Executive Summary / Key Takeaways

• Colgate-Palmolive is executing a robust 2030 strategy, focusing on science-led innovation, digital transformation, and supply chain optimization to drive consistent dollar-based EPS growth and strong total shareholder return.
• The company delivered solid Q3 2025 results with 2.0% net sales growth and 0.4% organic sales growth, despite a challenging macroeconomic environment, demonstrating resilience through strategic pricing and productivity.
• Hill's Pet Nutrition continues to be a standout performer, achieving 2.5% organic growth ex-private label in Q3 2025 in a soft category, driven by therapeutic innovation and strategic segment focus.
• Significant investments in AI, data analytics, and a new Strategic Growth and Productivity Program (SGPP) are poised to enhance efficiency, accelerate innovation, and optimize marketing, creating a competitive edge.
• While facing headwinds from tariffs, raw material inflation, and consumer uncertainty, Colgate's diversified global footprint, strong brand health, and P&L flexibility position it for continued outperformance relative to category growth, with a commitment to expanding margins in 2025.

Setting the Stage: A Global Consumer Staple's Strategic Imperative

Colgate-Palmolive Company (NYSE:CL) stands as a venerable institution in the global consumer products landscape, a legacy stretching back to 1806. Today, it is a caring, innovative growth company focused on reimagining a healthier future for people, their pets, and the planet. The company's core business is tightly segmented into Oral, Personal and Home Care, and Pet Nutrition, serving consumers in over 200 countries and territories. This extensive global footprint is a foundational strength, with approximately two-thirds of net sales generated outside the U.S. and about 45% stemming from faster-growing emerging markets across Latin America, Asia, Africa/Eurasia, and Central Europe.

Colgate's overarching strategy, now transitioning into its ambitious 2030 plan, is centered on delivering consistent compounded earnings per share growth through driving organic sales, operational efficiencies, and leveraging its robust balance sheet. This strategic direction is deeply informed by its history of adapting to dynamic markets and a consistent focus on household penetration and brand health as key drivers of sustainable growth. The company's ability to consistently meet or exceed its long-term organic sales growth target of 3% to 5%, even achieving high-single-digit growth in 2023 and 2024, underscores the effectiveness of this approach.

Technological Edge and Innovation as a Growth Catalyst

At the heart of Colgate's strategic differentiation lies its commitment to science-led innovation and the aggressive adoption of advanced technologies, particularly in digital, data, analytics, and artificial intelligence (AI). This is not merely an operational enhancement but a core competitive moat. The company is implementing a new innovation model, channeling additional resources to deliver more impactful, science-based offerings across all price tiers. This model integrates AI to accelerate product development, making the process faster and more adept at prioritizing innovations that resonate most with customers and consumers.

The tangible benefits of this technological focus are multifaceted. In innovation, AI is being leveraged to more efficiently generate consumer-centric concepts, enabling quicker testing, validation, and incubation across core markets. This capability is crucial for driving premiumization, as seen with the global relaunch of Colgate Total, which features a meaningful upgrade in its formula designed for superior prevention and regimen claims across toothpaste, manual toothbrushes, and mouthwash. This innovation is already showing "terrific share growth" in Latin America, its initial launch market.

Beyond product development, AI and predictive analytics are transforming revenue growth management (RGM) and supply chain operations. Colgate aims to drive "more dynamic change by accelerating investments and efforts in areas like RGM and agentic AI," working to enhance efficiency, disrupt internal processes, and integrate new ways of working. In the supply chain, predictive analytics and automation are increasingly used to deliver personalization at scale, optimize asset utilization, minimize downtime, improve service levels, and enhance quality systems. The ramp-up of the Tonganoxie wet pet food facility, described as Colgate's "most automated facility in the world," exemplifies this, unlocking growth opportunities in the wet segment and driving efficiency. These technological advancements contribute directly to Colgate's competitive moat by enabling faster, more targeted innovation, more efficient operations, and a more responsive market approach, ultimately bolstering financial performance through higher average selling prices (ASPs), lower costs, and better margins.

Financial Performance and Operational Resilience

Colgate-Palmolive's recent financial performance reflects its strategic resilience in a volatile global environment. For the three months ended September 30, 2025, net sales increased 2.0% to $5,131 million, driven by net selling price increases of 2.3% and positive foreign exchange of 1.2%, partially offset by volume declines of 1.5%. Organic sales, a key non-GAAP metric, increased 0.4% in the quarter. For the first nine months of 2025, worldwide net sales were $15,152 million, nearly flat compared to $15,156 million in the prior year, with organic sales increasing 1.2%.

Profitability metrics, while facing headwinds, demonstrate the company's ability to manage costs. Worldwide GAAP gross profit margin decreased to 59.4% in Q3 2025 from 61.1% in Q3 2024. This 170 basis point decline was primarily due to "significantly higher raw and packaging material costs (600 bps)," partially mitigated by "cost savings from the Company’s funding-the-growth initiatives (290 bps), higher pricing (90 bps) and favorable mix (30 bps)." For the nine months ended September 30, 2025, GAAP gross profit margin decreased to 60.1% from 60.6% in 2024. Selling, general and administrative expenses as a percentage of net sales decreased by 90 basis points to 38.4% in Q3 2025, driven by decreased advertising investment and lower overhead expenses. Operating profit margin was 20.6% in Q3 2025, a 60 basis point decrease from 21.2% in Q3 2024.

Net income attributable to Colgate-Palmolive Company for Q3 2025 was $735 million, a slight decrease from $737 million in Q3 2024, yet diluted earnings per share increased to $0.91 from $0.90. For the first nine months of 2025, net income increased to $2,169 million from $2,150 million, with diluted EPS rising to $2.67 from $2.61.

Segment Deep Dive: Oral, Personal & Home Care and Pet Nutrition

The Oral, Personal and Home Care segment, contributing approximately 77% of total net sales, experienced 2.1% net sales growth and 0.9% organic sales growth in Q3 2025.

• North America: Organic sales declined 0.5% in Q3 2025, primarily due to softness in skin health and hand dish categories, though oral care saw growth. Management acknowledges that restoring profit margins in North America is a "significant priority."
• Latin America: Organic sales grew 1.7% in Q3 2025, led by Mexico and Brazil, despite a 150 basis point negative impact from a Colgate Total formula replacement. This adjustment, made due to consumer complaints, caused a 40-50 basis point gross margin impact but early signs indicate market shares are recovering.
• Europe: A strong performer, with 1.2% organic sales growth in Q3 2025, driven by the UK and oral care. The Elmex brand continues its "huge success," achieving record shares.
• Asia Pacific: Organic sales decreased 1% in Q3 2025, mainly due to challenges in Greater China and India. The Colgate business in China, however, delivered "exceptionally well" with mid-single-digit organic growth, while the Darlie business is undergoing strategic adjustments. In India, a GST tax change impacted Q3 organic sales, but a return to growth is expected in 2026 with new innovation.
• Africa/Eurasia: Organic sales increased 6.2% in Q3 2025, led by Türkiye, with strong and growing market shares.

The Pet Nutrition (Hill's Pet Nutrition) segment, representing about 22% of net sales, saw net sales increase 1.4% in Q3 2025, but organic sales decreased 1.3%. This organic sales decline included a significant 370 basis point negative impact from lower private label pet volume. Excluding private label, Hill's organic sales grew a robust 2.5% in Q3 2025, and 5% in Q1 and Q2 2025, in what management describes as a "bit soft" and "flat" overall pet category. The Prescription Diet business is "exceptionally well," driving market share and improving margins. The strategic exit from the private label business, largely completed by July 2025, is expected to be fully cleaned out by the first half of 2026, allowing for a sharper focus on higher-margin branded growth. The acquisition of Prime100 in Australia is performing "really, really well ahead of expectations," providing entry into the fresh pet food category.

Liquidity and Capital Allocation

Colgate maintains a strong financial position, with management confident that "cash flow from operations and debt issuances will be sufficient to meet foreseeable business operating and recurring cash needs." Net cash provided by operations decreased 3% to $2,745 million in the first nine months of 2025, primarily due to changes in working capital. Capital expenditures for 2025 are expected to be approximately 3% of net sales.

Total debt increased to $8,419 million as of September 30, 2025, from $7,949 million at year-end 2024.

The company's Board authorized a new $5 billion share repurchase program in March 2025, underscoring its commitment to shareholder returns. Colgate's "record operating cash and free cash flow" in 2024 and a "top tier return on invested capital" of 35-36% highlight its disciplined capital allocation.

Competitive Landscape and Strategic Positioning

Colgate-Palmolive operates in a highly competitive global marketplace against formidable multinational and local players, including Procter & Gamble (PG), Unilever (UL), Johnson & Johnson (JNJ), Kimberly-Clark (KMB), and Nestlé (NSRGY) in pet nutrition. The competitive environment is characterized by aggressive product claims, marketing challenges, increased promotional spending, and geographic expansion.

Colgate's competitive advantages are rooted in its strong global brand portfolio, extensive distribution networks, and leadership in oral and pet nutrition. Its "healthy brands in growing categories with strong market shares" enable it to command pricing power and foster customer loyalty, contributing to robust margins. For example, Colgate's global toothpaste market share was 41.2% year-to-date, and manual toothbrush market share was 32.4%. In Europe, the company has achieved "record market share performance" in Oral Care, up 300 basis points since 2016.

However, the company faces vulnerabilities. Heightened competitive activity, particularly from private label brands and new entrants, can pressure market share and pricing. The shift in consumer purchasing patterns towards private label or lower-priced offerings due to economic uncertainty is a direct competitive threat. While Colgate's strategy of offering products across all price tiers helps mitigate this, its ability to drive premiumization remains critical. The Darlie business in China and urban markets in India have experienced competitive pressures, requiring strategic adjustments in go-to-market and innovation.

Colgate's strategic response involves leveraging its technological differentiators, such as AI-driven RGM and supply chain optimization, to gain an edge. This allows for more precise promotional spending and efficient product delivery, directly countering competitors' aggressive tactics. The focus on "science-led, core and premium innovation" is designed to differentiate its offerings and drive value, rather than engaging in a race to the bottom on price. The strategic exit from private label pet food for Hill's underscores a commitment to higher-margin, branded products, sharpening its competitive focus against broader pet food players.

Outlook and Risks

Colgate-Palmolive's outlook for 2025 anticipates continued global macroeconomic, political, and market challenges, including inflation, high interest rates, foreign currency volatility, and tariffs. Management expects global categories to grow "roughly 2% on a global basis," with volumes "basically flat" and pricing "more or less 2%." Despite this, the company aims for 3% to 5% organic sales growth, "outpacing the categories" and driving brand penetration. Full-year organic sales are projected to be "roughly in line with the year-to-date" 1.2%, implying an improvement in Q4 2025. Gross margin is expected to be "roughly in line with" the year-to-date 60.1%, with Q4 around "60% plus or minus," and advertising spending "roughly flat this year on a percent of sales basis."

The new Strategic Growth and Productivity Program (SGPP), with estimated pre-tax charges of $200 million to $300 million through 2028, is a key initiative to fund incremental investments and drive savings, supporting the 2030 strategy. First charges from the SGPP are expected in Q4 2025.

Key risks include ongoing geopolitical tensions (Ukraine, Middle East, China-Taiwan), which can impact supply chains, raw material costs, and consumer sentiment. Volatile foreign currency fluctuations, particularly in hyper-inflationary economies like Argentina, Nigeria, and Türkiye, remain a significant headwind. The company also faces legal contingencies, including Brazilian tax matters (approximately $112 million and $27 million) and talcum powder lawsuits (402 pending cases as of September 30, 2025). The fair value of the skin health reporting unit and one indefinite-lived trademark intangible asset exceeded their carrying values by less than 20%, indicating potential impairment risk if future cash flow estimates or macroeconomic conditions change adversely.

Conclusion

Colgate-Palmolive is a resilient consumer staple, strategically positioned to deliver consistent growth amidst a challenging global backdrop. Its core investment thesis rests on the strength of its diversified brand portfolio, particularly in oral care and pet nutrition, and a proactive, technology-driven strategy to enhance innovation, operational efficiency, and market responsiveness. The company's 2030 strategy, underpinned by significant investments in AI and the Strategic Growth and Productivity Program, is designed to accelerate growth and expand margins, even as it navigates persistent macroeconomic headwinds and intense competition.

While risks such as geopolitical instability, foreign exchange volatility, and legal challenges warrant close monitoring, Colgate's proven ability to generate strong cash flow, maintain P&L flexibility, and drive brand health through science-led innovation provides a compelling long-term investment narrative. The company's commitment to outperforming category growth, coupled with its disciplined capital allocation and leadership in technological adoption, positions it favorably to continue delivering value to shareholders.