Noel Wallace
Chairman, President and Chief Executive Officer at Colgate-Palmolive
Thanks, Dara. Clearly, a great quarter for Hill's, strong performance across the board, quite frankly, and we're particularly pleased with the strong volume in light of the significant pricing we've taken in historically. I'll come back and talk about pricing in a moment, but obviously, ex private label, to see the strength of the volume and the pricing move through the P& L is extremely encouraging, particularly, given the advertising investment that we put into the business, which continues to strengthen the brand. And I think what's important to call out in the quarter is the real inflection on the margin line: strong gross margin, strong operating margin. And this is a reflection, I think, of getting more volume running through the business and obviously, seeing the leverage move through the P&L.
But if I take a step back again and characterize the marketplace, clearly, as we've talked about before, low household awareness and low brand penetration overall of the Hill's business, clearly supporting the strong advertising investment, and we're seeing that delivered in the quarter. Penetration up, market share is up. We were one of the fastest growing global brands in some of the pet specialty stores this quarter. So again, I think a reflection of the upside potential we still have. And when you look at segment opportunities, we've talked about that in the past. Obviously, wet, an area that we're under-indexed in, clearly seeing the ramped-up capacity we have in wet, delivering better penetration, better growth, better execution in stores as we're getting more wet SKUs on the shelf, that's obviously translated into more upside potential as we see consumers obviously shifting into those categories.
So overall, we think that the balance of the business is where we want it, and we're continuing to invest aggressively to drive that household penetration. You couple that with a really strong innovation pipeline and we see that in the first half of this year and we see that moving into '25 as well. So we think, quite frankly, the flywheel of the business is working very effectively for us right now.
Low penetration, low awareness. We're working on that, getting more effectiveness in our advertising spend, which we're increasing, and importantly, getting the gross margins and operating margins back to where we'd like them is allowing for the increased gross margin dollars to invest behind the business.
International, likewise, we've talked about the opportunities that we still see globally in the long term to take this brand around the world. We're very focused on the big core markets right now, but long term, we see opportunities to expand into new markets.
The last, I'd say, is obviously the mix between Science Diet and Prescription Diet. We saw a good inflection on Prescription Diet this quarter. That's been deliberate. That's been a function of partly due to the capacity expansion that we've had. It has allowed us to get more diets on the shelf, allowed us to provide more sustained, consistent delivery to the vet professionals on the Prescription Diet business. And we saw a good mix benefit of that in the quarter as well.
So overall, we're pleased with it. The category is a little soft right now, as you mentioned, as household starts come down, but as we see the -- hopefully that the U.S. economy starting to show some vibrancy, or at least for a softer landing, we think that will bode well for us.
Pricing is an opportunity, given the strength of the brand, we'll continue to take pricing where we have the necessity to do that. The good news is we've seen a little bit of flattening on commodity pricing in the Hill's business, which is excellent for us. As we get that pricing we've had historically, we've seen the benefit of a more moderate inflation environment on input costs, and we get more leverage through the P&L as we see the volume come back. So overall, we feel like we're in a good position to sustain that moving forward.
