Noel Wallace
Chairman, President and Chief Executive Officer at Colgate-Palmolive
Sure. Thanks, Dara. So let me go back to a couple of the comments I made in my opening statement and really talk about how we're trying to work to improve the quality of the P&L, which puts us in the best position to drive compounded long-term balanced growth top and bottom line, which is what we've been talking about for quite some time. As you know, we're coming out of what has been the worst raw material environment in decades.
So our plan is with the combination of the revenue wealth management we talked about and the discipline that we're putting across the company in that area, more pricing and productivity, we can restore our gross margins, and that's been the key focus. We believe that if we exit this type of environment with a structurally lower gross margin, you're going to be in a hole that's very difficult to dig yourself out of in the future, particularly because you need the gross margin to fund the investment in capabilities and the brand building, which you certainly saw in the quarter. We want to grow margins while still investing behind our brands and sustain a consistent organic sales growth, which we're clearly demonstrating.
The key to do it is getting pricing in the P&L. We certainly focused our teams on the ground in that area because the depth and duration of this cost inflation that we're experiencing has been an issue. And you simply can't do it with one round of pricing, it needs to be consistent and deliberate and purposeful.
And now as we look at cost inflation slowing overall, there are still places where we see margin pressure. So we -- of course, we need to take additional pricing, and this has had an impact on the volume. Maybe a couple of examples. So China is a good example. We've taken pricing on our Hawley & Hazel joint venture in order to improve profitability long term to drive the necessary investments in digital, the premium innovation required in that market and a continued shift to e-commerce. And as you know, China is a very difficult market in which to take pricing. And in the short term, that hasn't -- that's had an impact on our volume through lower promotions and wholesaler inventories as we look to set the new pricing in the market. But the long-term implications of not restoring margins are more problematic.
I'd go on to North America as well, where we're working to improve the health of our business and our brands through shifting more consistent brand support from above the net revenue line to obviously into margin expansion. This will improve health of our brands and our P&L. We're seeing this play out in our non-promoted share, which is growing, which is a healthy way to grow the business.
In the short term, was the volume impact from reduced promotions more than we expected? Yes, it was. But the good news is, we've adjusted the P&L, we've strengthened it and we can adjust moving forward as we see the opportunities provide themselves. So while we're delivering both sales and profit growth along with increases in brand support in the middle of the P&L, it's clearly a healthier way to drive the business.
If I look at the Hill's business, we're still seeing high levels of cost inflation, as you've heard us talk about in the first quarter, and gross margins are still down year-over-year. So we've taken additional pricing to get the right margin structure for this business for the long term. Much of the Hill's volume decline in the quarter was in emerging markets as much of the time is due to go-to-market changes or shipments that we had. The good news is the EMEA or our Europe business, and particularly, there we were strong. U.S. volumes were only down slightly in the quarter against a very difficult comparison with pricing as you saw up in the teens. But we're focused on getting Hill's back to volume growth the right way. This is a business that responds very well to science-driven innovation and strong advertising. We want to make sure that it's well funded and through the gross margin expansion that you've seen. And Hill's saw the biggest advertising increases in brand building in this quarter and will continue to fuel that investment.
So I understand the importance of gaining volume growth, as you asked. We know we're all focused on that and as you are. But as I said, we want to do that in a way that sets us up structurally long -- for long-term profitable growth. That means a good visibility towards restoring our gross margin to previous levels through revenue growth management and productivity that we've been talking about, well-funded advertising and the ability to drive operating leverage with the strong innovation that we're bringing to the market and healthier brands.
So with a lot of great work by Colgate people, we have gross margin, overheads and logistics trending positively. We just finished the first half where we increased advertising by 17%. We have put additional pricing in place. We have strong innovation across all the divisions and categories. And we have a second -- we have second half volume comps that are easier by about 500 basis points. So we feel we're very well positioned.
So with that, let me turn it over to the other questions.
