Colgate Palmolive India : Conference call transcript 13 December 2022

"Colgate-Palmolive (India) Limited Analyst/Investor

Conference Call"

December 13, 2022

MANAGEMENT MS. PRABHA NARASIMHAN --MANAGINGDIRECTOR &

CEO, COLGATE-PALMOLIVE(INDIA) LIMITED

MR. M.S JACOB - WHOLE-TIMEDIRECTOR AND

CHIEF FINANCIAL OFFICER, COLGATE-PALMOLIVE

(INDIA) LIMITED

MR. SURENDER SHARMA - WHOLE-TIMEDIRECTOR,

LEGAL & COMPANY SECRETARY, COLGATE-

PALMOLIVE (INDIA) LIMITED

MR. BALAJI SREENIVASAN - EXECUTIVE VICE

PRESIDENT (HR), COLGATE-PALMOLIVE(INDIA)

LIMITED

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COLGATE-PALMOLIVE(INDIA) LIMITED

December 13, 2022

MS. SARALA MENON --EXECUTIVE VICE PRESIDENT,

MANUFACTURING AND PRODUCT SUPPLY CHAIN,

COLGATE-PALMOLIVE(INDIA) LIMITED

MR. RUCHIR BHATNAGAR --VICE PRESIDENT,

CUSTOMER DEVELOPMENT, COLGATE-PALMOLIVE

(INDIA) LIMITED

MS. SWATI AGARWAL --VICE PRESIDENT, INDIA

GLOBAL TECHNOLOGY CENTER, COLGATE-

PALMOLIVE (INDIA) LIMITED

MS. SUJATA NAIRI --ASSOCIATE DIRECTOR,

COMMERCIAL AND INVESTOR RELATIONS, COLGATE-

PALMOLIVE (INDIA) LIMITED

Disclaimer: This transcript has been edited to remove any grammatical inaccuracies or inconsistencies of English language that might have occurred inadvertently while speaking

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COLGATE-PALMOLIVE(INDIA) LIMITED

December 13, 2022

Sujata Nairi:Hello, everyone. Good morning, and welcome to the Colgate-Palmolive Analyst Conference Call today. I'm Sujata Nairi, Associate Director, Commercial and Investor Relations. And I would like to extend a very warm welcome to all of you here, who are physically present and also to the participants who have joined us virtually. It looks really nice to see a lot of familiar faces around. So, thank you for being here. The session today will be for 90 minutes. We will start with a presentation from the leadership team. Post that, we'll have a question-and-answer session for 30 minutes, and we'll try our best to answer all your questions.

Before we start the session today, let me just remind you of our safe harbor policy. Please note that the conference may have some forward-looking statements. These statements are based on our views and assumptions at this point of time and are not a guarantee of our future performance. Before we go further, let me just introduce you to the management team of Colgate-Palmolive. We have Prabha, the Managing Director and CEO; Jacob, the Whole-Time Director and Chief Financial Officer; we have Surender, who's the Whole-Time Director, Legal; Balaji, who is Executive Vice President, HR; Sarala, who is Executive Vice President, Manufacturing and Supply Chain; Arvind, who is Vice President, Marketing; Niraj, who is Director, New Geographies; Ashish, who is Vice President, CS&L; we have Ruchir, who is Vice President, Customer Development; and we have Swati Agarwal, who is Vice President, India Global Technology Center.

Actually, Niraj, Ashish and Arvind could not join us today due to certain prior commitments. I would now request Prabha to share her opening comments as well as on the overall CP India strategy.

Prabha Narasimhan: Thank you very much, Sujata. Good morning, everybody. It's really a pleasure to see all of you here today. This is absolutely my first analyst meet at Colgate. I've been in this organization 100 days. And before I started talking to you about our perspective on Colgate and the way forward, I thought I'd take this opportunity to just talk you through what I've done that's brought me here in the first place.

So, I was actually just this last weekend at my 25th year reunion of IIM Bangalore, having graduated from that institute in 1997, and straight from there joined HUL, where I spent the last whatever, give or take, 24 years across numerous different businesses of HUL and numerous different functions, including consumer insight, sales across both Delhi and South branches. And over my last couple of roles, actually, I've had the opportunity to handle their Skin Care and Colors business and then most recently, the Home Care business over the last 2 years. I have the greatest of regard for that organization. And a lot of the stuff that you hear is really learnings from there in terms of how you build categories, how you build great brands and how you build businesses. And I'm actually really privileged to be able to move from an organization of that caliber to an organization of this caliber. And I'm very, very excited to be here.

So, I want to start with really what were early reflections of Colgate. I'm sure a lot of this information is not new to you, but certainly worth us reiterating. It is India's most penetrated

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COLGATE-PALMOLIVE(INDIA) LIMITED

December 13, 2022

brand. There is not another brand in this country that reaches more households than the Colgate brand. It has its spontaneous awareness in the category of near universal.

There are 4% of the country who when you ask them, Oral Care or toothpaste, don't say Colgate, but 96% of the country, otherwise, thinks of Colgate when you say Oral Care. We are about 3x bigger than the second biggest player in the Oral Care category. And I think that becomes both a privilege as well as a responsibility and we will talk about both facets of privilege and responsibility as we go forward.

I want to reiterate this piece because this was one of the things that really struck me as I entered this category. This is a company that is largely a single-category company in Oral Care. But in Oral Care, actually, I don't think there are many companies or there are any companies that are better than Colgate. Cutting-edge technology, we have thousands of scientists who on a daily basis are working towards making sure that the products that we have, have fabulous scientific underpinning backed by the right clinicals and are constantly on the quest of making them better and better, and we'll talk through some of these technologies as we go forward.

We have numerous research studies and a whole series of patents, almost about 1,500 patents a year. A couple of the most recent ones include the recyclable toothpaste tube, the arginine technology that goes into Colgate strong teeth, the MPS technology that goes into Colgate whitening. And I'll talk about some of these as we go forward. And we're actually very, very proud of the fact that we have 2.7x higher publications than the next player. And this underpinning of science is something that we will revisit as we discuss the way forward.

But what makes Colgate, I think truly fabulous in India is really its execution prowess. Small, focused company relatively speaking, but the reach of 1.7 million stores, actually comparable to pretty much everybody. 95% of these are active every quarter. And we have 70% of them now working on the algorithm, where we get the data, we're able to see what is sell in, what is sell out, what's our ability to add assortment and to make sure that we are constantly expanding what is both the availability in the right place at the right time as far as these stores are concerned.

And when you look at direct trade or modern trade, we're actually exceedingly lucky to have category captaincy, great partnerships with all of the key modern trade customers in this country. 75% of our business is actually supported by on-site merchandisers who help us to create the fabulous execution that I hope that you see when you shop. And as a result of this fabulous partnership, actually, our shares in the future-facing channels, which is both e- commerce as well as modern trade are usually higher than the shares that we have in traditional trade, which is, I think, a tremendous advantage for us as we do expect that these channels will grow faster and faster.

This is another unique area that is quite specific to Colgate. I'm sure many of you as I have grown up with the Colgate Dentist in advertising, and the fact that Colgate has the seal of

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COLGATE-PALMOLIVE(INDIA) LIMITED

December 13, 2022

approval from the IDA. We have a great relationship with the IDA and the Dental Council of India. We are still the #1 brand prescribed by dentists in this country. And obviously, the trust and the relationship that comes with many, many years of working with these dentists. And this is actually going to be one of the areas that I want to talk about first in terms of the future.

What we have done is to launch a platform called Dentist FIRST. It has been beta testing as we see to go live in 2023. This is the platform that is meant for dentists to be able to access the best of information and the best of products from the Colgate team to add one more leg to the already great relationship that we have.

Let me show you a quick video of how this Dentists FIRST platform is.

(Audio-Video Presentation)

Actually, we have a series of products that are actually targeted at dentists and consumers of dentists, and we do expect that we will be able to expand this portfolio because the Colgate global world, obviously, has a lot more products that we can bring into India in this space. And so, all of this together, the execution prowess the technology, the brand, the connect with the dentists, the connect with our customer partners, really makes this one of India's most trusted brands. It has been so for decades. I think this measurement is perhaps only about a decade old and therefore the 11 years. But Colgate has been in this country for 85 years. And I would imagine that for 85 years, it has certainly been amongst the most trusted brands.

Early consumer work that I did before in my interim stage between the two jobs, that was the one thing that when you speak to consumers every time they talk to you about Colgate, the third or fourth word will be trust. I trust this brand to take care of my family's health, and that is the trust, I think, that which we, as an LTE truly value. And that is the trust that we hope we will make this company even bigger and even greater.

So, that then brings me to what therefore is our opportunity sitting here as we do with such advantages. And I think the first opportunity for us, of course, is to drive category volume. This is a category that has tremendous opportunity. If you look at a comparison to 2 other countries, if India uses x grams per annum, then in the Philippines, that number becomes 1.8x; and in Brazil, that number becomes 3x. And you take what is the roughly 250,000 ton market currently, and you can see the math's of where this market could easily end up.

If we double click on India and separate it out as urban and rural, you then see a really stark difference there as well. Rural consumers at 0.6x of the national average with 55% of them not brushing daily. So, that really does become our first and lowest hanging fruit to ensure that we are exhorting rural consumers to brush daily and to make sure that oral care is a part of everyday regimen. And then of course, in urban India, we have a very limited number of people who brush twice a day, which is actually the recommendation morning and night. And that 80% then gives us the other opportunity to continue to grow volume in this category.

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