The Procter & Gamble Company (NYSE:PG) Barclays Global Consumer Staples Conference September 6, 2023 10:30 AM ET
Company Participants
Andre Schulten – Chief Financial Officer
Jon Moeller – Chairman, President, Chief Executive Officer
Conference Call Participants
Lauren Lieberman – Barclay
Unidentified Company Representative
P&G would like to remind you that today’s discussion will include a number of forward-looking statements. If you will refer to P&G’s most recent 10-K, 10-Q and 8-K report, you will see a discussion of factors that could cause the company’s actual results to differ materially from these projections. Additionally, the company has posted on its Investor Relations website, www.pginvestor.com, a full reconciliation of non-GAAP and other financial measures.
Lauren Lieberman
It’s over now.
Unidentified Company Representative
I guess.
Lauren Lieberman
Okay. Good morning. Jon, Andre, thank you very much for being here. I wanted to just maybe get in — let’s get some near-term stuff out of the way.
Andre Schulten
Sure.
Question-and-Answer Session
Q – Lauren Lieberman
Probably we’ll start to move for longer term strategic topics, that I frankly prefer. So first thing is, you know, as the benefit from pricing continue to vein, how do you think about volume progressing both for the industry overall for P&G specifically? And you’re bridging from the 1% volume growth for the market in fiscal ’24 and little more steady state, kind of, medium term level?
Andre Schulten
It’s a couple of things. First of all, if you just look at our situation, the volume progression has come along nicely. So two periods ago minus 6%, then minus 3% then last quarter mins 1% with positive volume growth in a market, the U.S. And we only — we need probably 2%, maybe 3% volume growth on a going forward basis, combined with mis and some pricing that’s associated with innovation to really drive the model I’m confident that we’ll get there.
Lauren Lieberman
Okay. And I guess, as theme coming out of the second quarter earnings season overall, it’s been that companies really — starting to step up re-investment spending, more conversation for sure on innovation, on marketing, some other companies raising their marketing spend for the year. And that’s all as raw material cost comingless with owners. So I just kind of love to hear your take on that. If you’re seeing it in the industry separate from just what P&G is planning specifically? And how you think it out competitively?
Jon Moeller
So I’ll start with P&G and then I will address the industry. The — we’ve been investing, as you know, at a very high level across those [Indiscernible] last five years. And the results have been great in our view. So if we look at the last five years, top line growth plus 5%, plus 6%, plus 6%, plus 7%, plus 7%. And we don’t see any reason to change that trajectory. In terms of the industry, we’re not seeing a significant increase for example in promotion spending across the industry. There’s some if not anything to be terribly concerned about. You heard from Mike this morning as well.
The spend on innovation, on equity building and brand building, that’s very industry constructive and typically done well recently to market growth, which is good for us, good for our competitors, good for our retail partners, and it reflects the benefit the consumers that we’re seeing. So that’s the direction that additional investment takes. Bring it on.
Lauren Lieberman
Okay, okay. Great. And then for you guys also, the way ’24 is shaping up, I think with the gross margin recovery, easing in ocean freight, it seems that there’s a lot more flexibility in the P&L to spend back into the business. As you said, you’ve already been spending throughout. But as you think about fiscal ’24, where does some of that flexibility go? Where are you reinvesting the flexibility?
Jon Moeller
I’ll turn to my friend, Andre.
Lauren Lieberman
You’re going to tell me about flexibility.
Andre Schulten
Right.
Lauren Lieberman
Sorry.
Andre Schulten
No, look, if you just look at the cumulative impact, we saw almost 50% of earnings wiped out from commodity transportation labor inflation over the last two years. We right now see about $800 million of after-tax help from commodities, but that’s offset by headwinds of $400 million, $500 million from [Technical Difficulty] FX and about $200 million from interest expense. So the net flexibility to the P&L is still very limited, compared to the incremental cost increase that we saw. So that’s not to say that won’t invest, as Jon said, I think the rise of our investments are generally very high. The ability to generate higher ROIs with more capability in media, for example, better copy quality. We’ve got strong innovation out there that still has runway to support and drive volume growth and penetration. And we’ll continue to do that, but it has to deliver a positive ROI not because there’s flexibility in the P&L.
So I think our guidance reflects the flexibility of P&L that we see. We tend to run businesses very decentralized. So the CEOs of the sectors make their decisions on what is right for their business to invest behind and we generally don’t step in. We trust them to generate positive ROI. And ultimately, their scorecards are focused on total shareholder return. So that’s all the [Technical Difficulty]. But I wouldn’t see — again, there’s no — for me, there’s no correlation between investment levels and flexibility generated by commodity declines. It’s more about the ability to create return on investment.
Jon Moeller
And just to bring some quantification to that constructive discipline that Andre refers to looking for high-return investments. If you look at the last five years, the team built $15 billion in incremental sales, which puts us at the 85th percentile of the S&P 500. At the same time, they built $5 billion in incremental profit, which puts us at the 90th percentile of S&P 500. Over that five-year period, building $180 billion in additional market cap. So that’s the model, and we’ll stick with it.
Lauren Lieberman
Okay. I know it’s only a little over a month, I guess, since you reported, and Andre, you referenced this, but I — there’s so much change, right, all the time. Very short percent. So just wanted to confirm kind of current expectations for raw materials and FX is a $400 million net headwind — net tailwind still the right way to think about the outlook for ‘24. And I guess also, should the $800 million in raw material benefits not materialize. What would be some levers you could pull in the P&L to keep the — well, keep the strategy intact.
Andre Schulten
Yes. I think we’re still in that ballpark. What I’d tell you is though is the commodity basket is not stable. So there’s run-ups in some commodities and some commodities are easing. It’s still changing on a weekly basis. There is no consistent easing of input costs, I would tell you that we see beyond what we communicated in our guidance. There’s obviously a number of other dynamics at play, which we generally accommodate in our guidance. So we have a level of volatility that we include when we put the guidance range together. We still feel very comfortable with that range.
The best news I think, if the business continues to grow strongly, again, as Jon said, 6%, 6%, 7%, 7% organic sales growth. And we, for guidance or to remain in that range when volume returns that provides leverage in the manufacturing and the logistics side that will be helping our productivity. Our structural savings, our productivity efforts have returned to pre-COVID levels, so between $2 billion to $2.2 billion of gross savings that provides flexibility. And again, if we do it right, every dollar we invest will increase top line will increase growth contribution. So we still, I think, sufficiently equipped within the P&L to deal with the variability that’s out there. That’s no guarantee, big things can go wrong, but within a reasonable range that we see. I think we feel confident in the [Technical Difficulty].
Lauren Lieberman
Last year at this time [Technical Difficulty] where capacity wasn’t keeping up with demand in certain spots in the U.S., so tampon-type pods. So today, just us where you are in that capacity rebuilds opportunity? And if there are other [Technical Difficulty] newly or continue to be capacity constraints.
Jon Moeller
Yes, certainly. So let me first frame the capacity dynamic. I think this is important. It does — during COVID, we had days or weeks where we were constrained with our ability to operate, to procure materials, to secure transportation for finished product to our retail partners. The dynamic now is not that. We’re largely through that. They are days and hours, but generally we’re through that. The dynamic is actually a very exciting one, I think. I can you be excited about a capacity constraint. Well, it’s being driven by those instances where we bring superiority together, product package, communication, go-to-market and value when that all comes together, we frankly underestimated the demand that’s associated with that kind of market growth such as safety with that. So the vast majority of areas where we’re still working to quickly build more capacity reflect those situations.
The capacity situation that we have on detergents towards the end of the year prior was driven by that. The capacity situation that we’ve had a high and protection products was driven by that. We’ve now got capacity on stream are shipping those products to full demand. There’s still a couple of areas that — just for competitive sensitive reasons, I don’t want to go into the details, but we’re in much better shape. We’ll continue to try to stretch our supply capability through demand creation and we’ll work within capacity onstream.
Lauren Lieberman
Okay. Let’s switch to get a little more strategic. So I guess last year plus, right so much talk about the health of the consumer. And I think a big concern had been how P&G’s brand portfolio would fair in a more challenged economic environment. Global value share, like flat over the past year, so it seems like has been it well. But I guess as you look back, are there some brands with category in hindsight, you maybe would have managed differently in terms of pricing innovation or merchandising? And if there’s anything you’re doing to refocus these efforts to capture more of this like cash conscious consumer, particularly as there turnabout things that still get helper for here.
Jon Moeller
Of course, we don’t have 100% accurate view of all the moving pieces in the marketplace at any given time. So it’s difficult for us to predict exactly what competitors are going to do, exactly what retailers are going to do, exactly what consumers are going to do. So yes, there have been situations over the past number of years. Well, we found ourselves with the wrong answer, and we had to adjust and do that quickly and help our retailers understand that it was in their interest to work with us to do that quickly. And the organization has done a great job in that regard.
So our job is to wake up every morning, out both feet on the floor, understand the situation as it exists today in reality, not as we would want to see it and respond accordingly, which we have increasing tools to do more effectively than in the past, we have much more visibility into what’s happening in the stores. What are the relative competitive price points, et cetera. Now aggregate macro standpoint, do I think that we made significant errors that need to be corrected for. I don’t. And the business results bear that out are consistent with that. So this is by channel, by brand, by country operations, nothing that’s strategically misaligned.
Andre Schulten
And I think the biggest — just to add, Jon. The biggest learning, I think, for the team and for us was when we are able to combine strong innovation with pricing, it makes all the difference. And Western Europe was the most difficult market through the last 18-months, but we have probably the strongest innovation pipeline combined with pricing in those markets. And even in the most difficult environment, we’re not able to grow vote share and value share and by combining it with innovation, providing value to retailers and to consumers. So I think the recipe really worked.
Lauren Lieberman
Yes. Okay, I’m going to with Western Europe because your growth in your European focus markets, even prior to the latest wave of pricing has been really resilient, as you pointed out. Market shares are stable or looks in Neilson data that we get in right looks stable. And in — even in some cases, you’re growing share, where there’s high private label exposure. So I am curious to talk more about, kind of, what could derail the strength, let’s take it on the other side. And how might you tweak the playbook in that case and your view is also on the Western European growth in the medium term. I mean is there anything changed in terms of the growth profile of the Western European marketplace.
Jon Moeller
As long as we continue to successfully innovate and delight consumers, there’s no reason that any of our markets can’t grow and grow profitably, and that includes Western Europe. It’s — the progress of the team there is just remarkable. And there’s nothing in the story that causes us to touch to blink, to set back the change. In fact, we want to double down on our strategy in Western Europe and other markets and keep moving. So if everything that we’ve experienced really across the world just strengthens our resolve to do exactly that. And if we do it well, we’ll be in great shape. If we don’t, we could have the problem that you refer to. I don’t know of a substitute. We have to succeed with this approach. And so far, we’ve demonstrated a pretty strong ability to do that.
Lauren Lieberman
And you talk of there being no silver bullets when you think about strategy. And there’s not one thing and it’s a collection of things. But I mean the ability to excel in Western Europe where would you put on the continuum maybe as kind of innovation, marketing, more structure go-to-market. I don’t know.
Jon Moeller
You’ve already provided the answer. It’s…
Lauren Lieberman
But I want the rank order.
Jon Moeller
It’s all of that. This is — it’s a very interesting conversation, because it’s one that we have with our teams quite a bit. Human beings have a very understandable desire to simplify and focus. So I have this conversation in my office almost every day with, okay, I know you want me to do these five things, but I can only do two, which are the most important? Wrong answer that won’t work. And I’ll just — I’ll give you some data to back that up. If you look at our top — this analysis is a couple of years old, but if we reran it, I expect the numbers will be the same.
If you look at our top 40 category country combinations where we judge ourselves this is about superiority. When we judge ourselves to be superior on four out of the five factors of superiority, product package communication, go-to-market value. We grow the market, we grow household penetration, we grow sales, we grow share, we grow profit, 80% of the time. Where we judge ourselves to be superior on three or fewer of those elements, we grow those metrics exactly 0% of the time. So the data are very, very clear that the answer is the totality. If we were still working through the old organization structure, I don’t expect our results would be as good. If we didn’t have the innovation on those areas I just described, I don’t think our results would be good.
If we didn’t have a commitment to productivity to generate a financial flexibility to invest in these things, I don’t think our results will be as good. But — so it’s a combination of all those things. And that’s important, not only important for our organization to underpin the element to execute. It’s also important to the question of what is your competitors just do what you’re doing? Well, it’s not that simple. It’s a big ask because you’ve got be successful across all of this in order to make it work. So I’ll leave it there.
Lauren Lieberman
Okay. China, so you started to see sales recover after declining in the first part of the year. But just kind of taking a step back and thinking about the market longer term, changing demographics and aging population, declining birth rates, lower consumption. How do you factor these pieces into your longer-term view on market growth? And how does it impact your work to grow category and by definition, your market share in that process?
Jon Moeller
China is a market that we — it’s our second largest market in both sales and profits. We expect it will be a continued source of growth as we go forward. When we started coming out of COVID, we were very clear that we didn’t expect in our representations to you, we are very clear that we didn’t expect the recovery path to be linear and didn’t expect it to be necessarily as fast as people were talking about. And that’s exactly what we’ve seen. It is growing. We’re growing with it. I think worst case, China on a going basis is mid-single-digit market growth story. And when you take the size of the market, the amount of the population that’s moving into the middle class within China. There’s every reason to believe that under reasonably normal situations, that, that market continue to be a source of both growth and value creation for Procter & Gamble and other companies.
Andre Schulten
And I think the — just to add maybe one point. I think the more normalized growth will also change the industry dynamics where we’ve seen investment in growth at all costs from a product investment, pricing investment promotion investment, that’s coming to a more reasonable levels because realize it’s going to be a mid-single-digit market. And in order to create value there, I have to pace my investments. So I think it’s going to be a more rational market environment that hopefully helps create value there.
Lauren Lieberman
Okay. Just wanted to touch on your distribution footprint in China, brick-and-mortar versus online. I know your online penetration has grown significantly, but I think earlier this calendar year maybe or even this time last year, talked a little bit about your relatively lower exposure to online channels being a headwind during zero-COVID. So I guess, what are you doing to ship distribution? Is it sort of a brute force or is it a more gradual shift in the model there?
Jon Moeller
Well, we like brick-and-mortar distribution. There’s nothing wrong about that, and it can be more profitable. But we do need to ensure that we are fully serving consumers wherever they choose to shop and increasingly they’re choosing to shop in a social commerce context or e-commerce context with delivery to their door. And so we’re working around the edges of our portfolio to ensure that we have relevant offerings in those channels that work for those retailers and that work for the shoppers that are shopping those channels and that’s a very deliberate concerted effort. But it doesn’t involve typically saying we’ll take distribution out of the traditional channels. It’s just a growth story in the emerging channels. And we’re still — I mean, very candidly, we’re still weighted to the more traditional channels, and it will take probably a couple of years to fully address that.
Lauren Lieberman
Switching gears to Supply Chain 3.0. So we’ve written that we think supply chain is kind of like the next frontier where P&G will set the pace of the industry and further separate from peers. So first, I guess, do you think that’s a fair assessment? And secondly, kind of what inning are you in implementing this mix layer of improvement? How should we think about the development of the march towards Supply Chain 3.0?
Jon Moeller
I think it can be an accurate assessment, and I see this as a big opportunity. But let’s start from current state. We have one of the best supply chains. I don’t say that with arrogance. If you look at our retail partners and they’re ranking of us on an annual Cantor survey, we’ve been number one for eight years in a row. So we have a very good team that’s executing with excellence in the supply arena. But you have to ask yourself across all areas of our value creation activity system, are there additional opportunities? And there are big opportunities in supply.
So we mentioned earlier, supply constraints. When we were in COVID in the U.S., 24% of our SKUs were on allocation, meaning that we weren’t meeting demand for those products. That’s a huge opportunity right there. Now most of those SKUs were our smaller SKU offerings, but still a big opportunity. We talked about some of the big categories in the U.S. and other markets where we have opportunity to more fully supply demand. That’s a big opportunity.
Automation is a significant opportunity. And COVID really pushed us along that journey because we had to. We couldn’t operate in the same proximity to each other that we had been used to operating in. We needed — we had some times of the week or month, we’d have 50% of employees, who are supposed to be in the plant or in the plant, because they either were sick, they had family members that they needed to care for. Their kids were in school. So I think it opened up everybody’s eyes to this big automation opportunity.
One example on quality, pretty important if you’re going to offer superior products and pretty important if you’re going to be in continuous supply. We’re still in most of our facilities, assessing product quality at the end of the line or in the warehouse that’s past the end of the line. And if it passes inspection, then it gets shipped, if it doesn’t, anything gets reworked or scrapped. If we could instead on a real-time basis with sensors and cameras assess the quality and the purity and identify any contaminants in ingredients as they were coming in the front door of the plant, and have continuous sensing along that production line such that we immediately identified an issue.
One, we’d be able to correct it much more quickly. And two, the cost of that operation is going to be a lot less than the one that we’re operating today, just given the very little scrap that would be associated with it. So those are just some examples of the opportunities. We’re working hard with our retail partners to ensure the conversation I have with our retail partners, CEO is let’s think about this as one supply chain. We spent years with Australian optimize our portion of the supply chain, you optimizing your portion of the supply chain.
And there’s a lot more opportunity if we can look at this as one supply chain, which we’re increasingly doing. So yes, I do think there’s a significant opportunity both in terms of productivity and in terms of customer and consumer service whether will be — whether that will differentiate as a company or not, I can’t really speak to, but we’re all over this.
Lauren Lieberman
Okay. Good lead in talking about SKU simplification. So kind of a new area that you introduced on the earnings call, a new simplification initiative to improve quality of the shelf and accelerate sales growth over time. So maybe you can talk a little bit about SKU proliferation, if you — if there’s been an increase in SKU count on your part, what kind of drove that — or if this is something that is more from a steady state thing we can just have been more efficient. Is it corrective? Or is it structural improvement and how the conversation with retailers if we’re there yet kind of the conversation?
Jon Moeller
I’d say it’s a little bit of both. But Andre, your perspective on the SKU simplification opportunity?
Andre Schulten
No, look, it’s not that the SKUs during COVID or post-COVID has significantly changed, right? Our SKU count is relatively stable and the category SKU count is relatively stable within the big brand of manufacturers. I think what has happened is retailer sensitivity to the SKU count is significantly increasing as their shelf get more and more cluttered, they have to fulfill not only their demand in store, but also the online demand from the shelf, which means in many cases, on the bigger brands, they don’t even have the holding power. So they — over the weekends, they run out of stock, both in the back room and on the shelf, because of the number of SKUs that they need to restock. The cost of restocking is increasing with labor cost increasing and labor availability issues. So their desire to engage in that conversation, I think, is increasing.
Generally, the categories we operate in are very inefficient. 50% of the SKUs across the world deliver less than 5% of sales on the shelf. So that in of itself represents a huge opportunity to simplify the logistics system, take cash out of the system, take operating expense out of the system, but most importantly, make it a much better shopping experience for the consumer. So that’s what we’re after.
From our side, for the first time, we’re able to use retailers data to convince them of the opportunity. So we have basically images of every shelf set that exists in the U.S., for example, and we’re able to correlate that shelf set and the completion of the set with sellout data. So we can go to retailers and explain to them. Here is what it does, if you have a simpler shelf set to your sellout, to your ability to restock to your on-shelf availability. That’s a very strong discussion to have with them. So the opportunity is huge. It’s important for us to make it a category discussion, not a P&G discussion. So that’s the process we’re in.
Jon Moeller
And I’ll just add one thing. You think you’d be serving consumers better by having a wider assortment, so more SKUs in the store. And you’ve probably all had the experience of the reverse being true. So if you — if we test consumers and ask them to assess the assortment level of the shelves. They will assess a heavily skewed shelf as having less assortment than a more lightly skewed shelf. How could that be?
Well, I can’t process that very complicated shelf. So they don’t get to an endpoint in terms of what’s really there. And that’s why I said I’m sure you’ve all had the experience we have of walking up to a shelf and walking away. I defeated at the moment I arrived. I have no idea how to shop this. So we think that this can be something that grows markets those sales for our retail partners and ourselves and does that more profitably. So it’s a win, win, win.
Lauren Lieberman
So since you’re trying to have a — you said a category level of conversation about this with retailers and not just P&G specific, that’s maybe a little controversial. So like how does that go? Is it a test store to — because I understand the data can be powerful, but.
Jon Moeller
We’re category captains as nominated by our retail partners in a disproportionate number of our businesses. So this is a conversation that they ask to have, and we’re very objective and database in that conversation. This isn’t an attempt — it has to be about an attempt to truly improve the velocity of that shelf. And if you hold yourself to that objective, you don’t run into some of the problems that you might, with a different approach and typically because of the innovation, the branding, the communication of that branding, we fare very well in that objective analysis.
Andre Schulten
But you have to let the data speak. Having done this myself with many retailers, if you let the data speak and it’s their own data, the credibility is there, the conclusions are clear. What we don’t do is make recommendations on behalf of other manufacturers. But we present the data as we see it from the algorithmic tools that we have.
Lauren Lieberman
Are there differences in scope for this program by market? Is it the biggest in the U.S.? Or is it biggest in other markets? I think U.S. centric.
Jon Moeller
I would say the opportunity exists everywhere. We are further along in our understanding and implementation of the opportunity in the U.S. than we are in some of the other markets, but it’s a global opportunity.
Lauren Lieberman
Okay. I wanted to just quickly touch on ESG because going back to your Investor Day last year I guess. You’ve spoken about sustainable superiority and sort of using the same language on superiority and taking it in ESG lines and the idea of integrating sustainability into every aspect of the strategy. So could you just give us examples of what that means in action and maybe like the trade-off between offering these types of products at scale and the impact on margins?
Jon Moeller
I think we can have it all and we need to have that mindset. So we need to continue increasing our margin of superiority. We can’t compromise on that. We need to do that more sustainably, and I’ll give you some examples in a minute. And we need to do that profitably. That’s the charge to the organization and they’re executing against that very well.
A couple of — and we look at sustainability across three opportunities. One is our own footprint. I’ll give you a couple of examples. Another is helping consumers reduce their footprint. But doing that in a way that delights them doesn’t disappoint them. And then innovating to create multi-industry solutions to very difficult problems.
So I’ll give you just a couple of examples in each of those pillars. The change we’ve made to razor packaging first in Europe. Moving from a plastic container and the same on blades to a fiber-based container, almost all of which is recyclable. Parity cost more or less once we got the design right. But importantly, and this is how it should work every time, increase consumer delight. Why is that?
Well, some of you have heard me joke before about having to stop taking my blood-thinning medications before I attempt to open a Gillette package because it’s almost impossible to do. Very easy to open. Very easy to shop at the shelf. The graphics are very clear. The shelf is very well organized. That was not the case historically. I can give an award every year for the worst shelf. Gillette received the two years in the row. So that’s an example of improving sustainability while improving consumer delight and customer delight and superiority. And that’s just a red line because look, we operate in — we’ve intentionally focused our portfolio into categories where performance drives branches.
If we give up performance, we don’t have a business, number one. But number two, no sustainability objective is advanced because no one is buying those products. They’re buying products that are less sustainable that do the job. Another good example is the Ariel. Ariel is our detergent brand in Europe — or one of our detergent brands in Europe, if the Ariel Indiscernible] packaging, which takes single unit dose detergent packaging that you’re familiar with here, that’s a plastic tub or a jar and puts it in a fiber-based package consumer delight off the chart, 70% of consumers who have used that package prefer it versus their liquid detergent or powdered detergent package. I think one, I won’t we get the idea of what we’re trying to accomplish.
In the consumer use area, we’ve talked a lot about cold water washing. The energy to heat the water has the biggest footprint of the whole job. And our objective is to get wash water temperatures down by 5 degrees Celsius in Europe. We’re already down 2% on average. So that’s progress. We have the same opportunity in the U.S. where we’d like to get to a point where three-quarters of laundry loads were done in cold water. And we’ve very intentionally innovated in the cold water space to ensure that we have a detergent for you that we’ll do a better job than most of our competitors in Walmart.
So again, this isn’t about compromising your experience. It’s about enhancing your experience in — by the way. What happens if you wash in cold water, assume your folks get clean. The colors on your garments stayed truer. The shape of your garments stays truer. You get longer life out of your clothes. So that’s an example of helping consumers reduce their footprint.
The last piece of this, I’ll just give you a couple of examples. Polypropylene recycling exists today. But the process is a mechanical process, which doesn’t remove odor or pigment. And so the product that you get out of that process is not usable by a lot of manufacturers. I think about three manufacturers, for example. Our team has created a process for polypropylene recycling that removes odor, removes pigment and gets you to 99% virgin quality product at the end of the process. We can’t make economic sense out of that just for our own operation.
We’ve licensed that technology to a company called Pure Cycle, which is working to build capacity for multiple industries, the automotive parts industry, the health care device industry. We’ve done the same now for polyethylene. We also have created and basically given it to companies, who will help participate and scale this with us, the ability to put a digital watermark out piece of plastic. So that when it goes through the sorter at a recycling facility, it can be easily sorted without a lot of manual in terms of what the content is of that piece that’s coming in.
So when you start improving the economics on the front of the recycling operation, you improve both the yields and the quality on the back part of that operation, you now have an economically viable model which attracts capital from the capital markets. And now we’re talking about real solutions to very big problems. So sorry to go on and on about that, but it’s another area of huge opportunity where I think we have believed.
Lauren Lieberman
This was an update note to end of. So thank you. Okay, we’re going to do a breakout. Please join me in thanking Jon and Andre for being with us again this year.
Jon Moeller
Thanks, Lauren.
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