Colgate-Palmolive Q2 2021 Earnings Call Transcript

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Provided by Quartr
July 29, 2021

Key Takeaways

  • Delivered 5% organic sales growth in Q2 (10th consecutive quarter within or above target) and 9.5% net sales increase, led by nearly 10% oral care growth and 15% pet nutrition growth.
  • Latin America net sales rose 12.5% with 8.5% organic growth across all categories, driven by double-digit gains in Brazil and Mexico despite political unrest in Colombia.
  • Second-quarter gross margin declined 80 basis points to 60.0% due to rapid raw material cost inflation and tougher promotion comparisons from Q2 2020, and H2 margin is expected to remain modestly below last year.
  • Raw material costs remain high for 2021 but are anticipated to ease sequentially into Q4, with the company layering additional pricing and productivity measures to offset inflation.
  • Updated full-year outlook calls for net sales growth of 4–7%, GAAP EPS up low- to mid-single digits (likely at the low end) and base-business EPS up mid- to high-single digits, with a tax rate of 23–24%.
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Earnings Conference Call
Colgate-Palmolive Q2 2021
00:00 / 00:00

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Operator

Good day, and welcome to today's Colgate-Palmolive Company second quarter 2021 earnings conference call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. For opening remarks, I would like to turn the call over to Chief Investor Relations Officer, John Faucher. Please go ahead, John.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Thanks, Katie. Good morning, and welcome to our 2021 second quarter earnings release conference call. This is John Faucher, Chief Investor Relations Officer. Today's conference call will include forward-looking statements. Actual results could differ materially from these statements. Please refer to the earnings press release and our most recent filings with the SEC, including our 2020 annual report on Form 10-K and subsequent SEC filings, all available on Colgate's website, for a discussion of the factors that could cause actual results to differ materially from these statements. This conference call will also include a discussion of non-GAAP financial measures, including those identified in tables eight and nine of the earnings press release. A full reconciliation to the corresponding GAAP financial measures is included in the earnings press release and is available on Colgate's website.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Joining me on the call this morning are Noel Wallace, Chairman, President, and Chief Executive Officer, and Stan Sutula, Chief Financial Officer. I will provide commentary on our Q2 performance, as well as our latest thoughts on 2021 guidance before turning it over to Noel to provide his thoughts on the current operating environment and how we will continue to deliver on our growth trajectory. We will open it up for Q&A. As usual, we request that you limit yourself to one question so that as many people as possible get to ask a question. If you have further questions, you are welcome to reenter the queue. As we report results at the halfway point of 2021, we remain pleased but not satisfied with our performance so far as we navigate through what can charitably be described as a complicated year.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

For both the second quarter and on a year-to-date basis, we delivered growth in organic sales, net sales, operating profit, and net income. This is despite difficult comparisons as we lap last year's strength in categories like liquid hand soap and dish soap. We are also dealing with the impact of COVID restrictions in several markets, economic and political uncertainty, strong competitive activity, and of course, significantly heightened raw material and logistics headwinds. We expect that all of these factors will continue to impact our business through the second half of this year. Because of that, we remain focused on delivering impactful innovation, leveraging our revenue growth management capabilities to deliver on pricing, and driving productivity up and down the income statement. All of these are crucial to deliver long-term sustainable growth that will help us as we look to deliver TSR at the high end of our peer group.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

We delivered 5% organic sales growth in the second quarter, which marked our 10th consecutive quarter delivering organic sales growth either in or above our targeted range of 3%-5%. As we have discussed before, the key to delivering against our long-term targets is delivering balanced growth, which we did once again in the quarter by delivering both volume and pricing growth. We delivered growth in both developed markets with 3% organic sales growth and emerging markets, which delivered 7% organic sales growth. We delivered organic sales growth in every division but North America. Our largest category, oral care, delivered organic sales growth of nearly 10%, with organic sales growth across toothpaste, manual toothbrushes, and electric toothbrushes, and organic sales growth in every division. Innovation continues to be a vital contributor to our oral care business as we benefit from new products across all of our divisions.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Products like CO. by Colgate, Colgate Elixir toothpaste, and Colgate Enzyme whitening toothpaste are all delivering consumer-desired benefits and premiumizing our portfolio. Pet nutrition delivered organic sales growth of 15%. Personal care and home care declined on an organic sales basis year-over-year in the quarter as expected, but net sales remain above 2019 levels. Net sales increased 9.5% in the quarter, which was our highest net sales increase in almost 10 years. Foreign exchange was a 4.5% benefit to net sales as we lapped the peak of last year's COVID-driven strength in the dollar. After strong gross margin performance in 2020 and in Q1, our gross margin declined in the second quarter due to the rapid acceleration of raw material costs across our business and the lapping of lower promotional levels in Q2 2020.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

We took additional pricing in the second quarter, which will help offset raw material costs in the second half of the year, and we will continue to layer in additional pricing where possible. We expect raw material costs to remain elevated throughout 2021, but we do expect some sequential lessening of inflation as we get into the fourth quarter. Our efforts on premiumization and pricing, along with our focus on productivity, like our Funding the Growth initiatives, will also help us as we look to improve our gross margin performance. In the second quarter, our gross profit margin was 60.0%, which was down 80 basis points year-over-year on both a GAAP basis and a base business basis. Year-to-date, our gross margin is 60.4%, down 10 basis points. Again, that is on a GAAP and base business basis.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

For the second quarter, pricing was 90 basis points favorable to gross margin, less than in the first quarter as we lapped lower promotional spending in the year-ago period when many of our markets reacted to COVID restrictions by pulling back on promotional activity. Raw materials were a 370-basis point headwind as we continued to see significant pressure from resins, fats and oils, and agriculture-related costs and many other materials. This includes a slightly favorable transactional impact from foreign exchange. Productivity was a 200 basis point benefit. Our SG&A was up 100 basis points as a percent of sales for the second quarter on both a GAAP and base business basis. This was primarily driven by an increase in logistics costs and also by a 30 basis point increase in advertising to sales.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Excluding advertising and logistics, our SG&A ratio declined year-over-year as our net sales growth and savings programs drove leverage on our overheads. For the second quarter on a GAAP basis, our operating profit was up 5.5% year-over-year, while it was up 2.5% on a base business basis. Our EPS was up 12% on a GAAP basis and up 8% on a base business basis. Our free cash flow was down year-over-year in the quarter as we continued to lap very strong working capital performance in the year-ago period. As we discussed previously, our capital expenditures are also up year-over-year as we invest behind growth, productivity, and our sustainability strategy. A few comments on divisional performance. North America net sales declined 4% in the second quarter, with organic sales down 4.5% and a modest benefit from foreign exchange.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Volumes were down 8.5% in the quarter, driven by Home Care and Personal Care, which saw strong growth in the year ago period, driven by COVID-related demand. Pricing across Home Care and Personal Care was positive as we worked to offset higher raw material costs. Oral care organic sales grew mid-single digits, driven by innovation and pricing. I mentioned CO. by Colgate before, which is helping us further expand into the beauty and direct-to-consumer channels. We are pleased with the initial performance of the Colgate Keep manual toothbrush. It comes with an aluminum handle, and by using our replaceable heads, consumers can use 80% less plastic compared to similarly sized Colgate toothbrushes. We're also excited about our Tom's of Maine relaunch, which is bringing new graphics and advertising to a historic natural segment brand.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Our logistics issues that we discussed on the first quarter call continued to negatively impact our promotional timing, but service levels have improved, and we expect our promotional cadence will normalize as we go through the third quarter. Latin America net sales were up 12.5%, with 8.5% organic sales growth and a 400 basis point benefit from foreign exchange. All three categories delivered organic sales growth in the quarter, with oral care organic sales growth in the high teens. Brazil and Mexico both grew organic and net sales double digits in the quarter. Our strong innovation performance was led by core innovation behind Colgate Total Reinforced Gums in Mexico, which apparently sounds much better in Spanish and Portuguese than English, and several charcoal variants in Brazil.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Volume was plus 2.5% in the quarter, despite a sizable negative impact due to political unrest in Colombia, our third largest market in Latin America. We believe this disruption, which negatively impacted our distribution network for some time, is largely behind us, but political disruption will remain a risk, not just in Colombia, but in several markets. Pricing was up 6%, despite lapping lower promotional spending in Q2 2020, as well as some incremental pricing in the year ago period as we look to offset foreign exchange. Europe net sales grew 15% in the quarter. Organic sales grew 5%, driven by mid-teens growth in oral care, offset by declines in personal and home care as we lapped COVID-related demand in the year ago period.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Volume grew 7% in the quarter, offset by a 2% decline in pricing as we lapped lower promotions in the year ago period as store traffic declined in Q2 2020 due to COVID restrictions. I mentioned Colgate Elixir toothpaste before, and we're very excited about this truly differentiated product. We designed it with more of a beauty aesthetic, including skincare-inspired ingredients, a unique, clear recyclable bottle, and LiquiGlide technology that allows the paste to leave the bottle, leaving no messy tube or cap. This product began rolling out across the division in Q2, with further launches this quarter. We delivered 7.5% net sales and 1% organic sales growth in Asia Pacific this quarter, with organic growth in oral care partially offset by a decline in home care.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Volume growth of 3.5% was partially offset by negative pricing as we cycled lower promotional levels in the year ago period, given COVID-related lockdowns across the region, with the biggest impact coming on our South Pacific business. We have additional pricing planned in the second half across the division to offset raw material cost inflation. Volume growth was led by India, despite the impact of COVID-related disruption in May, and Thailand, driven by naturals innovation in the Colgate Vedshakti and Colgate Panjaved lines as we lap COVID-related disruptions in the year ago period. Our volume in China declined on growth on the Colgate business, which was more than offset by weakness in sales for our Hawley & Hazel joint venture, which is primarily related to inventory reductions in our distributor network.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Africa/Eurasia continued its strong performance trend in the third quarter, with net sales growth of 15.5% as we delivered strong organic sales growth throughout the division once again. Volume grew 9.5% in the quarter, while pricing was up 3.5%. Foreign exchange was a 2.5% benefit. Are behaving in line with our expectations, with sales below 2020 levels, but ahead of 2019 levels. Please note that given widespread COVID outbreaks in many of our markets, we could still see an impact from government actions to stem the spread of COVID and other disruptions related to COVID, and this is not in our guidance. Using current spot rates, we expect foreign exchange to be a low single-digit benefit for the year, although slightly less favorable than when we gave guidance in April. All in, we still expect net sales to be up 4%-7%.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

We have reduced our gross margin guidance for the year, and we now expect gross margin to be down year-over-year for the full year on both a GAAP and base business basis, given the additional cost inflation we have seen. We expect the gross margin percentage to improve sequentially in the second half, which would leave us down modestly for the year. As I mentioned above, we are taking many steps to mitigate the impact of these costs, including additional pricing, optimizing trade spending, accelerating FTG where available, and many others. Advertising is still expected to be up on both a dollar and a percent of sales basis. Logistics will continue to be a headwind, as costs also have risen faster than anticipated, particularly in the U.S. We still expect these costs to moderate somewhat as we go through the balance of the year.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Our tax rate is now expected to be between 23% and 24% for the year on both a GAAP and base business basis. On a GAAP basis, we still expect earnings per share growth in the low to mid-single digits, but most likely towards the lower end of that range. On a base business basis, we continue to expect earnings per share growth in the mid to high single digits. Again, we would expect to land at the lower end of that range. With that, I'll turn it over to Noel.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Thanks, John, and good morning, everyone. I hope you are all safe and well this morning. The overriding message I want to leave with you today is that our strategy to re-accelerate profitable growth by focusing on our core adjacencies all over the world, new channels, and markets is really working. As we like to say, nothing moves in a straight line, but we now have 10 straight quarters of organic sales growth at or above our long-term target range. Year to date, we're at the high end of the range, despite difficult comparisons and continued volatility in the business. We're making good progress on our journey, but we still have more work to do.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

As I look back at my comments to you over the past 18 months that we've been dealing with the implications of COVID, there's one consistent theme that we keep coming back to: managing through this crisis with an eye on the future. This is still the appropriate theme, although obviously some of the elements have changed. The prevalence of the vaccine in many developed markets gives us a sense of guarded optimism, but we've highlighted that many emerging markets, which represent almost half of our revenues, the availability of the vaccine remains very low. Case rates are high, and governments continue to put in restrictions to help stop the spread of the virus. We remain hopeful that we will get to a post-COVID sooner rather than later, but we're not there yet.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

We will continue to manage to the retail and supply chain disruptions, changes in consumer behavior, and government actions to stem the spread of the virus, all while doing our best to protect the health and safety of our employees, which remains our number one priority. There are changing headwinds as well. Last year, we were faced with adverse foreign exchange movements, heightened consumer and customer demand, supply chain volatility, and uncertainty for our customers about changing business models and retail environments. This year, we're faced with unprecedented cost increases for raw materials like resin, fats and oils, and many others. Logistic networks are taxed, whether it's the trucking and warehousing here in the U.S. or ocean freight coming from Asia to the rest of the world. We're seeing some political disruption in markets like Colombia and Myanmar.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

18 months into the COVID, many of the challenges are the same. Some have changed, our approach remains. We will manage through the crisis with an eye on the future. We feel we've done a pretty good job. We know the markets look forward at our potential, not backwards at our achievements. We know that to deliver top-tier TSR, we need to balance organic sales growth, both volume and pricing, all four of our categories, and across all of our divisions. We've talked to you a lot about our changes in strategy that will enable us to continue delivering this balanced growth. First is our focus on breakthrough and transformational innovation. John discussed many of these in his commentary, this improved innovation is a direct result of the changes that Pat and I discussed during our CAGNY presentation.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Our emphasis on faster-growing channels and markets continues to pay off through growth in e-commerce, direct-to-consumer, discounters, club stores, and pharmacies. We're taking formerly regional brands like Tom's of Maine, Hello, Elmex, and Meridol and launching them in select markets and channels to take the advantage of their strong brand equities and ongoing consumer trends. We're supporting these efforts with increased focus on our digital media and emerging data analytical capabilities. We have to deliver gross margin expansion to fund our brand investment. While we now expect gross margin to be down modestly for 2021, it comes on the heels of strong gross margin expansion in 2020 and in the face of unprecedented increases in raw material prices. We will continue to leverage our robust revenue growth management program and drive productivity so we can return to gross margin expansion.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

We have made progress in our journey to improve our mix, but we have further upside potential on this given the benefits we provide to consumers and the fact that our brands under-index in pricing relative to the category across many geographies. We are working to accelerate our productivity programs like Funding the Growth wherever possible to try and create additional offsets. All this should help us in our drive to return to gross margin expansion.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

While the raw material inflation is obviously negatively impacting our gross margin performance this year, we're optimistic that this raw material inflation could drive an improvement in emerging market fundamentals. Again, we need to first get through the difficulties surrounding COVID, but on the back of our continued rebound in emerging market organic sales growth, particularly in Latin America, we have some optimism that we could see some additional GDP growth, and therefore, higher category growth on the back end of this movement in commodities. We have seen some of the emerging market currency stabilize for the first time in what seems like several years, and they're optimistic this may be a first step. Since our last call, we have released our 2025 sustainability strategy.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

This comprehensive plan highlights the actions we're taking around climate, plastics, sourcing, diversity, equity, and inclusion, and all the other areas that are vital to the future, not only of our company, but our communities and our planet. With that, I'll open it up to your questions.

Operator

Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star one for questions. We'll take our first question from Peter Grom with UBS.

Peter Grom
Peter Grom
Analyst at UBS

Hey, good morning, everyone. I just wanted to ask around Latin America in the quarter. I know it's not all the same category and country exposure, but the read-through from a lot of other companies that have reported thus far was that the region was really strong, with most seeing better performance sequentially. I know you mentioned Colombia. Is there any way to quantify how much of a headwind you think the disruptions there caused in the quarter? Maybe just more broadly, can you provide an update on your performance versus the category in the region, and how you're thinking about growth in the back half of the year, just on the heels of your positive GDP commentary there, Noel?

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure. Thanks, Peter. Overall, we're really happy with Latin America. You mentioned that obviously we saw significant headwinds from the Colombia disruption, which, in many respects, took almost a month of sales out of that specific country. Despite that, we obviously still delivered very strong top-line growth. If you look at our two key markets, Mexico and Brazil, both delivering double-digit growth in the quarter. You've seen now Brazil deliver four consecutive quarters of double-digit growth. Obviously the market seems to be returning, despite the fact that we're definitely not out of the woods relative to COVID. We think as vaccinations improve, particularly in those markets, that will continue to help categories. Categories are up on the year, which is good, despite the fact that we still see limited mobility, we still see some disruptions in particularly the down trade around how retail environments are behaving.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Overall, the categories are up, which is good. We had strong innovation in the quarter. We had some good innovation on our core business, Colgate Total, which John mentioned, which is driving good share growth. We've resisted a little bit of the transactional couponing and deep discounting in some of those markets. Overall, we've lost a little bit of promotional share, but our baseline shares look good and the innovation process of plans we have in place for the back half are strong as well. Likewise on pricing, we've always been a strong driver of pricing in those markets. We continue to obviously see a lot of headwinds on commodity prices, particularly on tallow prices coming out of Brazil. We're ramping up for obviously a strong back half relative to how we see pricing evolving and obviously continuing to drive the volume in the quarter.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Overall, I think we're pleased, despite the fact that Colombia was a significant headwind to the quarter. Bear in mind, if you look at the overall Latin America, that region continues to perform exceptionally well on balance. 10.6% in the fourth quarter, 9.5% in the first, and 8.5% now. Again, I think despite the headwinds, good consistent growth.

Operator

Thank you. We'll take our next question from Rob Ottenstein with Evercore.

Rob Ottenstein
Rob Ottenstein
Analyst at Evercore ISI

Great. Thank you very much. Noel, I'm wondering if you could go around the world and talk a little bit about your actual pricing power. I think we all understand less promos and that was one effect on the reported pricing in Europe and Asia. Obviously there's mix effects. If we clear through all that, can you talk about actual headline pricing that you got in the quarter or that you expect to get later in the year, and to what extent you're able to do that given disposable income in the various markets and competitive activity? Thank you.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure, Rob. Thank you. Let me start macro. Obviously, if you look at developing markets versus developed, developing have obviously moved pricing a little faster than the developed world. When I say developed, I'm referring to Europe and the U.S. We've seen good pricing movements in Latin America, good pricing movements in Africa, and we've seen competition likewise in those regions follow. Similarly, in Asia, John mentioned in the upfront comments that we took some pricing, obviously in the first quarter. We were lapping promotions from the second quarter last year, although we have pricing planned quite aggressively in the back half across the Asia region. If you take the developed world, U.S. has been a little slow in terms of the market. I think everyone is focusing on promotions and couponings to drive pricing.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

We haven't seen a lot of list price changes in North America yet, and I would say that particularly holds true for Europe as well. Our strategy continues to be, as we've outlined, very disciplined approach to revenue growth management. We're taking list pricing where we see the opportunity. We're optimizing our promotional spend. We're looking at price pack architecture. We're looking at all the levers within revenue growth management to drive pricing overall. The other point is, as you've heard, we're very focused on premium innovation. We continue to under-index, as I'd mentioned, and that's a real opportunity for us to drive overall gross margin percent in dollars as we look at the back half of the year. I think the headline is pricing is going to have to come up in the back half.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Everyone is faced with the same challenges, and we anticipate that as we move into the back half, we'll see a little bit better environment around developed markets and continue to focus on our revenue growth management discipline across the world to do that with.

Operator

Thank you. We'll take our next question from Kaumil Gajrawala with Credit Suisse.

Kaumil Gajrawala
Kaumil Gajrawala
Analyst at Credit Suisse

Hi. Thank you. Good morning, everybody. A couple questions on local competition. It wasn't really that long ago we were talking about market share gains from local competition in a variety of your major markets. Can you maybe talk about how that's evolved through the pandemic, what position you're in now, particularly maybe as it relates to pricing, couponing, promo right at a time where it's necessary to push some pricing through the market because of inflation?

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure. Kaumil, thanks for the question. We talked about, I think, throughout 2020 and perhaps touched on it a bit in the first quarter. The strength of our brands and the efficacy of our brands has certainly brought consumers back into the mainstream, so to speak. I mean, a lot of the local brands, relative to the credibility they had in the market, which was questionable, we saw consumers returning to big brands and certainly trusted brands in the market. That was very prevalent in categories like personal care, like home care, like pet nutrition, as well as oral care, quite frankly. So that certainly has benefited us in terms of how we've seen the categories evolve. I think that will continue, particularly given the overarching issues around COVID around the world.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Consumers are still looking for big, trusted, efficacious brands, and we expect that to continue as we move through the balance of the year.

John Faucher
John Faucher
Chief Investor Relations Officer at Colgate-Palmolive

Kaumil, it's John. If I could add something to that, what I would say is, if you look at the success of the local brands over the last five or six years, it's been a lot on differentiated benefits. The way naturals is expressed in a number of different markets, different type of packaging, different media strategies, and mostly at premium prices. I think as you look at our innovation strategy that Noel talked about, and you look at the type of innovation we're putting out, whether it's Elixir in Europe or whether it's the naturals relaunch in Africa/Eurasia, we have the ability to compete more effectively with some of these local brands, and we can drive that premiumization at the same time.

Operator

Thank you. We'll take our next question from Andrea Teixeira with JPMorgan.

Kodjo Tshienguan
Kodjo Tshienguan
Analyst at JPMorgan

Hey, good morning, everyone. It's actually Kodjo Tshienguan for Andrea. Thanks for taking the question.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure.

Kodjo Tshienguan
Kodjo Tshienguan
Analyst at JPMorgan

Just at a high level, could you maybe talk a little bit more about some of the specific actions that you plan to take to help reverse some of those share losses, particularly in the U.S., really in the core toothpaste and dish detergent categories?

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure. Obviously, the North America performance was below our expectations. We had a lot of factors driving that. Obviously, the impact of logistics challenges that we alluded to in the first quarter. We continued to have some case fill issues in the second quarter, which obviously had an impact on our promotional ability to put promotions in the market and obviously, therefore, share. We're working those behind us, and as we move into the back half, those will be ideally gone. We expect some of that to come back. We've pushed a lot of the premiumization. That market has become highly competitive. We saw increased activity in promotion and couponing in the second quarter. We have adjusted our plans for the back half of the year, and our guidance reflects those plans for North America. Likewise, in the dish business, we saw similar promotional activity.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

We've adjusted our promotional plans for the back half. By and large, we saw obviously some logistics challenge, some competitive activity, obviously some of the comparisons that we had last year dealing with elevated categories, obviously softening the dish liquid and the liquid hand soap category in the second quarter. We anticipate as we move through the back half, things will settle down, and we have strong innovation and promotion plans to rebuild the North America shares.

Operator

Thank you. We'll take our next question from Chris Carey with Wells Fargo Securities.

Chris Carey
Chris Carey
Analyst at Wells Fargo Securities

Hi, thanks so much for the question. I had a question specifically on China. Consciously, margins were better in APAC than the rest of the world, but also on a pullback in marketing spending with China declining. Can you just provide any additional perspective on what you're seeing in that market and maybe by category and the rationale behind the marketing and how you see that going forward? Thanks.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure. As John alluded to in his comments, we did see some weakness in the China business from our Hawley & Hazel partner. That's a business that's heavily driven down trade. We have very strong distribution in CDE cities, and as we've seen e-commerce continue to grow, our distributor network has been cautious on managing inventories as we've seen the brick and mortar categories fundamentally flat, not growing so far in the first half of the year. As e-commerce will potentially continue to accelerate and those inventories get drawn down, we expect that'll sort its way through in the back half of the year. Importantly, I think we're seeing terrific growth on our e-commerce business, as we've talked about over the last couple of quarters. In fact, our Colgate franchise and our Darlie franchise were two of the three fastest-growing brands in the e-commerce retail environment in the quarter.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Obviously, up significantly versus where we were in the first quarter from a share standpoint, which is really nice to see. That's driven behind a lot of good premium innovation that we've had in the quarter. The Miracle Repair continues to do well. We've launched a series of premium enzyme toothpastes as well, so that continues to perform well. The advertising is there in the back half to continue to grow that business as we go out the year. We're comfortable with where we are from an advertising standpoint. Obviously, the comps versus a quarter last year, where we had drawn down a bit of our advertising, we saw a little bit of elevation in Asia in the second quarter, but good plans in the back half to continue to drive share.

Operator

Thank you. We'll take our next question from Mark Astrachan with Stifel.

Chris Armes
Chris Armes
Analyst at Stifel

Hey, everyone. Good morning. This is actually Chris Armes on for Mark.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Okay.

Chris Armes
Chris Armes
Analyst at Stifel

Just wanted to talk a little bit about Hill's growth. Obviously very good. Maybe on the growth, if you could parse out how much is share gains versus just elevated category growth. Can you talk also about growth by geography? Also the growth from expansion to new markets versus existing markets? Thanks.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

Sure, Chris. Yeah, overall, listen, Hill's had another fantastic quarter, up 15%, comping obviously a really strong quarter last year, where we did double-digit growth as well. We're hitting on all cylinders on that business. Growth is across the world. We had all of our regions up with exception of Japan. Market share is up across the board, typically where we're gaining market share is at namely the U.S., which is our largest market, as you know. We saw good share growth across most retail environments, both on the base business, the Science Diet business, as well as the Prescription Diet business.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

That's behind a continued focus on the strategy, which is the core renovation, premium renovation, new channels, in this case continuing to grow online as well as farm and feed, and obviously continuing to see an increase in the Prescription Diet business, which as more and more pet owners return to their vets, we see the benefit of that coming through as well. Across the board, very strong growth, and we continue to obviously invest for growth in that business, and that continues to be the strategy moving into the back half of this year.

Operator

That will conclude our question and answer session. At this time, I would like to turn the call back over to our speakers for any additional or closing remarks.

Noel Wallace
Noel Wallace
Chairman, President, and CEO at Colgate-Palmolive

No. Well, thank you. Obviously, an extremely volatile quarter. Again, I think we're continuing to execute our strategy. As we've talked about for the last couple of years, some real opportunities ahead and some challenges that we'll face, as we have in the past. I simply want to extend my thanks to all the Colgate people listening for their incredible resilience during these difficult times and look forward to a good back half for the company. Thank you.

Operator

That will conclude today's call. We appreciate your participation.

Executives
    • John Faucher
      John Faucher
      Chief Investor Relations Officer
    • Noel Wallace
      Noel Wallace
      Chairman, President, and CEO
Analysts
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