Colgate's Unrelenting Commitment to Brand Spending Should Ensure Its Competitive Edge Holds Firm

While headwinds have abound from rampant cost inflation and a strangled global supply chain, we think Colgate-Palmolive is navigating the uncertain landscape quite astutely. Under the leadership of CEO Noel Wallace, the firm's strategic focus has centered on elevating research, development, and marketing spending (on its core mix, in adjacent categories, and throughout the digital realm) and responding to evolving consumer preferences more expeditiously (bringing products to market in just six to 12 months in some cases, down from 18-36 months historically). The prudence of this course has been evident as Colgate has chalked up 17 consecutive quarters at or above its 3%-5% long-term organic sales growth target. We attribute these results to the firm’s renewed focus on consumer-valued innovation, even that which comes with a higher price, as well as cultivating its fare with elevated brand spending (expending almost 12% of sales toward marketing on average the past three years, 110 basis points above the level directed in 2017-19).