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John Faucher; Chief IR Officer; Colgate-Palmolive Company
Noël R. Wallace; Chief Executive Officer and President; Colgate-Palmolive Company
Stanley J. Sutula; CHIEF FINANCIAL OFFICER; Colgate-Palmolive Company
Andrea Faria Teixeira; MARYLAND; JPMorgan Chase
Bryan Douglas Spillane; Director General of Stock Research; BofA Securities, Research Division
Callum Elliott; Analyst; Sanford C. Bernstein
Christopher Michael Carey; Senior Equity Analyst; Wells Fargo Securities, LLC, Research Division
Dara Warren Mohsenian; MARYLAND; Morgan Stanley, Research Division
Edward James Lewis; Research Analyst; Redburn (Europe) Limited, Research Division
Filippo Falorni; Vice-president; Citigroup Inc. , Research Division
Kaumil S. Gajrawala; Equity Analyst; Jefferies LLC, Research Division
Lauren Rae Liberman; MD and Senior Research Analyst; Barclays Bank PLC, Research Division
Mark Stiefel Astrachan; MARYLAND; Stifel, Nicolas
Olivia Tong Cheang; MD and Research Analyst; Raymond James
Peter K. Grom; Head of Research and Equity Analyst; UBS Investment Banking, Research Division
Robert Edward Ottenstein; Senior MD and Head of Global Beverages & Household Products Research; Evercore ISI Institutional Equities, Research Division
Stephen Robert R. Powers; Research Analyst; Deutsche Bank AG, Research Division
Sunil Harshad Modi; Managing Director, Tobacco, Household Products & Beverage and Senior Consumer Commodity Analyst; RBC Capital Markets, Research Division
Operator
Welcome to Colgate-Palmolive’s fourth-quarter and full-year 2023 earnings conference call. This call is being recorded and livestreamed on www. colgatepalmolive. com. Now, for opening remarks, I’d like to turn the floor over to John Faucher, Executive Vice President of Investor Relations, Mergers and Acquisitions.
Jean Faucher
Thanks, Betsy. Good morning, and welcome to our Fourth Quarter and Full Year 2023 Earnings Release Conference Call. This is John Faucher. Today’s conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the Q4 and full year 2023 earnings press release and related prepared materials and our most recent filings with the SEC, including our 2022 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 tables 4, 6 7, 8 and 9 of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the Q4 2023 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. Noel will provide you with some thoughts on our Q4 and full year results and our 2024 outlook. We will then open it up for Q&A. Noel?
Noel R. Wallace
Thank you, John, and hello everyone, and thank you for joining us to talk about our very strong finish to 2023 and our positive outlook for 202four. Over the past two years, we have specifically focused on maintaining the pace of our robust biological expansion. expanding our sales, while rebuilding our margins and improving our cash flow consistent with our performance. We are achieving all three goals this year as we proceed to invest in advertising to strengthen our logos and expand and expand our features to ensure long-term expansion. 2023 marked our fifth consecutive year of expanding biologics sales, assembling or exceeding our long-term diversity goal of 3% to 5%. We achieved a balanced expansion in biological sales, expansion in the 6 divisions, in our four categories and with a greater balance between value and volume at the end of the year. Volume was stable in the fourth quarter and increased during the quarter, excluding the effect of the decline in line with personal label volumes at Hill’s. Our market position according to percentage dynamics is improving through strong innovation and according to brand investment levels with a focus on improving the effectiveness of each dollar spent. We are also seeing the benefits of our virtual transformation as our insight analytics efforts continue. Our commitment to managing expanding currencies and the strength of our financing of expansion efforts, combined with our global productivity initiative, resulted in gross margin expansion, consistent with double-digit profit expansion and EPS expansion single digit top center. We achieve those effects while expanding investments in market positioning and strategic functions and absorbing headwinds from emerging interest costs, pensions and taxes. We achieved over 60% flexible cash flow expansion, allowing us to invest in our logos, build capacity, and buy back inventory. We are also growing our division for the 61st consecutive year. I am deeply proud of the impact Colgate workers have achieved in a challenging and constant work environment. The year 2024 will bring many of the same demanding situations as 2023: geopolitical turmoil, currency and consumer issues, continued weakness in China, and a gigantic number of political elections around the world. We enter 202four with strong momentum and plans positioned to deliver on our promises in this environment, as well as greater flexibility in our coin source and balance sheet. As we have discussed in recent quarters, our goal is to support continued expansion of composite EPS and our guidance for 202four reflects this ambition. We will continue to invest to generate a balanced and high-quality organic sales expansion, with expansion in both volume and prices. We plan to improve productivity to fund this additional investment while expanding currencies in a percentage-consistent manner. This will allow us to generate a strong expansion of cash flow to reinvest in the business and return money to shareholders. I look forward to speaking in more detail about our four 202 plans at CAGNY next month, so that they can emphasize the Colgate-Palmolive team’s confidence in our continued expansion. And with that I will answer your questions.
Operator
(Operator Instructions) The first query comes from Dara Mohsenian of Morgan Stanley.
Dara Warren Mohsenian
So I just wanted to focus on the percentage effects of the market in the fourth quarter. And if you look to the future, the percentage of Oral Care is notoriously strong, and you’ve achieved healthy year-round expansion. Can you tell us about their complex positioning on the front lines of equity in oral care. Here’s a more complicated comparison. So what do you think about the sustainability of those inventory gains through 2024, and then a similar question about pets?Of course, some industry stress points, can you juxtapose your market share with those industry stress points?A significant driving force of the long-term market opportunity percentage in this sector?
Noël R. Wallace
Great. Dara, thank you. So let me start a little bit broader on the categories, particularly Oral Care, we’re really encouraged to see the inflection of positive volume growth in the categories around the world. And in many of the regions where we had seen negative volume growth, we started to see an inflection of that towards the end of the fourth quarter in the category. So that gives us great confidence that the category and the pricing that we put in place is continuing to turn. And importantly, we’re going to see that growth continue in 2024. As you bring that back to our business, a really strong quarter for Oral Care, as you mentioned, both from an organic and sales standpoint, but likewise, has that transferred into better market share growth?If I take oral care in general, we were up double digits in the quarter. That translated into strong market share growth, particularly in regions like Latin America, Europe, Africa, Eurasia, and you saw some improved scanner data in the U.S. as well. I think this is a reflection of the core business strategy that we have in place, the increased advertising that we’re putting behind the business as well as a strong innovation pipeline that continued in the back half of 2023 and will continue in 2024 as well. So market shares around the world is strong, and we would anticipate that, that will see continued growth as we move through the balance of ’24. And I would caveat with some of that, obviously, the markets will be challenged given some of the upfront issues I mentioned but pleasing to see the strong volume growth in some of our bigger regions. If you take Latin America, particularly 3 strong quarters of strong volume growth very much driven by Oral Care. But quite frankly, that was a cross-section of all of our categories, and you see that volume improving across all of our divisions. So again, I think we’re well positioned on that. Let me talk a little bit about Pet because I think there’s some important context to our strategy and why what we’re doing is different for the market and what we’re doing is working for the marketplace as well. We talked about Colgate being the most penetrated brand in the world. We also know that Hill’s is low penetration. So we will continue to execute a series of differentiated strategies on Hill’s in order to continue to accelerate our growth on that business. So if I take the 3 aspects that we think about for Hill’s, reach, awareness and conversion. Reach, obviously, is a reflection of the strong advertising that we’re putting in place to get the message out with low single-digit penetration on Hill’s. We want to ensure the awareness of our superior science is well understood. Hence, the strategy to drive more TV spending, more digital spending through consistently through the quarters. We’re spending a lot of time on the effectiveness of that reach to ensure that we’re getting the awareness of it. We’re using obviously, a strong professional endorsement that we have behind vets and continue to accelerate our science and our clinical communication with that key opinion new leader is critical to the success of the brand and importantly, as we think about conversion, a lot of nonusers in the category, as I mentioned, I think, on the third quarter call, 5% of consumers are using a therapeutic nutrition, but theoretically, 80% should be using the therapeutic nutrition. So a lot of opportunity to continue to drive share. The dynamics in the category hence, you’re seeing a little bit of trade down from wet into dry. I mentioned that on the third quarter call, treats have suffered. Now we’re not immune to the category softness but if you take a step back and look at our principal retail environments, Pet specialty, neighborhood Pet, we’re growing share nicely across all of those environments, which means we’re helping our retail partners grow category dollars. Penetration was up roughly 10% in the U.S., our biggest and largest market. So we’re very pleased with the progress we have there. Yes, the category is a little softer, but we have the right strategies and differentiated strategies in place to continue to accelerate growth.
Operator
Next up is Bryan Spillane of Bank of America.
Bryan Douglas Spillane
Maybe this query for Noel and Stan, similar only to Argentina, I think there would have possibly been a depreciation that went through the other line of spending. So if you could also give us a little bit more color about this and how much of this. It can also happen again. And possibly, Noel, just take a step back. I think this week we’ve heard from several other corporations that might even reconsider their strategy with Argentina, given the devaluation. It’s been a while, right?? Since we had this kind of currency crisis in Latin America. So I don’t know, just your point of view, in the short term, how do we think about it from an accounting perspective?And then, Noel, what is your vision of Argentina, perhaps in the longer term.
Noel R. Wallace
Alright. Excellent. Brian. Let me tell you a little about the history of Argentina and I apologize for having to respond at length, but I think it is vital for the public to see how we function in these hyperinflationary environments. We have been in Argentina for almost a hundred years. We have an extremely competent control team that understands hyperinflationary accounting, understands how to manage the revenue stream and the balance sheet, understands how to save you additional balance sheet devaluations as we move forward. And that just reflects years and years of delight in dealing with this point of volatility. We can go back to 2001, 2002, which I think was the last primary devaluation of the country. In 2014 there was also one. So we are very accustomed to doing everything we can to manage the potential volatility of a market like Argentina, and that experience has certainly paid off. At all times, at all times we have continued to invest long term in Argentina. We have production on the ground. We are smart about our ability to access money. But, crucially, given some of the limitations that we have noted over the years in terms of ability to access dollars, we now have the flexibility to also import products into the country. So, I would say that we are very sensitive to volatility, but on the other hand, it is good news that the price controls seem to have been reined in a little bit, and we may not see as much going forward. Therefore, we continue to operate in an environment where we can offer costs to the client and set values to offset some of the large transactions. Today we are not immune to devaluation. We’ll see how this plays out over the next few quarters, more in terms of margin than profit. But at the end of the day, we will make sure we get value in the market, and that will last; It will take some time to reflect on the source of income. Array But in general, this is a wonderful equipment, which I need. appreciate their incredible diligence in how they manage the economic environment there and that they feel quite smart knowing that we have genuine control over what is happening in Argentina, despite the continued volatility. With that, let me give Stan a chance to communicate a little more closely about how we’re managing the P&L.
Stanley J. Sutula
Thanks, Noël. And Bryan, let me start and pick up where Noel left off on the team. As an example, we have a guy I work with, José Fernando, and he is my CFO for Latin America. But he was also CFO or monetary director in Argentina in 2002. So we have extensive experience. And I think that manifests itself in a very proactive strategy in market situations. So he and I talk a lot about converting situations in the market and, more importantly, the proactive nature of what we’re doing about it. Therefore, they have been operating in a hyperinflationary environment for a long time. They take mandatory measures with a long-term perspective. So even though we live in a hyperinflationary environment, we accounted for it appropriately, as you see the effect of devaluation and other income, other expenses were not the priority of that item. So there are other elements there. But we have this constant problem. We have delivered our general figures. We have improved our productivity. We managed to increase margin, profits and cash flow, so I think the team did a very smart job proactively looking for the scenario and addressing it decisively. So you talked about a possible technique. Obviously, when you pass, your balance is transmitted, we will continue to take those steps in the future. We have a business developing there. So from now on, I don’t expect a major impact on our effects in Argentina.
Operator
The next one comes from Andrea Teixeira of JPMorgan.
Andrea Faria Teixeira
I’m wondering if you could tell us a little bit more about marketing investments, Noel, and you recently explained that you talked about an increase in advertising in the market, and do you also see a normalization of the promotional environment in the past?had said that it had composed and is reinvesting its advertising promotion functions in the United States. Can you tell us where you are lately and what are the degrees of promotion of the categories?And separately, if you could tell us a little bit about the source chain changes that you’ve implemented with the new control and also how you’re positioning yourself in light of the disruptions in the Middle East and the lessons learned from the panic.
Noël R. Wallace
Let me let you know about publicity and promotion, and I’ll come back and upload a little context about the wonderful work Luciano has done in taking on his new role. The strategy has been pretty consistent over the last three or three years. Four years in terms of our ability to drive, to build brands through wonderful communication and wonderful innovation. And you’ve clearly noticed that that’s reflected in the source of the income statement. And despite the fact that we’ve grown and accelerated advertising noticeably especially in recent years, we’ve continued to meet our guidance and exceed our operating profit targets, which is fantastic. But it only gives you an idea of Fr.
Stanley J. Sutula
And Andrea, I’m just passing through to go back to your last comment about the disruptions in the Red Sea and shipping. So we were proactive in this as well, looking for choice strategies when they became available, making plans for disruptions in lead times. And the rest of the origin chain has remained stable, so we don’t see any disruption there, but we have planned for longer lead times and have planned for 2024.
Operator
The next question comes from Filippo Falorni with Citi.
Filippo Falorni
So Noel, going back to Health, clearly, high single-digit top line growth, excluding the private label, discontinuation, very strong results in the quarter. As you think about ’24, like, can you give us a sense of how you see the volume for that business evolving and also the pricing environment in Pet food? And then at the margin line, you saw a pretty significant cost headwinds in 2023. Are you seeing any moderation on the cultural and protein side for the Hill’s business?
Noël R. Wallace
Philip. We are seeing more balanced volume and pricing as we get closer to 2024. Obviously, we have had about 6 quarters of competitive pricing. 7 quarters where we had to adopt costs to offset much of the inflation we saw in agricultural products. Turning to the current component of your question, we see that agricultural costs are starting to moderate, which is a smart thing, and over time, as we see costs stabilize in the markets, we will expect volume to return. But remember, this is the only category in which we compete and where we have seen widespread inflation during the second component of 2023. But we expect this to moderate as we move into 2024, and costs will also moderate, and we will see a return to a genuine increase in the household penetration rate that I shared with you earlier, which is evidently our ability to continue strong advertising. So overall, we will see a more balanced expansion as we move through 2024. And in terms of margin, as I mentioned again, a more moderate cost. We are still dealing with some of the strong inflationary environments that we experienced in the first component of last year. So the prices that we set in the second component of this year and at the beginning of the quarter will remain, but we will see volumes start to return as we move more specifically into the second component of the year.
Operator
Next comes from Callum Elliott with Bernstein.
Callum Elliott
It’s smart to see the huge increase in logo spending this year and the good fortune translates into competitive functionality and growth. My question is, can you communicate with me about some of the other investment segments outside of ad spend and logos?Thinking about the r
Noel R. Wallace
Yes Callum, that’s a smart question because we’ve talked a lot about positioning ourselves to win in the short term, but more vitally, consistently succeed in the long term. And this obviously depends largely on advertising investment. But, as you have pointed out, investing in other areas, specifically in functions, in our virtual transformation, would be at the forefront of that, education and emerging talent, attracting talent, making sure that we Optimize our company and the talents that it has. on that side. So this is a vital component of building the capabilities necessary to continue to increase the power of our spend and ultimately build the greater knowledge architecture and infrastructure necessary to achieve this and do so consistently over the long term. That is why there is also a lot of investment in this area. On the capital side, it is clear that we have invested a lot of money in terms of capacity expansion. As I mentioned above, we will see this beginning evolve into many more optimization and savings projects in our production facilities. As I mentioned earlier, building infrastructure for our knowledge architecture and our knowledge transformation, in general, are long-term investments that we will continue to make and help drive the continued expansion of benefits we talked about earlier. Stan, anything to upload to that?
Stanley J. Sutula
Callum, the only thing I would say is that when you look at the revenue source or the balance sheet, the absolute numbers, they don’t reflect one of our key responsibilities here, which is to allocate resources and we reallocate them to those that have a higher level—areas of expansion or spaces with greater potential. Although it is not surely shown under the covers, this reallocation of resources, whether dollars or human capacity, is what sustains us in analytics, virtual and data. And it’s for Hannah and to improve all her abilities. So there’s a lot of work behind the scenes to direct resources to those key spaces.
Noël R. Wallace
And I talked about this very roundly in relation to your question: Money is sound, isn’t it?Cash gives us the ability to have a lot more flexibility in how we invest across the business, and that’s increased significantly, as you may have noticed above. the quarter and the year.
Operator
The next question comes from Steve Powers with Deutsche Bank.
Stephen Robert R. Powers
I tried asking about the gross margin. It is evident that it is very strong in the quarter and progress is expected in the 24th. Maybe just a little bit of attitude in the paintings that you’ve done to get here, this quarter’s pilots. But also, when we look at 24, I guess year-over-year, the expansion is largely concentrated in the first component of the year. But sequentially, how do you think about gross margin?Or is there any sequential progress that can be made?
Noël R. Wallace
Yes. Let me top line, and I’ll let Stan answer a couple of questions. Obviously, I think that pricing, I think cost, I think foreign exchange is obviously the big drivers in the cost line for us. So we’ve done a terrific job in delivering strong funding to growth. I think a lot of opportunities as we head to supply chain settling down our ability to start ramping up a lot of the projects that were in many respects on back burner during COVID. That has allowed us to drive strong funding to growth. We anticipate that, that will continue as we move forward into 2024. The pricing has been a big part of the gross margin expansion that we’ve been very aggressive with over the last 6 quarters. Yes, pricing will be more balanced as we move forward. So you would anticipate that will be a lesser impact as we move through the gross profit and raw materials will continue to, I think, be inflationary, but far more benign than we’ve seen in the past, and there’s clearly a moderation there. So ultimately, hopefully, an opportunity for us. With that, let me turn it over to Stan to give you a little bit more construct to that.
Stanley J. Sutula
First, we are very pleased with the progress made in gross profit through 2023. We saw sequential improvement across categories, driven by a broad base of innovation and productivity that helped offset the raw materials situation we all had to face. Now, if you think about the future, after the fourth quarter, there are a number of things that still have an effect on the timeline from the fourth quarter to the first quarter. And this year there are novelties with a little bit of Argentina, the calendar of some dates around the world, such as the Chinese New Year, the time in which it occurs and where a component of this value is reflected, from 2023 and more news. So, as the year progresses, we expect it to grow, but not at the same kind of levels, of course, as it does in 2023. So while we’re working on that, teams are focused on productivity. The balance of turnover will shift from value as principal to value and volume and this productivity will help us improve margin as the year progresses.
Noel R. Wallace
Oui. Je would simply like to point out that there will be a sequential effect on the margin line in Argentina, as we will take costs into account during the quarter, but it will take some time to recover the effect. the transaction in the trades.
Operator
Next up is Peter Grom of UBS.
Peter K. Grom
So I wanted to do a quick inquiry about the volume functionality in Latin America, an 8% increase this quarter, which is three consecutive quarters of expansion. And I agree that the compositions are kind of straightforward, but the expansion is still really impressive. Can you tell to what extent this is a category expansion feature rather than an inventory functionality?And indeed, how does this reflect your vision of volume expansion through 2024 in Latin America in particular?
Noel R. Wallace
I think we communicated that in the current call and in the third, in the third quarter call, the strength of our business in Latin America and, ultimately, our ability to be a valuable leader. Then the constant story we have of seeing the volume comes back to the category point. So if I first communicate on a category point, the wonderful thing is that we have noticed that the 3 categories we compete in have a positive influence from a category perspective. And you have clearly noticed that we have grown in terms of volume over the last 3 quarters, which is driving smart expansion in the volume percentage of our business. That’s why we’re very happy with the overall functionality there. And given the evolution of the existing category, we are confident that we will continue to see balanced expansion as we move forward. We will definitely want to take currency values into account throughout the year. But as we’ve said before, we expect volume to return to those markets, and that’s precisely what we’re seeing. If you take a look at some of our largest markets, namely Brazil and Latin America, as well as Mexico, you will see a very strong quarter for any of those markets, with double-digit volume expansion for Brazil and Mexico, as well as a strong double-digit expansion. Again, this clearly indicates that the strategy of implementing strong innovation in all value points, achieving advertising, which we accelerated in the fourth quarter, also in Latin America, is helping to recover the categories and generate a smart volume market share in this sector. matrix
Operator
Next up is Nik Modi of RBC Capital Markets.
Sunil Harshad Modi
I just wanted to keep up with the inflation of raw curtain packaging. Just a little more perspective, you talked about the special products. I just wanted to have a little bit of context on this and what exactly some of those elements are.
Noël R. Wallace
Of course. Let me ask Stan this and he can give you a little more context.
Stanley J. Sutula
Sure. Unlike the prior 2 years, we don’t expect a material impact here. So we see modest inflation in 2024 and there are some areas like every year that go up and down. But there are some new ones this year, things like fish oil has increased significantly. But overall, we expect modest inflation. And so while commodities overall are off of their highs, they’re still elevated versus pre-COVID levels. And we expect that as we go through this, there might be a little bit of benefit moving in our favor, but not dramatically. And the only thing I’d say after that is raw materials are one component. So we deal with conversion costs, we deal with transport and logistics costs, and we drive productivity across all these areas through our Funding the Growth program, and that’s why we’re confident on margin expansion for 2024.
Sunil Harshad Modi
And Stan, if I may continue with Filippo’s question. I think he is asking a protein question in relation to Hill. So, you discussed agricultural costs, but maybe you’re just commenting on protein? And what do you see? . . .
Stanley J. Sutula
Fortunately, at least at this point, we’re not seeing a full effect on Hill’s at a higher level year-over-year. So we’re doing research in general around the Hills, because agriculture has stabilized here, as has protein. and we don’t expect any major headwinds heading into 2024, based on general commodities for Hill’s. And that’s vital because we’re boosting productivity with modest degrees of pricing and innovation transfer that will allow us to continue to grow margin around the world. Hill’s portfolio.
Operator
Next up comes from Chris Carey of Wells Fargo.
Christophe Michael Carey
So I tried to ask about productivity and maybe convey it to the regional level. I think it was the most productive productivity in our style anyway. That was about 20 years ago. So, is there anything abnormal about this quarter, progress, or productivity?Or maybe we’re just talking about the fact that productivity continues to grow here?And that’s anything we can envision that will have a slightly higher rate in the future. So, similar to that, it’s the most productive margin in North America that we’ve noticed in a long time. Was there an excessive productivity increase in the quarter, or are you just starting to see some relief in costs and increased power compared to stabilization?that we’re seeing in the industry.
Noël R. Wallace
Yes. Thanks, Chris. Yes, a little of all that, frankly. Obviously, with the incredible inflation that we have seen over the last year and a half in most of our basic basket, we have obviously had to push for financial expansion and higher prices have obviously made it possible to generate more financing for expansion. As I mentioned earlier, much greater factory power and our ability to use our manufacturing facilities to generate more investment for expansion projects has also allowed us to build up a small portion of that investment for expansion in 2023 that we had historically. No, I had time to do it. So this will be partly symptomatic of the year and the opportunity, but I think the field that we’ve embedded and the culture that we have at Colgate around financing expansion, as well as the global productivity initiative that we’ve implemented. . It allowed us to generate a strong general contraction in our prices. I wouldn’t say use it as a reference to move forward. There will be many moving parts to this, but we believe that structurally we are in a better position to fund the expansion. Structurally, we managed to run the GPI in line and slightly towards the upper end of the direction range we previously provided for this initiative. So we feel like we’re in a smart position. Prices will moderate, so it is vital that we continue to generate strong investment for expansion and through P&L to drive the margin expansion that Stan talked about.
Operator
Next up comes from Olivia Tong with Raymond James.
Olivia Tong Cheang
I just wanted to ask you a couple of questions about earnings, obviously, after an impressive 7% earnings expansion in the fourth quarter. The forecast for the fiscal year is approximately 3% to 5%. Can you give us a concept of the first part of the year compared to the second part of the year, is the speed of volume expansion a kind of contribution to costs that’s starting to fade?And then, in the same way, in EPS, obviously, a very strong 23 in the fourth quarter, which indicates average and higher figures. Of course, this diversity implies the possibility that expansion will slow in 2024. So let’s talk about what you want to happen to get to the top spot and what’s expected. Are they getting incorporated in terms of low finish and a progressive conservatism built into the consultant?
Noel R. Wallace
Thank you, Olivia. So, as I said in my opening comments, we are well placed for continued compound earnings expansion going forward. And this is surely reflected in our recommendation regarding the diversity that we have provided. We have smart momentum coming out of the 23rd and heading into the 24th. And I think most importantly, P&L and balance sheet flexibility has allowed us to set ourselves up for continued success. If we look at the cadence of that, we will see the overall balance being replaced as we overcome the higher costs that we have had for up to 2023, which will surely rebalance and we will see volume return. in the categories. As I mentioned before and at the end, our goal is household penetration through increased advertising and market share. That’s why we think we’re in a smart position. The trade-offs will be more complicated as you say, but we will see the volume expansion recede and generate a balanced expansion throughout the year. Let’s recognize now that we still have some inflationary markets, Argentina, we talk openly about Nigeria and Turkey, which will influence costs. We have a safe flow. Most of the costs we will see in 2024 will be fluid costs. We will be introducing some new pricing in select markets. But in general we are going to see a much greater balance, as I mentioned at the beginning. We’ll see how this plays out in the end, but we’re surely hoping for a more balanced expansion in the second part of this year.
Operator
The next one comes from Kaumil Gajrawala with Jefferies.
Kaumil S. Gajrawala
Could you give us a sort of overview of the scenario in China, starting with the market and then specifically addressing your business?
Noël R. Wallace
Of course. In China, I think you’ve heard it consistently throughout the earnings season so far: There’s a genuine slowdown in China, and we’re not immune to that slowdown. I will say that, in terms of some numbers, we think we’ve performed very, very well in Greater China. Our business is down by only single digits between 5% and 10%, which is very commensurate with the category declines we’ve seen in those markets. But clearly, on the fitness side of the skin, we saw a bigger drop in categories and therefore also a bigger drop in our business. In the long run, the basics of the market remain intact. And I think it’s going to be some time until 2024 for those markets to come back. Obviously, as you’ve read, much of the stimulus budget is being fed back into the market, but we’ll see what effect it will have on consumers and consumption. But we think we’re in a smart place. The company continues to gain market share against Colgate. We’re talking about Hawley
Operator
The next one comes from Lauren Lieberman of Barclays.
Lauren Rae Liberman
In North America, it was wonderful to see that volumes definitely had an effect this quarter, and you talked about the expansion not only in oral care, but also in bar soaps, liquid hand soaps, and cleansers. So I know there’s a lot of things that contribute to that most wonderful performance. You talked about more balanced promotions. But I wondered if he would spend any time talking about company-wide innovation and his plans for 2024. And maybe I could also talk a little bit about the plans that I might have in relation to the handheld plate and the plans to stabilize and recover stock. in this corporate?
Noël R. Wallace
Lauren. I can’t really speak particularly to the innovation that we will have in 2024. But I can clearly say that we have a strong portfolio and a much more balanced portfolio across all of our businesses. Increasing advertising is thoughtful and strategic and we will do more business in North America. I think that reflects the strong expansion in operating profits that we have returned to the business. Therefore, we believe we are in a much better position for some of the categories that have seen a decline in advertising over the years. Therefore, we believe we are well placed to reflect continued expansion in terms of volume. Obviously, costs will decline especially in the United States as we move into 2024. And we have a strong innovation pipeline across categories to ensure we continue to grow our market share. The other thing is, as I mentioned, a more balanced cadence of promotions, and we’re moving forward to make sure we execute them very, very thoughtfully. We don’t intend to go back on old numbers, but we believe we have opportunities in linked accounts in linked regions of the country to boost ourselves where we’ve noticed some pretty competitive competition. So smart position. Really pleased with the adequacy of the P&L. In fact, I’m happy with the advertising we’ve included in the revenue stream, which bodes well for the long-term suitability of this business.
Operator
The next one comes from Mark Astrachan with Stifel.
Mark Stiefel Astrachan
2 questions for me. One, on North America. So global market share better in North America markets for toothpaste, a little bit weaker advertising spend obviously increased 4Q and for the year. How much is the right level? And is there a correlation in the U.S. between advertising and volume performance? Is there more to it than that R&D, whatever it’s curious there. And then on the Hill’s business, given the weakness in Pet specialty channel, has it made you think at all about whether your distribution mix in terms of where the product is sold, is it right at this point? Or do you potentially think about expanding that to other retailer areas.
Noel R. Wallace
So North America first. Obviously, we’re going to achieve much more balanced investments across North America. We had to deliver the P
Operator
The next one comes from Robert Ottenstein of Evercore ISI.
Robert Edouard Ottenstein
Christmas, I was wondering if you could tell us a little bit about India. Many of the corporations we communicate with are very excited about the market and see it as becoming more and more dynamic, so maybe you can review your position there, the market. Percentage trends, if you see more opportunities and what are your plans?And then just type in a chore item for Stan. There seems to have been a $0. 07 effect on other income, but there were also some trade-offs. such as some asset sales and a value-added tax refund. If only you could make us understand more exactly what is happening there.
Noël R. Wallace
So, in India, you’ve noticed the effects this week, very strong effects across the board, 9% organic, consistently high prices, and sequentially higher volume in this market. I would also say that we remain very enthusiastic and positive about the Indian market. We’ll see the continued pullback of the rural segment, the energy of the rural segment, which bodes well for volume as we move forward. How we look to the future. The other aspect, which I probably wouldn’t go into much detail about, is that we have a very strong innovation plan for India, especially around our core business. And we’re excited to see this noticeably implemented in the market. and executed. The team is doing an exceptional job of locating more distribution issues to ensure we continue to capitalize on the investment strategy. So bullish on India, smart effects and sequentially precisely where we’d like to see your business today and yet sets us up for another strong year in 2024.
Stanley J. Sutula
Rob, let me go back to your current questionnaire and your other income and other expenses. As we discussed earlier, this is made up of a number of elements, from this year and from last year. And Argentina’s devaluation is indeed an impact, although not a majority. We also come with upfront costs, unique pieces from this year and last year. What I would say is that this is not a new implementation rate. This will not continue at this level. And you deserve to think of this as kind of unique occasions in nature. Therefore, these replace the year.
Operator
The next one comes from Edward Lewis of Redburn Atlantic.
Edward James Lewis
Oui. Je was only looking to communicate about Europe. Another quarter of the maximum costs this quarter. And in hindsight, I think it will be 9. 5% through 2023 or 4. 5% through 2022. So I’m interested to know what you think about pricing here, because systematically, I guess, in the past, pricing hasn’t been a significant topic. Is this a new kind of attitude that we deserve to expect and that deserves to continue to raise costs in general from Europe?
Noël R. Wallace
Yes. Thanks Ed. Good question. We’ve learned a lot about pricing in Europe and are collaborating heavily with our retail partners to find tactics to drive pricing and, ultimately, their categories. Obviously, significant inflation over the last 6 or 7 quarters, which has actually contributed to higher costs in the market. But I think our teams came out of the 23rd with more confidence. There is no doubt that as inflation falls in 2024, we will get a much more balanced view of costs and volumes in the revenue stream, but I think smart stories have allowed us to drive our innovation and generate genuine revenue. price in the sector. categories through the relaunch of our brands. You heard Jean-Luc talk about this at the Deutsche Bank conference and I think it’s still a constant theme. So we learned a lot there, not to say it’s going to be a challenge as we move forward to get more pricing in Europe, but we think we have the team and the vehicle to continue to look at tactics to drive category expansion. and therefore, our margin expansion in the activity
Operator
This concludes the Q&A portion of our call. I would now like to call back Noel Wallace, chairman of the board of directors, president and chief executive officer of Colgate, for any final comments.
Noel R. Wallace
Well, thank you all for joining the call this morning. We hope you’ll agree that the methods and plans we have in position to drive successful, consistent, and consistent expansion to drive price for all of our stakeholders are there. And let me especially thank all Colgate painters around the world for their hard work and determination to achieve those strong effects in 2023 and thank them in advance for the effects they will continue to generate in 2024. Thank you all. See you in Florida.
Operator
The conference has now concluded. Thank you for attending today’s call. You may now disconnect.