Good day, everyone. And welcome to today’s Colgate-Palmolive Company second quarter 2009 earnings conference call. Today’s call is being recorded and is being simulcast live at www.colgate.com. Just as a reminder, there may be a slight delay before the question-and-answer session begins, due to the Web simulcast. At this time, for opening remarks, I would like to turn the conference over to the Vice President of Investor Relations, Ms. Bina Thompson. Please go ahead, ma’am.

Thank you, Sharla, and good morning. And welcome to our second quarter earnings release conference call. With me this morning are Ian Cook, Chairman, President, and CEO; Steve Patrick, CFO; Dennis Hickey, Corporate Controller; and, Ed Filusch, Treasurer. This conference call will include forward-looking statements. And these statements are made on the basis of our views and assumptions as of this time, and are not guarantees of future performance. Actual events or results may differ materially from these statements. For information about certain factors that could cause such differences, investors should consult our annual report on Form 10-K filed with the Securities and Exchange Commission and available on our Web site, including the information set forth under the captions, “Risk Factors and Cautionary Statement on Forward-Looking Statements.” We will discuss organic sales growth, which is sales excluding the impact of foreign exchange, acquisitions, and divestitures. And we will also discuss our results and expectations, excluding charges relating to the 2004 restructuring program, which was completed last year. A full reconciliation of these measures with their corresponding GAAP measures is included in the press release and the company's financial statements, and is posted on the Investor Relations page of our website at www.colgate.com. We'll be glad to answer any questions you may have including or excluding these items, as you wish. We are pleased with our strong results in the second quarter. Of particular note is our outstanding progress in gross margin, excellent bottom line performance, and continued healthy organic sales growth. As you know, building gross margin momentum is a critical part of our financial strategy, as is having the appropriate balance between pricing and volume. As you've seen, we have been able to successfully implement price increases through last year and into the first half of this year. With…

The question and answer session will be conducted electronically for the telephone audience (Operator instructions) We ask that you limit yourselves to one question. And if you would like to ask an additional question, please re-signal and place yourself back in the queue. We also ask that if you are listening to the conference on the Internet, that you would please turn the volume on your computer before asking your question. (Operator instructions) We’ll have our first question from Bill Chappell with Suntrust.

Good morning.

Good morning, Bill.

Could you talk a little bit about the gross margin trends as we look on a go forward basis? The 75 to 125 basis point guidance seems pretty conservative. Is there any reason why margins should go down sequentially over the next two quarters? Or is there something I’m missing?

Good question, Bill. Let me just put it in a sort of slightly broader strategic context. As you know, and we had been saying for a while, we have been putting a great focus on trying to, A, offset of the dollar impacts of commodity costs and transaction; and then, B, move our gross margin back into positive territory year-on-year as a percentage to sales because that provides the ability to invest in business growth going forward. And obviously, we are delighted with the gross margin increase in the second quarter, slightly ahead of our original expectations. As we look at that gross margin going forward, our plan right now would see it holding at about the same level as the second quarter, still allowing us to increase advertising support behind a strong pipeline of new products, both of the higher priced end and entry priced end and entry price end over the back half of the year. So for the balance of the year, an expectation that gross margin would be around the same level as the second quarter

Great. Thank you.

Sure.

We’ll go next to Bill Schmitz with Deutsche Bank.

Good morning.

Good morning, Bill.

How do we think about pricing going forward? I mean, I know a lot of it is to offset some of the currency transaction hit in developing markets. So you have the dollar softens, will you give that pricing back right away and probably see the volume resume? Or is there a little bit of lag in it? How does it work or how has that worked historically?

Yes. Again, back to the strategy of recovering gross margin as the fulcrum of the income statement, we have taken the pricing we believe we have needed to take. Pricing, therefore, is at that level that we were targeting. And we have in our plan no new pricing for the balance of the year. And as I was saying in response to the earlier question, with our innovation stream skewed to the second half, our focus now is on increasing advertising support behind that innovation stream, advertising in the traditional areas, and also as we head been saying for a while, advertising that is in-store, much of which is captured in the gross to net line, not in the traditional A to S line. So I think what you’re going to see going forward is pricing established, no new pricing, and an increase in marketing support to resume volume growth in the second half.

Okay. So does that mean that the promotionals will probably get an increase? So like you said, maybe half of its advertising and half of its gross to net, which obviously, will sort of impact -- is that on a pricing line for you guys or in volume mix? - Deutsche Bank: Okay. So does that mean that the promotionals will probably get an increase? So like you said, maybe half of its advertising and half of its gross to net, which obviously, will sort of impact -- is that on a pricing line for you guys or in volume mix?

It’s on price, Bill. It’s on price.

Okay. Got you. Okay. Perfect. - Deutsche Bank: Okay. Got you. Okay. Perfect.

Well go next to Ali Dibadj with Sanford Bernstein.

Hi. Thanks.

Hey, Ali.

How are you? Just want to get underneath a little bit of potentially disconnect. It sounds like you say you’re comfortable with roughly a 10% EPS growth that’s external. However, it sounds like foreign exchange or surely, foreign exchange has gotten better. Russia-China is improving, gross margins were higher this year -- this quarter and you expect that going forward. So what’s worse? Where were you surprised by? And maybe if I can lead the answer essentially a little bit, its sounds like the price elasticity perhaps, is a little bit worse and so you have to spend more back on advertising and into promotion. Is that the surprise or is there something else?

I wouldn’t caption it that way, Ali. But let me try and take the thrust of the question. Again, as I said, we started the year with a prudent stance, given the world we were facing then, and we put a focus on gross profit. And by the way, I would add, and as you’ve seen in the release and heard in Bina’s comments, while we have been recovering gross margin, the organic growth has been healthy, and we have seen our market shares, in other words, the general health of our brands improve, and the Colgate business, the traditional Colgate business has held flat volume wise for those two quarters. So that business, a slight readjustment with a step up in traditional A&P behind innovation with in-store marketing activity, that will include a component of price but not a complete change in strategy. The Hill’s business warrants a separate comment. The Hill’s business as you saw, posted double digit volume decline in the second quarter, which was worse than our expectation. And as a few comments to make there, you know the three price increases that we have taken over a period about 15 months, the year-on-year comparison with the July increase last year. But coming into the second quarter, things were cracking pretty much as we had expected. We always saw the uptake in that category go down to about a quarter when pricing was taken. And as I commented on the last call, we expected competitors to take price towards the end of the second quarter as they have not followed our first quarter increase so quickly. That didn’t happen. We saw people not taking pricing, and we saw people taking pricing on tops rather than all of their business. And as the second quarter unfolded, we began to take pricing adjustment on the Hill’s business for the second half because our pricing versus other premium products that historically followed, that was becoming uncompetitive. Interestingly, the category stayed solid and we found ourselves losing to other premium products. It wasn’t that that segment was shifting to other channels. So on the Hill’s business, what we see is very similar to the Colgate business and innovation stream, an increase in advertising in general. Certainly no pricing planned for the second half, but here, more selectively, pricing adjustment over the back half of the year in order to make sure that we realize our pricing strategy against competitions which we overshot a bit in the second quarter of this year. All of these, I would add, with a gross margin that has increased year-on-year. And even with that increase pricing activity and promotion activity in the back half will continue to be up year-on-year, so a sharper definition on Hill’s, Ali.

This is very helpful answer. Are you seeing any of the competitive activity in Hill’s in the other businesses at all or not really?

What it wasn’t competitive reaction, it was more--

Inaction, I’d say.

I’m sorry?

Competitor perhaps, inaction.

By separating the businesses, I guess the responses we have seen how competitive pricing strategy been maintained on the other businesses. Hill’s was the only call out.

Thank you.

We’ll go next to Wendy Nicholson with Citi.

Hi. My first question had to do with Russia. I know you said your market shares were still strong, but you called that out as a particularly weak area. Do you think inventory adjustment at retail, or something just something wrong with the consumer?

Yes. I’d love to categorize it as something wrong with the consumer. But I think Wendy, in answer to the question, you may recall on the last call we had together, we talked about the incredible currency slides in the Eastern European markets, which Russia head experienced before, you will remember at the end of the 90s. But many of the other Eastern European markets (inaudible). So we found ourselves in a situation where in key Eastern European markets like Ukraine and indeed Russia again, we took significant pricing in the second quarter over 20%, and we felt the customary consumer reaction, which is they de-load entry while that pricing goes through and we fully expect that to come back in the third quarter. I guess the one editorial comment I would make, and I made it on the last full, is that the Eastern European consumer doesn’t adjust quiet as readily to Latin American price increases as the Latin consumer does, given their education over time. But we don’t see any major dislocation. It certainly not de-stocking beyond some distributor adjustments we have made, which again, I mentioned in the last call. I think it’s more the lead lag between significant pricing increase and the consumer coming back to the market.

Okay. And the reason I asked on Russia is, you know P&G has talked a lot about increasing their emphasis in investment in emerging markets and I would assume Russia is one of their key areas of priority. And I know you hate answering that question about P&G, but so far any way, you haven’t seen anything from a competitive perspective, it sounds like your shares are off, and you’ve gotten by with not a lot more spending. So far, you don’t see anything from a destabilizing just a sort of category help or freeze the level of competitive promotion or anything like that?

Let me just answer in the general rather than the specific. In many of the key emerging markets, I think Brazil, I think China, and I think Russia, to your point, we are in fact and have seen so far this year, some of the principal competitors in fact, pull back spending in our key categories. So our impression weight or share of voices, we call it, has in fact increased.

Terrific. Congratulations.

Next is Chris Ferrara with Merrill Lynch

Hey. Thanks. Ian can you talk a little bit about, I mean this is sort of a tired question, but as retailers try to consolidate shelves and you know, we know its happening, consolidate SKUs. What are you seeing in the US in oral care and specifically tooth paste, and I guess, if anything, as you relate two different things, first of all, you guys and Crest have a lot of different SKUs across toothpaste, right? And there is also a fair amount of tertiary brands that seem like big potentially be at risk. So are you seeing anything, you seen any progress on shelves there with respect to even weeding out some of your slow-moving SKUs or you ordering some of those tertiary brands that aren’t own by you or Procter?

Yes, Chris. Good question. And frankly over more essentially to these days, in another new subject we call as SKUs-year-on-year. Every time we go through a planogram research with any key retailer trying to make sure we have the right SKUs, power SKUs we call them, with the right velocity at the shelf. There’s no question over the last year and a half, the intensity on that space has increased. I will tell you that our relative shelf and assortment position in the US toothpaste business continues to be very, very strong. And, as I say, we often delete SKUs ourselves, as we try and make sure we have the greatest velocity, so not seeing any significant impact in the US. But you’re right, it’s a very -- an area of great attention from retailers these days, but one we are accustomed to discussing and dealing with.

Great. Thank you.

Sure.

We’ll go next to Joe Altobello with Oppenheimer.

Good questions, Joe. On the Hill’s business, we have not lost distribution. You will remember that our strategy on Hill’s is, you might say, a limited distribution strategy. Our go to market is very much to provide products that we label pet nutrition not pet food, to provide a clinically proven benefit to the pets of the consumers that buy the product. And in order to do that in an educated way, we provide those products to neighborhood and pet stores, vets themselves, and the retailers who provide education in this space, given their nature like the Pet Superstores. So that’s our area of focus and those retail channels are quite loyal and supportive of the Hill’s business. As I was saying earlier to Ali in response to the question about Hill’s pricing, what actually happened was that premium pricing -- that segment, we saw what the pricing we took in the first quarter, a gap beginning to appear against other premium competitors who did not follow the pricing we took in the first quarter. And so, as a matter of operations, we’ve had to adjust. And we have adjusted here in the US and in key markets around the world in order to make sure we are on pricing strategy, and that is what we are seeking to return to. So it’s a global initiative, and it is selective, where we find ourselves out-priced, no loss in distribution. And as I mentioned in response to the earlier question, all with gross margin up year-on-year and projected to be up year-on-year for the full year as well.

Okay. And in terms of the marketing spend from a geographic perspective?

Selective, globally. It’s a global initiative against select premium global competitors to make sure that we are achieving our pricing strategy on the business. So, global.

Okay. And then one last, if I could sneak it in. Back to Hill’s, obviously one month has passed now since the end of the quarter. Are you seeing any pick-up or improvements sequentially in volumes?

Very good question. In fact, the answer is yes, specifically on the Hill’s business. In fact, across the entire Colgate business, the volume pace so far in the quarter, sees us with a fastest start in the first month of the quarter, for two quarters. So faster than the first quarter and faster than the second quarter. And that absolutely applies to the Hill’s business. So off to a good start.

That’s great. Thank you.

We’ll go next to Andrew Sawyer with Goldman Sachs.

Yes, sure. Thanks, guys. I was wondering if you could talk a little bit more on the A&P side, and perhaps maybe give some context around your share of voice. In the US it looks like at least in the measured media channels, we can that your share of voice is still up slightly. I was wondering if you could talk to where your share voice levels are in some of your other large markets outside of the United States?

Yes. I think obviously for competitive reasons Andrew, I would prefer not to get into a market-by-market dialogue because we’re very specific about where we put our emphasis. To repeat comments made before, there are various issues at play here. You’ve got the real reduction in cost of media. Which as I’ve said before, we are seeing around the world between 5% and 25%. That’s giving us increased impressions for less money. We are seeing competitors pulling back in some key markets, which is providing opportunity. And we, particularly at this time, are finding ways, like the “Seeing is Believing” campaign with Hill’s, of communicating directly communicating with consumers at retail. And that spend, a large part of it comes out of the gross to net line and you don’t see in the traditional A&P. I think the ultimate distillation of it is the kind of market share movements that you are seeing on our toothpaste business, many of which we described in the release or being commented on.

And just a quick follow-up, if I could. I know entering the year, Latin America, you had to talk about launching a portfolio that skewed pretty heavily to premium priced products. And Bina, in her prepared remarks mentioned that you’re seeing market share gains from Total. Have you seen a trading up phenomenon in some of the other categories, whether it’s liquid soap, toothbrushes, et cetera? And what’s that meant for -- as far the mix contribution to your unit volume figures in the Latin American region?

The mix is a factor of gross margin growth for us and the dollar weighted volume growth. We are continuing to see the consumer paying for value. I wouldn’t overstress that point. We have consistently said that we have a broad portfolio of products, and variance, and sizes to reach all different retail environment priced accordingly. And we innovate across that portfolio. The consumer chooses to continue to buy, at an increasing rate, the premium end of the portfolio because of the perceived benefit.

Thanks a lot.

We’ll go next to John Faucher with J.P. Morgan.

Yes. Good morning. It seems that the concern on getting play back from investors today is the ramp down in advertising. And yes, it’s going to shift a little bit more favorably in the back half of the year. But you combine that with disappointing volumes. So are you seeing any correlation whatsoever in terms of the pullback in ad spending and a disappointment in volumes? And to get more specific on that, can you talk about the pullback on the ad spending on Hill’s, relative to what you are seeing across the rest of the portfolio?

Yes. First, the answer is no. The answer is absolutely and categorically no, John. I think the strongest correlation we’re seeing, and it traces specifically to Hill’s, is in pricing, period. Advertising, you know, a percent to sales ratio is an interesting ratio and the conventional wisdom is that it should always go up. But as I have said before with the rate reductions we’re getting -- we’re seeing, the competitive pullback we’re seeing, and our own choice to shift into the in-store activity, I don’t see that as a concern. We are increasing our advertising in the second half. We did say we we’re going to be prudent coming into the year until we recovered gross margins. So I think we’re poised quite well now to step up the A&P behind an innovation stream so that there is news and we have corrected the pricing imbalance on Hill’s. Hill’s, specifically on advertising, actually year-on-year on a ratio basis will be up. But again, one has to be careful because the Hill’s model is so different in terms of that vets’ recommendation driving the purchase of the product. And that recommendation continues to be at all-time high, leadership level. And that’s what we focus on with Hill’s because it’s their belief in the clinical behind the nutritional efficacy of the product that creates the consumer conversion.

Okay. And then geographically-- thanks for that. Geographically, again it seems that the correlation between the volume disappointment is probably more related to pricing than advertising. But if you could provide a little more color on that?

Well, again the Colgate business held flat overall from a volume point of view with the pricing that we have taken in order to offset transaction and commodity and recover gross margin. No new pricing across the balance of the year, and the pullouts were Hill’s, which we’ve discussed. And as I mentioned in the Greater Asia region, the significant pricing we had to take in South Africa, Russia and Ukraine, which affected the quarter, but which we expect to bounce back in the second half of the year.

Got it. But again, no atypical variances from an advertising standpoint in those markets, relative to what you were seeing globally?

And all projected to continue up on the balance of the year.

Okay. Thanks.

Thanks, John.

We’ll go next to Lauren Lieberman with Barclays.

Thanks. Since no one else has asked, could you give us the breakdown of gross margin in the quarter?

Oh. Yes. Yes. Yes.

Thank you.

The prior year gross profit second quarter was $56.8 million. The pricing contribution, very similar to the first quarter this year, was 3.1%, $310 million. Nothing from restructuring, as you would expect, funding the gross came back very nicely in the second quarter at $1.8 million. The material prices were negative at 2.9. And that, as you can see, if you track it back, is an easing. And net, that delivers the 200 basis points increase year-on-year to the 58A.

Okay. Great. I just wanted to follow-up --I know someone asked this earlier, but I just wasn’t quite clear on the answer. I know there’s no new pricing coming. But as currency eases -- or is it just that we are not yet confident that where currency is based, where it will stick. So you don’t want to move back quickly on pricing. I would have thought there’d be a little bit of pullback on pricing where you’ve taken it to cover translation and transaction, rather than letting it ride. I mean, is the decision to let it stick because you’re comfortable in where volumes are in those markets?

The pricing we have taken on the Colgate business, we’re comfortable with where it is and expect it to stick because in the main, competitors have followed and the investment goes behind more traditional marketing techniques, which includes promotion to be sure, but not a rollback of pricing. But of course sequentially, quarter-on-quarter, the benefit impact of pricing will ease as you are taking new pricing and you’re lapping year-on-year.

Okay. And then just the other thing with North America because I know at least in specific regions, Nielsen data is useful. And certainly what you guys have been saying, Wisp is doing fantastically well and I would think is actually -- given its market share of the toothbrush category, it’s certainly big enough to be mattering in the quarterly results. So how does the rest of the oral care business volume-wise look in the US right now?

One second.

Sure.

The oral care business -- I don’t have the US number here, I have a North American number, which, for the quarter, would show organic growth about between 2% and 3%. That’s the North American number.

Okay. And that includes Wisp, of course, right?

That includes Wisp, yes.

Right. So volume ex-Wisp is probably down?

No, no. Wisp is not that significant, Lauren.

Okay.

So that’s it. It’s exciting, it’s encouraging. We still have to wait for the repeats to play out over the back half of the year. It’s accretive from a gross margin point of view. But it’s not -- it's not a -- it's not that significant a factor.

Okay, great. Thank you.

Thanks.

We'll go next to Jason Gere with RBC Capital Markets.

Good morning.

Good morning, Jason.

Hi. And adding on to Lawrence’s question, could you just talk about maybe the oral care category in North America. Going to or seeing different channels in different geographies, a bit surprised about the magnitude of promotions out there on the super premium category. I can understand more about the basic lines, but this is what we’ve been seeing in the last few weeks. So I’m wondering, is this retail driven, to just move inventory, or is there some sort of shift going on and kind of talking about where the volumes are that they put out last quarter?

I don’t know what channel you’re looking at, I guess the headlines in the US were outdated, doesn’t show anything of a significant change compared to this traditional promotional activity. It does show the category posting good value growth, low single digits, healthy in this environment. It shows a channel shift more to mass. The club stores and the dollar stores, they are the ones outpacing, which I think is data well known to people. And quite pleasingly, for our US business, we have seen the consumption of our aggregate categories outpace category consumption on a volume basis for each of the months of this year, and that accelerating actually in the second quarter. So we’re quite pleased with our performance and we don’t see anything untoward or unusual, thus far, in category activity. And our share is up very nicely.

Okay. And then, I’m not sure if you clarified this, in terms of those categories, I think you said your share was flatter up in 11 of the 14. Did you call up the three that were down? And is this where we’re going to see a bit more instant merchandising? Is there innovation behind those three?

Well, there’s innovation behind all of them. If there is corrective action required, it will be taken. We’re getting into too much US data, frankly, but balls would be one, which is a declining category in favor of body washes. And body wash would be a second, but I’m not sure I’d call point one significant. And the serums launched being mentioned is coming, and a modest decline on underarm, with activity coming as well. So we were just being thorough in terms of what was down, but we’re not talking about meaningful declines and we have innovation streams behind those three segments to rebound in the second half.

Okay, great. And just a last question, I’m just wondering, this has been the year that we occurred most HPC coming talking about sales productivity. I was just wondering if you could give us an update of some of the measures that you’ve taken. Which regions that maybe you’re seeing the most effectiveness from a sales productivity standpoint?

Well, I guess we would caption our productivity program in the sales area excluding the fixed cost would be governed by Covey business planning, which is that SAP driven technique we’d been deploying for the last four years, which focuses on increasing our return on investment, in terms of each of our sales activities, and sharing those learnings around the world. And I know we have spoken on several meetings about the kinds of techniques. We said this year that we were goaling [ph] a pre-tax savings of around $150 million and thus far, this year we’re on track to deliver that and we will have CBP SAP driven in place on about 3/4 of our trade spending subsidy -- 3/4 of our global trade spending by the end of this year. So we’re seeing improvement.

Great. Thank you very much.

Thanks, Jason.

We’ll go next to Linda Weiser with Caris.

Hi. Thanks. First, I was just curious on the materials cost. I was projecting them to be down in the third quarter. Is that the case or will it not be until the fourth quarter?

We’re seeing some materials cost off already, year-to-date. I guess the way I would answer that is to say that the primary benefit would be in the fourth quarter.

Okay. And just a longer term question on innovation. I know when you started your multi-year restructuring a few years ago, you put some investment or partnership with some medical institutions or something that focused on oral care. Are there any big time innovation you’re expecting to come from that? Because it has been a while since we’ve seen major innovation.

Well, we felt like Wisp, but who’s looking? I guess, Linda, you’re right in your recollection. We stepped up the resources we had and there are shorter term innovation groups, the so-called Centers of Innovation, focusing on products that we could bring to the market three-year window. And then we established three years ago, two years ago, in fact, some long term innovation centers, which are focused on three and five-year plus innovation. And we have several of these external partnerships that you mentioned. The one you’re probably remembering is the full site institute up in Boston that we have talked about before. These are much longer term innovation streams and we have, indeed, some interesting leads. More than that, I would not say.

Okay. Thanks a lot.

We’ll go next to Alec Patterson with RCM.

Good morning.

Hi, Alec.

Hi. I just wanted to get a better handle on the materials trend, the gross margin trend from two angles. One, you did break down packaging raw material impact by region, and I guess it was surprising to see where it was a benefit in North America, Asia, and Africa, but not called out in Europe and Latin America, but overall, it was still quite negative. So should one draw the conclusion that it was predominantly a Hill’s factor, in terms of the negative raw material impact?

What page are you looking at, Alec?

You just said that, I believe the 290 basis point impact to gross margins from raw materials and in the release you cite lower raw impact material cost in Asia, Africa, and North America, with no comment whatsoever on Latin America and Europe. So I’m just trying to zero in on the cause of the raw material hit.

Well, you’ve got the foreign exchange piece, I guess, in the Latin countries. But remember, that is a -- what I was calling out was the roll forward of the gross profits. So last year, for example in the second quarter, material prices negatively affected the gross profit by 430 basis points. This year, the impact was 290, so a lessening of the impact on the gross margin. If we -- I don’t have the data in front of me to break down that by division. So we’ll have to talk about that offline, Alec.

Okay, well, maybe just a different attack then on the Hill’s business. The price gap, you talked about having widened and became a competitive issue, and you’re looking to close those price gaps. Do you have a sense for whether your position, in terms of your raw material cost in that business, tend to be more locked-in, more supply contract constraining, such that it’s more of a lag for your business to benefit from a lower raw material environment than, say, maybe a private label manufacturer of some of your other competition.

No, I wouldn’t say that. And the over-arching comment balancing the pricing action that we have already started to take on the Hill’s business and what we see in terms of the material cost environment, again on that Hill’s business, sees the gross margin up year-on-year for the full year and the balance of the year.

Okay. All right, thanks.

Okay, sure.

We’ll go next to Connie Maneaty of BMO Capital Markets.

Hi, just two questions. What is the order of magnitude of price roll-backs by Hill’s?

We’re not rolling back pricing, Connie. We’re adjusting promotionally and it varies.

Okay. But to the consumer, it would seem more affordable?

The pricing will -- yes, is the answer. The pricing will be more in line with our other premium competitors, yes.

Okay.

Because they did not follow in the main -- the pricing we took in the first quarter, which have not been the case with the last two price increases.

Okay. And then secondly, one final question on advertising. I understand that the dollar spend would go down because rate has come down and there will be more in-store activity. But I was kind of puzzled by the comment about competitive activity. So I was wondering what difference does it make what competitors are doing. Why wouldn’t you have stepped up advertising in the quarter to fully take advantage of the spending gross margin and really solidify the shares?

The timing doesn’t work quite sometimes as precisely as that, Connie. We had said we wanted to be prudent. We had said we wanted to recoup gross margin. We exceeded our expectations on gross margin in the second quarter. It is very relevant, I think, in terms of what competitors are doing on market-to-market basis. And some of these emerging markets, the GRP weight, the actual number of spots we are running are extraordinarily high in terms of reaching the consumer. You’re talking about four, five, six spots a day, which is a very elevated level. So if a competitor is not spending, it may be much wiser to adjust your advertising spend, still dominate share of voice, but in a more economic fashion on top of the market cost reduction. And the proof of the pudding in the end is what happens to market share. And again, what we have seen is our market share in key markets continuing to increase. So that’s the balance you’re revisiting all the time, Connie.

Okay. That’s very helpful. Thanks.

We’ll go next to Nik Modi with UBS.

Yes, I’ll make this quick. Good morning --

Hi, Nik.

Just a couple of questions, Ian, if you could just go around quickly and globe trot, and tell us your perspective on the consumer just given we’re six months into the year or seven months, are you seeing any stabilization out there or do you continue to think it’ll get worse? And the second question is on the emerging markets, as you took pricing late in the first quarter, did you see your local competitors follow, as you had expected? Thanks.

Yes, globe trotting, I guess like everyone else, the consumer is looking for green tubes. But they are seeing -- continuing to see value in our categories and they are continuing to -- they’re continuing with the behaviors. So once they buy in to a health and wellness behavior, they don’t drift out. They continue to put a disproportionate loyalty to a brand because a branded good provides a level of confidence and trust, pleasingly as you’ve seen in the shares. They continue to provide a loyalty to our brands. Now, we continue to see them shift in terms of channel. We continue to see them look for value. But we haven’t seen any disconnect from language I have used before, in terms of the consumer's behavior in the world today. So we continue to feel quite comfortable. We’re seeing the categories growing and they’re growing in the kind of sequencing you would expect, faster in the emerging, slower in the developed. So I guess that would be the summary there. And your second question, Nick, again, sorry?

It’s on the emerging markets. How do competitors and local competitors follow the price increase?

It depends. In the main, everyone is faced with the same cost increases, particularly in those emerging markets, if the materials are dollar denominated. So in the main, we see both private label and local brands come with the pricing. It may be later. It oftentimes is later. But ultimately, the same economic reality hits and they have to accommodate and adjust for it.

Excellent. Thank you very much.

Sure.

And we’ll go next to Victoria Collin with Atlantic Equities.

Hi, Ian. Hi, Bina.

Victoria.

Hi. I just wanted to ask Ian a little bit more, and I’ll be brief about Europe and the South Pacific volumes. You’re guiding too modestly up in these three. And I was just wondering what strategies you’re undertaking to get that swing in the volume into positive territory, given that you’re still facing a relatively tough comp? And the same question will probably apply to the greater Asia-Africa region as well.

It’s separate answers, I would say. Europe-South Pacific is largely -- same as most places; no new pricing, increased advertising, and increased innovation stream. In fact, in the second half in Europe, our innovation stream in terms of sales impact is twice what it was in the first half of the year. So that’s really the answer for Europe and South Pacific. Asia is a little different. I mean, the same general principles apply. The big drag this quarter, as I mentioned, was the pricing we had to take in South Africa, Ukraine, and Russia, over 20% to offset the significant currency devaluation. And as I have said before, consumer tends to work down (inaudible) for a quarter before coming back to the category. So the same applies; no new pricing, increased advertising, increased innovation stream, but also, the rebound of the consumer after some significant pricing in some major markets.

Okay. Great. Thank you. If I could just sneak in a tiny, follow-up question. Are you seeing much in demand for trading down on more value orientated products in Europe? And would that support the volumes that people leave a little bit away from the more premium priced items?

We are seeing in some categories in Europe, contraction. We are seeing private label at a higher level in Europe than we see in other parts of the world. But in the end, the consumer is looking for value. And as a branded-goods manufacturer, if you deliver that value, the same principle applies that the consumer will choose the value. And value isn’t necessarily a just price. And as I’ve said before, the kinds of businesses we’re in, particularly the oral care and personal care tend to have a greater emotional loyalty than some of the other more functional businesses because of who you use them on and which parts of your body you put them on. But yes, private label is definitely more developed in Europe than other parts of the world. Victoria?

That’s very helpful. Thanks. And if I may just ask where the private label was growing or where you’ve seen it increase slightly?

Usually, where we have seen it increase is in the functional categories; categories like bleach, categories like detergents, categories like household cleaners, and to a degree, garbage disposal bags. These are the categories we have seen the greatest increases in private label.

Thanks very much.

Okay.

We’ll have our final question from Alice Longley with Buckingham Research.

Hi. Good morning -- good afternoon. Your volume in Latin America was up 2%. In what countries was it more than that and what less than that, please?

I’m not sure we’re going to go through a run through of countries, Alice. But it was led this time by Brazil and Venezuela.

Okay. That’s great. My second one was you said the dog food category was just fine. You’re stable. Was volume for dog food and specialty channels flat in the quarter, roughly?

One second. First of all, I challenge your definition. We view it as pet nutrition. But that said -- and when we talk about the category, we talk about the -- what I would call the specialty category, as you say, which would be the PETCOs, the PetSmart, the Neighborhood Pet, and the vet outlets. And overall, the specialty channel, as you asked, was indeed positive, is positive year-to-date, and was positive for the months in the second quarter that we have data.

In value terms or unit terms?

In unit terms, volume terms.

Okay. Perfect. My last--

Balance.

Perfect. And then my last question is, if you had to guess how much ad rates are running down, what would that be?

Yes. The answer Alice, would be, “It depends.” Without docking it, we advertise in 80 countries. And the ad rates are down anywhere from 5% to 25%, depending on the country.

Thank you very much.

Okay. Well, thanks very much for joining us. Thank you very much for all of your questions and interest in the company. And special thanks to all the Colgate people around the world who make all of this happen. Talk to you next time.

That concludes today’s conference. Thank you for your participation.