, I guess, managing their working capital that they were going to take those down in the fourth quarter,” Wallace said. “We didn’t see a significant impact on our consumption. Our shares were actually up and the more important news is that we started to see that inventory rebuild itself slowly, I would say, in the first quarter of this year, particularly January.”
There could be more drawdowns toward the end of the quarter, but for now there are signs of improvement.
In China, the Filorga anti-aging brand also saw inventory drawdown at the end of the third quarter and into the fourth quarter.
But overall, executives painted an upbeat picture of ecommerce at the company.
The digital transformation isn’t only shaping ecommerce.Data-driven modeling is helping advertising. Analytics are playing a role in price increase initiatives.
It must be cognizant of expansion moves at a time when profitability is a chief concern in consumer goods. Advertising spend and digital advancement require investment that can eat into margins, and there is a tradeoff that must be made. But looking ahead, Colgate Palmolive will continue to scale in digital and data analytics going forward.
“By delivering on our revenue growth management and productivity initiatives, we are continuing to fund increased investment behind innovation, advertising and digital transformation, which is helping to drive this broad-based growth and deliver improved market share performance,” Wallace said.
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Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.