Good day and welcome to today's Colgate-Palmolive Company First Quarter 2021 Earnings Conference Call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now for opening remarks, I would like to turn the call over to Chief Investor Relations Officer, John Faucher. Please go ahead, John.

Thanks, Sarah. Good morning and welcome to our 2021 first quarter earnings release conference call. This is John Faucher, Chief Investor Relations Officer. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the earnings press release and our most recent filings with the SEC, including our 2020 Annual Report on Form 10-K and subsequent SEC filings, all available on Colgate's website, for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in table six of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the earnings press release and is available on Colgate's website. Joining me on the call this morning are Noel Wallace, Chairman, President and Chief Executive Officer; and Stan Sutula, Chief Financial Officer. I will provide commentary on our Q1 performance as well as our latest thoughts on 2021 guidance before turning it over to Noel to discuss our 2021 priorities. We will then open it up for Q&A. As usual, we request that you limit yourself to one question so that as many people as possible get to ask a question. If you have further questions, you are welcome to re-enter the queue. We started 2021 in a positive fashion with strong organic sales growth despite a very difficult comparison, which included some consumer pantry loading in March of last year. Our net sales grew 6% in the quarter. Organic sales growth of 5% was driven by 0.5% organic volume growth and a 4.5% increase in pricing. Foreign exchange was a 1% tailwind in the quarter. While the tough comparisons particularly impacted our trends in developed markets, which were flat on an organic sales basis in the quarter, we delivered double-digit organic sales growth in emerging markets with volume up 5.5% and pricing up 6%. We also delivered organic sales growth in three of our four categories: Oral Care, Home Care and Pet Nutrition, while Personal Care organic sales declined due to difficult comparisons. We believe our strategy to deliver more impactful premium innovation, which Noel and Pat Verduin talked about at CAGNY, is bearing fruit and we will continue to focus in this area to drive future growth. Our efforts on premiumization and pricing along with our focus on productivity, like our funding the growth initiatives, drove improvement year-over-year in our gross margin despite a worsening raw materials environment. This gross margin expansion was a key factor in allowing us to deliver base business earnings per share growth in line with our full year guidance despite higher logistics costs, incremental advertising spending and investment to build capabilities. In the first quarter, our gross profit margin was 60.7% on both a GAAP basis where we were up 50 basis points year-over-year and a base business basis where we were up 40 basis points. For the first quarter, pricing was 170 basis points favorable to gross margin, while raw materials were a 310 basis point headwind. This is a large impact for our first quarter and it was driven by increases in the cost of raw materials like resins, fats and oils, agriculture-related costs and the transactional impact from foreign exchange. Productivity was a 180 basis point benefit. Our SG&A was up 90 basis points as a percent of sales for the first quarter on both a GAAP and base business basis. This was primarily driven by a 50 basis point increase in advertising to sales as we drove strong activation on brand building, innovation and e-commerce. Our SG&A ratio was also impacted by increased logistics costs, primarily in the U.S., and investments behind innovation. Excluding advertising and logistics, our SG&A ratio declined year-over-year. For the first quarter on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 5% on a base business basis. Our EPS was down 4% on a GAAP basis and up 7% on a base business basis. Our free cash flow was down year-over-year in the quarter against a very difficult comparison. The decline was primarily driven by the negative impact of accounts payable and other liabilities, which was mostly due to changes in the timing of payables and income tax payments. A few comments on our divisional performance. North America net sales were down 0.5% in Q1 with organic sales down 1.5%, a 50 basis point benefit from the Hello acquisition and a 50 basis point benefit from foreign exchange. Our volume declines in the quarter were primarily due to a combination of category deceleration in the face of difficult comparisons as we cycled last year's COVID pantry loading, logistics issues related to a warehouse transition on our U.S. business that impacted our shelf availability and our market shares, and the winter storms in February. The logistics issues lessened over the last month of the quarter as service levels improved, and we expect service levels to return to normal by the end of the second quarter. Pricing grew mid-single digits in the quarter, as our efforts in revenue growth management drove pricing growth across all our categories. The combination of higher raw materials costs, higher underlying logistics costs and costs related to remediating the company's specific logistics issues pressured margins in the North America division. Despite these headwinds, we continue to invest in advertising, particularly behind premium innovation like Colgate Renewal and the Colgate Optic White Overnight Teeth Whitening Pen and behind the continued strength of Colgate Optic White Renewal. Latin America net sales were up 2%, as 9.5% organic sales growth was mostly offset by the negative impact of foreign exchange. We continue to deliver broad-based organic sales growth in Latin America with organic sales growth in all three categories and in every hub. As we highlighted at CAGNY, our innovation in Latin America is driving growth in the premium segment of the toothpaste category. In Brazil, Colgate Total is gaining share behind Colgate Total anti-tartar and our natural extracts line is gaining share particularly behind charcoal. Our toothpaste value share is flat year-to-date in Brazil in measured channels and is up year-over-year in e-commerce. Europe net sales grew 6% in the quarter. Organic sales were down 2%. Volume declined 3.5% in the quarter, as we lapped strong shipments in the year-ago period, which were driven by COVID-related demand in pantry loading. Pricing was plus 1.5%, as we took pricing across all categories to help offset raw material inflation. We're launching equity campaigns across our core Oral Care equities, Colgate, meridol, and elmex, and we're excited about the launch of Sanex microbiome, which Pat talked about at CAGNY. We delivered 16.5% net sales and 11% organic sales growth in Asia Pacific led by volume growth across our biggest markets, Greater China, India and the Philippines. While China and India benefited from comparisons that included COVID-related shutdowns in 2020, our innovation continues to drive improved underlying performance, particularly in e-commerce. Over the next several quarters we will begin to roll out more premium innovation in brick-and-mortar in China, like our Colgate enzyme whitening toothpaste, leveraging the success we have had online in transforming our portfolio. Africa/Euroasia net sales grew 8.5%, as we delivered strong organic sales growth throughout the division. Volume grew 5% in the quarter, while pricing was up 8%. Foreign exchange was a 4.5% headwind. This growth was led by our toothpaste and manual toothbrush businesses, although we also delivered organic sales growth in Personal and Home Care. Our business in Turkey delivered strong sales and market share performance and launched significant premium innovation in naturals, charcoal and white. Phil started the year with another quarter of strong net sales and organic sales growth, despite lapping significant growth in the year-ago period. Developed markets led the growth, particularly the U.S., Canada and Europe, led by e-commerce. Emerging markets grew organic sales greater than 20% in the quarter through a combination of volume and pricing growth. We're very excited about our Hill's equity campaign addressing pet obesity. This global campaign is leveraging digital, in-store, in-office and traditional media assets to drive growth in our weight control products across both our prescription and wellness businesses. And now for guidance. We still expect organic sales growth to be within our 3% to 5% long-term target range. As we think about our current organic growth assumptions versus where we were three months ago, we're probably a little more cautious on developed markets. As you have seen from the scanner data, our categories moved negative more quickly than we had anticipated and we expect that to continue in the short term. Hopefully, this allows for some of the volatility to play itself out sooner in the year and we will see trends stabilize more quickly. Coming into this year in categories where consumption rose last year due to COVID, we expected 2021 consumption levels to be below 2020, but above the levels we saw in 2019. That is the case so far across our developed markets businesses, although year-to-date these categories are slightly weaker than expected. Categories like toothpaste, where usage did not spike in relation to COVID, should normalize more quickly as we move past some of the aggressive pantry loading in March and April of last year, and we're beginning to see that happen and scale has returned to growth in the last several weeks. We are encouraged by how we started the year in emerging markets. We saw broad-based organic sales growth in our emerging markets across all the divisions and with a good balance of volume and pricing. Comps will get more difficult as we go through the year, but we believe we have solid momentum. Please note that given widespread COVID outbreaks in countries like Brazil, Mexico, and India, we could still see an impact from government actions to stem the spread of COVID and other disruptions related to COVID and this is not in our guidance. Using current spot rates, we expect foreign exchange to be a low-single-digit benefit for the year, although slightly less favorable than when we gave guidance in January. All in, we still expect net sales to be up 4% to 7%. Our gross margin guidance remains unchanged, as we expect our gross profit margin to be up year-over-year in 2021, on both the GAAP and base business basis. As we mentioned on our 2020 year-end call, raw materials began the year moving higher and faster than we had expected. This trajectory has continued through the first quarter as you all know. We are still laser-focused on driving our gross margin higher, but the significant increase in costs across our materials base obviously requires additional pricing and productivity. Advertising is still expected to be up on both a dollar and a percent of sales basis. Logistics also continues to be a headwind, particularly in the U.S., where costs also have risen faster than anticipated. We expect these costs to remain elevated in the near term but to moderate later in the year. Our tax rate is expected to be between 23.5% and 24.5%. We point out that our guidance does not account for any changes in U.S. corporate tax rates, given the recent change in administration. On a GAAP basis we still expect earnings per share growth in the low to mid-single-digits. On a base business basis, we continue to expect earnings per share growth in the mid-to high-single-digits. The adverse moves in foreign exchange and raw materials have moved us slightly lower in that range over the past few months, but it is still early in the year. And with that, I'll turn it over to Noel.

Thanks, John, and good morning, everyone. I'll keep my commentary brief since we have plenty of time for the Q&A. I think the results for the quarter really speak for themselves. Obviously we're really pleased with our performance in the first quarter. Despite the significant volatility and headwinds, we delivered strong results around the world and up and down our P&L. While we've made progress in our strategic areas we've been discussing, we still have a lot to do in the balance of the year. Here are our key priorities for the remainder of 2021: Continue to drive broad-based growth. Our priorities here are the same as we've discussed for the past several years. We need to grow volume and pricing. We need organic sales growth in every category and in every division in both emerging and developed markets. In order to do this, we'll continue to ramp up our breakthrough and transformational premium innovation. We delivered high-single-digit growth in toothpaste in the first quarter, despite lapping solid growth in the year-ago period, which helped us drive high-single-digit growth in our Oral Care business. We're driving growth through innovation like Colgate Renewal in the U.S., Colgate Enzyme Whitening toothpaste in China and our natural extracts line and Colgate Total Anti-Tartar Line in Latin America. As Pat and I discussed at CAGNY, this is a marathon not a sprint, but we're making good progress, which will continue as we shift our resources, continue to build new skills and even adapt how we motivate our teams. Pricing is also an important element of growth. And behind our revenue growth management efforts, we continue to drive strong pricing as we look to increase our price index versus the market as well as offset rising costs. You're hearing about rising costs from every company this quarter and we're seeing inflation on pretty much every line of the P&L, but especially raw materials, warehousing and logistics. Naturally our pricing plans are focused. We're battling the cost inflation across the board. We are also driving savings through funding the growth and other efficiency initiatives, which helped to offset these headwinds, an effort Stan, our new CFO, is spearheading for us. We do not expect these headwinds to abate anytime soon, so we have to continue to invest in marketing and building capabilities for future growth while delivering on our earnings guidance. We know we need to be disciplined and efficient in this area. The third is maintaining our focus on building out the key pillars of our long-term strategy while simultaneously managing through all of the volatility. That includes building our capabilities on innovation, e-commerce, digital and data and analytics, progressing on ESG, including increasing our commitments on diversity, equity & inclusion and advancing our 2025 sustainability targets, and then ultimately navigating to return to work for most of our office-based employees. We are building a team and a culture at Colgate that is focused on adapting and changing to this volatile world. We're embracing new strategies and new ways of working and it's paying off. We've had a good start to 2021 and we're looking to maintain our momentum through the rest of the year. So with that, why don't we open it up to questions?

All right. Thank you so much. Today’s question-and-answer session will be conducted electronically for the telephone audience. Okay. We will take the first question from Dara Mohsenian with Morgan Stanley.

Hey, good morning guys.

Hi, Dara.

So can you give us an update on category growth rates in some of your key emerging markets as we cycle COVID? Obviously, there's a lot of volatility short-term but I'm thinking more looking out longer-term, just an update here on volume growth and per capita consumption development opportunity going forward as well as any thoughts on pricing mix and trade-up potential? Has anything changed here longer-term more structurally as we think about the consumer? And what are your strategy adjustments? And, obviously, it won't be a monolithic answer. So maybe you can compare and contrast some of the different emerging markets? And how that might be different? Thanks.

Yeah. Thanks Dara. If you go back, obviously, it depends on the geography. What we've talked about consistently is the volatility that we're seeing all over the world and it's highly dependent on how countries have treated and dealt with COVID and the rate of incidents in those countries. If you start with Asia, the categories are coming back, although still not back to where we were pre-COVID due to some of the store closures that we continue to see across Asia, particularly China and Southeast Asia coming back in terms of category development. In China, you see the COVID issues being put to rest and consumers returning to some level of normality. Thailand continues to be a challenge. That market is highly dependent on tourism, so it's impacted that category. India had easy comps from last year from a category standpoint but you're starting to see those numbers come back quite nicely. Moving on to Latin America, we've seen a very resilient Latin America, particularly our business there. In terms of where we see the categories playing out, toothpaste is starting to come back although it started off quite slowly but we've seen in recent readings the category returning to growth, which is good. Africa continues to perform okay. Africa is an uncertain environment right now relative to the rate of vaccinations in that geography, so that will have an impact. But taking it holistically across emerging markets, those markets were from a GDP standpoint severely impacted in 2020. As you see oil prices come back those tend to benefit emerging markets and that will play out in higher GDP; some inflation, obviously, allows us to continue to take pricing in those markets. As you see the rate of vaccinations increase, those markets are likely to come back quite nicely particularly in the back half of this year. From a pricing standpoint, consistently across all emerging markets, we've been able to take strong pricing given the strength of our businesses and that really started back in 2020. Competitors are facing the same raw material inflation and have been taking pricing, which has allowed the emerging markets to take a little more value in their categories. From a per capita standpoint, we continue to invest in our per capita programs particularly across Africa, parts of Asia and Latin America and that is consistent and I think the margin growth that we've had has allowed us to continue to invest in areas like per cap, which we think bodes well for the long-term.

And we will take the next question from Lauren Lieberman with Barclays.

Great. Thanks. Good morning. I was curious if…

Hi Lauren.

… I know pricing obviously is a key part of your strategy, Noel. But I was particularly intrigued by the pricing in Europe this quarter. I know it was discussed in relation to cost inflation and maybe a little bit less on the side of the longer-term strategic revenue growth management initiatives. But I was just curious, because the ability to get pricing through in Europe even from a consumer or competitor standpoint is pretty notable. And I believe one of your large HPC and food peers has a tougher pricing environment in Europe. So I'd love some more color on that if possible. Thanks.

Sure. Two things. I think the pricing environment in Europe historically has been extremely difficult, as we all know. That being said, if you go back to a lot of the strategies that we've been putting in place around revenue growth management, which is a discipline we're trying to embed broadly across our commercial organizations, we're finding ways to get pricing into the P&L, particularly through how we manage gross to net. Also in Europe is the strength of the elmex and meridol brands; those are strong premium brands with strong brand loyalty that allow us to take more aggressive pricing in those markets. We've been disciplined to do that on a pretty sequential basis across the continent. So it's a combination of revenue growth management discipline taking hold and the strength of our toothpaste equities in that region which have allowed us to take more pricing. To a certain extent, as we saw more lockdowns early on in the year, the promotional environment was probably a little more benign. But we anticipate that will continue to accelerate as store traffic increases in the back half of the year.

All right. We will take the next question from Andrea Teixeira with JPMorgan.

Hi. Good morning. Thank you. I just want to go back to the pricing comment. I think what you said, obviously, you have been able to price to inflation in some of these countries. And in particular, you sounded very positive about Latin America. Do you think you can still pull those levers there? And to John's comment before, if you have to take more pricing in some places is that like you're trying to price to inflation so that you can go into the guide, because the other comments at the end of the prepared remarks implied that if you're not tracking to the high end of your guide, you're tracking more at this point to the low end. So what would take you to the high end of the EPS guide?

Yeah, two aspects to talk to. There's obviously the foreign exchange aspect, which moves transactionally into the margin line and we tend to try to offset that. And there's then commodity inflation that we see locally in the markets and we look to gauge our price increases based on where the market is and what the consumer will bear. But stepping back, it's the strength of our brands in emerging markets that have really allowed us to do more on the pricing line. In Latin America, last year we took 9.5% pricing in the third quarter and 9.5% in the fourth quarter. Across emerging markets, we got ahead of some of the pricing environment that we've incurred due to raw material pricing. As you build that pricing into your P&L that sets us up for strong growth on the pricing side in 2021. We've continued to take pricing as we've seen elevated inflation around raw and packed materials. That's allowed us to deliver the gross margins in the quarter. We continue to look at the marketplace. Competitors face the same level of inflation, and as a result that creates a healthier environment to take pricing particularly in emerging markets. Ultimately, getting to the high end of the EPS guide depends on the trajectory of costs, foreign exchange and how much we can offset through pricing, productivity and mix improvements. We remain focused on those levers.

Okay. We will take the next question from Jason English with Goldman Sachs.

Hey. Good morning, guys. Thank you for slotting me in. So, I guess, I'll come after the gross margin question since no one's really pushed into it yet. The inflation rate this quarter, 310 basis point drag, it's almost 8% year-on-year COGS inflation. Is it safe to assume that that number should escalate as we progress through the year? And assuming that's the case, which seems reasonable, what are the offsets that will escalate in kind to try to help you still get gross margin expansion in this environment, which would truly be phenomenal? Are we looking for more productivity than is typical in the year? Price continuing to climb, or are there other offsets we should consider?

Yes. Thanks, Jason. We would anticipate, as we’ve built into our guidance, that costs will continue to remain elevated as we move through the year. As we start to lap some of the increases from later in the back half of last year, it will become a little more benign. A couple of things: continue to be highly disciplined about taking pricing and taking it quickly — that will continue to be the case. We've got to be courageous and bold in that regard, watching carefully based on local market dynamics. Revenue growth management is an important discipline that we need to embed across our organizations, and we've seen some fruits of that last year and in the first quarter, so that will continue. Mix is also important: last year we saw significant lifts from some of the lower-margin categories driven by COVID, such as bar soap and liquid hand soap. As oral care normalizes and the category returns to historical trends, that will help from a mix standpoint. Our professional health business was significantly impacted by closures but is starting to come back, and travel retail likewise. Foreign exchange, while less favorable than we had originally anticipated, should still provide some benefit. Finally, productivity and getting volume moving in the back half, plus the ability to support advertising and innovation from pricing, will help. All these levers — pricing, revenue growth management, mix improvement, productivity, and FX — are the offsets we expect to deploy to drive gross margin expansion.

And the next question is going to be from Chris Carey with Wells Fargo Securities.

Hi. Good morning. How are you? So if we're not mistaken, this is the best two-year stack in Hill's in like 20 years. I want to understand how you view sustainability of consumption trends in the business today, whether you think there are incremental distribution opportunities as pet ownership has increased, or if you're just gaining market share. It's a bit harder to track given the channels, but basically the concept here is there's quite a bit of momentum. I want your thoughts on sustainability and what you see as the opportunities going forward. Thanks.

Yes. Thanks, Chris. Clearly, we're really happy with the progress because it gives us confidence in our strategy. Comping 2020 last year and still delivering 7% organic is terrific. A couple of aspects that excite us: one, pet ownership is up, and that's an annuity for the category — pets need to be fed and that will play into category dynamics. Second, Hill's remains low in penetration and brand awareness in many markets, which underscores the opportunity to invest and grow. We are increasing investment behind core and premium innovation, and driving premium innovation in Prescription Diet, particularly as consumers return to the vet space. Tough comps will persist, but the business has momentum in the U.S. and in emerging markets as well. We've seen rising agricultural commodity prices and have taken pricing, but overall the health of the business, rising pet ownership, and the low base for Hill's give us confidence we can continue to drive sustainable, profitable growth long term.

All right. And your next question comes from Wendy Nicholson with Citi.

Hi. Good morning. Just on housekeeping: the plant in India, I think has a fair bit of export business throughout the rest of the region. Just wondering if you're worried about that, if you think there could be any disruption there given the outbreak right now. I know you don't want to comment on operations, but I'm thinking about your business in the region and whether that plant is still a big deal from an export perspective and if there could be any pressure from the outbreak. My other question is you haven't talked much about the skin care business. How are trends there apart from COVID, and how is the prestige skin care business doing? For example, how is distribution expansion in China going? If you could give an update, thank you.

Sure. We're concerned about India given the case counts, but the health and safety of our employees remains number one. We've taken significant precautions across India and we're pleased to say we continue to operate all of our plants in India with no disruption. Our most significant plant there has a good percentage of employees vaccinated and is performing well. That plant and the regional capacity are delivering against expectations. We cannot control government lockdown decisions, but at this stage the plant is being run extremely well and the business across the region is benefiting. Regarding professional skin, it was a tough year for that segment, given the channels we focus on such as spas, dermatologists, and travel retail. But these businesses are slowly coming back. We saw good performance in the skin health business in the first quarter — that business was up double digits. We're seeing a return to offices and foot traffic into the professional space increasing month to month, not back to pre-COVID levels but trends are positive, particularly in North America. The outlier remains travel retail in China, where international travel retail hasn't returned, though domestic travel retail has improved. We expect some loosening in the back half of the year. We spent a lot of 2020 building capabilities, refining innovation, and positioning the business for growth in 2021.

Okay. And your next question comes from Kevin Grundy with Jefferies.

Great. Thanks. Good morning everyone. Noel, my question relates to profitability in your North America business. Sales growth was under pressure cycling difficult year-over-year comparisons, so you had volume deleverage, higher commodities, logistics and supply chain issues. Nevertheless it was a low watermark for segment margins in a very long time. So at a more granular level, what percentage of your portfolio in North America, specifically the U.S., do you think you can cover through pricing? What has already been announced to retailers? The environment seems a lot more amenable currently than it had been even a few months ago in terms of retailer receptivity. And what should the market expect in terms of margin recovery in the segment for the balance of the year? Thanks.

Sure. We experienced a perfect storm in the U.S. in Q1. Category expectations declined faster and deeper than we anticipated. On top of that, we saw a significant increase in raw materials greater than expected. Third, logistics: capacity and cost have risen significantly across the U.S., and that was exacerbated by a warehouse transition issue we had that compounded our problems. Those warehouse issues impacted sales, market share and operating margin. The warehouse issues are quickly moving behind us, service levels are returning to normal, and we've got a handle on that. The silver lining is categories have come back nicely in the last two weeks, particularly toothpaste, which is rebounding strongly as store traffic returns. We have a good innovation pipeline and we've maintained our support to drive volume and share in the back half. Regarding pricing, we won't discuss specific plans now, but it's a market where everyone is looking closely at this lever. I anticipate more price increases across the sector given the headwinds. Q2 will continue to be a difficult comp for the U.S. due to last year's strong growth, so performance will depend highly on category trends as we move forward.

All right. And we'll take the next question from Steve Powers with Deutsche Bank.

Hey thanks. So, we've talked a lot about pricing. You just mentioned again there Noel, I guess, I'm thinking about in the context of your underlying strategy the mix shift towards premium innovation. So, in light of the uncertainties you called out on emerging markets and some of the volatility we've seen in developed market category trends and just the notion that there's inflationary pressure building on the consumer shopping basket not only in your categories, but more broadly, does that impact what you anticipate in terms of consumer appetite for that premium innovation that you're bringing to market, especially if the prices associated with it are going higher? How are you thinking about that? Do considerations vary by region or category and has it impacted how you're prioritizing investments over the balance of the year? Thanks.

Thanks Steve. It has not distracted us from our strategy. Premiumization remains a very important element. We've refocused our innovation cadence on premium brands, and if you look at Oral Care growth in Q1, a significant portion came from premiumization. For example, in Brazil our premium business has grown from roughly 27% of our toothpaste portfolio in 2018 to about 30% year-to-date, up 120 basis points versus last year. Launches like Colgate Anti-Tartar, our natural extracts line and elmex in Brazil support that. Premiumization will continue, and we have innovation across price points, allowing us to be agile and play in mid and lower tiers if necessary. E-commerce is also a strong channel for premium; our online business is growing very well and supports premium launches. As consumers return to stores, that historically favors our ability to drive both volume and pricing. We will continue to be agile in allocation: premium investments where they make sense, and mid-price execution if market conditions require it.

And we will take our next question from Bill Chappell with Truist Securities.

Thanks. Good morning.

Good morning.

Just a question around capital allocation and any thoughts there? For years the company had a pretty steady share repurchase program that's faded over the past two to three years. M&A activity seems to be picking up within the industry. Any changes to the thought process over the next year?

No. Our strategy remains consistent: reinvesting in the business with the high ROIC we have. We continue to see opportunities to invest in capacity and cost-saving projects around the world and that remains our priority. We will be selective on M&A if we identify strategic gaps in our portfolio, but right now we're focused on our current portfolio. We think there's significant opportunity to expand the skin health business and roll out Hello and other brands globally. We'll continue to pay the dividend and we've increased share buybacks this year as we had outlined in our guidance coming out of 2020 when we paid down debt. There's no real change: we remain flexible, focused on investment and maintaining a strong balance sheet.

And the next question is from Mark Astrachan with Stifel.

Thanks. Good morning, everyone. I wanted to ask about ad spend and market share. Ad spend has grown ahead of sales since at least 2018. How long does that continue and where does it normalize as a percent of sales? And related to that does market share factor into that thinking — especially given the numbers disclosed in the release around sustained share loss in Oral Care? Could you tie that together?

We don't have a specific target for advertising as a percent of sales; many inputs go into those decisions. We're being more strategic about where we spend, guided by our innovation strategy and premiumization, which requires the right level of advertising to seed launches. Digital spend improves our ability to measure returns and increases efficiency. The most important aspect is continued sustainable, profitable growth. We are selective by category and geography and invest where we see the best returns. Hill's is an example where deliberate investment has paid off. Ultimately advertising supports premium innovation, which supports higher margins, which funds more advertising and capability building, so it's a balanced approach rather than a fixed percentage.

And your next question is from Kamil Jagrulla with Credit Suisse.

Noel, as you're thinking about coming out of COVID and the various divisions and portfolio pieces, has anything changed in terms of where you want to deploy capital? Specifically, are you thinking about the cleaning side differently, or other parts of the business like doubling down on Hill's? What has evolved now that we're on the other side of this?

We spent significant time developing our 2025 strategic plan and made tough choices on where to invest. We're focused on allocating funds to where we expect the best returns through the P&L and to build businesses and geographies with strong long-term growth potential. That includes continuing premiumization, building capabilities in innovation, e-commerce and per capita programs, and investing where demographic and category opportunities exist. We'll be disciplined and allocate based on where we see the best growth opportunities as categories unfold in the back half.

The next question is from Rob Ottenstein with Evercore.

Great. Thank you. I missed it earlier. Your corporate expenses were higher than most modeled. Did that have to do with the warehousing issues you referenced? If so, how much was related to that and what other investments drove it? Also you mentioned you're gaining share in e-commerce. Can you give more detail on the percent of business that's e-commerce and growth rates in the U.S., China, Europe? Some granularity would be helpful. Thank you.

On the SG&A line, the increase was driven by logistics and advertising. If you strip out corporate fixed costs, our corporate fixed costs were actually down — productivity initiatives delivered fixed cost reduction in the quarter. Regarding e-commerce, growth is strong across the board and we're seeing market share gains in North America, Hill's, Asia, and Latin America. India numbers look outstanding. Where we focus time and investment, we're seeing strong returns. We exited the year with double-digit e-commerce penetration and that accelerated in Q1. We're up 260 basis points year-over-year as a percent of sales in e-commerce. It's growing nicely and importantly bringing new users into our franchise.

Thank you. Mr. Wallace, it appears there are no further questions at this time.

Okay. Well, thanks everyone. That concludes our call. We're really pleased with how we started the year and we have a lot to do. We're excited about what's ahead, but there's no question there are many volatility and challenges. We have an incredible culture at Colgate and our entire team is deeply focused on delivering strong results while ensuring that we continue to adapt to a rapidly changing environment and win the future. I want to thank everyone for their continued support of our business and look forward to talking to you soon. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.