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Ladies and gentlemen, thank you for your patience in holding. We now have your presenters in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of this morning’s short remarks, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question.
It is now my pleasure to introduce today's first presenter, Taryn Miller, VP of Finance and Interim Head of Investor Relations.
Thank you, and good morning, everyone. Welcome to Kimberly-Clark's second quarter earnings conference call. On the call with me today are Mike Hsu, our Chairman and CEO; and Maria Henry, our CFO. Earlier this morning, we issued our earnings news release, and we also published prepared management remarks from Mike and Maria that summarize our second quarter results and full year 2021 outlook. Both documents are available on the Investors section of our website. We hope you find it valuable to have prepared remarks ahead of this call. In just a moment, Mike will share a few opening comments and then we'll take your questions.
During this call, we will make forward-looking statements. Please see the Risk Factors section of our latest annual report on Form 10-K for further discussion of forward-looking statements. We may also refer to adjusted results and outlook. Both exclude certain items described in this morning's news release. The release has further information about these adjustments and reconciliations to comparable GAAP financial measures.
Now I'll turn it over to Mike.
Okay. Thank you, Taryn. Good morning, everyone. Before we get into the Q&A, I'd like to offer some additional perspective on our performance. Clearly, our results did not turn out as we expected, and we knew it was a tough comp, given our strong growth and record profitability in the year-ago quarter. Now while we expected volatility this year, the external environment has proven to be even more volatile than our expectation at the beginning of the year and versus our April update.
Since we spoke in April, commodity inflation has spiked higher and our supply chain has been challenged. These dynamics are impacting us and, more broadly, the industry. We're also navigating historic levels of demand volatility in consumer tissue. Last year, we worked really hard to support our consumers and our customers as demand increased at a record pace. While we expected the category to retract this year, that decline has meaningfully outpaced our expectations. This has been driven by reduced at-home consumption due to increased mobility and destocking of both consumer pantries and retailer inventory.
Consumer tissue has historically been very stable and we expect demand to normalize over time. We remain confident in our brand fundamentals even as we acknowledge that the short-term tissue outlook has been difficult to call. We've taken decisive action to offset the impact of raw material inflation. We have announced pricing in key markets around the world. Our pricing actions are on track, and we expect to fully offset the effects of input cost inflation over time as we've done in previous cycles.
We've also taken prudent steps to control and reduce discretionary spend across the business. We expect this to be reflected in our results as we continue to implement these actions. We view this level of input cost inflation and the COVID-driven demand volatility to be discrete issues. We will continue to take appropriate action to reduce the impact of volatility over time.
At the same time, we remain confident and committed to our approach to building brands. Despite near-term challenges, we have plenty of bright spots in our business. Our strategy to invest in our brands is working. You can see this in our second quarter results broadly across personal care and especially in D&E markets. Excluding North American consumer tissue, our organic sales were up 4%. Personal care organic sales were up 6% globally, driven by a 4% volume increase. In D&E markets, personal care organic sales were up 8%, with very strong market share performance, including in China, Brazil, throughout Eastern Europe, India, Peru and South Africa. We've recently captured #1 diaper share positions in China and Brazil, which reflects the strength of our brand fundamentals with consumers.
Importantly, we're starting to see green shoots in K-C Professional. The business grew year-over-year and sequentially as we saw strength in international markets and positive trends in washroom products. As more companies transition back to in-person environments, we expect KCP momentum to improve in the back half.
We're encouraged by our underlying brand performance and have made significant progress in addressing the supply challenges we faced earlier this year in our North American personal care business. Looking forward to the second half, we are expecting better results across the business. We believe the major factors impacting this quarter do not reflect the fundamental health of our business. We remain committed to our strategy to deliver balanced and sustainable growth for the long term. We'll continue to execute K-C Strategy 2022 and we'll invest in our business for the future. This includes investments in innovation, commercial capabilities and technology.
Importantly, I also want to emphasize that we are acutely aware of the impact that this pandemic continues to have on our employees, our consumers and our partners and the world. We will continue to prioritize the health and safety of our people and all that interact with Kimberly-Clark.
Now with that, we'd like to address your questions.
[Operator Instructions]. Our first question comes from Lauren Lieberman with Barclays.
Wanted to first, to start with, I think, the biggest question, which is relatively short term but is the guidance reduction for this year. And I think it'd be helpful for everyone to just hear a bit about your degree of confidence that like, this is it, right? The environment has been incredibly volatile. But as you look forward from here, to what degree have you built in flexibility for things to perhaps worsen? So I think that's sort of an important starting point. And along with that, within the inflation basket, what has been the biggest delta versus when you last communicated an outlook for the guidance to the Street back in April?
Got it. Thanks, Lauren. Yes, a couple of things. I'll start with the outlook and I'll ask Maria to provide a little more color. But first of all, I'll just say overall, my view on the outlook is, it reflects certainly, as I mentioned in my prepared remarks, significant changes in that external environment that we, here, view as being discrete issues and that really -- that we're managing and fully managing, I would say. The 2 issues that we're talking about are one, raw material inflation and then the consumer tissue demand changes, particularly in North America. And if you add it up, Lauren, year-on-year, if you add those 2, it's well over $3 of EPS on a year-over-year basis. So it's a pretty significant increase. Obviously, given that amount and given our outlook, we are covering a significant portion of that but we can't practically cover all of that this year, all right?
And so what I would say is part 1, our pricing implementation is largely on track and we expect to fully offset inflation over time. Not all this year but over time. And then the North American consumer tissue volatility is COVID-driven, and I view that as more episodic in nature or temporary in nature, and I think the team is doing a very good job in navigating it. But certainly, Lauren, it's a little tougher managing shortfalls in the category versus some of the gains that we went up against last year. And so those are, I think, 2 that I would say are discrete issues.
The big delta on the commodities perhaps that's less visible to all of you is the polymer resin side of the business, right? So you could see the -- you could track the eucalyptus prices which have kind of remained in the space that we've called. But what's really escalated is resin, which I think for the full year, our estimate it will be up almost 100% and certainly at historic highs for us. And that should abate at some point, but I think it's -- initially, we thought that was going to come down some in the back half but it looks like the highs are staying high longer. And so that does reflect some of the pricing that we've taken.
So overall, I think those are really the 2 big issues. I do really want to point out, Lauren, that our brands are fundamentally very healthy, and we continue to see really robust growth around the world in both organic and in share. And even we're really, really pleased with our North American personal care recovery. Although we are a little light on share, I would say almost all of that is related to supply issues. We still under-shipped orders significantly in the quarter despite being positive on organic growth in the quarter. And so we feel good about where the business is and where our brand fundamentals are, and we're expecting a stronger Q3 in our personal care business. But maybe, Maria, do you want to add some color?
Yes, sure. I'll -- on your first question, Lauren, about the full year outlook, we've been wrong twice now, and so it's an incredibly dynamic environment that we're operating in. And the changes versus our expectations are clearly on the input cost side as well as how the consumer tissue category in North America has unfolded here.
So when I think about the guidance range that we've provided, we have 6 months left to go in the year, and there's $0.25 still in the range, and I don't like to take guidance down ever. And since we've done it twice, you can rest assured that the guidance that we provided is both thoughtful and based on the trends that we see, allowing for some ranges, given how dynamic this current environment is.
And then on the outlook for operating margin compared to 3 months ago, a couple of the things that I'd call out, higher commodity costs, lower volumes in consumer tissue. And along with these lower volumes, there's associated fixed cost absorption. The tissue business generally runs at very high utilization rates and has high fixed costs, and the actions that we've taken to offset that also go into our outlook, which include higher cost savings and reduce between-the-lines spending.
Okay, great. And Maria, when I look forward -- I mean, it feels maybe a bit early, but to look forward into next year, as I think about the headwinds that you faced year-to-date from those higher manufacturing costs, be it a combination of the storm impact in Q1 and really more materially the negative operating leverage, like the absorption on tissue, I mean as we look into '22, simply the absence of those factors, if you just go back to a more normalized demand environment for tissue, right, those should be -- they should just go away next year. I mean, is there anything I'm missing as I think about that kind of impact to profitability from operating leverage and higher manufacturing costs looking into next year and as we start to compare against these periods?
Yes. I'll say 2 things. It's very tempting to talk about 2022, given where we are with this year and the very unusual dynamics that we're facing. I'm going to resist that temptation as the environment has been quite dynamic. And I think we're best off waiting to see another 6 months before we call 2022, given that the macro factors are moving so much. But that said, Lauren, the way you're thinking about it is correct.
Our next question comes from Dara Mohsenian with Morgan Stanley.
So Mike, you mentioned you expect to be able to fully offset the cost pressures with pricing over time. Is that with just pricing alone, to be clear or does that include other areas like cost savings? And just given the inflation's unprecedented this year, do you think you have pricing in place by year-end to fully offset those cost pressures? Or might it take a longer period of time to realize the pricing necessary and sort of a couple of rounds of price increases? How do you think about that? And I'm particularly focused on how you think about pricing, just given the magnitude of that inflation is much worse than it typically is when you take pricing.
Yes, great question. I would say yes and yes. I'm not trying to be flip. But I would say, one, generally, we've taken really broad-based pricing action globally, almost -- I wouldn't say all markets but in nearly all key markets and pretty extensive. The price -- and the pricing ranges from mid-single digit to high single-digit, in some cases, double-digits, right? And so pretty extensive pricing.
Obviously, we couldn't recover all of that, given timing because we announced in March, generally implemented in June or in beginning of the third quarter, so we'll get a half year run on the pricing and then a full year as we get into next year. That said, commodities have continued to move. But even as we announced our pricing, part 2 of pricing is we remain committed to leveraging our revenue growth management capability. And there's a lot of other levers that we can pull beyond list to continue to manage pricing in our environment and we're committed to doing that. So that's part 1.
I do think kind of given where we are, and I think it's normal and reasonable to expect that, we're also going to leverage our cost savings program. I mean, we have a very strong program, as you're well aware, on FORCE and we've kind of beefed that up over the course of the past year or so and we feel good about that. And so we'll continue to leverage that.
So overall, again, I think the answer is yes on both. The bigger thing, Dara, is we do recognize the impact of raw material inflation over time. In our categories, they tend to be a little more volatile. And we're -- a fundamental underpinning of our strategy is margin improvement. And so because of that, we believe we really have to, on an ongoing basis, offset the effect of inflation over time.
Okay. And just 1 follow-up on the pricing front, where you have implemented pricing so far. What's the retailer reaction and receptivity been like? And it'd be early to judge consumer receptivity, but obviously, some pretty large price increases in your portfolio. So just any thoughts on the ability of consumers to handle that higher pricing and impact on market share, and any thoughts there on what we might see going forward would be helpful.
Yes. Look, we never take pricing actions lightly, and we know they can be stressful for both the retailer and our consumers and their shoppers. So we think hard about that. I will say, we believe our pricing actions globally are generally on track. And I think broadly, the retailer conversations, though never easy, I would say, have been largely constructive. And certainly, they understand what's happening in the cost environment and so we're working through that.
And then I think from an execution perspective, our teams have done a phenomenal job executing rapidly around the world. I would say in terms of other brands, I would say generally, we've seen a lot of the other brands move in a similar direction. I wouldn't say identical but directionally in that same place. But the execution of other brands and private label tends to vary market-by-market. And so some will lag a bit more but I would say, generally, we feel like our pricing actions are on track.
Our next question comes from Kevin Grundy with Jefferies.
A question for you, Mike, on advertising and marketing. So it looks like you did decide to defer some investments, which is unsurprising in the current environment. The intention was clearly not to do that. Maybe, Mike, just spend a moment on where you decided to pull back and why. And then just -- I know this is difficult, we can appreciate that in the current environment, but balancing appropriate levels of investment behind your best and highest return ideas with the current commodity cost environment. And then I have a follow-up.
Yes. So overall, the thing about it, and when I say our challenges are kind of discrete, the challenges, as I'll remind you, I'm sure you remember, Kevin, is like the inflation in North American tissue. In the balance of our markets, our businesses are performing very well and generally above-plan. And so I would say maybe the thing I'll land with you is despite our near-term challenges, we're really focused on improving our long-term growth profile. We're really confident that our balanced sustainable approach to building brands is working and that the brand fundamentals globally are very healthy and that we're improving our market positions.
We were up in share in about -- by our tracking, about 2/3 of our market category combinations in the quarter and so we feel good about that. And the brands continue to respond well to strong investment. I mean, we had multi-share point gains in infant child care across China, South Korea, Australia, New Zealand, in India, Indonesia, Eastern Europe, Argentina, Peru, pretty much double-digit growth in Brazil. So we feel good about the overall performance of the business. So because of that, we're really maintaining investment where that's working and where the businesses are on plan.
We have dialed back in some markets. You can assume, for example, in North American bath tissue, given that the fluctuation in the category, we have chosen to pull back a little bit on the spending. And we're going to continue to do that. We're going to operate with discipline. I think we talked about it in prior quarters, but there is as much a mass component to our advertising program as there is a creative component, and we're pretty disciplined. It's kind of how we manage all of our consumer investments, whether that's trade or marketing. And so we're pretty disciplined on the ROI. And so our teams are reacting as you would probably hope that they would. Maria, do you have anything to add?
Yes. The only thing I'll add is if you look at our full year outlook, what's the thought on advertising is that it's down somewhat to 2020 for the reasons Mike just discussed but it's well ahead of 2019 on a dollar basis.
Got it. Thanks, Maria. One quick follow-up for both of you. Just on capital allocation and M&A, we saw that the buyback outlook came down with a lower earnings outlook. But when you're going through the type of environment you're going through now, you can't say pricing fast enough and even sort of leaning in and getting the organization behind productivity is still not enough to offset the sort of commodity cost pressure. Does it sort of give you pause with respect to the M&A strategy over time, and the school of thought that the company should look to diversify the portfolio away from some of these commodity sensitive categories and do that in a disciplined and accretive way? So your thoughts there would be helpful then I'll pass it on.
Yes. We're always looking at acquisition or M&A opportunities, right, and whether that means additions to the portfolio or subtractions to the portfolio. Certainly, you saw that last year with Softex, which continues to be a really exciting opportunity for us and that business is performing very, very well, by the way, up in the teens, up multiple share points in the quarter. So we're super excited about that.
Given where you are, I think we'll continue to look for opportunity to enhance the portfolio, and certainly, on both the plus, whether it's attractive markets or attractive categories. But also, we're going to continue to look hard at our performance of our existing categories and businesses that don't add to our overall growth profile or aren't going to be ongoingly accretive to our business, we're going to take a hard look at it. And so again, we manage capital with incredible rigor and discipline. And hopefully, that's what our investors will appreciate about our approach.
Yes. And on the buyback specifically, our -- at the midpoint of our guidance, our operating profit now expected to be down $450 million year-over-year. And you'll recall that in January, when we were coming into the year that our target for buybacks, we were expecting operating profit to be up slightly. So with the reduced cash flow coming into the business, that's really what's behind the reduction of $250 million to $300 million on the share buybacks.
And then in terms of capital allocation, we also trimmed our CapEx plans for the year by $100 million, and we remain committed to the single-A credit rating and to make all of that work after having leaned into it with the restructuring as well as the acquisition of Softex, that's how we make all of that math work.
Our next question comes from Chris Carey with Wells Fargo Securities.
So I just want to actually touch on the consumer tissue outlook for the back half of the year. It seems to me that the kind of the important part to making the outlook work, but at the same time, you had noted, that's an area that's been a little tougher to call. And I guess, I'm trying to understand maybe just a little bit of the confidence around the normalization which you had noted in your prepared remarks. It seems to me that market share has really peaked during COVID, maybe some capacity benefits and that you just -- you've seen some reversion in market share back to pre-COVID levels. And so if you kind of run it flat to 2, 3 years ago, it's sort of unchanged. And I guess what I'm getting at is just what exactly you think is occurring in that business, and just maybe specifically, the types of things that you're seeing that give you confidence in this reacceleration in that business in the back half, which again to me seems to be kind of the important factor in making the full year outlook work.
Okay. Yes, great question, Chris. And I'll try to unpack it and we can go back and forth on this a little bit. First, let me just say, I remain very confident in our North American tissue business. And we've got great brands, performed very well last year. I do think we have given back some share this year. What happened last year when the category spiked, and at this point last year, I think the category was up about 30% or so. Consumers were looking for tissue and our customers were looking for tissue. And so our organization really moved aggressively to try to serve our customers and consumers at a point where we felt like they needed us the most. And so we really pulled out all the stops.
We probably did gain a little bit of share, particularly on a brand like Cottonelle, where we had a little more availability than maybe some of the other brands in the marketplace. And so it looks like to us, while our share is down a bit this year, I do think it's kind of reverted maybe to the prior year levels to some degree. And we'll continue to go forward and earn our share growth over time on that business. But we feel like our brands are healthy, but we are navigating what I would say is like the most volatile part of the demand curve that we experienced last year. So the front half is where all the spikes in demand.
And so there are really 2 effects there is the spike in consumer demand and then there was a corollary effect on retailer supply. And so maybe the 1 disconnect that you might not have visibility to the data are the category in the quarter in North America, and I'm talking bath tissue specifically was down 12% in consumption, okay? And then our shipments were down about 27%. And so the difference between the 12% and the 27% is really, for us, we estimate as retailer inventory changes.
And what happened last year on the inventory side was, I think exiting Q1 where there was the big spike, retailer inventories as a percent, if I index it to historical levels or 2019 levels, had dropped down to below 40% of what, I would say, the traditional turn inventory. And so retailers work really hard to get back in the supply. And so by the end of the year or toward the back half of the year, they were well north of 100% of overall levels. And so as we entered into this year, our estimate would be retailer inventories were probably in the 130%, 140% range. And so that's dialed back in the first and second quarter this year. And so it explains kind of a big chunk of the delta here on demand.
Looking forward, again, I'll stand by it. I mean, I looked at this category for a long time and it's one of the biggest categories. Obviously, if you think about bath tissue in particular, it's a very stable category. And so the logic for me is, in a post-COVID world, I think there will be more people at home on an ongoing basis than there were pre COVID. I don't think the office environment or the work environment is ever going back to 100% every day. And so logic would say consumption should be a little higher than the base level of '19.
Now year-to-date, we're below '19 levels for the category, but we think I would say logic would say that, that should kind of normalize over time. And I won't estimate whether that's at what point, but over the long term, this category has proven to be very stable. And our brands have proven them very, very stable and very healthy.
The other comment that I'd -- yes, just -- you were asking specifically on consumer tissue, which certainly has a big first half, second half effect. If I look overall first half, second half, in the first half, our organic sales are down 5% and our operating profit is down 26%. If you take the midpoint of our ranges, you get to a second half that looks something like plus 3% on organic and plus 5% on operating profit growth.
And so if you think about the -- our second half outlook and the key drivers there, we'll have easier comps. We will have a step-up and benefit from volume growth and price realization in the second half. The majority of the consumer tissue destock, we're assuming, occurred in the first half. We won't have the winter storm effects that we had in the first half. KCP washroom is expected to continue to see sequential improvements. The pricing actions are now fully in the market.
We'll see some build on our cost savings as we typically do. It's usually second half weighted and our other manufacturing cost headwinds should be lower. And then offsetting that what will be the higher commodity cost headwinds. If you take the 45 year-to-date and our guidance, it implies year to go is [765] at the midpoint. So -- that's -- those are the drivers for the second half, and certainly, the dynamics in consumer tissue are a key part of that.
We threw a lot at you and I threw a lot at you on tissue. I don't know if that answered all your questions or I'm happy to take a follow-up.
Yes, that was extremely helpful. The only quick follow-up would be just on the level of inventory -- retail inventory in tissue as you enter Q3, given some percentages, where do you see it today? And then if I might, I would just sneak in a question on how you're thinking about birth rates and medium-term impact on volumes, and then I'll get back in the queue.
Yes, all right. And just -- I'm going to -- a disclaimer on my inventory, those are our estimates and so that's kind of how we look at it and think about it. I would say, close to historical levels. The caveat I'll say on, Chris, is we're not exactly sure and I'm not sure the retailer is exactly sure how they want to handle it at this point, right? And so I think kind of given the category volatility and on a retailer-by-retailer basis included, I think it's going to continue to bounce around a little bit, right?
And so because -- and the example I'll give you is we were building up inventories, but there was another spike kind of in the fall period and then the winter period as well. And so I do think consumers largely understand that there is plenty of tissue availability. But that said, I've seen a lot of new things over the last 18 months. And so we won't be surprised if behaviors continue to shift around a little bit. So that's on the tissue side.
And the other part of it is, certainly, there was a consumer -- we think consumer pantry destocking as well. I will tell you, the team in North America has done a phenomenal job conducting research to try to estimate that. I will say it's probably as accurate as trying to estimate share from panel data, right? And so you're asking consumers how much they're carrying. And so -- but we do believe consumers are taking a lot of their stock out as they have more confidence that tissue is available but that remains to be proven out. So that's on the tissue.
And then on the birth rate. Yes, our estimate for this year, first of all, it's probably down about mid-single -- low to mid-single digit. And that's probably a little worse than the last -- the prior 2 years. I think the prior couple of years were down about 1% to 2% depending on the year. And then given COVID, I think it feels like some families have decided to defer family formation and so kind of in that range.
I will say we feel really good about the recovery of our infant child care business and the fact that we're really recovering from a supply perspective. Our brand propositions, we feel very strongly about. And so we feel like in the third quarter, we should be back being on track in our infant child care business.
Our next question comes from Steve Powers with Deutsche Bank.
You did throw a lot at us on that consumer tissue conversation, but I guess I have just a clarification coming out of the back and forth you just had with Chris and the commentary this morning. If -- I guess I'm still trying to ascertain whether you see a change in consumer takeaway expectations on the balance of the year. Because what I read in the prepared remarks is that the consumer pantry and retailer inventory rebalancing occurred faster than you previously assumed as it relates to 2Q. And you just kind of reaffirmed that, but I didn't really hear anything about a net reduction in consumer takeaway. So I guess, were you not assuming any rebalancing in the course of '21 before? It just happened in '21, where you thought it would happen later downstream? Or is there -- because I guess I can understand the pull forward in the rebalancing for the first half versus more spread out and not hurt 2Q, but there's still a net negative impact on the full year that I can't pinpoint. So can you just help me there?
Yes, there's a couple of different ways for me to answer that question. I'll say let me anchor it versus our original plan, our plan expectations for tissue at the beginning of the year. We walked in the year -- and just think back to December, Steve, where the vaccines were really not rolled out, and so our going-in was that the category would be lower than 2020 overall, but in some ways, probably a mid-single-digit decline, right? Because we thought at that point in time, consumers -- people would still be at home generally, right?
Now coming out of that, and as we entered our April update, it's clear that the vaccines rolled out much faster than anybody anticipated and mobility, the data that we track, show that we're returning to maybe 80% or 85% of historical levels. And so that was faster than we had anticipated. And so our expectations for the category, I'd say, were down a little bit further.
I think coming out of the second quarter, I would say our category expectations, which were up about 22% in bath last year, probably, we would say, are going to be down at least in the mid-teens or so, mid- to high teens. And so overall, I think our expectations for the category are going to be worse than they were at the beginning of the year. That said, at that level, I would say that's still -- I still believe it should be above a base year of 2019, right, if you take the 2 years together.
That remains to be seen. It feels like a kind of a sticking my neck out there call on that just because of what we experienced in the front half. But again, I'm working from logic that says there are likely to be more people at home than there were in 2019. And if people are home more often, then the consumption of at-home issue should be higher but that remains to be proven out.
Yes. Okay. Okay, that helps. And I guess that segues into my next question, which you sound pretty satisfied and happy and kind of upbeat with the trajectory of the Professional business, probably in part because of that vaccination reopening trend. I guess -- so that resonates with me, but I guess I was expecting a bit more just as it relates to 2Q, given the dynamics you said as an offset to consumer tissue. And so just maybe a little bit more color as to how you see that business trending and kind of what your expectations are in the back half?
Yes. On KCP, I wouldn't convey happy. I would say it's certainly proud of our team and how they respond to all these challenges. I'm cautiously optimistic about where that category is, and I do see some green shoots. I mean, a couple of things kind of going on. Organic was up 2%, right, which is a sequential improvement versus where we -- we've been for these past several quarters. That was predicated on really strong growth internationally, which had a really soft comp from a year ago.
But importantly, improvement in -- sequential improvement in the North American washroom business, which is a big business for us and really, really important. I wouldn't say it's taken off yet but we are seeing the impact of more people returning to work, whether it's in the office environment or a factory environment. And so I think that's -- those are all positives there.
There are some offsets because we did grow significantly in our wipers and PPE or safety business last year due to additional COVID demand. That's probably cycling down a little bit this year and that's a bit of an offset. So we feel good about the KCP business. I think the team, even throughout last year, was working hard. I think somebody mentioned on the call last year around jet-air dry conversions, and we've got better offerings in our washroom business, great towel products, great dispenser products. And so we are winning conversions. But I think I said on prior calls, we haven't seen the -- we won't see the share until the products flow through the dispensers. So what we feel good about what the team is doing and looking forward to, I'm cautiously optimistic.
Okay. If I could just, Maria, you've mentioned that [770] or so at the midpoint of inflation to come over the back half. Do you -- is there any, I guess, color you can offer in terms of how you see that flowing 3Q versus 4Q, if it's weighted significantly one versus the other or if it's more evenly spread? Just some help with the cadence there would be helpful.
Yes. I think the expectations are that the commodities will reach peak in the third quarter and then start to ease a bit as we get into the fourth quarter. So I'd use that as the kind of phase-in guidance.
Our next question comes from Peter Grom with UBS.
So you mentioned in your prepared remarks, and I was also pretty encouraged by the performance and commentary around D&E. And so obviously, you have pockets of strength, pockets of weakness, and you mentioned strong share performance there. But I was just curious, has the consumer been more resilient in those markets than you would have anticipated, kind of given the COVID environment? Or is this strength really just Kimberly-specific?
Well, that's really hard for me to generalize because I think it varies. I think certainly, there's a lot of markets that were less impacted by COVID, and I would say a lot of that is in Asia. Although I caution when I say that because it's starting to pop up again now more significant, particularly in market big markets for us like Indonesia. So I think there is some aspect of resiliency.
But the other aspect is and maybe underlying is the strategy that we're on, which is to elevate the category and expand our markets. And I think the teams are really concentrated, particularly in infant and child care with the Huggies brand, really great product offerings. I mean I think the big thing that's happened over the last, I would say, 2 years is, globally, our teams on diapers have really aligned around kind of a set of consumer benefits that we're going to win on and really aligned on kind of the product technology platforms at our global platforms that we're launching.
For reference, we're up 4 share points in Australia, New Zealand in diapers. We're already obviously the market leaders there. But that diaper has specific lineage that's linked to our China diaper. I wouldn't say they're identical but they're highly related, right? And so that's kind of the work that we've been on. We've taken share leadership positions in Argentina and Brazil. And again, the diaper there is related to the diaper that we're making in North America. They're not twins but they're related, right?
And so I think again, the teams are really focused on, I would say, a -- made a shift from product features to consumer benefits that we're focused on delivering. And I think that's really shown in the shares. And again, I'd say in China, we were up about 3 share points in the quarter as we were last quarter. I mentioned 4 share points in Australia and New Zealand, 4 in Korea, 4 share points in Peru. So we're seeing pretty broad-based share gains.
But we feel like they're earned. We're certainly not promoting our way to those share gains because we don't really believe in renting share. I think it's basically great products, great digital execution and then really hard sales execution and great partnership with customers.
No. That's super helpful. And then I just wanted to ask a couple of follow-up questions in regards to the commentary on second half organic sales growth. So first, I just want to make sure I heard the comment on volume growth correctly. Is that a total company comment or was that something specific to consumer tissue? I thought total company but I just wanted to be sure because I think Chris's question was on consumer tissue. And then just like anything you can share on phasing of that 3% growth between Q3 versus Q4, given the cycling of the accrual true-up in Q4 would be really helpful.
Sure. I was making the comments I'm just bridging from the question on consumer tissue to the total company because consumer tissue is certainly part of the story in the second half when we look at the total company outlook. So to clarify, I was talking about total company in my remarks about first half, second half.
And the phasing of the quarters, I'm going to stay away from quarterly guidance. Here, I think the things to consider are the year-over-year comps. I did make some commentary around phasing on the commodity headwinds. And beyond that, I think I'm going to stay away from the quarters.
Your next question comes from Jason English with Goldman Sachs.
So a couple of questions. I guess I just I really want to focus in on tissue and pricing. You guys had phenomenal price growth in the fourth quarter '20 in North American tissue. And I believe it was because you had under-accrued or over-accrued -- excuse me, over-accrued for trade spend throughout the course of the year and had the true-up. So we're lapping a period where you had over-accrued for trade spend, suggesting that, well, I know list prices take time to get in, but I think I was expecting -- many of us were expecting you to at least get some pricing benefit from lower trade.
Yet on a 2-year stack basis in North America, prices eroded. In developed markets outside of North America, prices are deflationary. In developing and emerging markets, your prices are deflationary, and you just achieved the worst price/cost deficit that I can find on record. So it begs the question of what's happening? What's really impeding your pricing power right now, particularly in an environment where as you're saying, you expect demand to be above base case 2019? Why aren't we seeing more responsiveness of sort of net price benefits flowing through the P&L?
Yes. I will start, Jason. So part 1 is we have announced pricing in consumer tissue in many markets, in most of our tissue markets around the world, including in North America. I wouldn't say we've taken it across every product line. And so Scott 1000 is kind of a key product that we have. And so that's 1 area.
Certainly, we did benefit, as you mentioned, from accrual differences at the end of last year. And the other thing that we benefited throughout last year was given the amount of demand in the marketplace, we reduced our promotional spending overall, right? And so we kind of earned maybe the same or higher volume levels without having to spend the trade. So that was a benefit last year that we are cycling this year, and so we are putting some investment back in trade.
For reference, I would say, the category promotional intensity in a market like North America, still below historical levels but moving its way back to what I would say are more normalized levels, and so we recognize the need to do that. The thing that I will tell you is I think your point is on, which is we've got to get better price realization. I will say we don't necessarily view the additional spending of trade to be a negative profit driver in the sense of, we've invested in a lot of tools and revenue management, and we expect our teams to be able to use those tools to drive volume and growth profitably. And so we're going to hold ourselves accountable to that.
But with that, again, we recognize the need to get additional price realization, and there's many ways for us to do that in addition to the list pricing that we've taken. And there's also ways for us to do that through revenue management, through trade efficiency, price pack and other things that we'll continue to look at. I don't know if, Maria, you have any thoughts.
Yes, that's right.
Okay. So there's other mechanisms, we're just not going to see them yet. They're going to take time to see. Last time we had inflation in tissue, you guys ran a price/cost deficit for 8 consecutive quarters before you flipped positive. Is there any reason to think that you could close the gap faster? Or given the environment that you're mentioning, with promotional activity actually picking up in the face of rising costs, could it actually even be more prolonged this time?
Well, again, I think we've actioned generally our pricing in the marketplace. And so I would think that, hopefully, the duration of that gap would be shorter. Certainly, we didn't like the gap through the first half of this year. And so that's 1 part. Second, again, we're going to continue to review kind of all the levers that we have on revenue management and make sure that we make the appropriate adjustments to our plans on a market-by-market basis.
Our next question comes from Andrea Teixeira with JPMorgan.
So I wanted to go back to pricing, I'm sorry to beat a dead horse here. But what is your read on the consumer elasticity, not only in the U.S. but also internationally as you obviously compete with players that oftentimes are private? But specific to the U.S., the dollar share that we're looking not only in tissue, in track channels, as you explained well through Chris' question before but also in diapers, are you seeing that the same decline across all channels? And is that an indication that consumers are probably down-trading now, that they see private label, for example, Scott 100 (sic) [Scott 1000] is the one that competes more neck-to-neck with private label? So are you seeing any issue there or perhaps you're going to tweak a little bit of your price increase now that you know what you know about tissue, and then perhaps do more RGM where you barbell a little bit of these price increases. So any update on embedded in your guidance, if you were changing some of your pricing or any second rounds in North America that we may not be aware or you embedded in there? So any color there would be great.
Yes. Great question, Andrea. Maybe the short answer for me is I don't know yet. I think for reference, we took about a high single-digit price increase across our personal care businesses and then some selective price increases, for example, on Scott tissue in North America. And I would say those went into effect at the end of June. And so it's a little early for us to gauge that.
If I go off the history though, I will say the last list price increase we took on these businesses actually in personal care was not list, it was more count, okay? But that said, I would say the consumer elasticity at that point back in 2018 was probably, in my mind, a little lower than what we modeled in terms of elasticity. So what that implies, I think there's a couple of different factors. If I would say, more price sensitive factors would be that I think consumers are facing broader inflation in this environment across all categories, right, beyond consumer packaged goods. So that may be 1 factor, right, that makes it a little more challenging.
The other factor that I know talking to people in other industries is there have been reductions in other spending, consumer spending, which create a little more wallet for some of the more consumables, and so that's an offset. So for me, the answer is at this point, a little theoretical ambiguous. And so it remains to be seen but we'll know as we work through this quarter.
And no, that's super helpful for tissue. And in diapers, like I felt that you don't have as much of this channel stuffing that we saw, even I'm assuming retail inventory. I think you spoke mostly from a consumer tissue perspective and not so much on the diaper. So what is happening there? Do you see that changing also the elasticities moving around as a moving target for you?
Again, I don't see significant change, but again, it's still early for us to tell. Yes, I think you're right, Andrea, the dynamics in personal care were very different than tissue last year. And so there was a bit of a, I would say, consumer buy-in in the first quarter last year, but it was, I would say, a mid-single-digit kind of number, maybe mid- to high single-digit, whereas the first quarter last year consumer tissue was like up 30%. And so very, very different behavior.
And then we unwound that, almost all of that in Q2 of last year. And so I think the consumer -- the personal care North America behavior has perhaps been a little bit normalized. And again, I think the same thing holds from what I was talking about with tissue, which is our pricing has been kind of in the market for about 3 weeks now. It's a little bit earlier for us to get a read, but again, I think we feel cautiously optimistic about it.
Next, we have a follow-up from Lauren Lieberman with Barclays.
Sorry, I was taken offguard. Wanted to ask about -- let me just find my follow-up question -- just the category growth in personal care in D&E markets. I know you talked a bit about -- very much so about market share gains. But one of the things that's definitely been out there like the resilience of some of the categories in D&E markets. So just anything you can offer in terms of perspective on why the categories have kind of held in as well as they have because even again, with your share growth, it still implies the categories are in a pretty good spot, too?
Yes. And maybe I'll go around the world because it varies so much because of a couple of things, one -- probably the biggest 1 being COVID. I would say we were really positively encouraged by our performance across Latin America. I thought it was terrific performance in a really, really challenging COVID environment. I'm sure you're kind of reading all about it. But I mean, in a market like Brazil, our personal care organic was up over 20% behind volume and price, and we did take pretty significant pricing actions there.
Overall, we maintained our share there. We're already in the leadership position. And I think what's happening in Latin America broadly and why we're winning is the team is doing an excellent job adding value by premiumizing the category but also pivoting, in some ways, back and forth, even within the same year between value and premium. So the big thing is we have very strong leadership positions throughout Latin America. For example, in Argentina, we're the leaders in value tier and we're the leaders in premium tier, and we're the #1 brand overall.
And so the team, depending on kind of what's happening in the local environment, kind of makes the pivot as to what products they're going to maybe drive and emphasize a little harder. And certainly, I think in Latin America, maybe this year more than maybe even 2 years ago, value is very important. Consumers are stretching out their consumption. But we flow through a lot of our great product innovation to our value tier as well. And I think that's working. So that's kind of 1 set of things.
I would say China is different. Lauren, we're up 3 share points in the quarter. We're proud, at least for now, we're in the #1 share position, which we feel great about and we feel really great about our products. And so I think the consumer continues to really respond to product superiority and innovation. I will say the category conditions are pressurized because I don't know how much you're seeing but the birth rates are coming down fairly significantly. And so we recognize that's going to be an issue for us to work through. But in the near term, our team feels great about their ability to grow the business, to grow share and work with the big e-commerce partners.
And then in some of the other markets, Eastern Europe, I mean, I think we are multiple share points up in almost every market across Eastern Europe, somewhere in the 1 to 7 points of share in the quarter. And again, I think great offering. They're all related. The China diaper, the U.S. diaper, the Brazil, they're kind of all related to each other and very good. And I think the teams are recognizing how to drive those. So I think it varies.
The 1 watch-out area that we're very kind of paying close attention to because of COVID is ASEAN, Indonesia, Vietnam, India as well. Again, those environments right now are really pressured with the pandemic, and so we're really keeping a close eye on that. So I don't know if I answered what you were looking for, if there's something else.
Yes. No, absolutely. I really appreciate it.
Next, we have a follow-up from Jason English with Goldman Sachs.
Super quick follow-up question, real tactical on your response to Lauren there. I think you said China growth for you on personal care was up maybe mid-single-digits, but you just said you captured 300 basis points of share in the quarter. It implies a pretty sharp market decline in the market. So can you drill down a little bit deeper there, like what is the rate of decline you're seeing? And I think you mentioned birth rates down and that we know, the birth rate is down, that has a prolonged drag on infant population. So is what we're seeing today likely to persist for a protracted period of time?
Yes. Sorry, my bad. I was a little unclear. China overall, personal care was up mid-single-digit. Our diaper business was up double digits. But that said, I think your question still holds. Yes, there are expected to be some birth rate challenges in China, so it will slow down as a market. I still believe, and I think our team believes, there's still significant opportunity to premiumize our categories and we're still a low double-digit share. And so there's still plenty of share opportunity. That said, I do think there will be a slowdown on the diaper side of the business.
Our fem care business has been growing strong double-digits. In the quarter, it was down a bit because we were cycling a promotion, a big promotion that we've decided to get out of this year. And so -- but we feel great about our fem care business. That's grown strong double-digits for, I think, 3 or 4 years in a row now. And so we expect continued growth in China, although I think on the diaper side, the category will be challenged somewhat. It also kind of points out our emphasis on diversifying our growth across developing and emerging markets. So one of the things I'm excited about, Jason, is I think we grew significantly in India. I don't know if I could -- I think -- well, strong double-digits in the quarter. And I would say, Indonesia, I'm really glad we made the acquisition of Softex. It's a great business. I think the business is up in the teens. Even though they are cycling or working through some pretty good COVID challenges, pretty significant COVID challenges but it's a great business and a great team. And again, with Indonesia -- in India, I think the growth in those markets is going to be very significant for us over the next several years.
Thank you. There are no more questions at this time.
Okay. All right. Thank you all very much. We're certainly navigating some high volatility in external environment, but we're taking decisive action and we're continuing to improve our brand fundamentals to sustain long-term sustainable growth. All right. So for that, thank you.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.