Jon Moeller: Are you saying, Lauren, that you want 30% core rates for share growth? Just kidding.
Lauren Lieberman: Well, that’s kind of what I’m getting at, right? Yes.
Jon Moeller: All right, I’ll speak first on this, and I’m sure Andre has some perspective as well. But if you look at the amount of innovation that’s coming to market, both currently and in the future, and if you look at the opportunity to fully penetrate households with that innovation in ways that delights them and improves their lives, now is not the time to be pulling back on investments in marketing or commercialization efforts of that innovation. And that’s where the majority of the incremental spend has come from and will come from, we look very carefully. I don’t want to ignore your question on the effectiveness of that spend and continue to see through the addition of many tools and data sets that we can increase the effectiveness of that advertising, increase the return rates of that advertising as you see in our bottom line, while increasing reach.
So that’s what we’ll be focusing on. We’ll be very disciplined in that effort. Neither Andre or I or the rest of the team has any desire to spend money that isn’t working for us.
Andre Schulten: Yes. And maybe just to add, we just talked with our team actually about being very granular about the assessment of the ROI. So, we don’t have good investments, cover for bad investments. So really go down to the country level, to the brand level, to the channel level when we assess whether we are getting a payout on the investments. But the majority of the spend, as Jon said, is really focused on driving market growth. When you think about the opportunity on FE, for example, we’ve created 100% of the market growth in North America on FE, and it’s still the biggest opportunity the team has in order to continue to accelerate both our own growth in a constructive way and the market given the low penetration FE has – Fabric Enhancers.
Oran-B, another example, a power Oral-B was launched – Oral-B iO10 and we’re also expanding distribution of Oral-B iO3, 4 and 5. We’ve led 70% of global market growth with those launches. So, communicating the benefit and driving penetration is a huge opportunity. So be assured we look at ROI very carefully. And again, market growth continues to be the main area of focus when we invest incrementally.
Operator: The next question comes from Robert Ottenstein of Evercore ISI. Please go ahead.
Rob Ottenstein: Terrific. Thank you very much. I was wondering if you could go into a little bit more detail on the state of the consumer in your two most important markets, the U.S. and China, how consumer demand developed through the quarter and into January? And when you talk about China, if you could also touch upon travel retail and maybe what SK-II was on a greater China basis, including travel retail as well. Thank you.
Andre Schulten: I’ll start. Morning Robert. Look, the US continues to be very solid, continues to impress with I think a very smooth transition from pricing, annualizing and overall consumption coming up in terms of volume, which is enabling us to post the volume improvements Jon was quoting over the past few quarters, and still accelerating ahead of market with 4% volume growth and 50 basis points of market share growth. We continue to see trade up within our propositions. So as consumers come in, maybe at a lower tier and a lower value proposition, they continue to trade up in the U.S., which speaks to the health of the proposition but also the health of the consumer and willingness to invest. The last data point I’ll give you on the U.S. is we are able to grow as private label shares are slightly up, we are up the same range.
So, some consumers will look for value in private label, but an equal if not higher amount of consumers find better value in our propositions as we drive continued superiority via innovation. So, feel very strongly about the U.S., we’ll continue to invest to drive more market growth there, but the consumer is resilient and the business is doing well. On China, I’ll begin. I’m sure Jon has incremental perspective, but the China opportunity remains intact. If you look at the underlying market size, if you look at the potential development of the middle class, if you look at the ability to drive category penetration in our categories, all of those are huge opportunities for us, and all of those point to continued investment and commitment to the Chinese market.
We have a very capable organization, and we continue to be very optimistic that we can create value. Honestly, when the market requires market growth to be driven by manufacturers, I think that positions us very well with our retail partners in China to have a competitive advantage and execute the model that we know how to execute in many parts of the world. In the short term, we mentioned it in the script, consumer sentiment is not fully recovered yet, and that is reflected in the results. Again, if you want to take a silver lining, we see the attractiveness of key opinion leaders and heavy discounting in key consumption periods decreasing. And that’s actually good for us. And we believe that a focus on brand equity, a focus on strong everyday value via the priority, will allow us to help grow the market back to mid-single digits and strengthen our position in the market.
Last point on SK-II, no specifics. The numbers we’re quoting, obviously on the quarter, minus 34% include the domestic travel retail channel. Nothing else to add there other than we remain confident that as the sentiment improves, which we see already, with continued investment in SK-II, we see that business recovering over the back half.
