Noel Wallace: Yeah, Callum, thank you and good morning. A good question because we’ve talked a lot about positioning ourselves to win in the short term, but more importantly, succeed consistently in the long term. And that has been a lot around obviously the advertising investment. But as you well point out, investing in other areas, specifically capabilities, our digital transformation would be at the forefront of that, training and developing talent, bringing in talent, ensuring that we’re optimizing our agency and the talent that they have on that side. So that’s an important part of ultimately building the capabilities to continue to drive the effectiveness of our spend and ultimately setting ourselves up for better data architecture and the infrastructure required to do that and do it consistently over the long term.
So a lot of investment going in that space as well. On the capital side, we’ve had, obviously, a lot of spending on the capital side in terms of increased capacity. As I mentioned earlier, we’re going to see that start to shift to a lot more optimization and savings projects moving through our manufacturing facilities. As I mentioned earlier, setting up infrastructure for our data architecture and our data transformation. So overall, these are all investments for the long term that we think will continue to play out and allow us to drive that consistent earnings growth that we talked about earlier. Stan, anything to add to that?
Stan Sutula: Callum, the only thing I’d say is when you look at the face of the income statement or balance sheet, the absolute numbers, it doesn’t reflect the one of our key jobs here is to allocate resources and we reallocate to those high-growth areas or the areas with the most potential. While that may not show on the absolute line, underneath the covers, that reallocation of resources, whether it’s dollars or human capacity is what supports us in analytics and digital and data and S/4 HANA and to enhance all those capabilities. So lots of work under the covers to drive resource to those key areas.
Noel Wallace: And I’d mentioned very indirectly tied to your question, is the strong cash flow, right? The cash flow is giving us the ability to have a lot more flexibility in how we invest across the business, and that is pleasingly up significantly as you saw in the quarter and the year.
Operator: The next question comes from Steve Powers with Deutsche Bank. Please go ahead.
Steve Powers: Hey, thanks and good morning. I wanted to ask about gross margin. It was obviously very strong in the quarter and you expect progress in ’24. Maybe just some perspective on the work you’ve done to get here, the drivers this quarter. But then also, as we look at ’24, I’m assuming from a year-over-year perspective, that expansion is heavily weighted to the first part of the year. But sequentially, how should we think about gross margin? Is the fourth quarter a high watermark? Or is there a sequential progress that can be made? Thank you.
Noel Wallace: Yeah. Let me top line, and I’ll let Stan answer a couple of questions. Obviously, I think that pricing, I think cost, I think foreign exchange is obviously the big drivers in the cost line for us. So we’ve done a terrific job in delivering strong funding to growth. I think a lot of opportunities as we had the supply chain settling down, our ability to start ramping up a lot of the projects that were in many respects on the back burner during COVID. That has allowed us to drive strong funding to growth. We anticipate that that will continue as we move forward into 2024. The pricing has been a big part of the gross margin expansion that we’ve been very aggressive with over the last six quarters. Yes, pricing will be more balanced as we move forward.
So you would anticipate that will be a lesser impact as we move through the gross profit and raw materials will continue to, I think, be inflationary, but far more benign than we’ve seen in the past and there’s clearly a moderation there. So ultimately, hopefully, an opportunity for us. With that, let me turn it over to Stan to give you a little bit more construct to that.
Stan Sutula: So first, we’re very pleased with the progress on gross profit through 2023. We had sequential improvement across the categories driven by a broad base of innovation, productivity, that helped offset that commodity situation that we all had to deal with. Now as you think about going forward, coming off of Q4, there are a number of items that always impact the timing, Q4 to Q1. And this year, there’s a couple of new ones with a little bit of Argentina, timing of some events worldwide, like Chinese New Year, the timing of when that occurs and where some of this price rolls through, roll through from 2023 and incremental new price. So as we go through the year, we expect that, that will expand, but not at the same kind of levels, obviously, as 2023.
So working through that, the teams are focused on productivity. The balance of the top line will change from pricing being the predominant driver to pricing and volume and that productivity will help us drive the margin improvement as we go through the year.
Noel Wallace: Yeah. I would just simply underscore that there will be a sequential impact at the margin line on Argentina as we will take pricing in the quarter, but that will take a while to flow through to recover the transaction impact of the de-val.
Operator: The next question comes from Peter Grom with UBS. Please go ahead.
Peter Grom: Thanks, operator and good morning, everyone. So I wanted to ask specifically about Latin America volume performance, up 8% this quarter, three straight quarters of growth. And I recognize that the comps are somewhat easy, but the growth is still really impressive. Can you maybe just unpack how much of that is a function of category growth versus share performance? And really, how does that inform your view on volume growth looking out to ’24 in Latin America specifically? Thanks.
