Rick Dierker: Yes, okay. So the first one is on gross margin cadence. 50 to 75 for the year, we do expect gross margin in the first half to be a little bit better. Why? Because we have pricing carryover that’s happening a bit still in the first half of the year that wasn’t there. So gross margin a little bit better than the front half than the back half. And then your second question was on — yes, on marketing investments and stuff like that, okay. Well, look, the scorecard — last year was kind of unique, right? We wanted to build back the war chest on marketing because we got too low during COVID because we were outside of we were out of stock. We didn’t have to supply, all those reasons. And so we did that a year ahead of time.
We really initially said, we’re going to go to 10.5% and then 11% this year. And we fast-forwarded, put it back to 11%. We think 11% is the right number. But with that said, share matters, share is a scorecard to tell you if you’re the right number. Right now, we’re getting share in about 60% of our sales. That is a good metric and good scorecard. So right now, we believe that number is the right number.
Matt Farrell: Yes. And the other thing, Peter, I’m sure Barry Bruno put his hand up for spending more marketing money to the extent that we’re.
Barry Bruno: I got a lot of new products to support them, so yes.
Matt Farrell: But look, when you got all these new products launched and it’s a target-rich environment, there’s lots of places we could spend money. We’ve got the sheets then we just came out with. There is an awareness about that. You got to spend some dough in order to flow that out. But yes, there’s lots of opportunity.
Anna Lizzul: Hi, thank you. Anna Lizzul from Bank of America. I was wondering in your evergreen model with the recent revision today, how much is that driven by the success of your more recent acquisitions like HERO and THERABREATH versus the growth of the remainder of the portfolio?
Matt Farrell: Look, everybody is aware of the fact that we’ve got two fast-growing brands, but this is not just a one-year look. It’s because we’ve grown 4% for 10 years in a row. And the stable of your portfolio can change over time. And obviously, we got two fast-moving ones. We’ll have other ones in the future. So we need to see if it’s sustainable and clearly sustainable for the next couple of years because of those two.
Rick Dierker: Yes. I would also add that
Matt Farrell: But it’s not a cause effects. Thanks.
Barry Bruno: Yeah.
Rick Dierker: I would also add that in 2023, the rest of the portfolio, ex-THERABREATH, ex-HERO did hit or exceed our evergreen model, so we feel great about the strength of the portfolio.
Matt Farrell: Yeah. that’s a good point. So if you think back that 5% growth and 5.3% growth in 2023, more than half of that came from the business ex-THERABREATH and HERO, tell you that the base business is strong. Okay, let’s move over to the far table now.
Kaumil Gajrawala: Hi. Kaumil Gajrawala, Jefferies. It makes a lot of logical sense why you’ve narrowed it down to seven focused brands with the most growth. Does that open up the door for divestitures in some of your other categories?
Matt Farrell: I’ve had that question in the past. And we evaluate all of our brands regularly, because everything is going to pull their weight. But I wouldn’t say that signals anything. You see that MEGALAC is one that we’ve looked at that for a while. It had good years and bad years. But considering that’s become commoditized, we think we should move it out. But yeah, it’s a regular analysis that we do as a company.
Kaumil Gajrawala: Got it. And the second question on HERO, I think 40 countries that, sounds like a lot. Can you maybe just walk through the process why you feel comfortable there’s that much demand in many different places? Do you have a supply? How will you balance the marketing, maybe just going over that a little more?
Matt Farrell: Okay. Let’s start with supply. So Rick Spann, take a swing. You think you can supply 40 countries?
Rick Spann: Yeah. So we have a third-party manufacturer…
Matt Farrell: Hang on, Rick.
Rick Spann: Yeah, okay.
Matt Farrell: It’s such a good story I want to make sure everybody can hear it.
Rick Spann: We have a third-party manufacturer in South Korea who has a lot of them to grow right now, and they have a lot of property. And they have committed to us that they will put up more buildings and put more lines in place and keep up with our demand. So we have no issues on supply at all. And in fact, if you look at the growth that we’ve supported last year, we didn’t see all of that coming and they were able to respond and meet that very high demand that we had.
Rick Dierker: Maybe, Mike, do you want to comment on the 40 countries, maybe even tell the UK story a little bit.
Matt Farrell: Could we spring for another one up here?
Mike Read: Yeah. What I’d say is just generally across the portfolio, we’ve had really balanced growth across our five GMG regions and our sub’s really healthy. And with doing that, we’re able to add more brands to our business with strong appetite from our distributor partners and then on to retail. So HERO is not the only one. We actually have other opportunities to expand multiple brands across multiple countries. But I think just the success story of HERO, not only in the US, but now as we’ve gone into commercializing into most of our subs already they’re already taking number one positions. They have really strong consumption really early. So we’ve only been in for two, three months and we’re already well established as a brand.
So the playbook that clearly played out in the US is playing out beautifully already in the markets that we’re in. And that just becomes the story that we take to those 40 countries. But we are well poised with our distributor partners around the globe to make a big success globally.
Matt Farrell: Then you can tick off like four or five countries, we’ve already launched with success?
Mike Read: Yeah. So just in terms of registration getting into markets, so we’ve launched in Canada, we’ve launched in the UK, we launched in Germany, France, Australia, all with really strong positions, great retail partnerships doing well online. So everything that we’re hoping for, it’s that and a little bit more. So it’s the success is there. And every time we have that repeatable success in the playbook, it just adds more momentum for those new partners that we’re trying to bring on.
Kaumil Gajrawala: Okay.
Filippo Falorni: Filippo Falorni, Citi. I wanted to ask you about the promotional environment in your categories. You talked about, Matt, stepping back on boundary a bit. What about the other categories? Like do you see any need to step up more promotional activity and what you’re seeing from your competitors? Thank you.
Matt Farrell: Yes. Well, look, when you talk about the promotional environment, you’re generally talking about household. Household is where you have by far the most promotions, couponing, et cetera, et cetera. So, if you look at, say, liquid laundry detergent, unit dose, scent boosters sequentially Q3 to Q4, actually, the deal was declined. Now, went the other way with cat litter. So, cat litter was up 70 basis points sequentially from Q3 to Q4. But if you look at the numbers historically, litter is around 15% sold on deal today. If you went back to 2019 or 2018, it was 20%. So, it’s nowhere near where you have historical levels. The same is true for say liquid laundry detergent. It’s 33% in Q4. But you’d have to go back again quite a few years.
And I think the high watermark was 40% quite a while ago. But then yes, this is quite a while ago so you’d have to say yourself, hey, all suppliers have absorbed these huge cost increases, had to raise price. Is it sensible to think that this is going to be dealt back? So, I think if you look at the trend, you’d say probably not just looking at the trend line. Yes. Okay. Microphone over here?
Javier Escalante: Javier Escalante, Evercore. If you can talk again a little bit the opposite to M&A, the two acquisitions that you made seems to have more extendability into adjacencies. WATERPIK doesn’t come across that way, but HERO, THERABREATH, there seem to be adjacencies. Have you — when you talk about that, whether that inform also the 4% that probably is 5%, if the new target internally, if you can talk about that?
