Clorox Co (NYSE: CLX) Q3 2020 Earnings Call Transcript

Clorox Co (CLX) Q3 2020 earnings call dated May. 01, 2020

Corporate Participants:

Lisah Burhan — Vice President, Investor Relations

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Benno Dorer — Chair and Chief Executive Officer

Analysts:

Andrea Teixeira — JPMorgan — Analyst

Steven Strycula — UBS — Analyst

Steve Powers — Deutsche Bank — Analyst

Nik Modi — RBC — Analyst

Kevin Grundy — Jefferies — Analyst

Jonathan Feeney — Consumer Edge — Analyst

Lauren Lieberman — Barclays — Analyst

Olivia Tong — Bank of America — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Clorox Company Third Quarter Fiscal Year 2020 Earnings Release Conference Call. [Operator Instructions]

I would now like to introduce your host for today’s conference, Ms. Lisah Burhan, Vice President, Investor Relations for the Clorox Company. Ms. Burhan, you may begin the conference.

Lisah Burhan — Vice President, Investor Relations

Thank you, Christine. Welcome, everyone, and thank you for joining us today. On the call with me today are Benno Dorer, our Chair and CEO; and Kevin Jacobsen, our CFO. Before I go into results, I just want to express how grateful we are to be speaking to all of you today. This is clearly an unprecedented time. Our thoughts are with everyone who has been affected by this pandemic, especially those who have lost friends and loved ones. At the same time, we’re also inspired by so many frontline health care workers, first responders, delivery and grocery workers, our own production employees and more. We’re grateful to them for their selfless dedication to helping others. A few usual reminders before we go into results. We’re broadcasting this call over the Internet, and a replay of the call will be available for seven days on our website, thecloroxcompany.com. On today’s call, we may refer to certain non-GAAP financial measures, including, but not limited to, free cash flow, EBIT margin, debt to EBITDA, organic sales growth and economic profit. Management believes that providing insights on these measures enable investors to better understand and analyze our ongoing results of operations. Reconciliations with the most directly comparable financial measures determined in accordance with GAAP can be found in today’s press release, this webcast’s prepared remarks or supplemental information available on our website as well as in our SEC filings.

In particular, it may be helpful to refer to tables located at the end of today’s earnings release. Please also recognize that today’s discussion contains forward-looking statements, including, among others, statements related to the expected or potential impact of COVID-19. Actual results or outcomes could differ materially from management’s current views, beliefs, assumptions and expectations and plans. I would also direct you to read forward-looking disclaimers in our quarterly earnings release. Please review our most recent 10-K filings with the SEC and our other SEC filings for a description of important factors that could cause results or outcomes to differ materially from management’s current views, beliefs, assumptions, expectations and plans. The company undertakes no obligation to update or revise any forward-looking statements. Turning to today’s discussion of our business results. I’ll start covering our top line commentary as usual, with highlights in each of our segments. Kevin will then address our financial results as well as outlook for fiscal year 2020. Finally, Benno will offer his perspective, and we’ll close with Q&A.

For the total company, Q3 sales grew 15%, reflecting increases in every reportable segment. Organic sales were up 17%, supported by strong volume growth in all segments and significant demand of our products during the pandemic, products that either play an important role in public health or support the everyday lives of people, especially as they spend more time at home. In Cleaning segment, Q3 sales were up 32% for the quarter, with strong double-digit growth in all three businesses. For perspective, more than 2/3 of sales in this segment come from products with disinfecting claims. In Home Care, Q3 sales increased by strong double digits behind broad-based growth across the portfolio, with all-time record shipments of Clorox disinfecting wipes, Clorox ToiletWand, Clorox cleanup disinfecting spray, Clorox disinfecting bathroom cleaner, Clorox Scentiva products and Clorox toilet bowl cleaner. Shipments were strong across all channels, but especially in nontracked channels such as club and online where volume growth was nearly double that in tracked channels. While early, we’re encouraged to see from our data that the majority of the higher demand is coming from incremental households rather than just stockpiling or higher usage from existing users. With the pandemic expected to have a sustained positive impact on consumers’ disinfecting and hygiene habits, we’ll invest further in our brands, turn incremental usage into loyalty.

Laundry sales also grew by strong double digits for the quarter, fueled by high demand for Clorox Bleach. It has long been recommended by public health authorities for its disinfecting capabilities and the positive role it plays in public health. As we’ve mentioned in higher communication, we’re running our plants around the clock to get our products to where they’re needed the most. In the case of Clorox Bleach, we’ve been directing our shipments to health care facilities to prioritize supporting those on the front lines of public health. Putting recent demand aside, our bleach compaction rollout is in line with expectations, with our Clorox laundry sanitizing products are now on shelf. Consistent with our IGNITE Strategy, we’ll support our brands and innovations with strong marketing investments to drive awareness and trial at a time when hygiene and disinfection is top of mind for consumers. Lastly, within the Cleaning segment. Our professional products business also saw strong double-digit sales growth driven by unprecedented demands from health care facilities and commercial cleaning institutions that rely on our portfolio of disinfecting products. In this channel, higher shipments are driven by higher usage as health care facilities are operating at full capacity, and there’s a step-up in cleaning protocol everywhere.

Turning to the Household segment. Q3 sales were up 2%. Our Cat Litter sales were up strongly behind double-digit increase in volume as cat owners stocked up on essential products to care for their pets. Our Fresh Step Clean Paws product line continues to resonate well with consumers with all-time high record all-time record high shipments this quarter, even its third year after initial launch. We’ll continue to build on this differentiated platform and also highlight the value proposition of our Scoop Away brand, which is seen as affordable yet high performing. Grilling saw solid sales growth for the quarter, with grilling occasions up significantly as consumers stayed home. Importantly, we began to see improvements in the base health of this business even before the surge in demand related to COVID-19. There was higher consumption in January and February, and our share of the total Grilling category was also up at the end of February in tracked channels. Our innovation in pellets, a growing segment, shipped in March, and we’re in the process of expanding distribution, which will build throughout the grilling season. Early retailer response to our plans has been positive, helping drive strong sales. Going forward, we’ll continue to build on this momentum, focusing on our strategy that includes enhancing consumer experience, implementing the right trade and pricing structure and investing in innovation. Glad sales were down slightly for the quarter.

Like the other businesses, Glad also saw assertion demand as consumers stocked up on essentials to stay at home. However, that benefit for this business was more than offset by the negative impact from the loss of distribution at a customer. It’s important to note that while there are many puts and takes in distribution in any particular quarter, we expect an overall net gain in distribution by the end of this quarter through significant wins at other customers. Earlier this quarter, before the surge in demand from COVID-19, we had already begun to see share improvements due to progress, including price gap and increased distribution in tracked channels. And we’ll continue to build on this progress, coupled with strong innovation and retail execution, return to profitable category growth. Going forward, we expect higher demand to continue accompanied by higher usage as long as consumers are staying at home. In RenewLife, sales declined by double digits due to continued category and competitive headwinds. While there are early signs of progress and pockets of success, this business is not where we want it to be. We continue to believe this is a space with long-term tailwinds. Since we acquired this business, the category has fragmented more, including a proliferation of offerings that has led to an overall category deflation. We’re actively partnering with retailers to reinvigorate the category. We’ve been seeing volume growth with two of our three top customers.

Our brand relaunch in FY 2021 is on track. In our Lifestyle segment, sales grew 10%, reflecting growth in three of four businesses. Brita sales were up high double digits on top of very strong results in the year ago quarter. Our data shows that people are seeking out Brita filtration systems and filters to ensure they have access to clean, great-tasting water during this pandemic. Brita is a business that has been building momentum even before the onset of the global pandemic, with consistent volume growth dating back more than a year. During this recession, we’ll be focusing our marketing communication on value to further build on the good progress we’ve made in household penetration and share to drive profitable growth in the long run. Food sales were up strongly for the quarter driven by higher shipments of bottle Hidden Valley Ranch dressing and Dry Hidden Valley Ranch seasoning as many more people cook at home. The surge in demand due to COVID-19 builds on an already strong momentum within the Hidden Valley franchise, which has grown share in tracked channels for 21 consecutive quarters. Going forward, we expect this momentum to continue. The last recession, our Food business grew as people ate at home. The strong results in this quarter are allowing us to invest further in building our fast-growing online presence to capitalize on the ongoing shift to this channel. Sales were up strongly for the quarter driven by continued strength in Lip Care and Face Care.

And sales were driven by volume growth due to innovation, including double-digit shipment increases for both renewal and sensitive skin line. Also contributing to the strong growth this quarter were higher shipments of personal hygiene products, in particular, cleansers, moisturizers, baby care products that are so important to protecting families today. In March, the overall Beauty segment was negatively impacted by store closures as well as lower foot traffic in stores that remain open. As the stay-home measures are prolonged, consumer shopping patterns have also changed. While we expect the near term while we expect softness in the near term with this category continuing to be negatively impacted, we believe the future of this business is bright as fundamentals of our Burt’s Bees brand remains very strong. Finally, sales for Nutranext were down by double digits this quarter, mainly driven by a disruption of our supply chain related to COVID-19. While orders reached a record high in March, fulfillment was challenged due to a shortage of labor at our third-party distributor in the face of the pandemic. Excluding the impact of the supply disruption, our strategic brands would have grown strongly.

Lastly, turning to International. Sales were up 11% for the quarter driven mainly by 60% volume growth as we saw very high demand from not just our cleaning and disinfecting products, but also our household essential household products. Growth was broad-based with double-digit volume increases in every single region. Sales were also impacted by unfavorable foreign currency headwinds of about 11%, partially offset by the benefits of pricing, which was implemented before the onset of the pandemic. With cleaning and disinfecting products accounting for more than half of the segment sales, expect consumer demand in International to remain elevated in the near term.

Now I’ll turn it over to Kevin, who will discuss our Q3 financial performance and our updated outlook for FY 2020.

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Thank you, Lisah. And thank you, everyone, for joining us today, particularly during this difficult time. We hope you and your loved ones are well. I’m extremely proud of the strong financial results we delivered this quarter as they reflect how our company responded so quickly to address an unprecedented demand for disinfecting products and our other trusted products people count on every day as they shelter in place during this global pandemic. The impact from COVID-19 had a significant impact on our third quarter results. At the same time, I’m also encouraged by the continued progress we see in our core business prior to the increased sales as a result of COVID-19. In addition to our strong sales performance, we delivered our sixth consecutive quarter of gross margin expansion and another quarter of strong cash flow. And as you saw in our press release, with this quarter’s strong performance and our expectation for continued strong demand for our products in the fourth quarter, we have raised our fiscal year outlook, which I’ll discuss in a moment. Turning to our third quarter results. Sales increased 15%, reflecting 18 points of volume growth, partially offset by two points of unfavorable foreign currency headwinds and one point of unfavorable price/mix.

On an organic sales basis, third quarter sales grew 17%. Additionally, based on the trends we were seeing in the quarter prior to the impact of COVID-19, sales are tracking in line with our original plan to return to organic sales growth in the back half of the fiscal year. Gross margin for the quarter increased 330 basis points to 46.7% compared to 43.4% for the year ago quarter. Third quarter gross margin included the benefits of increased volume as well as 150 basis points from cost savings and 90 basis points from pricing, primarily in our international markets to offset inflation. These factors were partially offset by 70 basis points of higher trade spending, 60 basis points of unfavorable mix and assortment as well as 50 basis points of higher manufacturing and logistics costs. Third quarter gross margin also reflected ongoing cost favorability in commodities, partially offset by the impact of foreign currency headwinds. Additionally, while we did begin to incur costs late in the third quarter in our supply chain as a result of COVID-19, these costs will be more pronounced in our fourth quarter. Selling and administrative expenses as a percentage of sales came in at 15.1% compared to 13.9% in the year ago quarter. This higher rate primarily reflects higher year-over-year incentive compensation expense, consistent with our pay-for-performance philosophy. In addition to higher incentive compensation expense, it also includes donations we made to nonprofit organizations in support of COVID-19 relief.

Advertising and sales promotion investment levels as a percentage of sales came in at about 10% of sales or about equal to the year ago quarter. On an absolute basis, spending increased about $23 million versus year ago quarter. Additionally, spending in our U.S. retail business came in at nearly 12% of sales. Importantly, we continue to invest in our brands and are not reducing investment levels during this period of heightened demand. Our third quarter effective tax rate was about 19% compared to about 22% in the year ago quarter due to higher excess tax benefits on stock-based compensation. Net of all these factors, we delivered diluted net earnings per share of $1.89 versus $1.44 in the year ago quarter, an increase of 31%.Turning to cash flow. At the end of Q3, year-to-date net cash provided by operations increased to $806 million from $603 million in the year ago period. The 34% year-over-year increase was primarily driven by lower working capital due to reduced inventory positions to support increased demand and profitable sales growth. Now I’ll turn to our fiscal year 2020 outlook, which we have updated and noted in our press release. Our fiscal year sales outlook is now expected to be in the range of 4% to 6% growth driven by increased demand for our products as a result of COVID-19. Our sales outlook also reflects our ongoing efforts to accelerate the sales momentum of our portfolio, fueled by strong customer plans, meaningful back half innovation programs and higher consumer investments, leading to increased distribution.

Our updated sales outlook continues to assume about two points of foreign exchange headwinds. Our fiscal year organic sales outlook now assumes a range of 6% to 8% growth. Turning to gross margin. We now expect fiscal year gross margin to be up strongly or about 100 basis points, reflecting the continued benefit of operating leverage driven by our sales momentum, strong cost savings and favorable category mix as our Cleaning segment grows at an accelerated rate. This will be partially offset by temporary increased investments we are making within our production team in the form of increased wages and benefits as well as enhanced safety measures. In addition to investing in our team, we’re incurring increased transportation and warehousing costs as we expedite shipments to our customers to support the heightened demand for our products. We estimate these temporary cost increases to negatively impact our fourth quarter gross margin by about 250 basis points. We continue to expect fiscal year advertising and sales promotion investment levels to be about 10% of sales. We now expect selling and administrative expenses to come in at about 15% of sales, reflecting anticipated higher incentive compensation, consistent with our commitment to our pay-for-performance philosophy. We now expect fiscal year EBIT margin to be up modestly, reflecting strong gross margin expansion, partially offset by higher selling and administrative expenses.

We now expect our fiscal year effective tax rate to be in the range of 21% to 22% due to higher excess tax benefits on stock-based compensation. Net of all these factors, we now expect fiscal year 2020 diluted EPS to be in the range of $6.70 to $6.90. While this range is wider than what we would normally provide at this time of year, we think the range is appropriate given the heightened volatility we are managing, which makes estimating our fourth quarter results more challenging as they will be influenced by a number of factors we don’t directly control and are difficult to predict accurately at this time. Importantly, this outlook assumes minimal supply chain disruptions for the remainder of the fiscal year. Additionally, we have temporarily suspended both of our share repurchase programs. While the company maintains a very strong balance sheet and access to additional capital, we believe this is a prudent action to take while we further assess the environment and our capital allocation plans.

Before I turn over to Benno, I would like to reinforce that I’m pleased with the progress we continue to make on our base business. We’ve begun to rebuild distribution in the third quarter prior to the impact of COVID-19, and I expect that to continue this quarter. Additionally, we remain on track to deliver another strong year of cost savings, and we continue to increase brand investment in support of our strong innovation program focused on improving consumer value. Additionally, I’m pleased with our team’s effort to significantly increase manufacturing production capacity while continuing to operate safely to help provide essential products needed during this global health crisis. We’ve made good progress to date and expect to continue to expand disinfection production capacity over the balance of the calendar year and beyond, supported by the resiliency of our supply chain. To date, we have had no major disruptions, with all of our plants currently running and the vast majority of our contract manufacturers and suppliers continuing to operate. And finally, with accelerating revenue and cash flow, Clorox maintains a strong investment-grade balance sheet, giving the company plenty of financial flexibility. I believe Clorox is well positioned to manage through an economic recession while capitalizing on changing consumer behaviors as a result of this health crisis.

And with that, I’ll turn it over to Benno.

Benno Dorer — Chair and Chief Executive Officer

Thanks, Kevin. We appreciate all of you joining the call today. Our hearts go out to everyone who has been impacted by this global health crisis, and we hope that you and your families are safe and well. Clorox is a health and wellness company at heart. And during these past few months, our mission has never been clearer. In the uncharted territory presented by COVID-19, we knew it was important to act quickly to help, always grounded in our most important company value, do the right thing. We know that the public is counting on the Clorox Company and our products around the world, and our team of 8,800 strong is stepping up every day to make a difference the right way. With this in mind, here are the three important takeaways from today’s call. First, I’m proud of our people’s leadership and passion in serving public health, which has been rewarded by our consumers, customers and the communities we serve and has led to strong Q3 financial results. Back in early January, we activated our company to guide our response to increased supply to protect public health and people, and we have pursued three priorities since then front and center: first, protecting the health, safety and well-being of our employees; second, making cash and product contributions to support caregivers and other organizations providing coronavirus relief; and third, maximizing supply to get our products where they are needed most. In the U.S., our employees qualify as critical infrastructure workers because we make essential household products.

Our third quarter results reflect directly on the outstanding job our people are doing in the face of extraordinary circumstances, and the health and well-being and that of our families is top of mind. To support those who continue to work in our facilities, we’ve enhanced our infection prevention measures with increased pay and added benefits for the frontline workers making our products. For our broader global team, we’ve established an initial $1 million employee relief fund to provide COVID-19 support to them and their families. For more than 100 years, the Clorox Company has helped communities in times of global health crisis and natural disasters. As we work with our communities to help support them in battling this crisis, we have now committed about $14 million in cash and product donations. In addition to our initial $5 million to support caregivers on the front lines, our additional support extends to organizations such as Feeding America and Americares as well as local organizations in the United States and internationally, helping to meet the needs of vulnerable populations in our communities. Clearly, we have faced extraordinary demand for our products, especially our disinfecting products.

To try and meet demand to the greatest extent possible, we’ve been running our cleaning and disinfecting product plants 24/7. To increase output, we’ve accessed third-party supply sources focused on manufacturing of disinfecting products and those that can be supplied most quickly, and we’ve been partnering with suppliers and retailers to get product where it is needed the most. In the United States in Q3, we supplied 40 million more disinfecting units for consumers and end users for an increase of more than 40% versus the year ago quarter.

We are very grateful to our heroic production associates who made this possible. Additionally, we continue to find new ways to produce more disinfecting wipes and other products such as germicidal bleach for health care facilities. Importantly, we have 0 tolerance for price gouging. And we want to ensure that everyone has access to our sanitizing and disinfecting products at standard prices at all times and especially now. As such, we have taken aggressive action to combat price gouging, including partnering with online retail platforms to identify and remove such offers or sellers in the third-party marketplace. As needed, we’re collaborating with law enforcement agencies in connection with third-party price gouging increase regarding disinfecting products. More than ever, in an uncertain environment, people turn to trusted brands they can count on. And Clorox has the most trusted brands in many of the categories we compete in. And we see that reflected in strong market share performance and in rising household penetration on many of our U.S. brands.

We also see it in strong double-digit sales growth, a sixth consecutive quarter of gross margin expansion and a 31% diluted EPS growth this last quarter. My second message is I feel good about the progress we’re making on our core business, which also contributed to our strong Q3 growth and is on track against our expectations for the back half. In Q3, before the impact of COVID-19, volume and sales growth trends were in line with expectations, and we were seeing the anticipated distribution gains. We were particularly pleased with the significant progress we were making on our Grilling business. Shared rents have been improving prior to the impact of COVID-19 and have accelerated since then. I’m pleased that we grew share in six out of nine businesses in tracked channels. Our strong innovation program for the back half played a meaningful part in these improvements.

In Grilling, we launched the new Kingsford hardwood pellets, which helped gain strong retailer traction for our 2020 grilling season plans, and we’ll build distribution throughout the season. In Laundry, we started shipping our compacted bleach product, and we are very pleased with initiatives performance to date. Other innovations are off to promising starts, including a new platform of Clorox odor-eliminating fabric sanitizers and a new Glad Flex’n Seal food storage bags that stretch around food to keep it fresh, which builds on a highly successful presence and innovation. One exception to our Q3 innovation plans was our new Clorox compostable cleaning wipes, which were off to a tremendous start. However, we made a deliberate choice to temporarily suspend their production in order to prioritize disinfecting wipes at this time. We will pick up on this initiative as soon as possible and remain very excited about its future prospects. What’s important to understand is our business is performing well at its core. Prior to the impact of the pandemic, we were very pleased with the trends we were seeing in the majority of the business. We were rebuilding distribution, sales were strong and gross margin was continuing to expand. We expect those core trends to continue in the fourth quarter, even as we experience further impact from COVID-19. And my last point today is we remain confident that our strong portfolio, our IGNITE Strategy, our organization and our core capabilities will position us to pursue emerging opportunities and to manage through the expected near-term challenges to perform well and generate long-term shareholder value.

As we’re facing a period of volatility with the global economy now in economic recession, there are a number of external factors we’re monitoring. COVID-19 will continue to impact global consumer behavior, future government actions and our supply chain, and it’s difficult to predict the near-term future. With predictions that personal income will decline during the recession as unemployment rises, we anticipate discretionary spending will contract as consumers prioritize essentials. At the same time, we are seeing new households entering several of our categories, and we will invest strongly to turn many of them into loyal consumers. Most prominently, early indications are that the heightened awareness of the role disinfecting products play in public health brought about by this pandemic may be more lasting than following past global health crisis and will provide a meaningful long-term growth trend for our company. Clorox is the most trusted brand in the United States home care category with differentiated products fueled by a strong innovation program and our commitment to strongly invest in this business. We’re optimistic about our future prospects given the elevated role disinfecting products will have in consumers’ lives for the foreseeable future. Moreover, our portfolio has proven to be relatively recession resilient in the past as major Clorox categories like trash, grilling and food generally benefit from consumers eating out less as well as water filtration as consumers recognize the superior value of Brita filtered water when comparing to bottled water.

The percentage of our U.S. portfolio that is seen by consumers as delivering superior value was at an all-time high level since we began using this measure, positioning our brands well as we enter this recession. We will remain keenly focused on consumer value through strong brand investments, meaningful innovation and adequate price gaps. And given our expanding margins and strong cash flow, backed by a strong portfolio, strategy and core capabilities, Clorox is uniquely positioned to play offense by leaning into investments in the long-term health of our business. As we manage through an unprecedented business environment near term, we remain committed to long-term value creation for our shareholders and all stakeholders, and we’ll continue to be a purpose-driven business, committed to ESG and to doing the right thing. This core value of our company has served us well since 1913, and it has never been more important than now.

Operator, you may now open up the line for questions.

Questions and Answers:

Operator

Thank you, Mr. Dorer. [Operator Instructions] Your first question comes from the line of Andrea Teixeira from JPMorgan.

Andrea Teixeira — JPMorgan — Analyst

Thank you and hope all is well and congrats on your results. So Benno, I was hoping if you can comment on your increasing production capacity into the fourth quarter. And I understand you were using third parties and using some of this capacity that you always had through peak season of cold and flu. So if you can comment on, obviously, in the sanitizing and in all your portfolio, which I understand is about 20% to 25%, and into the International, too, if you can keep that production. And in terms of consumption trends against shipments, if you can update us if you’re still seeing a lot of demand from replenishing inventories at the shelf. And also what you’re seeing in terms of the grilling season for the other products you commented on the prepared remarks, but just to see if you can position us on the other portions of the portfolio. And then I have a follow-up on the gross margin, then I will pass it on.

Benno Dorer — Chair and Chief Executive Officer

Yes. Thanks, Andrea. That’s a lot of good ground to cover. And product supply, of course, is on everybody’s mind. What we’ve commented on is that demand has been clearly unprecedented, and we’re in uncharted territory for our supply chain, in particular, in disinfecting products. Typically, if you think about supply chains, they’re built to be in the sweet spot of quality, safety, efficiency, cost, effectiveness required to produce the necessary output for the long term. But when you have situations like we faced where, in March, we saw demand spikes for some of our disinfecting products of 500-plus percent, I think it’s evident to everybody that despite heroic efforts, you have out of stocks. And clearly, we are continuing to see out of stocks. We’re really proud of how our organization has responded. As Kevin commented, we haven’t seen any major supply disruptions on our side. We have been able to increase our production of disinfecting products by 40%. We focused on fewer SKUs. We saw great partnership and patience from retailers, and I want to thank all of them for it to help us bring products to market as quickly as possible.

We accepted incremental costs like air freighting, speeding up the supply chain to serve stores as quickly as possible. And as you commented, we activated third-party suppliers to help us cope with the surge in demand. We will continue to do that. We continue to find new ways to increase our capacity. We should see meaningful continued improvement this summer. And of course, we are also investing in the right capacity long term as we expect that demand for disinfecting products is going to be elevated for a long time as they will continue to play significantly increased role in people’s lives. As we’ve commented, we’re seeing very little stockpiling. We’re seeing a lot of use come from incremental households and in disinfecting, in particular. As you think about the future, as people stay home, they will want to protect themselves. At some point, when countries open up again, they will want to stay safe when they get out. And we have a lot of to-go products as well, in particular, with wipes. So that will continue to drive demand. Demand continues to be exorbitantly high. As you look at consumption data in tracked channels, it’s very, very high. And of course, that doesn’t factor in the fact that there’s a lot of latent demand given the out-of-stocks, which as people see wipes in store, they grab them and they’re pretty much sold out right away. And we’re far from refilling customer inventories. Typically, customers keep about four weeks of inventory.

So at some point, hopefully, we’ll be able to also refill inventories, which will also give us an opportunity to keep selling a lot of wipes sometime in the future. As we said, in the U.S., wipes is or disinfecting products account for about 1/4 of our sales. It’s definitely more right now, but we will see an elevation in demand for a while. We’ve also commented that in International, that number is about 50% of our sales being in disinfecting products. And of course, we’re seeing about the same dynamics there. So we feel like this is ongoing demand that we’ll be able to serve. On many of our other product lines were on allocation as well given the spikes in demand. But we expect to come out of that this quarter, which will help us. And I feel like on our core business, the demand continues to be high. We made a lot of progress even before the pandemic, as we’ve commented. But there are a number of product categories that see higher demand as consumers stay home. Grilling, of course, is one of them. We’re really pleased with the progress on Grilling even before the pandemic as we made strong progress to engage retailers in our 2020 grilling season, and we were rewarded with much better plans.

Clearly, as we think about Grilling, there’s not a lot of merchandising happening right now, so we expect that to partially offset the growth that we’re seeing. Memorial Day usually is a big grilling occasion, and I doubt that we will see a lot of merchandising at this point around Memorial Day, said that it’s offset by a really strong base business. So in a nutshell, supply has been difficult. We have done extraordinary work to meet the demand as best as we can. We expect substantial improvements this summer, both in disinfecting as well as earlier, perhaps on our core business. And we’re not seeing demand slowdown. If you think about the midpoint of our fiscal year sales outlook, which we’ve increased to 4% to 6%, it still assumes a double-digit sales growth in Q4. So that tells you that we believe that elevated consumption is going to be around for a while.

Andrea Teixeira — JPMorgan — Analyst

That’s helpful, Benno. But if you if I can also ask on the gross margin point. But before we go into the gross margin, just even if you do the midpoint of your range, it sounds a little conservative to everything you’ve just said. So I was wondering if it’s just a level of being conservative at this point, just for the puts and takes and potentially retailers facing their own issues because it looks like as everything you’ve said in the prepared remarks and now indicates that you can safely be at the top of that range. Or is it just like you’re trying to be conservative given the uncertainty?

Benno Dorer — Chair and Chief Executive Officer

Yes. We think we have a balanced outlook, Andrea. As you think about the range also, 4% to 6% with one quarter to go, and you can do the math, that implies a very wide range. Again, we think it’s balanced. We think that there is a lot of uncertainty as far as the consumer is concerned. We’re assuming that supply is not going to be disrupted, importantly. And as we learn more about asymptomatic cases, and the safety of our employees is very critical. And of course, for us, it’s important to continue to be able to manufacture the way we have, but we can’t take that for granted. So I would say, at this point, this is our best foot forward with a wide range, and it’s a balanced outlook. And perhaps Kevin can comment on gross margin. Do you want to?

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Yes. The nature of the question, though. Did you have a question, Andrea, specifically related to gross margin?

Andrea Teixeira — JPMorgan — Analyst

Yes. Yes. I appreciate the time. And just quickly on your point about 250 basis points, is that just the separate logistics impact? Or you’re saying that we should be seeing it seems to me just an isolated impact and temporary. But obviously, it’s the trend for gross margin, as we implied in the guidance, is up for the fourth quarter.

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Yes. So thank you for the question. On the 250 bps, we do believe that’s temporary. It’s really related to two items. We are investing more with our production team, as I mentioned, both in wages and benefits as well as enhanced cleaning measures. So that’s part of it. As well as I think Benno just mentioned some of the specifics, the increased transportation, warehousing costs we’re incurring. And I’d say that’s going to continue until we can catch up with the demand signal. So I’d expect in the near term, that’s something we’ll see hitting margin. And we’ll have to see how this plays out. That will be very much influenced by the shape of the demand.

Andrea Teixeira — JPMorgan — Analyst

Thank you. I appreciate it.

Operator

Our next question comes from the line of Steven Strycula from UBS.

Steven Strycula — UBS — Analyst

Hi. Good afternoon and congratulations on a very strong quarter. So Benno, I have a question as retailers have a newfound appreciation for some of the disinfectant strength that you guys have in your portfolio. How are your conversations going as retailers think about planning forward, maybe for fall, winter resets, in terms of the amount of linear display space for some of the disinfection products? And then as you think about your International business, given that COVID is a global pandemic situation, does this extend your portfolio reach and use maybe the wipes business as a foot forward into some markets where maybe you didn’t have a strong presence previously?

Benno Dorer — Chair and Chief Executive Officer

Yes. International first, Steve. So we do think that this gives us an opportunity to think about international expansion plans. And without getting into too much detail, we’re certainly expecting that disinfecting, in general, and perhaps wipes, in particular, are going to be seeing a lot of consumer demand. And this would give us an opportunity to serve more consumers. So it’s something we certainly look at and something that, as we have no shortage of dry powder to invest in growth, we would be willing to invest in should there be profitable opportunities that we can take advantage of with an eye on sustainable competitive advantage. So we would probably not be interested in opportunistic market entries. But where we see a strategic long-term opportunity, we’re certainly prepared to take advantage of it and we’re seeing what you see on this. As far as retailer conversations, I will tell you that most of the conversations right now are about meeting the current demand, which is difficult enough.

But what I would expect, of course, is that we’re going to have those discussions with retailers at the right time. And they certainly see the numbers as we see them. It’s a lot of incremental usage coming out of disinfecting products. The wipes household penetration sits a little north of 50%. Bleach is about the same. So and what we’re seeing more recently is that the household penetration on those two categories is climbing. So that would suggest that there is an opportunity to expand shelf space in those two categories. But it’s a conversation that still lies ahead of us, but it could certainly contribute to what we believe to be strong ongoing opportunities to serve more consumers with disinfecting products through the right amount of shelf space in store.

Steven Strycula — UBS — Analyst

Thank you, Ben.

Benno Dorer — Chair and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Steve Powers from Deutsche Bank.

Steve Powers — Deutsche Bank — Analyst

Hey Thanks. Good to hear your voices. Benno, just to build on your capacity planning comments and cleaning. As you think about getting ahead of the structural demand for disinfecting that you mentioned, not just in the U.S. in the near term but perhaps also over time overseas, how are you thinking about capacity builds against that backdrop? And should we begin to think of elevated capex associated with that? Or can this all be handled through third-party supply?

Benno Dorer — Chair and Chief Executive Officer

I’ll let Kevin comment on capex. But we are prepared to invest and, frankly, have started investing in more capacity in disinfecting with an eye on the long term because of the anticipated demand. And it will be a mix, but typically, we, on an ongoing basis, always like to manufacture our products in-house because we can deliver the right combination of quality and cost. So I’ll let Kevin give you his detailed perspective on how we should be thinking about capex.

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

As it relates to capex, typically, we spend about 3% of sales each year on capex. We’re doing the work right now. But I suspect, as we look to fiscal year 2021, we’ll be closer to 4%. And it’s really for the reasons Benno just talked about. We see a number of opportunities to increase investments and expanding capacity of our self-manufacturing facilities because as I think you’re hearing from us today, we’re seeing heightened demand certainly in Q3 and our Q4. We expect this to continue over a longer-term basis. And so we’re leaning in right now to start increasing capacity, and we’re investing right now to do that.

Steve Powers — Deutsche Bank — Analyst

Okay. And then if I could just follow up real quick on the household business and Glad specifically. Clearly, a step back on the distribution loss in the third quarter. But if I heard you correctly, Lisah, I think you spoke of net wins as of the fourth quarter. So I guess net of all the moving parts, how should we think about your shipments relative to takeaway in the fourth quarter and beyond as everything settles out across the market based on that?

Benno Dorer — Chair and Chief Executive Officer

Yes. So first of all, I will say that this distribution loss which occurred was contemplated in the previous outlook. So it’s not a change to the previous outlook. We knew this for a while. And as we think about by quarter, it’s simply a timing saying, so we lost this in Q3. But for the total back half of the fiscal year, as Lisah has commented, we expect distribution points to be up because we will get significant wins with other customers, including new distribution with significant customers. So it’s a net positive. And what we expect is, for the midterm, this business should do quite well given that it’s also positively impacted by the pandemic as people stay home more. But we’re also, as you will have seen, growing share market share quite significantly as a result of not just the improved distribution position but also some spillover from the lost distribution. We know that some Glad consumers are willing to change stores to buy their brands. And of course, the core fundamentals, as we think about innovation, as we think about price gaps, which we have continued to invest in, continue to improve. So we’re comfortable with where Glad is and the path forward on the business.

Steve Powers — Deutsche Bank — Analyst

Yes. Okay. I just want to make sure I hear I mean my impression based on all that is that we should think about shipments coming in ahead of wherever consumption lands in the fourth quarter. But before I walk away with that, I just want to test that hypothesis with you.

Benno Dorer — Chair and Chief Executive Officer

Yes. So we always try to stay away from being that specific on any business forward-looking, so bear with us at this point. You will continue to see the negative impact of the lost distribution for a while, right? But that will be partially offset by or it will be offset by the distribution gains that we’re adding. So it’s going to be a little bit noisy for a quarter or two, but it will normalize after that period of time.

Steve Powers — Deutsche Bank — Analyst

Okay, fair enough. Thanks so much.

Operator

Your next question comes from the line of Nik Modi from RBC.

Nik Modi — RBC — Analyst

Yeah. Good afternoon, everyone. I hope everyone is doing well. Benno, I’m curious how you would think about answering this question because I’ve been thinking about it a lot. There’s just so much trial. I mean how much marketing do you think sorry. How many marketing dollars do you think Clorox would have had to spend in order to get the kind of top line that you have right now? And the reason why I ask that question is this seems, I hope, like a once-in-a-lifetime opportunity where so many consumers are trying these brands and some for the first time across a wide ring of demographics. And how you can spend or lean into that to really engage them to create the stickiness. Now I know everyone is more focused on disinfecting, but I’m talking also about charcoal and your other products, salad dressing, etc. So I don’t know how you want to approach that question, but I’m just curious, like how much do you think how much value was created by this situation across your portfolio?

Benno Dorer — Chair and Chief Executive Officer

So we are not going to be a company that’s going to cut advertising. For us, advertising is a long-term investment. And as you say, we have a unique opportunity now to turn trial into loyal users. One of our IGNITE Strategies, as you probably recall, is to increase the number of people we have a close personal relationship with in the United States from 20 million to 100 million people over the next five years. Now we’re getting a lot of incremental people in, and it’s our opportunity to hold on to that volume. So in the back half of this fiscal year, we will spend $50 million, 5-0, more than in the previous year. And that tells you the stance that we’re taking. We will play offense. We think that advertising investment is a very good investment. Clearly, the ROIs, in theory, they’re a little lower right now than they would be if we didn’t have out of stocks. But the ROIs are still very good. And we’re not spending to make quarter commitments, but we’re spending to build the long-term equity of our brands.

How we spend is different. For instance, as you think about our disinfecting products, we’re trying to be useful in people’s lives. We’re trying to live the purpose that we have created for the Clorox brand. And in this particular case, we’re spending a lot of money on consumer education, in making sure that people use our brands the right way and in helping them be safe. That is a great investment because at this time, brands need to show up. And at this time, people make up their minds as to whether they trust the brand or not. And for Clorox, we believe that it’s a unique opportunity to continue to build trust in our brands, to hold on to the increased trial that we’re seeing. And as a result, we will be very bullish with our advertising spend and not cut any single dollars. Like I said, we’re spending $50 million more in the back half. And I would expect us to continue to spend quite strongly in the next fiscal year as well.

Nik Modi — RBC — Analyst

Very helpful. And then if I could, just a quick question on the Glad distribution loss. I know you’ve already budgeted for it, but can you just talk a little bit what was driving the distribution loss? Like what happened?

Benno Dorer — Chair and Chief Executive Officer

We typically don’t do that. It’s a discussion that happens between a retailer and the manufacturer. So I’d prefer not to comment as in all cases, just to protect the integrity of the conversations that we have with retailers. But it’s a good retailer. It’s a good partner of ours. We’re growing very strongly with them in other parts of the portfolio. And we’re also optimistic perhaps that at some point, we can have a different kind of conversation in this category with the same customer as we might have had in previous categories. So respect their decision, don’t agree with the decision, we’ll have to see how it works for them. And in the meantime, we’re very comfortable with where we are on Glad and our plans on the business going forward.

Nik Modi — RBC — Analyst

Fair enough. Thank you, Benno.

Benno Dorer — Chair and Chief Executive Officer

Thanks, Nik.

Operator

Our next question comes from the line of Kevin Grundy from Jefferies.

Kevin Grundy — Jefferies — Analyst

Hey, good afternoon, everyone. And I hope that you’re doing well. I wanted to pick up, Benno, if we could, on the topic of disinfectants and hygiene products but bring it to the company’s long-term guidance. So as you’re well aware, there’s a lot of pushback on these calls, I think, for a number of years on your prior guidance, the 3% to 5% organic sales growth and the achievability of it. And so it was just this past October, as you guys are well aware, that you trimmed it down to 2% to 4%. And now just building on the discussion in terms of increased consumer demand in some of your big product categories like disinfectants, it seems like this is certainly going to be more lasting. You’re seeing an increase in household penetration, you’re increasing capacity. So clearly, that’s a view that you guys share as well. But I was just hoping that you could comment, maybe you could quantify this a bit in terms of what you see as the appropriate long-term algorithm now for the company getting beyond this period of pantry load and so forth. But over the next three to five years, is 3% to 5%, again, more relevant? If so, where do you think is sort of appropriate as you guys are planning within that range?

Benno Dorer — Chair and Chief Executive Officer

So I think you’ll understand how we’re not going to give any numbers or any updated view on our long-term sales guidance. Like we said, we think that there’s going to be continued heightened consumer engagement, and that gives us an opportunity to serve more consumers in the U.S. and international. At the same time, I’d also expect that it’s going to be a more competitive space. As you know, we always worry about competition, and this is going to be an attractive category. And we will have to see what happens to the competitive landscape in the future. And then, of course, there’s other puts and takes, right? So if I think about Burt’s Bees right now, which, as you all know, has been an incredible success story for the company for a very long time, and we expect that to pick up at some point. But personal care businesses, in particular, are challenged. So I think there’s going to be puts and takes. We’re certainly thinking about what the right algorithm might be. We’re having the right conversations internally. And at the right time, if we believe there’s a change, we’ll communicate it. Now is not that time. We’re comfortable with the 2% to 4%. Near term, like we said in our fiscal year outlook, we expect elevated demand, but it’s way too early to say how this will translate into long-term value creation. The important thing to take away, though, beyond the numbers is that we will aggressively invest into it. We will play offense, and we will put ourselves in the best possible position in the retail and the professional business to serve as many consumers and institutional customers as we possibly can. And then we’ll see what comes out of that.

Kevin Grundy — Jefferies — Analyst

Okay, thanks Ben. I will pass it on. Good luck guys.

Operator

Your next question comes from the line of Jonathan Feeney from Consumer Edge.

Jonathan Feeney — Consumer Edge — Analyst

Good morning and thanks very much. And appreciate your leadership in all of this. Kevin, you gave us a couple of figures, and just a simplistic question. Can you tell us what either global takeaway was or U.S. takeaway was as far as you can? I’m just trying to understand what that will mean when we come to model next year and try to compare and see how this big surge of volume sort of smooths out over a few quarters. And secondly, on the cost front, it strikes me that your cost structure looking over the next year, so 12 months from now, not the rest of the fiscal year, which is probably pretty fixed, is pretty petro heavy. And can you give me a sense how much that is that right? And how much your sort of prospective look at those sorts of input costs has come down since, say, the past say, maybe January one when some changes in the price of energy and some of these upstream components?

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Yes. Thanks, Jonathan. On the second question related to our cost inputs, you see the same data we see, which, clearly, there’s a significant pullback in the price of oil. We’re also seeing that in the resin market. But I’d tell you to a much lesser degree because I think there’s some structural issues going on in oil, it’s going to get to pull back much further. I would say this. I think a lot of that is going to be driven by global demand more so than input costs. With GDP globally continue to decline, I think that will continue to put downward pressure on cost inputs, particularly in the energy complex. And for us, that really plays out in a couple of areas. So obviously, for us, resin is a big component of our buy, and that’s most pronounced on our Glad business. Keep in mind, though, in Glad, as we see cost inputs coming down on resin, typically, that means heightened trade spending within the category. And that’s really how the category is managed, that, that flows through to consumers through the form of increased trade. So as resin prices come down, I’d expect to see increased trade spending on the Bags and Wraps business across the categories. And then as it relates to oil, oil usually takes six months or so to work through our supply chain. So if oil stays down at these levels, this $20 a barrel level it looks like it’s projecting over the next few months, that certainly would be a tailwind for us going out for the foreseeable future. Now I think it’s probably too early to know that for sure. But certainly, if you look at the environment today, it certainly suggests that’s possible. And then, Jonathan, say more on your global takeaway. Tell me more what you’re looking for in that question.

Jonathan Feeney — Consumer Edge — Analyst

Pretty simple. Whenever you told about we know what U.S. takeaway is or at least your measured channels. You told us that club and e-com was something like double that rate. I assume that’s just a U.S. number. I’m wondering if you could give us if you think about global takeaway through retail, like how as it compares to your total global sales number or the U.S. version of that, just an actual number as opposed to double the rate, etc.

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Yes. I mean I’d say a few things. As we’ve talked, our volume growth is about 18% as a company. And International, we had very strong volume growth as well, very close to that. So our International business is growing at a fairly comparable rate to what we’re seeing in the U.S. And again, because of what we talked about, this is a global health crisis, and we have an international portfolio that’s very lined up to address this and help consumers. And so we’re seeing strong growth broadly. As I think about tracked versus nontracked, we are seeing elevated growth in nontracked channels. It’s probably growing 10-plus points higher than tracked right now. But I think that’s also not surprising. We’re seeing very strong growth in e-com, and we’re seeing very strong growth in club as consumers are even ordering from home or they’re trying to order in larger quantities. So we’re seeing those channels grow at an accelerated rate right now.

Jonathan Feeney — Consumer Edge — Analyst

Okay. That helps a lot. Thank you very much.

Kevin Jacobsen — Executive Vice President and Chief Financial Officer

Thanks, Jonathan.

Operator

Your next question comes from the line of Lauren Lieberman from Barclays.

Lauren Lieberman — Barclays — Analyst

Thanks, and good afternoon. I just wanted to ask a little about the commercial environment because I would expect and hope that there’s some pullback on promotional activity with demand trending so high. Promotion was still mentioned in the release, and the Nielsen data is sort of a bit of a mixed bag, and I know that’s always the best picture. So wondering if we can hit off on that promotional environment, I guess, within the cleaning categories and then your other businesses would be great.

Benno Dorer — Chair and Chief Executive Officer

As you might expect, given the supply shortages, there aren’t a lot of promotions, and we expect that there won’t be for the rest of the fiscal year. Said that, the way we accrue promotions is less of invoice, but most of our promotional dollars are reflected in everyday low pricing with most of our customers. And we also have a performance-based annual program where a lot of the promotional dollars are being spent. So the fact that there isn’t a lot of promotions given that EDLP is where it’s always been and given that retailers are more than meeting our performance requirements, the trade dollars are continuing to be spent. And we don’t expect that, nor frankly do we necessarily want it to be a source of savings. We have continued to spend against the right price gaps on Glad. And as you can see from market share gains and also pricing developments, we’re continuing to make progress, and we feel good about that. So promotional environments, pretty benign. Expect that to continue, but it will not translate to cost savings.

Lauren Lieberman — Barclays — Analyst

Okay. So the investments in the trade dollars, adjusting price points, that’s something that is still ongoing. We just don’t see it manifest as like promotion in store. But ultimately, it will show up as like a permanent list price change, for example, for Glad.

Benno Dorer — Chair and Chief Executive Officer

I’m not saying that. All I’m saying is that we’re continuing to spend the dollars. We’re not pulling back on any dollars in any area. And in Glad, we’re spending against a very specific objective, and that is to temporarily keep up pricing in line. What happens with that spend and whether it’s going to, at some point, be converted to a different list price will very much depend on what competition is doing, and that’s out of our control. Right now, we’re comfortable spending the dollars in trade, and it’s working.

Lauren Lieberman — Barclays — Analyst

Okay. Great. And then I was curious with the Professional Products business because that’s obviously been an area of interest for you guys for some time. And I feel like there were some fits and starts in really getting that business to grow as it was sort of hoped maybe at least not now, but five or seven years ago. So where that clearly is an opportunity in terms of usage, but just in terms of, call it, account wins or sales force investments, things like that, that you can do, it maybe early to talk about, but I was just curious about longer-range investments to continue supporting the growth of that business in a more contractual level rather than just right now meeting the surge in absolute need.

Benno Dorer — Chair and Chief Executive Officer

Yes, absolutely. That’s part of the broader disinfecting opportunity, Lauren. The Professional business, or PPD, as we call it, has done very well for us for a prolonged period of time. And the core of the business, which is to serve hospitals and other health care facilities with disinfecting products, has always done well. What we have done in the past was to look at whether we can enter additional categories. Some of it was successful and still is. Some of it was not mostly because the regulatory environment has changed quite significantly. But the core of the professional business is serving health care facilities with disinfecting products, and we have a number of proprietary and unique technologies. We have germicidal wipes, of course, which can help a great deal at this point. But also our total 360 electrostatic sprayer system is seeing an incredible uptick in demand that this fiscal year will be up 500% from last year, and we continue to see an opportunity to drive distribution.

So what you can expect is that we will continue to invest very aggressively in strategic opportunities that are centered around areas where the Clorox brand matters, which it does; where we have unique technology, which is predominantly in the health care space; and where our know-how in cleaning and disinfecting protocols can come into play. Importantly, we look at these options increasingly, not just as options that are limited to the Professional business but where we can bring the full power of the total company into play. And that will increasingly involve ways to reassure consumers that certain places are cleaned with the Clorox brand as a way to make them feel safe as, at some point, hopefully, we will be all back to normal and enjoying the things outside our homes that we used to enjoy and look forward to.

Lauren Lieberman — Barclays — Analyst

Thank you, Benno.

Operator

Your next question comes from the line of Olivia Tong from Bank of America.

Olivia Tong — Bank of America — Analyst

Thanks good afternoon. And hope everyone is well. We’ve covered a lot of ground, cleaning, disinfecting already. So maybe I can ask one about just private label and how to think about what potentially happened in some of your more private label exposed categories outside of cleaning, of course, as we think about the recession taking hold. What are you doing to stay focused in this in these categories as we emerge out of the pandemic?

Benno Dorer — Chair and Chief Executive Officer

Yes. So right now, I would say market share is driven by two things. First of all, just sheer availability, right? And as you think about our disinfecting products, for instance, one of the strategic choices, as hard as it may be, but whether you’re doing the right thing isn’t necessarily just determined by your words, but it’s determined by actions. And one thing we are doing is we’re prioritizing the health care section. That leads to more out-of-stocks at retail and it leads could lead to lower shares. And that is okay because that is the right thing to do. That could mean that private label in disinfecting could grow share. Said that, what we’re seeing also is that at the time of crisis, people turn to brands that they trust. And we have many of those brands that people trust. And if you look at tracked channels to date, what’s been happening is that we grow share very strongly, six out of nine categories in tracked channels. We’re seeing one category also growing nontracked channels, so it’s seven out of nine in nontracked channels. And we’re seeing private label and what we might casually call secondary brands or all other brands decline, all other brands declined very heavily. That is the fact, and that’s what we’re seeing right now.

And for us, as we have entered the recession, there are a number of things that we’re bullish about. First of all, the fact that brands do matter, and we have many of the brands that people care about. Second, as I said earlier, the percentage of our brands that is seen by consumers in the U.S. as superior in value is at an all-time high. And if you think about this recession and compare it to the 2008, ’09 recession, that recession was prior to our focus on consumer value. Our focus on consumer value started with our Strategy 2020, which was put in place in 2013. And since then, the percentage of our volume, of our of NCS that’s seen as better in value is up significantly. If you add to that our commitment to play offense, if you add to that our ability to invest in the consumer, if you add to that a portfolio that’s relatively recession resistant, several categories typically do quite well during a time of recession. If you then finally add to that our commitment to keep innovating and our expected continued strong innovation plan, we feel like we’re entering the recession with momentum, and we expect that we will do quite well with consumers. And we’re always taking private label seriously, but we like where we stand at this point.

Olivia Tong — Bank of America — Analyst

Great. Thanks, appreciate.

Operator

This concludes the question-and-answer session. Benno, I would now turn the program back over to you.

Benno Dorer — Chair and Chief Executive Officer

Yes, thank you, all of you. I look forward to speaking with you again in August when we will share our Q4 and fiscal year 2020 results. And in the meantime, please stay safe and well. Thanks.

Operator

[Operator Closing Remarks]