Procter and Gamble FY 3Q17 Earnings Call Notes

Jon R. Moeller – Procter & Gamble Co.

Emerging markets contracting

“India de-monetization continued to impact consumption in that market. In Saudi Arabia, one of our 15 largest markets, a prototypical household has endured a 20% income reduction, while utility prices have doubled and will more than double again by July as government subsidies are reduced. Economic crises in Egypt and Nigeria are dramatically impacting category size and markets in Russia, Argentina and Brazil are also contracting. ”

Deprivation testing

“In deprivation testing, we ask consumers to score the product they currently use, say out of 100 points. We replace the product they’re currently using, typically a competitive product, with the product we’re testing and have consumers use it for several weeks. Then we give them back their original product and ask them to score it again. If their score of the original product has not changed appreciably after use of the new product, we’ve not made a significant difference in expectation or delight and therefore wouldn’t rate the new product as irresistibly superior. If they rate their old product significantly lower after use of the new product, we know the new product has elevated the level of performance they expect in the category.”

Biggest opportunity for saving is in raw packaging materials

“Within this strategy, the largest opportunity, about $4.5 billion of the $7 billion, is raw packaging materials. These savings will come from strategic supplier partnerships, supplier consolidation and through an overarching simplification of our SKU lineups and manufacturing platforms. We’ve established joint business plans with our top suppliers focused on end to end supply network synchronization with a goal of reducing product cost year-on-year.”

Digitizing manufacturing

“We’re digitizing our manufacturing operations and automating with robotics using, for example, collaborative robots to automate activities like palletizing, and autonomous vehicles to move materials and pallets within our operations. We see an opportunity for additional $1 billion of savings from transportation, warehousing and other cost of goods sold.”

Packaging still important even in e-commerce

“the increase in the amount of business that’s done through e-commerce does not decrease the need for superior packaging. In fact, in some ways it increases it. There are product integrity challenges that are created by the e-commerce logistics channel that we need to address. And that’s the Air Assist packaging I was talking about. That’s one of the things that it’s designed to address. There’s also kind of a new moment of truth, if you think about it, in an e-commerce purchase. There’s the first moment of truth which is on the site. There’s the second moment of truth when you open that brown box and what’s inside of it and how is that packaged. And that can be a delighter or that can be a detractor and we want that to be a delighter. And then of course there continues to be the next moment of truth which is the use of that product and it needs to perform in an irresistibly superior way. So also, 95% of the business that continues to be in bricks and mortars retail stores, that packaging is very important in terms of informing brand choice, educating, communicating with consumers, attracting her to the shelf. So I don’t see packaging as being an area that should receive less attention going forward. If anything, it should receive more.”

April is slowing a bit I don’t know what that means

“April frankly is slowing a little bit. I don’t know what that means. And you know, you have to realize we’re talking about pretty small changes on the margins. They have a big impact on our results in any one quarter, but it’s hard to look at that and understand therefore what the future looks like. ”

E-commerce 5% of business total but 40% in Korea

“That’s a very interesting question. First, let me just comment on the progress on e-commerce. I mentioned earlier, organic sales grew 30% online in the quarter. It’s now 5% of our business, maybe it’s about a $3 billion business. It’s primarily focused, but not exclusively, in the U.S., China, and in Northeast Asia, particularly Korea. China is about a $1 billion business online currently. I would expect that’ll be 20% to even as high as 30% of our business within the next 12 to 18 months, so that’s moving very quickly. Korea, it’s 40% of the business today. ”

E-commerce in US skewed to bulky items

“The U.S. development in e-commerce is very different by category, with some of the bulkier and heavier products appealing to people online, so they’re not having to fill up their shopping carts with those items, baby diapers, as an example, but also items were more specialized attention. Skin care, for example, is seen as a benefit.”

Share is just as high online

“There has been a lot of talk though about kind of the other side of your question, which is what happens to big brands, businesses like P&G in an e-commerce context, and is that good or bad? And we actually believe that it’s good, that we can be very effective in an e-commerce world, and our market shares currently bear that out. Our online shares, on an aggregate basis globally, about equal to our offline shares, and as I said, the growth rates, not just from a growth standpoint but also from a share growth standpoint, are currently higher online than they are offline.”

Consumers actually expose themselves to fewer brands online

“There are two kind of discussions that occur relative to the online environment, and people who prognosticate the demise of big brands in that environment refer to lower barriers to entry, and they refer to what I’ll call the land of endless assortment. And clearly, there are lower barriers to entry, which is a threat to our business but is also something we can benefit from if we’re proactive about it just as well as anybody else can. From an assortment standpoint, if you actually look at shopping behavior, a typical shopper exposes themselves to a lower, smaller assortment online than they do offline. When they go to the store, they’re exposed to what’s ever there. Very few shoppers click through to the third or fourth page of a search, and what typically shows up on the first page of a search are the more popular offerings, the larger offerings. And then there are tools, whether it’s subscription or other tools that allow us to increase the loyalty of those consumers to our brands.”

Significant decline in growth rates in Jan and Feb, rebound in March, slow in April

“What we saw, and that I do know, was significant decline in category growth rates, I’m talk about the U.S. now, in January and more significant in February with a rebound in March. And April is, by all indications, relatively soft. And I don’t know what all the drivers are of that. And we’re just going to have to see as we go forward. And as I said, that’s going to have an impact, hopefully a positive one, but it will have an impact on our results both this year and next.”

Unilever 1Q17 Earnings Call Notes

Graeme Pitkethly – Chief Financial Officer

Prospects for global economy looking brighter

“I think it’s fair to say that the prospects for the global economy are looking a little brighter than they have done for a while. While last year’s GDP growth was the lowest since 2009, the forecast for this year are now looking a little better. Employment levels in the developed markets are improving and many of our key immerging market currencies like India, Brazil and Indonesia appear to be bottoming out.

Commodity inflation is returning

“Commodity inflation is returning and well there is adds to the cost pressures for us particularly in the first half of this year. It will of course be better and use for the economies of the producing countries themselves, many of which contain large Unilever businesses as you know.”

Changes everywhere

“We have faster changes in consumer trends at both our global and local level, or in our customer channels with the rapid rise with an online sales in convenience stores so progressively a little less reliance overtime on traditional big box retailing, or in media with a changing path to purchase now requiring multichannel digital mobile first approaches everywhere, or in the political environment with economic and political volatility.”

Brazil interest rate are 13% compared to inflation around 4%

“Okay, Alain. Let me tackle the Latin America question first. You’ve hit the nail on the head really, the Latin America was really a tale of two halves in the first quarter. We’ve seen just turning to Brazil which you’ve spoken quite a lot about in Q4 as well, but we saw a 10% volume decline in Brazil. Now the market was down between 5% and 6%. Now encouragingly that is an improvement from the negative 10% market volume decline that we saw in Q4. So there’s been a slowdown in the rate of decline in Brazil but the market is still declining between 5% and 6%. Added to that we’re in a situation where I think interest rates in Brazil around about 13%, inflation is around about 4%. What you see within the within our distributors and wholesalers and within the trade is a bit of a credit crunch if you like, you see a lot of tendency to put and take money out of inventory investment and put it on deposit where you make a 13% return against only 4% inflation, so it’s quite a good place to invest at the moment. ”

Overall message for Asia is we’re getting back

“overall message for Asia is that we’re getting back. I think we’re starting to see the start of normalization back to more historic levels of pricing growth hopefully in Asia going forward and a nice balance of mix and volumes.”

Procter and Gamble FY 1Q17 Earnings Call Notes

Procter & Gamble (PG) Q1 2017 Results

Jon R. Moeller – Procter & Gamble Co.

Commodities were a hurt to gross margin

“Commodities were a modest hurt to gross margin in the quarter. Feedstock costs for propylene, ethylene, and tropical oils are up as much as mid-teens since we set our initial budgets for the year. Wage inflation is also an increasing challenge in many developing markets.”

Sampling has longer term benefits

“In terms of payout on sampling, I’m glad you asked that question. This is something that is typically – if you can sample consumers at point of market entry or point of market change with noticeably superior products in categories where brand loyalty is relatively higher, the lifetime benefit from that relatively modest investment can be significant, but it is a lifetime benefit. A consumer will take a period of time just to use the product that you’ve sampled them with. And so that’s not an investment endeavor that we typically see immediate returns in. That’s why, unfortunately, we got into a practice of reducing that spending because it wasn’t producing – it never produces immediate short-term result. But it’s really the area of spending that should be the last that we cut because of its importance in building users for potentially a lifetime of consumption”

Harder for us to recoup pricing because our competitors benefited from weakening currencies

“There are real differences between, call it the last year and the years prior to that in the FX dynamics, which drive different decisions. You may recall, when we headed into the most recent round of big FX impacts, which was last year, we said that while historically we’ve been able to regain about 2/3 of the impact through pricing, we didn’t feel we were going to be able to do that this time around. And that was driven in large part simply by a divergence in what was happening to the dollar and what was happening to the functional currencies for some of our significant competitors, namely the euro, the pound, and the yen. And those currencies were weakening over that period of time, and so there was less need for competitors who were reporting results in those currencies to price. And as much as anything, that’s what you’re seeing being reflected in the actuals.”

We are a dollar functional currency company

“In terms of how people are compensated, we are a U.S. dollar functional currency company. We pay dividends in dollars. We repurchase shares in dollars. And our investor base, as you well know, really doesn’t care how many rubles we have or pesos we have. What they care about is how many dollars we have. And so the primary compensation lens is through all-in performance on dollar terms. We do, though, also have a look, because we don’t want to incent behavior that’s too short-term oriented, at constant currency. But over periods of time, we’re going to measure our success or failure based on earnings per share and earnings growth and importantly, cash growth in dollars.”

Hershey Company (HSY) 2Q16 Earnings Call Notes

Margins are the focus for HSY

“You have heard us talk about our focus against the cost of our operations coming up. We talked about the $135 million we want to deliver this year. So I would just come back and say, as you know, we are a margin focused company. We want to make sure that our opportunities and our costs are well aligned and we want to continue to be able to invest in our brands and our people as we go forward. But as it might relate to something hypothetical, I just can’t comment on something like that.” J.P. Bilbrey – Chairman, President and Chief Executive Officer


HSY sees a marketing opportunity in this year’s Olympics and will be an official sponsor

“we believe we will see a sequential improvement in our marketplace results over the remainder of the year, driven by new advertising copy, innovation and higher levels of in-store merchandising and display, starting in July with the Summer Olympics in Rio. Our company, for the first time ever, is an official sponsor of the U.S. Olympic and Paralympic teams. Packaging that proudly displays patriotic coloring such as red, white and blue lettering on our iconic Hershey’s Milk Chocolate bar began in the second quarter.” J.P. Bilbrey – Chairman, President and Chief Executive Officer


Innovation in the form of blurring snack categories may be the solution to health trends

“So I would say that it is – the innovation that’s coming up is really what I would call Snackfection in terms of blurring – the blurring that’s occurring between various snack categories. Think salty snacks and confection or other categories, cookies and confection, etcetera. So it’s really leveraging the fact that consumers are looking for more of those complex eats and opportunities to play at the seams between categories. I think there – that largely our confection or hardcore mainstream confection brands will continue to offer primarily indulgent benefits. But there are some places where I think there is a little bit of crossover. For example, Snack Mix certainly has nuts, pretzels, etcetera and consumers are seeing that a little closer to having some food value than a straight chocolate.” Patricia Little – Senior Vice President and Chief Financial Officer


Despite uncertainty of Chinese market, cost has been minimal thus far

“We are selling things. So, as I like to think about it kind of in a simple way, are we making stuff, shipping it, selling it and collecting money? And all of those things are working for us. So, I think that the market in China, as you have heard from a lot of companies, is pressured. I think we would align with that… And then as you think about the overall P&L, the impact of China restructure on our P&L this year is really relatively limited. So, we think that will continue to also help us as we go forward.” J.P. Bilbrey – Chairman, President and Chief Executive Officer

Procter and Gamble FY 4Q16 Earnings Call Notes

Procter & Gamble (PG) David S. Taylor on Q4 2016 Results

We see China sequentially improving

“on China. We see it sequentially improving. We are not done yet with hitting our portfolio right in China. That will take time. There are several categories that we are still losing share. And we’re not positioned with the appropriate portfolio in the premium and super premium segments.”

Chinese ecommerce has accelerated

“Having said that, the online portion has accelerated and is certainly in the double- digit, but you see many categories, 130%, 140%, 150%. And what is encouraging to me is our online business is starting to accelerate. We’re growing share the past 6 months. And we’ve at least now got a couple of our categories where our online share is higher than our off-line share, which bodes well for the future, given the choice Chinese consumers are making.”

Thoughts on the dollar shave club acquisition

“I do understand and certainly it is very real that the cost to enter a category has changed dramatically today versus 5 years and 10 years ago. And part of what we are doing by category again is looking to see how do we leverage the capability that exists. I expect we’ll continue to see competitors that can pop up. But generally to sustain and grow a business, you have to have a product and a product experience that meets the consumer’s need. There are many, many examples of Internet-based competitors that have been popping up, both here and China. Tremendous number of those that get trial. Repurchase though is another story. And repurchase and a profitable business model is the highest bar. And that’s the one that we’re working against, which is to have a substantive product that meets the consumers’ need, to have communication programs that meet consumers when and where they’re receptive to the message, and understand they want less to be sold and less to be – and more to be part of their life. And we’re adjusting our marketing and communication programs to do just that. And I think that’s the right way by category to win.”

Jon R. Moeller – Chief Financial Officer

Moving away from trend driven businesses

“We’re moving away from businesses that are more trend driven, where fashion, fragrance, and flavor drive consumer purchase decisions. We’re focusing on businesses where product and performance drive purchase decisions, where there are clear consumer jobs to be done and clear objective measures of performance. These are products that consumers purchase and use on a daily basis. And they’re in structurally attractive categories.”

Kimberly Clark 2Q16 Earnings Call Notes

Kimberly-Clark (KMB) Thomas J. Falk on Q2 2016 Results

7% volume growth in NA

“Now let’s turn to our North American consumer businesses. Our teams there delivered another strong quarter with 7% volume growth and healthy market shares. Product innovations, great marketing programs and good retail execution continues to drive results across our portfolio. Promotion activity was also a little higher than average in the second quarter. Our adult care, child care and feminine care volumes each increased by about 10% including benefits from innovations on Poise and Depend, Pull-Ups and U by Kotex. Our Huggies diaper volumes rose mid-single digits and market shares improved by about a point as we continue to make progress following last year’s Snug & Dry relaunch. Consumer Tissue volumes improved 6% with mid-to-high single-digit growth in the all categories led by Kleenex facial tissue. So overall, our brand positions are very healthy in North America.”

Expecting positive second half volume in Brazil

“Yeah, I mean, I think Brazil, if you look at it how the year has played out, it was a pretty start tough to the year with negative volume trends as we pushed pricing into the market. Second quarter the volume was positive in diapers and then a significant amount of price. We’d expect to see more volume in the back half, and so I’d say on – if you look at share positions in Brazil, we’re up a couple points in fem care and have a good momentum there, and are down about 0.5 point in diapers and would be looking to close that gap in the back half of the year.”

Expecting birth rate to pick up in China

“In China, we’re really expecting the birth rate to pick up as we’d expect to see a little bit more volume come there in the back half. Pricing has been more competitive than we’d anticipated, and we’re expecting it’s going to continue to be competitive in the back half of the year.”

China e-commerce growth is effecting promotional environment

“I mean, actually the consumers are trading up in terms of product format. So if you look at the Tier-5 super-premium type products, those segments are still growing. And so the issue is you’ve got – it’s one of the largest diaper markets in the world. It’s probably one of the fastest-growing diaper markets in the world on unit volume, and so you’ve got us and a couple of big Japanese players and P&G all competing in that same space. And I know everybody thinks the other guy started the fight, but it’s gotten more price competitive. And there’s also a channel issue whereas we’re – e-commerce is growing dramatically in that space and retailers are also trying to make sure they don’t lose their share of that young family’s market basket. And so there’s a lot of competition and promotional activity and the manufacturers like us are certainly fully participating.”

Early signs of optimism in Brazil

” Although I was on the phone with our guy who runs Brazil last week, and I think there are some early signs of optimism perhaps there that they’re things – expecting things to be a little bit better in 2017. And so we’ll see. I think the economy’s run on expectations and, hopefully, the Brazilian consumer will start to be a little bit more optimistic. And we’ll see that translate into category growth. But I would expect for 2016, it’s still going to be a challenging category story.”

I don’t think you’re going to see people try to take price in England. It’s easier to take price in some economies than others

“I’d say in markets where they have – where it’s pretty common to have big currency swings, if you looked at most – a number of Latin American markets or Eastern European markets, the retailers are quite understanding of the need for their imported products to – or products with imported raw materials to take price. I mean, that’s kind of the way the market works. And in probably more established markets, if you looked at like Australia and the U.K. and maybe even China, the currencies have been pretty stable and they’ve had a history of being pretty stable and you don’t typically get a big price-driven impact from currency.”

“For example, the sterling has weakened a bit since the Brexit announcement. I don’t think you’re going to see a lot of suppliers taking price in the U.K. because A, it wasn’t that big of a swing, and B, it’s a challenge to push price through with a U.K. retailer, if that color gives you some context for the way you think about it.”

Unilever 2Q16 Earnings Call Notes

Unilever Plc (UL) Paul Polman on Q2 2016 Results

Environment frankly not getting any easier

“Undoubtedly, reading the newspapers, you would agree with me that this is a challenging trading environment that frankly is not getting easier.”

Dollar shave club is more than just a grooming company

” yesterday, by coincidence, we announced the acquisition of the Dollar Shave Club. And I’m very excited about this move, as you can imagine. Let me explain why. First and foremost, it takes us further in the male grooming category, where Unilever, if you’d exclude the shaving segment, is the outright number one. This is much more than just a razor company. Their portfolio and their dialog with consumers extends across male grooming into hair styling, skin care and skin cleansing.”

Will have to take price in UK with devaluation of pound

“We think what we will see is a slightly less deflation in Europe, more pricing in Asia, no change in Latin America. The outlook that we have on pricing is cautious on pricing for the rest of the year. In weak markets that we see in many of these emerging markets, its price increases will still be difficult. But where we see cost going up, take for example the UK with the enormous currency devaluation we’ve seen in the British pound, we will look at pricing.”

We liked Dollar Shave Club because it could teach us about the subscription model

“The second reason that we like this is because the fast emergence of these subscription models. Big companies like us, like we’ve seen also with our competitors, have a hard time establishing those things because of the culture, the knowledge is just simply not there, not a good thing, not bad thing as long as you recognize that. And we were able to acquire the knowledge that they have built very quickly and undoubtedly will apply it also on other brands.”

It has also built a loyal following among millenials

“And then lastly, this is a very attractive proposition that has been built, growing very fast with a very loyal following amongst millennials, which is equally attractive to us. So, there are many elements that are good in this acquisition, and that’s probably why the market overall reacted positively.”

We definitely see a worse environment in Latin America in the second half

“We definitely see in the second half a worse trading environment in Latin America than the first half. We want to be unequivocally clear about that. Brazil is in recession. I’m actually going there in a few weeks’ time, but it has a high devaluation of its currency and incredible drop off of consumer demand. The market is negative and it’s more negative than people think unfortunately.”

Argentina still needs to go through a significant economic adjustment

Argentina, I was there two months ago and had extensive discussions with Macri, the new President and many others there. And here again, we’ve seen a significant sub devaluation of the peso. We are obviously having more currency, but it’s at a significantly reduced level. The country has to really go through a significant economic adjustment”

Mexico is slowly gaining traction

” Mexico, the economy is slowly gaining traction. I think that’s probably a little bit of the brighter light, but disproportionately smaller for us in terms of the business that we have there. But it’s not really to write home about yet”

US economy is growing 1-2%

“The reality is that the economy is growing and the market is growing in the 1% to 2% range. We are currently putting in a performance of 0.7% over the first half. So, we are slightly disappointed by that. I don’t want to call it differently.”

North America volumes are probably actually down

“And then in North America, I would re-guesstimate that the range of growth is between 1% and 2%, with volumes actually slightly down but driven by price growth. And if you look at that price growth, it probably comes from where you – what you identified which is the premiumization of Personal Care”

It’s very hard to read the Chinese market because of the shift to e-commerce

“China is a story in itself. It’s very hard to read the Chinese market. I think you’ll be hearing a lot of our other colleagues when they publish their results to talk about the Chinese market, because the rapid shift to e-commerce is confusing and the rapid move away from the tier 1 cities to the tier 2 and tier 3 cities. You can go to China now and really see empty stores when you go into hypermarkets and supermarkets that we’ve not seen before. So, we think that growth has significantly slowed down and, again, everybody has to draw his conclusions from that.”

No Chinese millenials go to the store anymore

” it’s frightening the speed at which this is changing, just like they leapfrogged the landline and moved to mobile phone. You now see the millennials – and it’s interesting if you go to China one day, just let them show you all the things they can do on WeChat, and it’s – you take Amazon and YouTube and Twitter and Google all together in one app and PayPal and whatever; it’s incredibly frightening. None of the millennials go to a store anymore. So, the speed with which this is changing is mind-boggling, and I think not many people predicted it.”

Our estimate is that e-commerce could grow to about 20% of retail sales

“13% of the retail sales is now already in e-commerce and our estimate is that it might be growing with about 20%. We are outgrowing this. We’ve put in a significant organization. Globally, we are 600 people, 700 people now just totally focused on e-commerce. We are continuing to ramp that up.”

Sometimes what you can gain is not compensated by what declines in other channels. Although 80% of people are still buying at retail, the marginal customer is driving the profitability

“But sometimes you feel that what you can gain there right now in China is not compensated with the decline in other channels. I am thinking about this and we’re diving deeply into this, but I think because of the phenomena of the e-commerce, the rest of the retail is struggling. And although there’s still 80% of the people buying in the rest of the retailers, if you look at these statistics, they’re aggressively adjusting the stocks and they’re aggressively looking at the business models, and their financial exposures, because it’s the gearing that they’re missing, it’s this incremental sales that was giving them the profitability that is disappearing.”

This is one of the reasons we bought DSC

“So the dynamics will be interesting and we need to closely follow them, but they will rapidly change in the Chinese market. You need to work much harder to fish where the fish is. And as I’ve mentioned before, you need to take different fishing rods. One of the reasons the Dollar Shave Club is attractive and why Michael has done such a great job creating this company is indeed the knowledge of the subscription model and we will be certainly looking at that also as well for the Chinese market.”

Procter and Gamble at Deutsche Bank Conference Notes

Jon Moeller – Chief Financial Officer

Restructuring will focus on 10 core business units

“Going forward, we are anchoring our portfolio on 10 category-based business units and 65 brands. These are categories where P&G has leading market positions and where product technologies deliver performance differences that matter to consumers. These 10 businesses have historically grown faster with higher margins than the balance of the company. We are moving away from businesses that are more trend-driven, where fashion, fragrance and flavor drive consumer preference. We are staying in businesses where the product and its performance is the hero, where there are clear consumer jobs to be done and clear objective measures of performance. The products that consumers – these are products that consumers use on a daily basis and they are in structurally attractive categories.”

4 largest are baby care, fabric care, hair care and grooming

‘We expect to make progress in all 10 product categories, but we are putting a specific emphasis against the four largest categories: Baby Care, Fabric Care, Hair Care and Grooming and the two largest markets, the U.S. and China. Combined, these four categories and two countries represent over 80% of sales and profit.”

We are increasing sampling, a key point of entry and change for consumerst

“We are increasing sampling in new washing machines, a key point of category entry and change for consumers. Last year, we distributed 5 million samples in washing machines globally. This fiscal year, we will distribute about 17 million, and calendar year 2016, we will distribute 30 million samples of our best performing products.”

Transforming organization and culture

“Importantly, we are transforming our organization and culture. We are making many changes that by themselves may seem small and obvious, but together, they are significant and important. As an example, we have made several important changes in how we go to market. We eliminated overlapping resources and duplicative structures and responsibilities of marketing and sales professionals in the global business units and market developing organizations, clarifying responsibilities and strengthening accountability.”

Online shares slightly higher than offline because online skews more premium

“e-commerce point broadly – on an aggregate global basis, our online shares are slightly ahead of our offline shares, which is a good starting place. I don’t get too excited about that, because the demographics of the online shopper currently skews more premium in our portfolios, more premium, so it should be the case, but we have a slightly higher share which we do. ”

China moved to premium products very quickly

“China, there were really three things that happened. One was a rapid premiumization of the market. So, I lived and worked in China in the mid-90s and probably 2% of the category was transacted at premium or super premium priced tiers. Today, that’s over 50%. It’s one of the most premium markets in the world. Those two price tiers that represent more than 50% of consumption in the market are growing at double-digit rates. The balance of the market is flat to declining.”

Price became a proxy for quality in China

” I think although this is a bit of a hypothesis by significant quality contamination issues that occurred particularly in the food chain and in the beverage chain, the infant formula issues, the milk [ph] issues, etcetera. And understandably, Chinese families responded by looking for the highest quality products they could find. And in many cases, price became a proxy for quality, rightly or wrongly. So, that drove this change very, very quickly.”

Kimberly Clark 1Q16 Earnings Call Notes

Kimberly-Clark (KMB) Thomas J. Falk on Q1 2016 Results

Now expecting slightly less drag from currencies and prices than we had been

“our current assumptions have improved somewhat compared to three months ago. And while this helps our U.S. dollar results, it also means we’re expecting less benefits from selling price increases this year. As we said before, it’s important to look at currencies, commodities and selling prices together since they are all related. We’re now planning that the net impact of these three factors will be a mid to high single-digit drag on our bottom line growth this year, and that’s slightly better than what we shared with you in January. If this turns out to be the case, we’ll have added flexibility to invest more behind our top line growth initiatives.”

Everyone is expecting results to improve as the year progresses

“I would say the momentum throughout the first quarter, particularly in some of the key emerging markets, they had a stronger March than they started the year, and so that’s a positive sign. I was just with a lot of our international teams recently at our brand week, and I would say everybody is expecting their results to improve as the year progresses”

Saw private label share down in the US which is good

“In terms of the U.S., actually, we saw probably better growth in our business than the underlying category growth because we picked up share in a number of markets and consumers are still responsive to innovation. We saw private label shares flat to down in nearly every category that we’re in, which is again another sign of health of the consumer for us, and are probably maybe more bullish on the outlook in North America at this point in time than maybe we would have been even at the beginning of the year.”

Toughest competition in China has been from Japanese competitors

“Yeah. I would say in China in particular, the toughest competition of late has been our two Japanese-based competitors, Kao and Unicharm. Obviously, the weaker yen last year helped them support that in a way. At least it didn’t have as big of a negative impact on them relative to what was going on in the U.S. And so they’ve been more aggressive, Kao in particular. We’ve been gaining share, Kao has been gaining share, Unicharm has been losing share. And so there’s been more competition in that direction.”

China may be skipping a generation of retail development

“We are looking to see how e-commerce does scale. And it’s certainly in a market like China, where it may be skipping a generation of retail development, you don’t have as many retail channels developed in a lot of those markets, and you are seeing very dense population, very high smartphone penetration, and a much lower delivery cost to get that last mile delivery”

Unilever FY 1Q16 Earnings Call Notes

Graeme Pitkethly

Business environment has proven to become more challenging

“In January, we said that we were prepared for the business environment to become even more challenging and that has proved to be the case. In Europe, markets continue to decline with stable volumes but falling prices; while in North America growth in our categories has eased back to only around 1%. In Brazil and Argentina, market volumes are contracting as consumers struggle with rising unemployment and the high local inflation brought on by currency adjustment.”

Prices and volumes across categories are flat but trading up and trading down beneath surface

” Looking on aggregate and taking a broad global average, market volumes in our categories are flat and pricing is around historic norms. But within these aggregates we continue to see some strongly diverging trends. Many consumers are up-trading to higher value items for at least part of the daily or weekly shop. Well at the same time those consumers are looking to economies by down-trading for other purchases.”

Comps do get tougher in the second half of the year

“The Group comparators do get tougher in the second half of the year, but we remain confident of delivering against our objectives, which remain unchanged.”

The UK has been a particularly competitive environment

“in the UK, the market was particularly tough as an environment, but in Q1 we did see good volume growth and some value share gains, but that was all offset by price deflation. I don’t want to go specifically based on one quarter into details of the UK’s performance, but it’s a continuation of a very, very competitive marketplace across all categories. You’re aware of the consumer changes in the UK, very value conscious, continued growth of discounters, but above all very competitive on a high level of the promotional intensity, which was particularly sharp in the first quarter.”

North America continues to see a bit of trade destocking

“Obviously North America, and I will let Andrew have a bit of a think about the sequencing of cost versus benefits for the programs, if I may. First of all, your question about sellout, we do continue to see a little bit of trade destocking in North America. Sellout continues about 2%. Our selling is about flat, so that’s our main litmus test of the impact that exists there. To get into the balance between what’s winning and what isn’t so much rather than HPC in foods and personal care, we are seeing pretty – we are continuing to see share gain driven by deos and hair, but we are down in skin and oral. And overall share gain in North America has been driven by refreshments and PC. Foods is declining a little bit as you said driven by spreads. I don’t want to get into the detail on a quarterly update of really with spreads by geography.”

Consumers have been trading up in India

“The consumers are trading up and down. The example, if I go across categories perhaps where we see that more strongly could be in personal care and home care. They’ve all been expensive category, home care in particular and just wanted to share the example of laundry in India where I was a couple of weeks ago and the more fundamental, because I mean India has been less impacted, stronger economy, currency less impacted and therefore the deflation that we’ve seen in a couple of categories in India is much more function of the commodity cycle, but more fundamentally in the laundry business in India, a brand like Surf Excel, a little bit above we are continuing to see consumers trade up from the bottom brand of [indiscernible] into a position like Surf Excel and that thinking more longer term is exactly the sort of thing we expect to see and continue in very much what our strategy is focused on.”

Andrew Stephen