Executive Overview

Colgate-Palmolive Company seeks to deliver strong, consistent business results and superior shareholder returns by providing consumers on a global basis with products that make their lives healthier and more enjoyable.

To this end, the Company is tightly focused on two product segments: Oral, Personal and Home Care; and Pet Nutrition. Within these segments, the Company follows a closely defined business strategy to develop and increase market leadership positions in key product categories. These product categories are prioritized based on their capacity to maximize the use of the organization's core competencies and strong global equities and to deliver sustainable long-term growth.

Operationally, the Company is organized along geographic lines with specific regional management teams having responsibility for the business and financial results in each region. The Company competes in more than 200 countries and territories worldwide with established businesses in all regions contributing to the Company's sales and profitability. This geographic diversity and balance helps to reduce the Company's exposure to business and other risks in any one country or part of the world.

The Oral, Personal and Home Care segment is operated through four reportable operating segments: North America, Latin America, Europe/South Pacific and Greater Asia/Africa, all of which sell to a variety of retail and wholesale customers and distributors. The Company, through Hill's Pet Nutrition, also competes on a worldwide basis in the pet nutrition market, selling its products principally through the veterinary profession and specialty pet retailers.

On an on-going basis, management focuses on a variety of key indicators to monitor business health and performance. These indicators include market share, sales (including volume, pricing and foreign exchange components), gross profit margin, operating profit, net income and earnings per share as well as measures used to optimize the management of working capital, capital expenditures, cash flow and return on capital. The monitoring of these indicators, as well as the Company's corporate governance practices (including the Company's Code of Conduct), are used to ensure that business health and strong internal controls are maintained.

To achieve its business and financial objectives, the Company focuses the organization on initiatives to drive and fund growth. The Company seeks to capture significant opportunities for growth by identifying and meeting consumer needs within its core categories, through its focus on innovation and the deployment of valuable consumer and shopper insights in the development of successful new products regionally, which are then rolled out on a global basis. To enhance these efforts, the Company has developed key initiatives to build strong relationships with consumers, dental and veterinary professionals and retail customers. Growth opportunities are greater in those areas of the world in which economic development and rising consumer incomes expand the size and number of markets for the Company's products.

The investments needed to fund this growth are developed through continuous, Company-wide initiatives to lower costs and increase effective asset utilization through which the Company seeks to become even more effective and efficient throughout its businesses. The Company also continues to prioritize its investments toward its higher margin businesses, specifically Oral Care, Personal Care and Pet Nutrition.

Consistent with the Company's strategy to prioritize higher margin businesses, in the fourth quarter of 2006 the Company announced its agreement to sell its household bleach businesses in Latin America and Canada. The transaction closed in Canada during the fourth quarter of 2006. In the Latin American countries, the transaction closed during the first quarter of 2007 with the exception of Colombia, where the transaction did not receive regulatory approval and the parties have agreed not to proceed with the sale.

The Company's previously announced four-year restructuring and business-building program (the 2004 Restructuring Program) to enhance the Company's global leadership position in its core businesses is progressing on schedule and is expected to be completed by December 31, 2008. On April 24, 2007, the Company expanded the 2004 Restructuring Program to encompass additional savings projects identified by the Company during the course of implementing the program. Including the expansion, the cost of implementing the four-year 2004 Restructuring Program is estimated to result in cumulative pretax charges, once all the projects are approved and implemented, totaling between $1,000 and $1,075 ($725 and $775 aftertax). Over the course of the 2004 Restructuring Program, it is estimated that approximately 50%-60% of the charges will result in cash expenditures. Once all projects are implemented, savings are projected to be in the range of $425 and $475 pretax ($325 and $350 aftertax) annually, substantially all of which is expected to increase future cash flows.

While the Company expects market conditions to remain highly competitive throughout 2008, the Company believes it is well-positioned for continued growth. Increasing material and commodity costs, and the extent to which the Company is able to offset them through selling price increases and cost-savings initiatives, will impact gross profit margins in the near-term. Over the long-term, the Company's continued focus on its consumer products business, the strength of its global brand names, its broad international presence in both developed and developing markets and its strong capital base all position it to take advantage of growth opportunities and to increase profitability and shareholder value.

Results of Operations

Worldwide Net sales were $3,964.8 in the second quarter of 2008, up 16.5% from the second quarter of 2007 driven by volume growth of 5.0%, net selling price increases of 4.5% and a positive foreign exchange impact of 7.0%.

Net sales in the Oral, Personal and Home Care segment were $3,417.3 in the second quarter of 2008, up 16.0% from the second quarter of 2007 driven by volume growth of 5.0%, net selling price increases of 3.5% and a positive foreign exchange impact of 7.5%.

Net sales in North America increased 6.5% in the second quarter of 2008 to $715.1 driven by volume growth of 4.5%, net selling price increases of 1.5% and a positive foreign exchange impact of 0.5%. Products contributing to the growth in oral care included Colgate Total Advanced Clean, Colgate Total Advanced Whitening, Colgate Max Fresh and Colgate Sensitive toothpastes, Colgate 360°, Colgate 360° Sensitive and Colgate 360° Deep Clean manual toothbrushes and Colgate 360° Sonic Power battery toothbrush. Successful new products in other categories contributing to growth include Irish Spring Moisture Blast and Irish Spring Reviving Mint body wash for men, Softsoap brand SPA Radiant body wash and liquid hand soap, Softsoap brand foaming liquid hand soap in new fragrances and Softsoap brand Body Butter Coconut Scrub moisturizing body wash. Operating profit in North America increased 5% in the second quarter of 2008 to $169.8, reflecting increased sales and the benefits from restructuring and other efficiency programs, partially offset by higher raw and packaging material costs.

Net sales in Latin America increased 23.5% in the second quarter of 2008 to $1,065.1 as a result of 7.5% volume growth, net selling price increases of 8.5% and a positive foreign exchange impact of 7.5%. Volume growth was led by Mexico, Brazil, Venezuela, Colombia and Argentina. Products contributing to the growth in oral care included Colgate Total Professional Clean and Colgate Max White toothpastes, Colgate 360°, Colgate 360° Sensitive and Colgate Max Fresh manual toothbrushes, Colgate 360° MicroSonic battery toothbrush and Colgate Plax Whitening and Colgate Plax Ice mouthwashes. Products contributing to growth in other categories include Palmolive Naturals Yogurt and Fruits and Protex Oats bar soaps, Palmolive bar soap and shower gel with ingredients from the Amazon, Lady Speed Stick Double Defense multi-form deodorants, Palmolive Caprice shampoo, Protex Oats shower gel and Suavitel Magic Moments fabric conditioner. Operating profit in Latin America increased 19% in the second quarter of 2008 to $294.5, reflecting increased sales and gross profit margins partially offset by higher levels of advertising.

Net sales in Europe/South Pacific increased 14.5% in the second quarter of 2008 to $966.7 as a result of 0.5% volume growth and a 14.0% positive impact of foreign exchange. Volume growth in the GABA business, the United Kingdom, Poland, Greece, Germany, the Baltic States and Australia more than offset volume declines in France and Italy due to challenging market conditions. Products contributing to growth in oral care include Colgate Total, Colgate Max Fresh and Colgate Max White toothpastes, Colgate 360°, Colgate 360° Sensitive and Colgate Max Fresh manual toothbrushes, Colgate 360° Sonic Power battery toothbrush and Colgate Plax Whitening mouth rinse. Products contributing to growth in other product categories include Palmolive Pure Cashmere Intense Nourishment, Palmolive Naturals Cherry Blossom and Palmolive Tahiti Pearl shower gels, Ajax Professional bucket dilutable and Ajax Professional glass cleaners and Soupline Magic Moments fabric conditioner. Operating profit in Europe/South Pacific increased 8% in the second quarter of 2008 to $202.1, reflecting increased sales partially offset by higher levels of advertising.

Net sales in Greater Asia/Africa increased 17.5% in the second quarter of 2008 to $670.4 driven by volume growth of 7.5%, net selling price increases of 4.5% and a positive foreign exchange impact of 5.5%. Sales growth for the three months ended June 30, 2008 was reduced by 0.5% versus the comparable period of 2007 as a result of the Company's divestment of its fabric care business in Senegal. Excluding the impact of this divestment, Net sales increased 18.0% on volume growth of 8.0%. The strong volume growth was led by India, Russia, Ukraine, Malaysia, Thailand, Philippines, Vietnam, South Africa, the Gulf States and the Greater China region. Successful new products driving the oral care growth include Colgate Total Professional Clean, Colgate Max Fresh, Colgate 360° Whole Mouth Clean

and Darlie Salt White toothpastes, Colgate 360° Sensitive and Colgate 360° Deep Clean manual toothbrushes, and Plax Overnight Herbal Sensations mouthwash. New products contributing to growth in other categories in the region include Palmolive Nutra-Oil shower gel, Palmolive Thermal Spa Nourishing Boost shower gel, bar soap and liquid hand soap, Palmolive Pure Cashmere shower cream and bar soap, and Protex Icy Cool bar soap. Operating profit in Greater Asia/Africa increased 21% in the second quarter of 2008 to $105.1, reflecting increased sales and gross profit margins partially offset by higher levels of advertising.

Net sales for the Hill's Pet Nutrition segment increased 19.5% in the second quarter of 2008 to $547.5 driven by volume growth of 6.0%, an increase in net selling prices of 8.0% and a positive foreign exchange impact of 5.5%. Strong performers within the U.S. specialty pet channel included Science Diet Adult Large Breed Canine, Science Diet Adult Lamb Meal & Rice Recipe Small Bites Canine and Science Diet Nature's Best Canine. Science Diet Indoor Cat Adult, Science Diet Nature's Best Feline and Science Diet Tender Chunks in Gravy Feline pouches contributed to growth in feline. Prescription Diet c/d Multicare Feline, Prescription Diet d/d Canine, Prescription Diet r/d Feline and Prescription Diet w/d Feline drove growth in the U.S. veterinary channel. Internationally, volume growth was led by Italy, France, Germany, Belgium, the Netherlands, Australia, Taiwan, Thailand, Poland, Venezuela and Hong Kong. New pet food products contributing to the international growth include Science Plan Canine and Feline Nature's Best, Science Plan Chunks in Gravy Feline pouches and Prescription Diet Hypo Allergenic Canine treats. Operating profit increased 6% in the second quarter of 2008 to $129.9, reflecting increased sales partially offset by lower gross profit margins as a result of higher costs for agricultural commodities and higher levels of advertising.

Worldwide Net sales were $7,677.8 in the first half of 2008, up 16.0% from the first half of 2007 driven by volume growth of 5.0%, net selling price increases of 3.5% and a positive foreign exchange impact of 7.5%.

Net sales in the Oral, Personal and Home Care segment were $6,627.1 in the first half of 2008, up 15.5% from 2007 driven by volume growth of 5.0%, net selling price increases of 3.0% and a positive foreign exchange impact of 7.5%. The 2007 divestment of the Latin American household bleach business and the 2008 divestment of the fabric care business in Senegal reduced sales growth for the six months ended June 30, 2008 by 0.5% versus the comparable period of 2007. Excluding these divestments, sales increased 16.0% on volume growth of 5.5%. Within this segment, North America sales increased 7.0% driven by volume growth of 4.5% and net selling price increases of 1.5%, Latin America sales increased 22.0% on volume growth of 7.0% and net selling price increases of 7.5%, Europe/South Pacific sales increased 15.0% on volume growth of 2.0% and Greater Asia/Africa sales increased 18.5% on volume growth of 7.5% and net selling price increases of 4.0%, with the remainder of the increase in each region due to positive foreign exchange. The 2007 divestment of the Latin American household bleach business and the 2008 divestment of the Senegal fabric care business reduced sales growth for the six months ended June 30, 2008 by 0.5% versus the comparable period of 2007 for each of the Latin America and Greater Asia/Africa regions. Excluding the impact of these divestments, sales increased 22.5% for Latin America and 19.0% for Greater Asia/Africa on volume growth of 7.5% and 8.0%, respectively.

Net sales for the Hill's Pet Nutrition segment increased 18.0% in the first half of 2008 to $1,050.7 driven by volume growth of 5.0%, net selling price increases of 7.5% and a positive foreign exchange impact of

5.5%. Like most North American pet food producers, Hill's Pet Nutrition was affected by the U.S. Food and Drug Administration's pet food recall in March 2007. Hill's Pet Nutrition took the precaution of conducting a voluntary recall of a small number of its products that may have been affected. These products accounted for less than 0.5% of Hill's Pet Nutrition's annual 2007 Net sales. Hill's Pet Nutrition's Operating profit for the first six months of 2007 does not reflect the impact of the recall as those costs have been included in the Corporate Segment.

Operating profit (loss) related to Corporate decreased to ($134.4) in the second quarter of 2008 from ($147.0) in the comparable period of 2007, primarily due to lower restructuring and implementation-related charges. Operating profit (loss) related to Corporate increased to ($280.3) in the first half of 2008 from ($269.1) in the comparable period of 2007, primarily due to the gain on sale of non-core product lines included in the results for the first six months of 2007, offset by lower restructuring and implementation-related charges. The changes in Corporate Operating profit (loss) are summarized in the following table:

                                                           Three Months Ended              Six Months Ended
                                                                June 30,                       June 30,
                                                         2008               2007           2008         2007
2004 Restructuring Program                           $       (38.9 )     $     (55.4 )   $  (77.3 )   $ (101.3 )
Gain on sale of non-core product lines                          -                 -            -          48.6
Hill's limited voluntary recall                                 -                 -            -         (13.6 )
Other Corporate                                              (95.5 )           (91.6 )     (203.0 )     (202.8 )

Corporate Operating profit (loss)                    $      (134.4 )     $    (147.0 )   $ (280.3 )   $ (269.1 )

Restructuring and implementation-related charges are reflected in the following income statement categories:

                                                           Three Months Ended              Six Months Ended
                                                                June 30,                       June 30,
                                                         2008               2007           2008         2007
Cost of sales                                        $        11.0       $      34.7     $   36.9     $   66.4
Selling, general and administrative expenses                  20.7              10.0         33.9         21.1
Other (income) expense, net                                    7.2              10.7          6.5         13.8

Total 2004 Restructuring Program charges, pretax     $        38.9       $      55.4     $   77.3     $  101.3

Total 2004 Restructuring Program charges,
aftertax                                             $        29.5       $      41.7     $   50.7     $   71.6

For additional information regarding the Company's 2004 Restructuring Program, refer to Note 9, "Restructuring and Related Implementation Charges," of the Notes to Condensed Consolidated Financial Statements.

Worldwide gross profit margin increased to 56.5% in the second quarter of 2008 from 56.0% in the second quarter of 2007 and increased to 56.5% in the first half of 2008 from 56.2% in the first half of 2007. Restructuring and implementation-related charges lowered the reported gross profit margin by 30 basis points (bps) and 110 bps in the second quarter of 2008 and 2007, respectively, and lowered the reported gross profit margin by 50 bps and 100 bps in the first half of 2008 and 2007, respectively. Excluding the impact of the 2004 Restructuring Program, gross profit margin was 56.8% and 57.1% in the second quarter of 2008 and 2007, respectively, and 57.0% and 57.2% in the first half of 2008 and 2007, respectively. For both periods presented, increases in raw and packaging material costs were largely offset by higher pricing, a continued focus on cost-savings programs and a shift toward higher-margin products.

Selling, general and administrative expenses as a percentage of Net sales remained consistent at 35.9% in the second quarters of 2008 and 2007 and decreased slightly to 36.1% of Net sales in the first half of 2008 from 36.2% in the first half of 2007 reflecting increased advertising costs offset by a continued focus on cost-savings programs. In the second quarter of 2008 advertising increased 18% to $462.1 as compared with $391.1 in 2007. In the first half of 2008 advertising increased 17% to $876.2 as compared with $747.4 in 2007.

Other (income) expense, net increased $23.0 from $27.1 in the second quarter of 2007 to $50.1 in the second quarter of 2008 and increased $59.3 from $18.0 in the first half of 2007 to $77.3 in the first half of 2008. The second quarter of 2008 includes a $13.0 provision in Corporate related to legal and environmental costs. Additionally, the first half of 2007 includes a pretax gain of ($48.6) related to the sale of the Company's household bleach business in Latin America. Offsetting the above was a decrease in expenses related to the Company's 2004 Restructuring Program of $3.5 from $10.7 in the second quarter of 2007 to $7.2 in the second quarter of 2008 and of $7.3 from $13.8 in the first half of 2007 to $6.5 in the first half of 2008. Other (income) expense, net in the first half of 2007 also includes $12.6 of charges related to the limited voluntary recall of certain Hill's Pet Nutrition feline products.

Operating profit increased 17% to $767.0 in the second quarter of 2008 from $657.6 in 2007, benefiting from a $16.5 decrease in charges related to the 2004 Restructuring Program compared to the second quarter of 2007. Restructuring and implementation-related charges were $38.9 and $55.4 for the second quarter of 2008 and 2007, respectively. Operating profit increased 14% to $1,490.7 in the first half of 2008 from $1,308.7 in 2007, benefiting from a $24.0 decrease in charges related to the 2004 Restructuring Program compared to the first half of 2007. Restructuring and implementation-related charges were $77.3 and $101.3 for the first half of 2008 and 2007, respectively. Additionally, the first half of 2007 includes the negative impact of $13.6 related to the limited voluntary recall of certain Hill's Pet Nutrition feline products as well as a $48.6 gain related to the sale of the Company's household bleach business in Latin America. Excluding the impact of the 2004 Restructuring Program and other items, operating profit increased 13% in the second quarter of 2008 and 14% in the first half of 2008, determined as follows:

                           COLGATE-PALMOLIVE COMPANY

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                      CONDITION AND RESULTS OF OPERATIONS

            (Dollars in Millions Except Share and Per Share Amounts)







                                                 Three Months Ended               Six Months Ended
                                                      June 30,                        June 30,
                                                                   %                                  %
                                              2008      2007     Change     2008        2007        Change
Operating profit, GAAP                       $ 767.0   $ 657.6    17%     $ 1,490.7   $ 1,308.7      14%
2004 Restructuring Program                      38.9      55.4                 77.3       101.3
Gain on sale of non-core product lines            -         -                    -        (48.6 )
Hill's limited voluntary recall                   -         -                    -         13.6

Operating profit, non-GAAP                   $ 805.9   $ 713.0    13%     $ 1,568.0   $ 1,375.0      14%

Interest expense, net decreased to $25.4 and $59.1 for the three and six months ended June 30, 2008, respectively, as compared with $40.4 and $83.1 in the comparable periods of 2007, due to lower average interest rates and higher cash balances.

The quarterly provision for income taxes is determined based on the Company's estimated full year effective tax rate, adjusted by the amount of tax attributable to infrequent and unusual items that are separately recognized on a discrete basis in the income tax provision in the quarter in which they occur. The Company's current estimate of its full year effective income tax rate before discrete period items is 33.0%, an increase from the 2007 tax rate of 32.0%. The 2008 estimated full year effective tax rate reflects higher U.S. taxes as a result of increased remittances of overseas earnings partially offset by a change in mix of income in foreign tax rate jurisdictions.

The tax rates for the second quarter of 2008 and 2007 were impacted by the Company's 2004 Restructuring Program, resulting in effective tax rates of 33.4% and 32.6%, respectively. The tax rate for the first half of 2008 was also impacted by 10 bps due to the Company's 2004 Restructuring Program. The impact of the 2004 Restructuring Program on an individual period will depend upon the countries and the projects involved. Over its duration, charges associated with the 2004 Restructuring Program are projected to generate tax benefits at a rate between 25% and 30%.

The 2007 first half effective tax rate of 26.4% was impacted by the recognition of $73.9, 600 bps, of tax benefits as a result of the reduction of a tax loss carryforward valuation allowance in Brazil of $94.6, partially offset by tax provisions for the recapitalization of certain overseas subsidiaries, the sale of the household bleach business in Latin America (30 bps), the Hill's Pet Nutrition voluntary recall, 10 bps, and charges from the 2004 Restructuring Program (20 bps).

Net income for the second quarter of 2008 increased 19% to $493.8 from $415.8 in the comparable 2007 period, and earnings per common share on a diluted basis increased to $0.92 per share compared with $0.76 per share in the comparable 2007 period. Net income for the second quarter of 2008 and 2007 includes $29.5 ($0.06 per share) and $41.7 ($0.08 per share), respectively, of charges related to the Company's 2004 Restructuring Program.

Net income for the first half of 2008 increased 6% to $960.3 from $902.4 in the comparable 2007 period, and earnings per common share on a diluted basis increased to $1.78 per share compared with $1.65 per share in the comparable 2007 period. Net income for the first half of 2008 included $50.7 ($0.10 per share) of charges related to the Company's 2004 Restructuring Program. Net income for the first half of 2007 included a $29.7 gain ($0.05 per share) related to the sale of the Company's household bleach business in Latin America and an income tax benefit of $73.9 ($0.14 per share) related to the tax items noted above. Such benefits were partially offset by $71.6 ($0.13 per share) of charges related to the Company's 2004 Restructuring Program and $8.2 ($0.02 per share) of charges related to the limited voluntary recall of certain Hill's Pet Nutrition feline products.

Net sales and volume growth, both worldwide and in relevant geographic divisions, are discussed in this Quarterly Report on Form 10-Q both on a GAAP . . .