Q2 2024 Kimberly-Clark Corp Earnings Call

Participants

Chris Jakubik; Head of Investor Relations; Kimberly-Clark Corp

Michael Hsu; Chairman of the Board, Chief Executive Officer; Kimberly-Clark Corp

Nelson Urdaneta; Chief Financial Officer, Senior Vice President; Kimberly-Clark Corp

Lauren Lieberman; Analyst; Barclays Capital

Dara Mohsenian; Analyst; Morgan Stanley

Nik Modi Modi; Analyst; RBC Capital Markets

Javier Escalante; Analyst; Evercore

Anna Lizzul; Analyst; Bank of America

Andrea Teixeira; Analyst; JPMorgan

Bonnie Herzog; Analyst; Goldman Sachs

Presentation

Operator

Good morning, and welcome to Kimberly-Clark second quarter 2024 earnings question-and-answer session. I will now hand the conference over to Chris Jakubik, Vice President and Investor Relations. Please go ahead.

Chris Jakubik

Thank you, and hello, everyone. This is Chris Jakubik, Head of Global Investor Relations at Kimberly-Clark, and welcome to our Q&A session for our second quarter 2024 business update. During our remarks today, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties, and these are discussed in our earnings release and our filings with the SEC.
We will also make some non-GAAP financial measures today or discuss some non-GAAP financial measures today. And these non-GAAP financial measures should not be considered replacements for and should be read together with GAAP results. And you can find the GAAP to non-GAAP reconciliations within our earnings release and the supplemental materials posted at investor.kimberly-clark.com.
Before we begin, I'm going to hand it to our Chairman and CEO, Mike Hsu, for a few quick opening comments.

Michael Hsu

Thank you, Chris. Before we jump into the Q&A, I would like to start by saying thank you to my colleagues at Kimberly-Clark who are working diligently on the implementation of our comprehensive innovation like growth strategy and delivered strong results for the first half.
We're excited about the opportunity to accelerate investments to build our powerhouse categories and brands in our pipeline of innovation. We are effectively navigating external dynamics while driving our consumer centric culture. For making the company better stronger and faster and we are turbocharging our ability to provide better care to consumers around the globe.
I'm very proud of our progress to date, it bolsters our confidence in delivering our outlook for the year and our ability to ramp up our investments to further leverage our core strengths and achieve our potential. We are on an exciting path, and I'm and are well positioned to deliver durable growth and sustainable shareholder returns.
So with that, I'd be happy to open it up to questions.

Question and Answer Session

Operator

Certainly. Everyone at this time, be conducting a question-and-answer session. (Operator Instructions)
Lauren Lieberman, Barclays.

Lauren Lieberman

Great, thanks. Good morning. So first, I wanted to check in and talk a little bit, Mike, about market share trends and because the organic sales growth this quarter was really solid, volumes were up. You had this unexpected headwind from inventory destock, but I wanted to also check in a bit on market share trends on where you stand versus not just competition, but also what you're seeing from private label of weight?

Michael Hsu

Okay. Good morning, Lauren. Yeah, thanks for the question. Yeah, overall, I feel good about the progress we're making on market share, and I do expect further improvement as we progress through the year. We were overall globally even on a weighted basis and upper even in about half of our cohorts around the world.
And that's progress versus the past couple of years where if you recall this time last year, I think we were up or even in about 40% of our cohorts. So yes, I think we've made solid progress, but there still remains plenty of work for us to do.
As you may recall Lauren, North America was a bit soft last year that is improving. That softness last year was primarily due to supply constraints the first half in North America on a weighted basis was flat and then up or even in about six of eight categories and that continued in the second quarter. And I expect further improve in North America as we cycle some of those constraints last year.
We also had pretty solid gains on market share in certain brands across our what we're calling focused markets or other big five markets beyond North America. In China, Huggies was up 180 basis points in share in the UK and Andrex, which is the leading brand, there was up 350 basis points.
In South Korea, Huggies. It has been up over 800 basis points since 2019 and was up over 300 basis points in the quarter. And in Brazil, I think got that we're working to improve the brand proposition and so we were up about a 100 basis points in Brazil.
So we're making progress, but as I pointed out, were both about flat on a weighted basis. And so they're at that signals that there's plenty of work for us to do.

Lauren Lieberman

Okay. Great. And just curious to know, you mentioned a couple of markets share, a bunch of market share positions outside of North America and China that have been very strong. When do we start to see that translate into growth? Because I think one of the interesting parts of the strategy is laid out in this sort of shifting the focus a bit so that we can get more visibility into the other areas of your business.
But when should we start to see some growth become more material in a matter more move the needle more in markets outside of the US and China?

Michael Hsu

Yes, I mean Lauren, I'd say we have a very proven playbook that we're really proud of, and we're implementing that more systematically behind this wiring for growth initiatives that we have. We're going to implement those playbooks more systematically around the world.
One, we've got great technology that the world you all haven't seen yet, which we're rolling out and we're excited about our launch that I mentioned in our in our opening comments in the script on skin essentials in the US.
So we've got great, a great technology portfolio. We've got the right we've invested in the past five years to build the right commercial and supply capabilities to accelerate performance. You're going to see a sharper focus on what we're calling our focus markets, right?
Those are the US plus the next five markets for us and so that said, I would say from a local conditions remain dynamic. And so there's plenty of opportunity to tighten up our brand propositions on a market-specific basis for reference, this type of Huggies as I mentioned, was up in share in China. Kotex was flat. And you know, again, it grew high single digits in the quarter on Kotex, but we'd love to get more share growing in China on femcare.
In Brazil, Huggies was up. Kotex is the leading brand or we call it intimus in Brazil, the leading brand in Brazil, but share was a little soft and down about just a little bit less than 100 basis points. So we got some work there.
South Korea, I said Huggies was up over 300 basis points for bath tissue was down a little bit. And so we have work to do around the world. And so part of our strong start is going to force the ability to make surgical investments to get our good, better best where we think they need to be in the local markets.

Lauren Lieberman

Great. Thanks so much. I'll pass it on.

Michael Hsu

Okay. Thanks Lauren.

Operator

Dara Mohsenian, Morgan Stanley.

Dara Mohsenian

Good morning, guys.

Michael Hsu

Hey Dara.

Dara Mohsenian

So a pretty sizable margin and EPS beat in Q2, but it does sound like investments are going to increase in the back half of the year. So Nelson, can you just discuss a bit the cadence of margins and EPS in the back half how we should think about Q3, Q4 margin performance, particularly as the divestiture impacts ramp up in the back half of the year?

Nelson Urdaneta

Sure, Dara. So let me start by echoing what Mike said. I mean, we're very proud of our teams have executed in the first half of the year. And we've gained momentum on a number of fronts. Relative to our power and great care strategy.
As a reminder, I mean, as we think about margins, our main focus is on driving profit dollars growth margins for us. As we've stated our milestones and we're moving on that progression. Growth in the first -- in the second quarter and the first half reflected solid volume mix driven gains.
And on the third quarter is the third quarter in a row that we drive positive volume mix. Importantly, in some of our largest most profitable geographies like the US, China, and the UK, we saw solid volume mix growth, which is something we've been focusing on.
And as Mike said, I mean, it is the key for our long-term algorithm. We delivered more than half of our profit dollar objectives for the year in the first half. And this actually gives us flexibility for the second half to further invest in strengthening our brands and our innovation pipeline, especially as we manage through some of the challenges in the macro environment and some of the increased consumer pressure that we're all seeing.
As we think of cadence of first half second half on the top line, we would expect the second half to grow at a similar pace of what we saw in the second quarter. With again volume and mix key drivers of growth, while pricing will continue to play a lesser role sequentially.
At the profits four things to keep in mind. First one, productivity delivery. It's been solid in the first half and ahead of our original plans, given timing of some of the projects. So we do expect a lower absolute dollar productivity delivering the second half, but still very strong on the year.
Secondly, pricing, net of costs, it's been strong and favorable in the first half due to timing of pricing actions relative to costs. And you've got to take into account Argentina, which again, a lot of the hits that we took on the currency were in the second half of last year. So we're going to be lapping that as we head into the second half of this year.
For the balance of the year, we expect pricing and other cost benefits to taper off. However, it's important to reiterate that on a full year basis, we expect to be at least pricing net of cost neutral. The third aspect is timing of investments. In the back half of the year, we expect the step-up investments behind our brands, given timing of some of the innovation programs that we have.
As a reminder, on the first half of the year, our spend on our brands was approximately 6% of sales. Heading into the second half, this number is going to be closer to 7%. As we take advantage of our strong first half and we strengthened the overall investment profile setting up the time for us to continue growing sustainably in years to come.
And then last but not least, is the divestiture of our personal protective equipment. We expect it to be a headwind in terms of profits of around 180 basis points in the second half of the year. We didn't have that in the first half of the year.
Two more things that you think of EPS, equity method investment income, while it grew in the first half of the year, some of it had to do not just with the underlying performance of our equity method investments. It also had to do with the strength of the Mexican peso in the first half year on year. That's going to revert in the second half of the year. And we expect the net equity investment to be largely flat in the second half of the year.
And the other item on EPS is the effective -- the adjusted effective tax rate. For the full year, we're now projecting 23% to 24% adjusted effective tax rate. And for the first half, our adjusted effective tax rate was 22.3%. So when you combine all those factors, that gives you the cadence of how we're looking at the first half and second half.

Dara Mohsenian

Great. That's very detailed and helpful. And if I could slip in one more question. You talked about price in regards to the second half outlook. Can you give us an update on the North American pricing environment in both personal care and consumer tissue? is their ability to drive mix to a greater extent in the back half of the year. How do you think about that be the promotional environment and how we should think about pricing realization from here in North America in a more normalized environment? Thanks.

Michael Hsu

Thanks Dara. Yes, and overall on the pricing environment, particularly in North America, I'd say remains, you know, stable. And as you may recall, since COVID in the COVID environment with the pandemic, related environment, we did see a reduction in promotional activity in our categories.
And I'd say, over the past two years, that has kind of return and normalized post pandemic and I'd say it's remained at that level. We are seeing a touch of promotion in some categories and some in some retailers. But overall, again, our strategy is to remain focused on volume and mix driven growth.
And we're maintaining what we're calling PNOC or pricing net of input cost discipline. And so overall, as you're well aware, pricing to offset cost inflation is receding for us. You know, as expected, we really want to be more valuable at every rung of a good, better, best ladder.
I think one of the things that's great about our portfolio is that we do serve all consumers from value to up to premium, even though premium is really the big growth driver for us. And so we're really focused on working to ensure that our value propositions all along the value spectrum are going to remain strong.
And so our focus on building brands with advertising, great storytelling, pioneering innovation. But again, we also recognize in some categories, promotions very important, and we're going to be competitive where we need to be. But again, we're focused on driving the categories growth through advertising.

Dara Mohsenian

Great. Thank you.

Michael Hsu

Okay, Thanks Dara.

Operator

Nik Modi, RBC Capital Markets.

Nik Modi Modi

Thank you. Good morning, everyone.

Michael Hsu

Good morning, Nik.

Nik Modi Modi

So two questions. Just one on the organizational design changes that are going to take place in a few months' time. Like I remember, when Procter & Gamble did similar type of thing, not exact the exact structure, but they had like a transitionary kind of era or a moment between kind of the old structure and the new structure and I'm just curious if that is something that is going on right now within Kimberly, which will make that transition much smoother when we get to October. That's the first question.
And then I was hoping you can just kind of give us your thoughts since the Analyst Day you've hired two new people. One from a Chief Growth Officer that has a consumer healthcare background and then obviously had a new head of R&D that just was announced. Just was hoping you can give us some words kind of how they fit into the new strategy?

Michael Hsu

Yes, great. Nik, okay. You're all over it. I think it's a great question often. As I mentioned, I think in the prepared script we made an interim move on effective July 1. That changed some of the reporting in our global supply chain in North America and then Brazil moving into International Personal Care on an interim basis.
And so I would say your observation around an interim structure, we've done some significant shifts there already. And again, that goes back to I had some experience with another corporate transition where Nelson and Chris and I worked and so having that interim model working before you officially make, those moves helps a lot.
And I think the organization is making tons of progress in new ways of working. I'm very, very excited about kind of the progress the teams are making and very appreciative of all the hard work that they're putting in to make this happen. So again, I feel great thus far about our wire for growth initiative or the organizational change. And we're making strong progress there.
With regard to Patricia and Craig, I'm excited to have him onboard, Alison Lewis, who was our Chief Growth Officer; and Robert Long, our Chief Innovation Officer, R&D Officer. They did great work for us and really advanced the agendas in both those areas very, very strongly.
But I knew I intercepted them at a point in their career where they wanted to go on at some point and do other things. And so I think I think we have an excellent transition period between the four of these leaders and as Patricia and Craig come aboard, I think they both bring great skills to Kimberly-Clark. Patricia has worked at companies like Kraft and Unilever and Heineken before Bayer.
And so and knows a lot about the consumer health space a really really focused on marketing and advertising, which is a great thing for us. And then Craig has is a real great transformational leader with Unilever and some products further in this background as well as you know, a great run at Campbell's. And so I think they'll bring a lot both in terms of organizational development, but also expertise in their fields that will advance the things that we're working on with power and care.

Nik Modi Modi

Helpful. I'll pass it on.

Michael Hsu

Okay. Thank you, Nik.

Operator

Javier Escalante, Evercore.

Javier Escalante

Hi, good morning, everyone. I would like to see whether I can get more color on the savings, right? Because at least I see three buckets. So basically, you're announcing something in North America. My understanding is that the supply chain. So if you can talk about the benefits of what you're trying to do there, you're exiting too small market. But when you look at the P&L, it feels versus the SG&A is where we get better numbers relative to consensus. So if you can expand that, and then I have a follow up.

Michael Hsu

Thank you. Maybe I'll just start and I think Nelson will kind of give you more color on the savings. I would say on the small market exits, you know, my overall on that would be we are taking steps to make our categories in all our markets, more robust and predictable contributors to growth in returns. And we like our positions in most markets.
But that said, in places where we don't really feel heavier that we have a long term right to win or the market conditions in that market are not conducive to winning. We're going to be disciplined and methodical. And so we made the difficult decision to announce our planned exits in Nigeria and Bolivia and we recognize the downside.
It does affect our employees there, but I think there's a wrong the right move long term for Kimberly-Clark. I don't think those will contribute to be a huge source of savings, but I think it does take some risk out beyond the ongoing performance of the business, but nothing I can comment on the other sources, Javier.

Nelson Urdaneta

In terms of how are the sources of the savings there are two poles. First and foremost and the lion's share of the savings will derive from our supply chain transformation. And as a reminder, they encompass three strategies. The first one is our value stream simplification. And as I've explained, and [Tamera] has explained, this has to do with product specifications and a few other items that will drive significant savings over time.
Second one is optimizing our network and it's the footprint. It's our four walls and you're seeing some actions that are being taken today and they'll be taken over the next few years. And then the third bucket is scalable automation, and that encompasses two areas.
One, it's actual automation of supply chain processes in our factories and our warehouses. And the second one is digital automation, where we're deploying tools to optimize our procurement capabilities as well as our supply and demand capabilities. We are on the early stages of our transformation journey and especially in the supply chain and we're pleased with where we're at on the first half of the year.
Productivity delivery is ahead of where we have planned that we are at about $255 million year to date on the supply chain productivity, and that does not include procurement. We will update annually on the procurement savings, but well on track as we seek to deliver the $3 billion over the next five years, as we said.
Specifically on actions that have been taken and what's driving this at one stage, you know, we're seeing conversion and waste reduction. That's a big bucket that's helping us drive and that again, is within the value stream. It's product material specification standardization that's starting to happen, and we've been working to get that going in the last 1.5 year or so. And then lastly, it's transportation and warehousing cost reductions. So that's in a nutshell, what's driving the savings on the supply chain.
The other bit is on the overheads. On the overheads, we said that our target is to deliver about $200 million of savings over the next two, three years. The lion's share of those savings is really going to kick in once the full organizational model is in place, and that goes into effect in the latter part of the year. So we will see not a lot of savings this year on the overheads line coming from that item.
What you're seeing on the overheads, which I think you're alluding to is we're seeing absolute dollars, largely flat sequentially is that the discipline that we've had on overall spend is still in place. I mean, we're driving a lot of discipline in terms of spending and costs and that's flowing through and you're seeing it in the P&L at this stage.

Javier Escalante

Oh, that's great color, okay. I do have a question because we've got a scanner data today and includes a Costco, which is an important retailer and Amazon. And we saw I mean what the data shows is volume accelerating at the end of the quarter. We have of around 2%, which is two to three points better than what you reported.
So your commentary when it comes to inventory reduction and uncertainty there. So in light that volumes accelerated in the last four weeks ending July 7. Should we expect kind of like a more consistent retail sales in North America versus where you are when that report going forward. Thank you very much.

Michael Hsu

Thank you very much.

Chris Jakubik

Yeah. Maybe I'll start with that, Javier. I think my adage is in the end, shipments must track with consumption. And so I tend to focus more on the consumption numbers. We feel great about the progression we're making on volume and mix. And I think in the quarter, I think if you add volume and mix, it was up about two combined.
And so that's the progress we're making. I think it's great to cycle. We're very glad to have cycled a lot of the pricing moves that we had to take to offset inflation. But, you know, we think the underlying momentum in our categories remain solid. These are essentials and daily use categories and so we're encouraged to see that volume progression.
There's going to be some noise because of retail inventory changes in North America, you had two effects because there were some I would say there were some we're comping a soft quarter last year because of supply issues. And so probably a little more inventory going in on personal care.
And then we are on the tissue side, we saw consumption stronger than organic. And so that implies we saw some inventory come out of tissue. And so I think that's, I would say, generally typical. And so that stuff is going to move around from quarter to quarter. But overall, we're very encouraged with our volume trends.

Operator

Anna Lizzul, Bank of America

Anna Lizzul

Hi, good morning.

Nelson Urdaneta

Hi Anna.

Anna Lizzul

Morning .Thank you so much for the question. I was wondering if you could just elaborate more on the volume improvement that we saw in the quarter, just where you're seeing gains across the categories more specifically and also in the back half, there is an expectation on additional cost inflation, which you mentioned. Was wondering if you can touch on the balance of pricing and investment on innovation to help offset this? Thank you.

Michael Hsu

Okay. Yes, overall, I'll start with the and we're seeing resilience in demand across our categories overall globally. You know, the underlying growth in our categories remains healthy. As I just mentioned, we provide daily essentials and therefore, as you're probably well aware, category substitute substitution remains low and we still believe there's a lot of room for us to expand penetration and also revenue per user across our markets.
And we are mindful of the consumer environment. And as I said, we're working to sharpen up our positioning across the good-better-best value spectrum. A little bit more specifically in North America, demand remains resilient, AMC and some value sensitivity more broadly across Staples. I'm well aware that. Our categories in the quarter were up mid-single digit with the categories having positive volume. And again, I think that reflects the essential nature of our categories and products.
We are closely monitoring the consumer health sensitivity in the mid to lower income households in a few of our categories. But overall, we feel like we're very well positioned and we have a robust offering. As I mentioned earlier, we're proud to serve all consumers and have a robust offering across the value spectrum. And we're proactively working with our customers to better serve consumers and ensure that our propositions remain strong as we go forward.
And maybe just to add it a build a little bit on address your question on expectations of volume and expectation of what to expect on inflation in the year. We've seen the progression in volume in the second quarter. We expect the back half, as we stated to be volume mix driven and the impact of pricing to continue to subside in the back half. This especially has to do with the timing of pricing actions in Argentina.
We already saw a step down of the contribution of Argentina from the first quarter to the second quarter. And we expect that based on what we are seeing today to continue to be the case in the back half. That takes us to pricing net of costs. In principle we're holding the enterprise minimally to a pricing that a cost neutral standard on an annual basis.
We have good visibility today for that to happen this year, absent, a market dislocation shock, like what we saw in 2021, 2022. As we think of the pacing and I stated that in a prior question, pricing net, of course, has been rather strong and favorable in the first half of the year. And that had to do with both timing of pricing realization, largely Argentina and then some of the timing on the cost inflation.
Overall, we still expect to be at least neutral, if not positive on the year and pricing net of costs and from an overall cost inflation standpoint, we're not seeing a material change versus where we are discussed in the last call.

Anna Lizzul

Great. Very helpful. Thank you so much bigger.

Michael Hsu

Okay. Thank you.

Operator

Andrea Teixeira, JPMorgan.

Andrea Teixeira

Hi, good morning, everyone. So I wanted to go back to -- and thank you. Go back to the North American tissue discussion. I understand volumes are down 3% and then there was about 250 basis points due to retail destocking. But on the other hand, you are probably shipping more Kleenex.
So I was wondering, looking ahead, if the with the lap of the supply chain issues, should we expect the underlying to be still negative? And on the personal care side, if I can squeeze that in, what was the exit rate on the quarter in North America and globally?

Michael Hsu

Yeah. Well, let me let me start with the tissue North America overall again, as I said, there was a bit of a retail inventory change and so organic numbers are different than kind of what the consumption was. Consumption was up [3] in the quarter, which is just a little bit under what the category did overall. And so again, I think the tissue categories in North America remain robust. That are healthy, resilient, depending on what adjective you want to use?
I'd say overall share, you know, we've made strong progress on Kleenex. I think clearance was up almost 500 basis points on share in the quarter. That does reflect an improved supply condition that I said we were cycling versus last year.
In bath tissue, I think our share was a little was a bit soft of a little bit under 1 point in share down, and that reflects a couple of things, a hard what we call a hard roll over a packaging change and shelving reset on Cottonelle. And then Scott 1,000 has still been somewhat supply-constrained year to date.
And so we've cut back on our normal merchandising calendar. And so therefore, because of that, we are seeing a little bit more increased promotional availability for private label. And that's kind of had a bit of an effect on some 1,000. I think the brand, it remains very very healthy and it's a power brand, especially for value consumers in this environment, and we feel great about that.
But overall, I think we feel great about the progress and I think the inventory change was a little bit different than what we were expecting coming into the quarter.
But I think I would hope that we're mostly through that.

Nelson Urdaneta

Yeah. On personal care, your question of what we grew, Andrea, I mean we grew mid-single digits solidly in North America and it was volume and mix driven. So the impact as Mike said on the trade destocking in the quarter was largely contained to tissue consumer tissue in North America.

Andrea Teixeira

That is super helpful. The exit rate of personal care do you think even with the merchandise, I'm assuming that you shifted the merchandising dollars from consumer tissue into our into personal care or you just are basically kind of flow through and then now you can kind of as you regularly in the supply chain improves into consumer tissue, you're going to merchandise more into the second half or just as an exit rate on just an idea of how personal care continues to do well into the remaining of the month right into June?

Michael Hsu

Yes. I mean, Andrew, I'm not sure I know how to answer that question on exit rate units, not that it's not how we think about it. I would say kind of what we're doing is we're very encouraged with our start to the year through the first half. I think the volume and mix are proceeding and moving in the right direction for us. We feel great about that.
There's going to be some inventory noise here and there in personal care, I would say it's going to be a positive in the category because we had some supply constraints last year that we're cycling. As I just mentioned, there was some inventory changes on the other direction on consumer tissue. But overall, I feel very good about where the brands are recognized.
We have more work to do, but also I feel good that we have the opportunity to make some additional investments to make sure that our value propositions are robust but that doesn't mean we're going to ride it through promotion as you may be well aware, I said in the past. I'm not a fan of over promoting our categories. And so really we're our focus on investment is to grow the category through advertising and bringing out the right kind of innovation to drive the categories.
Just like I talked about with skin essentials that we just launched in North America in the second quarter..

Andrea Teixeira

Thank you very much. I'll pass it on. Thank you both.

Michael Hsu

Okay, thanks a lot.

Nelson Urdaneta

Thank you.

Michael Hsu

We'll take one more question.

Operator

Bonnie Herzog, Goldman Sachs.

Bonnie Herzog

Yes. I just had a maybe a quick follow-up question on your tissue business. As you just mentioned, promos really have started to step up there. So I guess I'm trying to get a sense for how much you may need to or be willing to increase promos in an effort to essentially drive volumes in the back half of the year possibly resulting in a net negative price contribution similar, it relates to what we saw in Q2. And do you expect continued retail inventory destock impact in the back half as well?

Michael Hsu

Yes. Maybe I'll start with the last part, Bonnie. I again, I tend to focus a little bit more on the consumption and the consumption trends remain, I would say healthy, and I think there's going to be some shifting here and there I don't expect ongoing retail inventory contractions, but there could be some moves here and there we don't control those, right.
But we are -- we do work with these are big categories. And so our customers do work with us very closely to plan that out over time. And so I feel good about the inventory positions that we have right now, but can't exactly predict what we'll go forward on it on a what will happen on a go-forward basis.
On the promotional environment. I do think, I recognize broadly across staples that there is increased consumer price sensitivity. And so making sure that we have the right value proposition is going to be important.
The thing I'll point you to is what's fundamentally changed in these categories over the past 10 years, 5years is the analytics that we have available to drive the right decision making. And so and I know others gets a lot of play about the promotional environment. But you know, in the last five years, we've invested a lot in the predictive modeling tools that make enable us to make the right choices on promotion.
And so again, I tend to focus more on profitable growth and a promotion as a trade promotion is a tool to drive the overall brand strategy, but it is not a strategy in my mind and in itself. And so again, I think we'll work to make sure that our products are affordable and competitive. But again, we're focused on growing the category.

Bonnie Herzog

That's helpful. And just maybe one final clarification. I mean, is it fair to assume or maybe ask this way. Is it your expectation that volumes will inflect in the second half and in tissue just based on everything you said and how you expect things to play out?

Michael Hsu

Yes. Well, I'd say yeah, I mean, you know, we've shifted our emphasis to volume and mix driven growth. And so over time, we're expecting all of our businesses to drive positive volumes. And that's kind of how the model on how we want to grow. So I think that includes North American tissue.

Bonnie Herzog

Perfect. Thank you.

Michael Hsu

Okay. Thank you, Bonnie.

Nelson Urdaneta

Thank you.

Michael Hsu

All right. Well, thanks, everybody, for joining us. And if anybody has any follow-up calls we'll be available to take them today. So, thanks very much for your time.

Operator

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.