With a Stringent Eye on Cost Management, Colgate Stands to Buttress Its Competitive Edge

While concerns abound regarding consumers' financial health and ultimately their willingness to pay up for essential goods in Colgate-Palmolive's portfolio, we believe the firm is navigating the uncertain landscape astutely. Under the leadership of CEO Noel Wallace, Colgate's strategy has centered on elevating research, development, and marketing spending (on its core mix, in adjacent categories, and throughout the digital realm) and expeditiously responding to evolving consumer preferences. In this context, Colgate has worked to bring products to market in just six to 12 months in some cases, down from 18 to 36 months historically. The prudence of this course has been evident, as Colgate chalked up 24 consecutive quarters at or above its 3%-5% long-term organic sales growth target (through the end of fiscal 2024). We believe this reflects the firm's renewed focus on consumer-valued innovation across price tiers, as well as elevated brand spending. The company has spent an average of 12% of sales on marketing over the past five years, 160 basis points above the level directed in 2017-19.