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NEW YORK — On July 29, Colgate-Palmolive Company released its second quarter financials, detailing rises in net and organic sales, as well as strong growth from its Hill’s Pet Nutrition brand despite constantly rising prices.
Overall, Colgate-Palmolive’s net sales increased 5.5% from $4.2 billion in 2021 to $4.4 billion and organic sales growth increased 9%.
“We are very pleased to have delivered our 14th consecutive quarter of organic sales growth at or above our targeted range of 3% to 5%,” said Noel Wallace, chairman, president and chief executive officer of Colgate-Palmolive. “Our focus on premium innovation, brand building and digital capabilities drove broad-based organic sales growth, with growth in every division and all four of our categories, including double-digit organic sales growth in oral care and pet nutrition.”
Colgate-Palmolive increased its prices over the quarter to combat significant price increases in raw materials, packaging and logistics.
“As expected, significant increases in raw and packaging material and logistics costs continued during the quarter and currencies remained volatile in many parts of the world,” Wallace explained. “We acted boldly on pricing and are accelerating our revenue growth management plans, including additional pricing, in the balance of the year. We are also increasing our efforts around funding-the-growth and other productivity initiatives to help offset these headwinds.”
Colgate-Palmolive’s Hill’s Pet Nutrition brand saw significant growth, accounting for 20% of the company’s total sales. Compared to the second quarter of 2021, Hill’s net sales increased 14.5% and organic sales increased 18.0%. The pet nutrition brand’s growth was led by sales in the United States, Europe and Australia/New Zealand.
According to Colgate-Palmolive, Hill’s Science Diet Perfect Digestion, which supports microbiome health, is driving strong growth for the pet food brand.
In the three months ending June 30, Hill’s achieved net sales of $909 million, up from $794 million in 2021. Operating profit remained stagnant from 2021.
In the six months ending June 30, Hill’s hit $1.7 billion in net sales, up from $1.5 billion in the first six months of 2021. Operating profit decreased to $416 million, compared to $427 million in 2021, due to significantly higher raw and packaging material costs, as well as increase in logistics costs.
“In aggregate, raw materials prices moved higher over the course of the second quarter, consistent with our commentary on the first quarter call that we expected higher prices over the balance of the year,” Colgate-Palmolive shared in its prepared remarks. “Natural gas, which we use to power many of our facilities, has also risen dramatically in the past several months. While some raw materials and logistics prices have seen modest pull backs at this point, which is encouraging, we still expect significant inflation over the balance of the year.”
Colgate-Palmolive now expects 2022 raw material inflation of $1.3 billion, an increase from $1.2 billion. Despite the rises in costs, the company remains optimistic, hoping to balance rising prices with new innovations.
“Our innovation calendar remains robust,” Colgate-Palmolive shared. “We are focusing on our core businesses by relaunching brands like Hill’s Prescription Diet… with new formulas, packaging, and marketing campaigns, both to engage consumers and drive mix.”
In April, Hill’s announced the relaunch of its Prescription Diet line, focusing on reformulations and a broader veterinary outreach.
Source: Hill’s Pet Nutrition
“We are also innovating in faster growth segments like whitening, with Optic White Pro Series and Colgate Visible White, and at Hill’s with Prescription Diet Derm Complete, all of which leverage our scientific expertise and professional heritage,” the company added.
Hill’s Prescription Diet Derm Complete tackles environmental, skin and food sensitivities in pets with dry and wet formats for puppies and adult dogs.
Colgate-Palmolive has updated its 2022 guidance, detailing an expected increase in organic growth to 5-7%, compared to the previous 4% to 6%, due to its focus on new innovations. Net sales are now expected on the higher range of 1% to 4%. However, the company expects that foreign exchange rates will impact revenues, operating profit and earnings at mid-single digits, compared to the previous low-single digit range.
With its pet nutrition brand experiencing such strong growth, Colgate-Palmolive announced Aug. 1 that it would be expanding Hill’s capacity with the acquisition of three dry manufacturing facilities. The company plans to purchase the facilities from Red Collar Pet Foods’ for $700 million.
Located in Orangeburg, SC, Clinton, Okla., and Washington Court House, Ohio, the new facilities will be fully incorporated into Hill’s facility network, producing its Science Diet and Prescription Diet lines.
The facility purchase also includes the integration of about 350 employees.
“Our Hill’s business is growing well, and we continue to invest to expand production capacity, improve our capabilities with initiatives like our new Small Paws Innovation Center, and better engage pet parents, veterinarians and Hill’s retail partners,” Wallace said. “This investment will help further strengthen the Hill’s business today and for the long term.”
The acquisition of Red Collar’s facilities is just part of Hill’s goals to further expand its capacity to meet consumer demand. Currently, the pet food company is constructing a new canning facility in Tonganoxie, Kan., which is scheduled to begin production in 2023. Hill’s also acquired a canned pet food facility in Italy from Nutriamo in April, following increases in its 2022 first quarter sales.
“Hill’s is committed to enriching and lengthening the special relationship between people and their pets, and this additional production capability will help us reach more pets with our science-led foods and enable us to raise the level of service we provide to the specialty retailers and veterinary professionals that offer our products,” said John Hazlin, president of Hill’s Pet Nutrition. “We look forward to welcoming members of the Red Collar team to the Hill’s family.”
Red Collar will continue to operate the dry pet food facilities, specifically its private label segment, during a transition period. The company will continue to own and operate its pet treat facilities.
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