Andre, I don’t know if you want to add anything to that.
Andre Schulten: Yes, I just want to clarify, because the strategic intent really is what Jon described, right? We are moving in Nigeria to an import market, we will still be present, but it’s a better way to serve the consumer and a better way for us to create value. In Argentina, we are divesting our fabric and home care business, and again, are looking to find a better go-to-market model. The language you’re quoting Callum is substantial liquidation, that’s an accounting term. And that accounting term, is really defining the point at which we recognize the accumulated foreign exchange translation loss in those markets, which is part of that noncash restructuring that we talked about. So the accounting term doesn’t represent the business execution. It is a technical term that once we get to that point of substantial liquidation, we will recognize the accumulated foreign exchange translation loss.
Jon Moeller: By the way, as a prior CFO would have had no hope of explaining that to you as Andre Schulten is the current CFO just did.
Andre Schulten: I won’t comment.
Operator: The next question comes from Olivia Tong of Raymond James. Please go ahead.
Olivia Tong: Great, thanks. Good morning. Clearly, you’ve generated some impressive growth in the U.S. and Europe, so I want to bring it back to the developed markets. And you’ve held on very nicely the price. So I wanted to ask you about competitive response and any pushback from retailers or increase in promotion from competition, given the share gains you’ve made and whether you’re seeing any response there? Thanks.
Jon Moeller: You want to talk competitive promotion, Andre, and then I’ll talk to customers.
Andre Schulten: Happy to. Hi, Olivia, so I started to mention this in the U.S. Our promotion level is still below pre-COVID about an 85 index competitive promotion level around 90 index. So very similar. We don’t see a substantial increase in either depth or frequency in U.S. In Europe, we do see an increase in frequency, we do not see any increase in depth. Actually, both frequency and depth are still below pre-COVID levels, but frequency is increasing. So competitive environment still stable. And I think it’s also driven by the fact that we are driving growth. We are driving market growth, and that contributes to the share growth, which means we can grow, but also it doesn’t drive necessarily negative cycles in terms of pricing in the market.
Jon Moeller: The whole idea, just building on Andre’s last point there, is to create business not take business. And that works out well for us. It works out well for the categories that we compete in and it works out well for our retail partners. And that is really the focus of the existing interchange with our retail partners. It was number one, two and three supply as we’ve solidified our supply chains. The conversation moves very quickly to how do we work together to grow markets. That’s a win-win-win proposition, a win for them, a win for us, a win for consumers. And of course, adding a fourth win for shareowners. So that’s the state of play. And I experienced that in Europe, I experienced – I was in Europe as before Christmas. As you know, I was just in China, that was the nature of the conversation there, and it’s clearly the nature of the conversation here in the U.S.
Operator: The next question comes from Mark Astrachan of Stifel. Please go ahead.
Mark Astrachan: Thanks, and good morning, everybody. I wanted to go back to China for a brief time, I guess, on this call. The last quarter, you guys had talked about a portfolio structure examination. I guess I’m curious whether there’s – any update on that, or what even does that mean? And maybe specifically, any underlying changes in consumer attitude towards beauty as a category including what is perceived to be relevant by brand, or efficacy. And also sort of related to that, it just seems a bit more of a fickle category more trendy category than some of the others that you were in? And I guess I’m specifically talking in China as opposed to globally, so you could sort of parse out that, I guess, if you want. But any thoughts on maintaining a presence in a category that has more subjective sort of usage than some of your other categories on everyday usage? Thanks.
Jon Moeller: I’d offer a couple thoughts there. One, China is our second largest market, sales and profits. Beauty represents a significantly disproportionate amount of the business. So, if we weren’t committed to the beauty business in China, you’d have to ask yourself a different question. Second, when we did our significant portfolio restructuring, however many years ago, that was now into daily use categories where performance drives brand choice, we did the same with beauty. Exiting the most fickle to use your semantics portions of the business. We exited what I call fashion fragrances and flavors. The brands that we have remaining and the categories that we play in, there’s real opportunity to drive long-term loyalty with superior performance.
That’s true in China, that’s true outside of China. And there will always be a higher trial rate in that category than in many other categories. That’s not a bad thing. It helps demonstrate the superiority of what we do offer and people come back to our brands. So now – if the question is commitment to beauty in China, the answer is yes.
Operator: Our final question will come from Edward Lewis of Redburn Atlantic. Please go ahead.
Edward Lewis: Yes, thanks very much. We’ve been accustomed to strong performance in the U.S. for a number of years, but notable to see the strong performance in Europe again, with volume and price. I guess that comes at a time when you spent your scrutiny over here on pricing levels. So can you talk more about – what’s behind the strong results for Europe at present?
Andre Schulten: Look, I think the execution of the strategy in Europe is really behind the strength of the results. The team has done a fantastic job in combining the price increases that needed to be taken to recover the commodity cost increases with very strong innovation that delights the consumer at the time when they see higher pricing materialize on the shelf. And that’s really behind the benign volume impact as we took the pricing and behind the acceleration of volume growth now that pricing is established in the market. We’ve done that. A few examples. Jon mentioned Ariel, I mentioned Ariel as well, but Ariel parts in a more sustainable packaging launched with the price increase that we needed to take has been building organic sales by up to 20% or higher. So the results are really a combination of strong innovation, pricing and therefore, maintaining consumers coming into the franchise and trading up not different from the U.S.
Jon Moeller: We convinced ourselves for years that what mattered most in Europe was price, specifically the lower the better. And that wasn’t an uninformed decision. You had the highest development of heavy discounters, for example, in Europe, which would then indicate that price is an important part of the consumer value proposition. But as Andre said, in the last number of years, we’ve really pushed innovation as a driver of value, not forgetting about value, but delivering it through performance. And that, combined with the executional capability of that market, which has just been phenomenal. And I want to thank them all as long as you’ve given me the opportunity to do that, has led to just really terrific results and I believe sustainable results.
Great. Thank you for your time this morning. I know it’s a little bit of a difficult quarter to unpack. There’s a lot going on. The net of that, although is very positive, strong really strong earnings per share growth while increasing investments in the business, both present future maintaining top line momentum, building volume momentum and building share. As I expressed before, I have a high degree of confidence in our ability to achieve a level of success going forward, and that’s based entirely on both the strategy and the ability of our organization to deliver against that. Look forward to seeing many of you at CAGNY in a month or so, and we’ll advance the conversation at that point. We’re around John Chevalier sitting across the table from me right now.
He’s around all day. Andre is around. They’ll get angry if you call me, so call them, but have a great day. Thanks.
Operator: That concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.
