Colgate's Brand Prowess Should Help It Navigate Competitive and Macro Headwinds

While concerns abound around consumers' financial health and ultimately their willingness to pay up for the essential goods in Colgate-Palmolive's portfolio, we think the firm is navigating the uncertain landscape 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 6-12 months in some cases, down from 18-36 months historically. The prudence of this course is evident, as Colgate has chalked up 20 consecutive quarters at or above its 3%-5% long-term organic sales growth target. We attribute these results to a renewed focus on consumer-valued innovation, even that which comes with a higher price, as well as elevated brand spending; the company has spent almost 12% of sales on marketing on average the past four years, 120 basis points above the level directed in 2017-19.