Keith Allman: The way we view pricing is really a function of the strength of our brands and where commodities go as it relates to our ability to drive cost improvement. And there’s really no difference in pricing as we think about vast strategy as it relates to various channels, and we’re going to stay consistent with that. Beyond that, I’m not going to get into specific customer discussions or the like as it relates to pricing. But fundamentally, we look at the — our capabilities to drive productivities, the strength of our brands and our innovation. And over time, we’ve demonstrated the ability to get effective pricing over cycles. And when you look at where we are today in the Plumbing business and the ability to continue to drive margin improvements in the face of some challenging volume, I think that really speaks well to our continuous improvement culture and the tools that we have to continue to drive productivity.
So there’s a lot that goes into pricing, including the desire to gain share, of course, and that’s been consistent really how we’ve approached it over a number of years.
Sam Reid: Awesome. And then switching gears to Plumbing. Last year, you guys were gaining some shelf space on the paint side in a few different kind of subcategories. Just curious kind of how those conversations with Home Depot are coming this year and whether there’s any opportunity to continue to gain share in paint — initiative?
Keith Allman: Yeah, Sam, we think there is opportunity to continue to gain share. Our relationship with the Home Depot is outstanding. We’re focused on DIY paint. We’re focused on PRO, and obviously, our Plumbing businesses. Depot is a big customer for us in Plumbing, and we’re looking at ways to continue to drive solutions for the consumer that result in share gain, both in terms of shelf and in overall volume. So that’s something we always work on and we’ll continue to do.
Sam Reid: Awesome. Thanks so much.
Operator: Your next question comes from the line of Stephen Kim. Your line is open.
Keith Allman: Stephen, you might be on mute.
Stephen Kim: Can you hear me?
Keith Allman: Yeah. We got you now.
Stephen Kim: Okay, all right. Sorry about that, not sure what happened. It seems like North America Plumbing margins might have been up like 350 basis points or so. It seems like International margins were down due to the volume. I didn’t hear you talk about any specific cost saving programs, kind of general efforts and input costs and things of that nature. But could you talk about any specific cost savings programs that you’ve got going on in North America Plumbing? And give us a sense for how far along they are? How much more maybe we could expect and things of that nature?
Keith Allman: Yes. Good question, Stephen. The specific initiative — they cover — I’m hesitating just because the team is doing such a good job across multiple fronts and it’s not just in North America, it’s also International with Hansgrohe and across our Plumbing platform. But there’s a bucket of initiatives in our pipeline around purchasing and how we buy and who we buy from and how we can coordinate and consolidate our buy, and that’s certainly been beneficial. Value engineering, where we’re looking at our designs and our engineering teams in terms of how we can commonize component sets where the consumer — where it doesn’t affect the consumer interface and how we can consolidate volumes and have a better — a bigger purchasing capability and hence, get lower price.
Our operating system begins and ends with a mindset of continuous improvement. So, driving variable cost productivity and gross margin as it relates to how efficiently leverage our fixed assets, i.e., taking shifts off or adding shifts and being as efficient as we can in that regard. And then, of course, direct labor efficiencies and how we drive scrap rates and how we drive direct labor and indirect labor productivity. So, purchasing overhead absorption and doing better issue with that, value engineering initiatives that we’ve kicked off and then managing our new assets that we’re bringing online with regards to our Serbian plant and our new paint plant to be as efficient as we can as we bring those up. So, it’s all part of the Masco operating system that we’re more than a decade into.
And I think earlier, Susan used the word momentum. That’s really what it’s about. It’s about momentum and our leadership teams really getting in the groove of managing pipelines of continuous improvement in cost out projects across the full continuum of our cost drivers. In terms of what we can expect going forward, you can expect margin enhancements in Plumbing, we’re talking about and guiding to 18.5% margins in a flat to down kind of year and that’s shows good productivity initiatives. So, I think that’s — our expectations are baked into our guide and we’re confident in hitting it.
Stephen Kim: Yes, that’s really helpful. One thing I forgot to ask with respect to this, as you reframe in your remarks is to what degree is this really just managing the human capital that you have better or well versus any technological improvements that you’re seeing introduced into your systems or your processes?
Keith Allman: It’s a mix. Certainly, having efficient direct and indirect labor and that human capital side is part of it. Certainly, providing leadership and expectations and coordination with the technical — or the human capital on the engineering side is a big component of it. And technology is a piece. And we’re a leader, particularly in Plumbing, in the online and the e-commerce space. And we’ve seen a significant change in how products are flowing through that channel. And we need to look at how we handle distribution and logistics and the technology that’s behind that. Certainly, driving technology changes into the component sets and our component set strategy with regards to how we can have commonized components, as I mentioned, where the customer doesn’t see it and then we can have unit volume that can lead to price down.
