Please standby, we're about to begin. Good day, and welcome to today's Colgate-Palmolive Company Third Quarter 2021 Earnings Conference Call. This call is being recorded and is being simulcast live at www.colgatepalmolive.com. Now, for opening remarks, I would like to turn the call over to Chief Investor Relations Officer, John Faucher. Please go ahead, John.

Thanks, Jennifer. Good morning, and welcome to our 2021 third 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 8 and 9 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. 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 Q3 performance, as well as our latest thoughts on 2021 guidance, before turning it over to Noel to provide his thoughts on how we will continue to deliver on our growth trajectory. We will then 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. Our focus on innovation, premiumization, pricing, and productivity allowed us to deliver solid Q3 and year-to-date results, despite a very difficult operating environment. We continue to deliver against our targets because we are executing consistently on the strategy Noel laid out at CAGNY back in 2019. We are focused on delivering consistent, sustainable, profitable growth, both volume and pricing growth, growth in all…

Thanks, John, and good morning, everyone. So what I take away from our performance, I guess both in the third quarter and on a year-to-date basis, is that we continue to make good progress on our strict strategic and operational journey despite the significant volatility we're encountering across our entire business. At the heart of this is our strategy to deliver broad-based, sustainable, profitable growth. Every division, every category, both volume and pricing, that's our aspiration. And over the past few years, we have changed our mindset about how we drive growth. We're more proactive in attacking the opportunities for growth. Think core, premium [indiscernible] faster alternative channels and markets. And of course, we talked a lot about building capabilities. Think digital, data, e-commerce, innovation. All of these are helping us mine these important areas of growth. While lapping our most difficult comparisons in over a decade, we've delivered organic sales growth at the high end of our long-term target range of 3% to 5%. And on a 2-year basis, both pricing and volume growth increased sequentially in the quarter. Importantly, this growth is being driven by our two most important categories: oral care and pet nutrition. Oral care organic sales were up mid-single-digits in Q3 against the mid-single-digit comparison enter up high single-digits year-to-date. We're driving this growth through more impactful innovation, Sure growth and faster growth channels like e-commerce and pharmacies, and hire more efficient marketing spending. Our premiumization strategy is paying off with our focus on breakthrough and transformational innovation, changing how we interact with the people who use our products. A great example of this is how we've changed our approach to whitening. In U.S, you're familiar with Optic White renewal, which has done incredibly well. Outside the U.S., the story needs to be more about…

Thank you. [Operator Instructions] And we'll go first to Dara Mohsenian with Morgan Stanley.

Hey, guys.

Hey, Dara.

So, Noel, can you review your Oral Care market share performance globally, maybe compare and contrast some of the regions that are performing better versus laggards? And if you take a step back, looking at the strategies you laid out at CAGNY a few years ago, which strategies have sort of taken hold in Oral Care are working? Maybe what are some of the areas where you might need some more work? And if I can just slip in a related second part, can you also update us on the competitive and the pricing environment in Oral Care in light of the higher cost environment here? Thanks.

Sure. Thanks, Dara. So overall, we're pleased with the progress that we're making on Oral Care, particularly in toothpaste and manual toothbrushes. If you take our shares on a constant currency basis, they're relatively flat, which is better than where we had then. When you start to go around the world, particularly as you look at new channels, we're very pleased with the progress we're making in e-commerce and pharmacy. So let's just bounce around the world a bit. North America still has been a little bit soft, but we've seen the shares bounce back nicely in the last 13 weeks and where our shares are actually flat now. And all outlet basis if you take e-commerce and all the untracked channels, our estimation is our shares are back to flat and U.S slightly up, which is good progress, particularly as we've seen the acceleration of some of the premium SKUs that we've launched in the market, particularly whitening over the last 13 weeks. And likewise, our e-commerce shares continue to be good, not as good - strong as our general market, but progressing in North America. Europe, the shares have been strong. Our Elmex and our strategy behind Elmex and Meridol has been very successful in pushing those businesses across all of our core markets. Our shares continue to be up across that region and we continue to see the shift toward our premium bundles, which was again part of the strategy change that we outlined back at CAGNY that we were going to focus on underserved channels like pharmacy with some of our premium therapeutic equities, like Meridol and Elmex. Latin America, the shares continue to be very strong, flat in the quarter, slightly down as a result of some of the promotional volume that we've given up…

We'll go next to Peter Grom with UBS.

Hey. Good morning, everyone. I hope you're doing well. So, I was hoping to get your perspective on kind of what you're seeing in the current environment and how that informs your view on the growth trajectory as we look ahead to '22, right? So the top line momentum is strong, and as you mentioned, the inflation and FX headwinds are expected to continue. And I don't expect guidance, but I would just love to get your perspective on how we should think about margin progression looking out beyond Q4.

Well, listen, Peter. You've heard it, I think throughout the earnings season so far, that obviously, cost inflation is significant for all fast-moving consumer goods. And we're certainly not immune to that. And -- but what we are very good at is pricing, and you've seen that consistently over time and time over the years, whether it's foreign exchange inflation or raw and packing material inflation, we have found ways over time to recover that in our margin line. And that is certainly the focus right now in the business. The good news is when you have an inflationary environment that's indexed around raw materials, you tend to have everyone looking to take pricing in the market, and that makes it more conducive certainly from a category standpoint and making sure that everyone takes pricing that the volume continues to go along with that. So we're pleased that we've seen pricing in the marketplace, we've been leading that across the board, quite frankly, particularly in emerging markets where we've taken pricing quite aggressively throughout the first half and very much into the third quarter and we've laid out pricing for the fourth quarter and into early 2022. So we'll see the margins begin to recover. Now, the environment you've heard around raw materials and logistics continues to be extremely volatile. And we anticipate that we'll continue to see some headwinds in that space. The team understands that and is putting the strategies in to place in order to recover margins as we move forward. We will also be heightening our focus around Revenue Growth Management. That discipline is going to be really embedded much more so given the fact that we've now put some analytical processes in place to help the teams, as I outlined, which we think is terrific. It will give the teams a lot more confidence on the pricing that we're taking to ensure that we're working with our trade partners to grow category at the same time as we take pricing to recover cost, so we're pleased with that. Likewise, had a lot of discussions over the last couple of months on our grids our new product grids relative to premium innovation, and making sure that we continue to focus on that area of the business, whereas historically we've under-indexed and we've seen good progress against that, particularly, as you look at some of the premium businesses that we have around the world, whether it'd be Elmex, Meridol or some of the prices we've taken on our therapeutic bundles within the Colgate portfolio. So overall, a tough raw material environment will continue to be very choppy but we're very focused in terms of taking pricing and ensuring that we push our premium innovation moving forward.

We'll go next to Andrea Teixeira with JP Morgan.

Thank you. Good morning. Could you talk about your supply chain? And I know you mentioned the issues in China, but I think 2 parts to this question: A. What is happening globally? Do you see mostly things sequentially improving, or it's still very tough to service clients and customers globally. And B. I think you said there was an impact in the third quarter and it's going to linger in China in the fourth. I'm assuming this is not material, but just wondering if you can quantify. Thank you.

[Indiscernible] You've come to know Colgate in the fact that we consider our supply chain a competitive advantage for us and that is the fact that we operate globally with some of the most efficient facilities around the world. And the benefit of that is obviously translated into the strong gross margin progression that we've seen over the years. That being said, when you operated global supply chain, you're not immune to decisions taken in locally that will impact that. And obviously in Asia, where we have seen our government's taking actions to stop the spread of COVID, whether it'd be bad or obviously impacting some of our suppliers and our third-party contractors, we've seen disruption in the supply chain. And as a result of that, we have the contingencies in place to move that production elsewhere, which the team has done just a tremendous job in servicing the sales needs of the business. And you've seen that, obviously, in the acceleration or the continuous good topline growth that we've had. And that's a function of our supply chain ensuring that we meet the demand of our products and our retailers. And we move production around the world to do that. That comes with a cost that certainly we incurred in the quarter. Some of the disruption specifically related to what we referred to in our commentary, we're moving through those very quickly. We have moved behind one that was quite significant and we're back to where we needed to be in terms of output and we're back to pretty close on some of the other ones. We expect that to be fully back in capacity by the end of the quarter of this quarter, but that being said, the environment is very unpredictable. And we'll continue to try to anticipate some of these things moving forward as we've done, but one can never be for sure when a government decides to come in, and shut down a province, or an area based on their needs. Likewise, this has a big impact obviously on the rest of the supply chain, whether it'd be raw material sourcing, whether it'd be our contractors. You heard in John's commentary, we did take some decisions, particularly in North America, around some of the contractors that we use in order to clean that up and move into a supply chain strategy that allows us to exit some of those and get more efficiencies moving forward. We're taking all the right decisions moving through the issues that we had in the third quarter but we are not immune to the unpredictability of the supply chain that environment that everyone's faced with today.

We'll go next to Nik Modi with RBC Capital Markets.

Yes. Good morning, everyone. No. I was hoping you can talk about -- I was hoping you can talk about pet. It's been a remarkable turnaround over the last few years obviously, improvements in market share but also category growth. So I just wanted to see if you can unpack some of the drivers that you see for the business, and how long do you think that higher pet adoption phenomenon that we've seen during COVID will continue to be an incremental tailwind?

Sure. Listen, the pet business has been terrific, obviously. I think a lot of the change in strategies that we deployed a couple of years ago, which again are based foundationally on exactly all the stuff we're trying to deploy across the world, really working on the core of our business, looking at premium innovation and continuing to really dial up our focus on high-growth channels. And that's exactly what's unfolded over the last couple of years and that strategy is continuing obviously to get sharper and sharper, as we executed more broadly across the Hills network around the world. A lot of that growth has come out in North America which has been terrific, the double-digit growth compounding each other. U.S. had another outstanding quarter in the third quarter. Again, we're benefiting from a quite buoyant category, but the important part that you called out is we're growing share quite consistently, not only across our wellness products are our core products, but also our therapeutic products and Prescription Diet. We're seeing obviously Vetenerians open back up. That is certainly improving the consumption of our Prescription Diet. We talked at length about the innovation process we had behind Hills, which I think is second to none in the category right now, bringing real science and real therapeutic benefits to pet owners. And we're seeing that translate into obviously more penetration and growing share. We continue to talk about the low awareness of Hills, both in North America and around the world that affords us a significant opportunities We continue to build that brand consistently all over the world and we're continued to invest behind that business. Despite the fact that raw materials are a headwind, we're not going to jeopardize the health of the brand by cutting back on our investment. We will continue to invest to grow awareness And that ultimately is growing penetration in the category, so we feel very good about where we are. Obviously the comparisons continue to get tough, but those have been tough, and we continue to see good progress on the strategy, our ability to take pricing, and our ability to bring in new consumers to the franchise.

So the next to Chris Carey with Wells Fargo Securities.

Hi, good morning.

Morning.

I wanted to get a bit more context in North America. You said that you had incurred some extra manufacturing costs in the quarter. I think you just noted there were efficiencies with contract manufacturers, but the comment was in the prepared remarks, I believe to improve the long-term profitability of that business. And I was wondering if you could just expand on that. Do you think a lack of scale or efficiency or something else in the manufacturing base has been a cause of the margin compression in that business, and if they have opportunities to offset that? Am I reading that wrong? I guess just overall in the context of the pressure on margins and the commentary around some of the actions you're taking above, a bit more perspective.

Sure.

So thanks so much.

Sure. Yeah, let me jump into that in a little bit more detail. Obviously, it was somewhat of a perfect storm in the third quarter for us as we looked at the business in North America, significant inflation in raw materials, obviously, that came through in the quarter. Logistics was probably the most significant headwind we had in the last couple of months versus where we were previously. Obviously, you're not -- you're clearly aware of the logistics industry and whatever -- what's going on. Tighter capacity, tighter labor, higher costs obviously, which have obviously fueled significant increases in rates internally within North America, not to mention the fact that there's a lot of congestion going on, and a lot of delays in getting product to and from where it needs to be. As a result, we've been very focused on working with our retailers to ensure that we can continue to improve upon that. The other areas I mentioned earlier, we have this incredibly efficient global supply chain, but we do source product from different parts of the world. And you've seen obviously ocean freight increases -- increase dramatically over the last 3 months or 4 months. We have not been immune to that North America, quite frankly, brings quite a bit of its product from overseas. While we have very substantial manufacturing presence in North America, we do bring product from overseas, which has obviously been a victim of those price increases we've seen in ocean freights. The other one is we have seen increased demand, particularly in some of our Oral Care products and we want to continue to service that as we always have consistently and reliably to our trade partners. And as a result of that, we made decisions to airfreight product in to ensure…

And we'll go next to Wendy Nicholson with Citi.

Hi, good morning. You guys have such huge market shares in some of your categories in emerging markets. I wondered if you could take a step back and just comment on what you're seeing. I mean, we don't really have a sense for has consumer behavior changed in some of those markets. Is there a lag effect from COVID, either the consumer stockpile our has their free sensitivity changed just in some of your bigger markets. I figured you guys are a good Company to ask about what you're seeing on the ground, you had 3.5% growth in emerging markets on the volume side, which is good but not great. And I'm just wondering if there's something other than just tough comps, if there's a change in the way consumer shop or how much they have to spend from a high-level big picture perspective? Thanks.

Sure. Let me just address the 3.5% quickly, Wendy. Obviously, that was drawn down by some of the shutdowns we saw across Asia. And the lack of mobility of Southeast Asia, in fact, very little mobility. We saw categories fall off quite dramatically across Southeast Asia and that's certainly had an impact on volume in the quarter. And as you heard John mentioned, if you really want to dimensionalize a lot of the volume softness in the quarter, was liquid hand soap, which was a headwind of 400 basis points in the North America business alone. But let me step back to your broader question on what's going on around the world, coming out of COVID and what we're seeing in terms of category behaviors. Oral Care was not a COVID beneficiary, and obviously, it was not in the same camp as we saw from some of our personal care businesses which saw significant acceleration in consumption and a more systemic behavior change across the world. Oral care -- as mobility comes back into the market, we continue to see the oral care categories growing, and that's good for us long term, obviously, getting more and more consumers back into stores will allow more consumption, and more category-driven initiatives to take place. And so we think, over the longer term, we are going to see oral care continue to accelerate. Personal care and homecare were obviously quite significant beneficiaries during COVID. While the liquid hand soap has taken a significant drop-off this year, it still remains above the 2019 levels. And as you rightfully said, we're the number 1 liquid hand soap player certainly in North America and around the world. And that we'll see that behavior, at least, stay with the consumer above the '19 levels, but certainly not anywhere close to where they were in 2020. Hygiene products that we're very focused on in our homecare business, Whether it be dish liquids or floor cleaners, I think we'll continue to see nice growth in those categories. You heard John mentioned the Home Care growth that we've seen as more and more consumers stay home. Obviously, there's more dishes being cleaned and more floor being cleaned and that has allowed that category to continue to be quite robust. But as consumers move back and mobility comes back into markets, are people return to work? You may see a little bit softness in those longer-term, but overall, we think we're positioned well, particularly in the Oral Care space. If you go to pet food, obviously the significant adoptions that we've seen over the last two years during COVID and the fact that we're now executing much, much better against our strategy. We feel very good about where things are moving there. And there has been a behavior change unquestionably in that category, where consumers have returned to science and nutrition, and very focused on that space which we are obviously very driven by right now.

[Indiscernible] with Jefferies.

Great. Thanks, Good morning, everyone. Question, I want to come back to the pricing strategy and implications on gross margin over the next 12 months. So, specifically with all the pricing that's going into place, you guys have done a fantastic job at funding the growth for decades. My question, is the intention as you sit here today with all the volatility in the environment that you can fully offset the input cost pressure and everything you're dealing with supply chain perspective with pricing and productivity. Is that a realistic ambition? Is that a realistic goal as you're sitting here from a risk management perspective? Is that something you think you can do, or is the cost, inflation, and supply chain pressures just too great at this point? I'm just trying to get a better understanding of how you guys are thinking about it, how you're pricing, and how you're thinking about productivity. And then if I could just sneak in one related question. A lot of interest around demand elasticity, which has been relatively low, I think, across many categories. just observed and which I understand is going to vary by category, by geography, by channel, just some broader observations there. And Noel, what you're seeing so far with the pricing in place for your business would be helpful. So thank you for all that.

Sure [indiscernible] you're obviously watch this closely and price is always been a key driver of our organic growth given how we look at the markets around the world and we've consistently look for quick ways to get pricing in the market and not only to drive category growth, but obviously to protect the margin which ultimately allows us to protect the advertising. It's worth mentioning that obviously on a two-year stack that this was the highest pricing number we've seen in many years for us. Again, I think it reflects a consistent discipline we have across the board of taking pricing quickly in the markets. You heard me talk a little bit about how we're using data and revenue growth management now to get that information on the ground quickly to the teams, so they can do what they need to do to analyze, to take pricing across the board. But it's not just going to be pricing. We will look at, obviously, premium innovation and getting our mix improved, not only within our portfolios, but channel mix as well. I talked a little bit about the importance of driving pharmacy growth around the world, which is a growth opportunity for the Company, particularly in Oral Care. That typically trades with a much better margin for the Company given the therapeutic profile of those bundles. We're obviously going to continue to embed significant revenue growth management initiatives all over the world not just in some of the key inflationary markets. And as we talked about earlier, we're deploying some pretty nice strategies around the emerging markets right now to ensure that we get pricing up beyond just list prices. The other piece of this is productivity. Historically, you've seen us do a really good job around funding the growth.…

For the next [indiscernible] Jason English with Goldman Sachs.

Hey folks, good morning. I guess I want to pick up on Mr. Graham's question around margin progression, but zooming in a bit more just in North America. And if we step back, I know it's a tough year with cost and logistics, etc. But if we step back and just look over the last 5 years, year on track to lost 1300, 1400 basis points of profit margins in North America. I think you're also on track to actually have market share lower than you were five-years ago over that duration. So Noel can you just give us some context around what's happening with the investment plan in North America with tech and lose strategy there. And do you think you've got the right investment posture, the right innovation plan to compete effectively in the market? Is this just a low point on margins? Can we bounce back from here as a slick during point just any context you can give us around the profitability in the performance in that market. Thank you.

Sure. Thanks, Jason. So we talked about Oral Care, obviously a big focus for us in the North American business. That was strong again in the quarter up mid single-digits. I won't repeat what I talked about in terms of share growth, particularly last 13 weeks. We are more competitive in the U.S. market. We were not competitive in the first half. We've dialed up our competitiveness and we're seeing the benefits of that translate into better share progression, particularly across some of our premium bundles. We continue to support the business quite well. We think we're in a good place where we need to be, but obviously as any marketer would say, more support is always better. We're looking for increased efficiencies in that business as we move forward in order to accelerate gross margins. As I mentioned earlier, North America was disproportionately hit with raw material, inflation, logistics, and we took decisions very deliberately in the quarter to address demand that obviously had an effect in that quarter. So we anticipate that we'll start to come out as we move through the fourth quarter and certainly as we move into the first half of 2022. That being said, the raw material environment continues to be very volatile and unpredictable. And we'll take the decisions that we need to take to remain competitive. We are very focused on growing the North America business. It is a priority for the Company. We are ensuring that we give them what they need in order to address the challenges and the competitiveness of that marketplace, and we expect that we'll continue to see good gross margin expansion over time. I do think this is a low for us, but I say that in the context of an environment that's quite unpredictable. But given what we saw go through in the third quarter, we anticipate that things will get better as we move forward.

Next to Kamil Jagrulla with Credit Suisse.

Thank you, good morning everybody. I'll follow-up a little bit on the second question on price elasticity. And maybe just linked to price elasticity if you could also just maybe comment on the consumer condition, various areas around -- around the world.

Sure. Listen, we've historically led pricing in so many of our markets. And in the emerging markets, you tend to see a little bit more elasticity early on, but we are focused on ensuring that our innovation process is across multiple price tiers. And so when you combine pricing with innovation at the same time, we find that we can rebuild consumption quite quickly. Elasticity tends to dissipate over time certainly as we get the new innovation in the market and communicate that. So we're quite confident in where we are in emerging markets. Developed markets tend to be a little bit more difficult. Historically taking pricing in Europe and North America has been a challenge. We have certainly shifted a lot of our focus to now relaunching brands, relaunching the core, bringing more premium innovation in the market in order to drive pricing and typically then as you bring value-added consumer oriented benefits to the category, you can take pricing and therefore the elasticity is in its dramatics. So we will see it over time. I think there is everyone is raising pricing fundamentally in the categories that we compete in. That tends to reduce the elasticity as well. One might ask, where Is private label in this environment? Private label shares were down in every single category in which we compete fundamentally so the news is, big brands are winning and I think as long as you bring good quality innovation, you continue to support that innovation with good content that's personalized and targeted, we think we can offset some of the elasticity. But that being said, the raw material environment is significant and pricing will be significant over the next few quarters in order to offset that moving forward But we want to do that to make sure we protect our advertising line.

The next to Steve Powers with Deutsche Bank.

Hey, thanks, and good morning. Noel --

Hey, Steve.

-- I guess maybe to summarize a lot of what we've talked about so far and just try to cut through the -- some of the noise around manufacturing, closings, and mobility restrictions, and bottle supply chain, bottlenecks, etc. I guess I'm trying to get a better sense for how you're seeing Colgate's momentum trending, particularly on the oral home and personal care businesses. As I look at it, I think I see directional improvements. They are evident this quarter, sequentially, but at the same time, in most regions, I think overall performance came in lighter than many of us had hoped on the outside. So again, can you maybe just summarize the sequential momentum as you see it on a global basis, maybe how you expect things to progress in fourth quarter X Hill's, and what the early setup is heading into the new fiscal year in terms of building that momentum further r? Thanks.

Yes, Steve. We're very pleased with momentum. I mentioned in my comments, up sequentially or 2-year stack on volume and pricing in this environment, we think is a terrific result driven by our core focus areas, which is Oral Care and Pet Nutrition. Oral Care continues to drive good sequential growth quarter-to-quarter, we talked about at mid singles in the quarter, high singles on the year. Obviously, the pet nutrition business in double-digits, comping double-digit. So again, I think some terrific progress there. Personal care significantly impacted by COVID driven categories. And liquid hand soap, which is a very big business for us in North America and around the world, obviously, we saw a significant fall-off in the category. The category was down 28%, to give you some context on that, and as John mentioned, that was a 400 basis point headwind. So some of the COVID categories were certainly stabilized as we moved forward and we lap those moving into 2022. But the essence of your question is, where are we with the momentum on Oil-Chem? We feel good about it. We feel good about our 22 plans. We feel good about the pricing we're taking. We feel good about the segments we're competing in. We feel good about the channel strategy that we've had where we're growing share in the fastest growth channels which are typically e-commerce discounters and pharmacy. And the strategies that were put in place in the portfolio execution of that is delivering against it. So we feel, overall, we're pleased with the underlying momentum on Oral Care, Personal Care as we lapped some of the COVID will improve moving forward. We had some good discussions particularly in North America and Europe around some of the innovation that we need to continue to drive it. Our market share, interesting now, just as a data point on market share on liquid hand soap in the U.S. was actually up two points in the quarter given the fact that it was still down 400 basis points versus where it was last year on a volume standpoint. So again, we think we're taking the right decisions on portfolio and innovation in order to drive share and continue to recover some of the softness that we saw that was temporarily driven by the COVID expansion last year.

We'll go next to Lauren Lieberman with Barclays.

Hi, Lauren. I think you're on mute.

At this time there is no response so next to Brian Moynihan with Bank of America.

Hi, good morning and thank you for taking the question.

Hi, Brian.

I wanted to ask just a question around free cash flow and want to understand if -- with the inflation and just all of the noise, I guess, in supply chain, if it's having an effect at all on free cash conversion? And I ask because last year, you over-delivered relative to the 90% conversion target. Looks like this year, at least year-to-date, running a little bit below that. And so really just wanted to understand if there's -- if the effect that it's having on the P&L is also having an effect on free cash flow, and if that's something we should consider as we're looking into '22?

Yes, I'll throw this to understand. But let me just provide a couple of topline comments. Overall, if you go back historically where we are, it compares quite consistently with our historical numbers, that there were some benefits that we certainly had last year on a comp basis around working capital, but let me turn it over to Stan. Will give you a little bit more color on that, Stan?

Yes. Thanks. We continue to cycle favorable working capital performance versus last year and there's really an anomaly when you look at 2020. First of all, 2020 cash flow, driven by the unique environment, was up significantly. While we're down year-to-year, I think if you look back and compare to '18 and ' 19, you'll see that it's more in -- more in line. Higher raw materials pricing certainly put upward pressure on our inventories. But I think important to note as you mentioned, free cash flow, as you'll see the investment we're making in the business and capex. So capex up roughly a $120 million, that's really an investment, as Noel talked about earlier, in the long-term help our business and what we're looking to grow. So that investment has an impact on free cash flow. But we think, it's incredibly important for the long term. So you step back and look at cash flow where we are today. We're not concerned about the positioning. We think we are confident in our ability to generate that cash. We're confident in our ability to invest in the future of the Company through capex, so we're comfortable with the current positioning on free cash flow.

Yeah, I would only add that particularly around capex which has been quite consistent for us over the years, We found -- we see ourselves with some real opportunities to invest in growth areas of the business. And that's certainly what is elevated the capex in the quarter which we think only good news for the long term.

We'll go next to Javier Escalante with Evercore.

Hi, good morning, everyone. And another question on pricing, so basically we heard from both your competitors, Proctor and Unilever taking pricing either in Q3 or announcing price increases, but if you could talk about the big local players that China, in India, is there something in the supply chain that is different that they can drag on pricing? Is this a concern? And this is something that contributed to the weakness in Q3 both in China and India, that will be very helpful. Thank you.

Sure, Javier. Thanks. I think the answer is everyone is -- no one is immune to the inflation that we're seeing across the market, both from a raw material standpoint or from a logistics standpoint. Obviously, they may have had different constituents. They look at their business differently than public companies or big multinational companies. But in any case, no one is immune to it. And XIVE had discussions and been able to get out and travel a bit and talk to retailers. I mean, retailers are recognizing even on their own private label brands, they are going to have to take pricing to offset the significant inflation that's being absorbed in the market right now. So I expect that you'll see all boats rise, so to speak. In this environment, that pricing will go up. There will be certainly some delay with local players as they tend to try to search out a bit more volume as the big players take pricing. But again, I think if you can combine the pricing with the right innovation, which we're very focused on delivering, and adding value to the consumer, the local brands have to react to that in some form or fashion, either with their own innovation or with their own price increases in order to stay competitive from a support standpoint. So I don't anticipate it's going to be a significant issue, Javier, you know, our business. It's really well, you know, that we innovate across all price points and we have significant focus. It's very deliberate in markets, and looking at shares, and our innovation process across each of the key price segments that we compete in. And that will certainly be the case as we move forward.

To Mark Astrachan with Stifel.

Thanks and good morning, everybody. Wanted to ask just specifically on the ad spend. Are you guys getting the right returns on the absolute dollars that you're spending? If you take a look at that category, that column, the increase is somewhere north of 200 basis points over the last few years as a percentage of sales. Obviously, there's a lot of discussions on the call talking about market share challenges, Oral Care, household prior to the pandemic. Just maybe holistically kind of talk about how you think about that. Does that number needs to move higher from here? Can it stay the same, but can you kind of work in a different way? And then how does that all kind of tie into market share and profitable growth for the business going forward. Thank you.

Sure. Well, listen. Let's step back and look at what's happened over the last two years. And I think it's very clear that we have re-accelerated the topline of the Company. And that has been a core focus for everyone in the organization. It's just growth mindset that talks about elevating our core, our adjancencies, and faster growth channels and doing that across all categories and all geographies. And if you take a basis of two years ago, that's exactly what we were delivering against right now. The investment we believe is fueling that growth. Obviously the strategies, and the execution are big part of it, but we feel very strongly that the acceleration that we've had in investment, both on the oral care side, as well as the nutrition side, have clearly delivered top-line growth. Now we would like to see it reflected in some of the Nielsen based share readings. But the market is very complex now. The go-to-market strategies in the path to purchase for consumers is much more complex than it ever was in the past, and consumers moving between channels, and obviously the emergence of our [Indiscernible] which is quite significant. And in some markets like China has become a very significant part of the category. And we're seeing very strong [Indiscernible] there. Overall, we feel the top-lines moving in the right direction. The investment is supporting that. That being said, we are very focused on making sure that we deliver ROI against every dollar in the P&L. And we have brought in resources from the outside and amplified our capacity around the world, working with WPP, our partner, to get much more granular and much more analytical about how we're investing, particularly our digital spend to make sure it's targeted and we're getting ROI for that spend and we're getting much, much better at that. So as we look at our advertising, will continue to be competitive in terms of what's needed in the marketplace, continue to ensure the health of our brands are protected. But we're very focused from a productivity and efficiency's standpoint looking at that bucket as spend, and making it work harder for us. And that's exactly what we'll expect to see in 2022 as well.

Our last question comes from Lauren Lieberman with Barclays.

Hey, Lauren.

So, can you hear me this time?

Yes, I can. We can hear you just fine.

Okay, cool, because I don't what happened. I just was curious about Mexico, which is it was kind of called out in the context of Latin America and shares being a little softer. So I just wanted a little bit of detail on that. Thanks so much. I know this has gone on for a long time.

No. Mexico, again, high single-digit performance in the quarter. And obviously a difficult environment, particularly given the aggressive pricing that we've been taking in the marketplace. And that pricing certainly had a little bit of impact on volume shares in the quarter. But nothing that's terribly concerning to us. It's what we consider not real profitable volume, given that we're losing to the lower end of the market. Some of our competitors have been highly aggressive with their promotional -- there promotional levels and we've decided to protect the margin in the P&L, and continue to invest in building the brand. Interesting if you look at some of our equity measures in that marketplace, particularly given that we focus now on really supporting the equity as well as innovation. I was -- attended their budget review just recently and they look terrific. Again, I think -- we feel like we've got a very strong position in that market. We sacrificed a little bit of the promotional share, but that is not unusual when we take pricing and lead the market and will continue to ramp up innovation and ensure that we remain competitive, but nothing to be concerned of. Brazil, likewise, which you didn't ask about, but I'll mention that shares are flat there and doing very, very well, particularly as we see great growth in the pharmacy channel. So the balance of our portfolio has gotten much more therapeutic, which is obviously more profitable for us in the long term. So we're pleased with some of our 2 big markets. And you heard John mentioned Colombia is back on track given the political disruptions we saw last quarter and driving some nice growth for us. Across Latin America, good. Not concerned about Mexico at this point.

And at this time, there are no further questions. And this does conclude today's conference. We thank you for your participation. You may now disconnect.