Full Year 2024 Church & Dwight Co Inc Earnings Call and Investor Day
Okay.
Yeah.
Okay.
That's good.
Uh huh.
Yeah.
Okay.
[music] milk.
Okay.
Okay.
Yes.
Please go ahead.
Yes.
Right.
Yeah.
Yes.
Yeah.
Yes.
Uh huh.
[music].
Yeah.
Okay.
[music].
Yeah.
[music] good morning, everybody.
Thanks for coming today. This is the 2025 analyst day for Church <unk> Dwight.
We got a big crowd with US today, we've got the entire management team. We've got a couple of casualties due to the flu that's going around so let's begin with the safe Harbor statement I encourage everybody to read that after class and.
Here's a list of the people we're going to be here today, all the presenters got a for Ts Charbagh from S. P D. You've got Mike Reed from international guests.
So Robbie poke around for a chief Digital officer Hugh it's.
Rick and Matt show as usual, we've got Stacy Randstad, who is our CMO and Carlos will nourish you haven't heard from Carlos in the past he leaves R&D and innovation for the company.
Alright long agenda here I won't read it too so, let's say kind of jump right in but let's start with two a 2025 is the 31st anniversary 35th anniversary of Church <unk> Dwight being listed on the New York Stock Exchange and are you can see the chart there.
If you adjust for stock splits there was some buck of share does back in 1990, and you can see we're well over 100 Bucks a lot today.
It was kind of a fun fact, so if you invested $1000 in church and Dwight 1990. When it was first listed it would be worth $114000. Today. So that's kind of a mark of a consistent company.
And the fell on the lower left as the White Minton.
Dwight Minton became the CEO were thinking 1969, and he is the a descendant of Boston Church.
Speaker Change: The church and Dwight Fame. So he's the last family member of the company to to take him to be a CEO and he succeeded his dad, who was CEO before him. So I'm. The third non family member who is CEO of church, <unk> Dwight and Rick will be the fourth a fun fact, so looking let's look back at the 'twenty 'twenty four.
Speaker Change: Sure.
Speaker Change: As you'll know if you've been following our story organic sales growth. We we beat our algorithm all three businesses U S International and SPD.
Speaker Change: We have seven power brands, you know represents 70% of our revenues and profits and a five or seven and increase their market share.
Speaker Change: Are all of the algorithm for our marketing spend is spent on about 11% annually and we spent over 11 and in 2020 for.
Speaker Change: Innovation is a big number for us this past year. So if we grew our organic growth 4% on a full year basis half of that came from new products that we launched in 2024, and that's incremental growth year over year came from new products and then online sales you know we've been a bit of a standout among CPG companies.
Speaker Change: For quite a few years, our online sales, where there's over 21% it's 21.4%.
Speaker Change: For total company what that translates to is if you have $6 billion in sales. We've got 1.3 billion of that is ordered online.
Speaker Change: A few more things. So you know we bought hero a couple of years ago. That's been a great brand for us where we've expanded that has now launched in 40 countries and now our job is to grow that brand in those 40 countries around the world Japan.
Japan is a big market over 100 million consumers, we acquired a terrific distributor of ours in Japan as a distributor that drove oxiclean to the number one prewash additive and powder in Japan, SPD Youre going to hear from <unk>, Chief strategic childhood today, and that's now a perennial grower.
Speaker Change: For us I'm going to hear more about that we generate a lot of cash as a company.
Speaker Change: Well over one point.
Speaker Change: $1 billion for 2024, and we've got a lot of Dell on a balance sheet almost $1 billion of cash at year end and well and we're all dressed up to buy some businesses going forward alright. Its strong performance. This is the one to three five and 10 year chart for Us and let's give you an idea of the consistency of this company for me.
Speaker Change: Many many years and it's really a tribute to the culture and to the management team of Church <unk> Dwight.
Speaker Change: Alright, not who we are many of you are long term holders people, who are here today or listening on the phone.
Speaker Change: So I'm going to I'm going to run through the things that should be very familiar to you. So the way were split is 77% domestic 18% international for a long time, then international number was 17% almost since I joined the company. So we're trying to starting to grow that one little faster seven power brands that make up 70 <unk>.
Speaker Change: A cent of our revenues and profits and you know we have an evergreen model. So this evergreen model is something that guides our view long term not just for the coming year, but three years five years 10 years. This is what we've tried to drive how we tried to drive T S or for our shareholders. So you see the 4% organic sales growth, it's 385 domestic international SPD.
Speaker Change: Our gross margin of 25 to 50 basis points.
The bright line for marketing is around 11% of sales, we try to get leverage on SG&A. So we try to go to grow the top line faster than SG&A growth and we're trying to expand our operating margins 50 basis points annually and that translates into 8%, 8% EPS growth.
Speaker Change: So here's the formula.
Speaker Change: Five things I'm going to cover one.
Speaker Change: We've got a balanced and diversified portfolio right. So we've got pretty much balance between household and personal care and SPD is essentially at a foundational business for for the company, it's where the arm <unk> Hammer brand for our first arose okay, where are split pretty much eat 60, 40, or so I shouldn't say two thirds one thirds between premium.
Speaker Change: And value why is that important it's what what's important because we performed well in just about any economic environment.
Speaker Change: We don't have a lot of exposure to private label you can see you can see that a little bit over over 10% that's been true for many many years.
Speaker Change: And ecommerce has been a great story for US you know we were probably fourth quartile back in 2016 and now we're first quartile with respect to our performance online and as I said earlier half of our growth our organic growth in 2024 came from new products and of course, you know that is so important to the equity.
Speaker Change: D of your brands is new innovation, so that speaks really well for the company and we got a lot more coming in 2025 as far as acquisitions go where we're pretty strict about what we're gonna by gotta be a number one or number two brand okay.
Speaker Change: It has to be a gross margin that's at or above the gross margins for the company. We like businesses that are asset light prefer to buy a business that is that as a co manufacturer, who don't necessarily have to buy a plant.
Speaker Change: Number four would be can we get synergies yeah, we got a very very sophisticated supply chain can make damn near anything. So consequently, we tried to get leverage in manufacturing or logistics and then finally, it's got to have a long term competitive advantage, meaning we don't buy something that's just going to be successful for the next two or three years, it's going to be successful five years 10 years out.
Speaker Change: Alright long history of growth through acquisition. So if you look at 2004 were $1 5 billion dollar company you can see almost every year. We have acquired a business. We don't have every year up there, but just some area, where we've acquired something 2023 and 2024 bit of a drought I'd say if you. If so when did you have you had.
Speaker Change: Drought before if you look at 2008, we acquired or gel 2012, we acquired the vitamin business between them, we bought some small businesses, but I'd say that was some time last time, we had a drought a couple of years not for a lack of trying though so that work is going to come up and take you through a few more details.
Speaker Change: So this is probably one of the last times I'm going to go through detailed financials with you guys. Okay.
Speaker Change: Our Q4 'twenty 'twenty four we ended the year with momentum right. We had three 5% reported sales growth our outlook was one and a half to two and a half came in better than we expected or our share gains for the quarter of five or seven or.
Speaker Change: For the year of five to seven.
Speaker Change: Of our brands per share right. So those are the important brands are driving the company for 2% organic came in better than we thought to 2% to 3% was our outlook.
Speaker Change: Gross margin came right, where we thought it was we called 110 basis points for the full year that implied flat for the quarter and then for EPS, we were up almost 19%. So just really strong ending to the.
Speaker Change: For the year in the quarter.
Speaker Change: So for the full year, 4% net sales growth four 5% organic sales growth.
Speaker Change: Three and a half for domestic nine for international and seven for SPD. So just really broad based growth across the company across the divisions backed 110 basis points of gross margin youre going to see in a minute we're back to 2019 levels, which is fantastic.
Speaker Change: Marketing this is where we spent incrementally we ended up at 11 four.
Speaker Change: So we spent a significantly more than we originally thought and this is really just again to have momentum as we entered 2025.
Speaker Change: And then eight 5% EPS growth and we generated $1.16 billion of cash.
Speaker Change: See you in a minute 2025, we think we're gonna be right around the same number so just generating a lot of cash or free cash flow conversion is around 115% and that gives us a lot of optionality.
Speaker Change: So look ahead, you know Matt did a great job of obtain where we where we have been and where we are now a lot of things that are great about this company, we have confidence in our future. Okay. This is really the outlook for for the evergreen model over the years to come Matt walked through why that's healthy why that's doing well.
Speaker Change: I'm going to walk through in a few minutes how household penetration is a huge opportunity for us in the U S right. Their breath House Thoroughbred hero of course, these fast growing businesses, but litter and laundry are doing well and some other brands are driving growth as well.
Speaker Change: Mike will come up I'll talk about the high growth rate of the international missiles has 8% clip is very impressive we have high aspirations for that business over the over the foreseeable future.
Speaker Change: Innovation Carlos will come back up and he'll talk about how we innovate we've totally transformed over the last five or 10 years, how we innovate.
Speaker Change: <unk> gone from one vector to more like four or five different vectors and then Stacy is going to kind of talk about what we've innovated and so the new products. We have I'm very excited about many of those a year or two as well for some of the big launches we had last year.
Speaker Change: And then so Robin will talk about our e-commerce growth and being digitally savvy R. E. Comm growth you saw the chart that Matt provided 2% go into 21%. This is an advantage for us and we're going to continue to drive that forward not just domestically but globally.
Speaker Change: Focus on domestic and international M&A M&A is a huge part of this company. So here's a new slide. This is a back end of year 2001, or 2000, we had one power brand. It was arm <unk> Hammer, we were $1 billion business fast forward 24 years and were arm <unk> Hammer is around a $2 billion business right mid single digit CAGR over 20 years plus.
Speaker Change: I know that brand is known and loved by consumers across many categories are it's rare to have a brand that can play in so many different categories and then that means we have $4 billion of businesses and brands that are not arm <unk> hammer.
Speaker Change: And that ability to identify acquire integrate and grow.
Speaker Change: Random businesses is a competitive advantage for us and we're going to keep that and hold that dear and we're going to continue to do that as well.
Speaker Change: Okay moving to the U S story.
Speaker Change: We're going to we are hiring a new U S president and a new CFO, but today I'm the U S president as well.
Speaker Change: So domestically.
Speaker Change: Our our algorithm is 3% right. The company has four we do three eight and five okay. We have a long track record of growth organically in the U S and we have a lot of confidence in our future three 5%. This year why do we have confidence in our future. We're leaders in growing categories, you'll see in a second our categories are largely green.
Speaker Change: We thrive in difficult environments wide private low exposure to private label, but also household and personal care are are balanced and then our acquisitions have room to run.
Speaker Change: Our seven power brands feel our growth Matt showed a slide that said, 70% of our sales and profits from those seven brands in those eight categories in 2025, it's closer to 75%. So these these brands are driving the company.
Speaker Change: Here's the snapshot and report card on the categories. So again, we're in the right categories. So it doesn't happen stance, we acquire businesses that get us into categories that we like the attributes of.
Speaker Change: Our weighted averaged two 7% growth largely green in 'twenty 'twenty four that's fantastic and then or one of very few companies that do this here's the scorecard from our our brands. This is our share growth and again five of seven grew in 2024.
Speaker Change: So let's go to the individual businesses fabric care, our laundry business is growing at or above category averages, which is great gaining share in fact, we're at all time share highs. You know you look at the left side of the page we're at 5%.
Speaker Change: 18 years ago and today, we're fortunate in that 5%.
Speaker Change: And why is that well one thing that's working really well is our good better best strategy for arm <unk> Hammer laundry detergent and Orange bottle is our is our value brand arm <unk> hammer with oxy in the middle Middle which is a better offering and then deep cleans our best offering right consumers are are picking up deep clean and they're sticking to it.
Speaker Change: The increment healthy rate on an deep clean is very impressive.
Speaker Change: Stacy is going to talk a little bit more about new products around the plane so stay tuned for that.
Speaker Change: Cat litter cat litter, saying, we're growing at or above category rates. This is actually doubly impressive because a competitor was out of stock last year and so we maintained largely maintained our share despite that which is which is a great result.
Speaker Change: Hard ball as a big opportunity. This is a lightweight litter and a year ago, we were around a four share today, we're around an eight share.
Speaker Change: Seven and a half share if we get our fair share of the clumping litter category, that's about $100 million opportunity and so we're really encouraged.
Speaker Change: Encouraged by the progress we've made already on lightweight litter category.
Speaker Change: Hero and thorough breaths. So hero is first stop hero consumption is off the charts, it's 40% growth, it's driving the category and we're not just talking about the patch we're talking about total acne. So we have the number one share in past we had the number one share in acne as a larger category.
Speaker Change: And we have a lot of room to run distribution has been fantastic. We have lots of distribution gains we think theres more as we spread out on shelf are TD piece will continue to go up but more importantly, it is household penetration, 9% household penetration for hero <unk> 25 per cent for the category, we're going to continue to invest our marketing dollars behind.
Speaker Change: Find hero to drive awareness.
Speaker Change: Similar story for Thoroughbred their breath, 40% plus consumption, it's driving the category and it's not just the number one non alcohol mouthwash, it's actually the number two overall mouthwash are all timeshare highs for the year of 17, the half, but same story as hero a lot of room to run here too on distribution points.
Speaker Change: We've made some great gains.
Speaker Change: We think we're going to spread out even more on shelf in the years to come.
Speaker Change: You'll hear from Mike about hero and thorough breath for international there's great great momentum there as well so household penetration where a 10.
Speaker Change: 10 share in households for their breath, but looking mouthwash at 65% of households have a mouthwash and so again, we're going to invest marketing dollars and innovation behind this category.
Speaker Change: And then as you look at the trend line over a long period of time.
Speaker Change: It shows that we're the number two mouthwash and we've been that way for the last three or four months.
Speaker Change: And then batiste Batiste is a category and a brand that that is has great growth.
Speaker Change: Mid to high single digits, and we're gaining share in booties as well had an all time share highs youre going to hear about innovation and even maybe some AD campaigns from from Stacy are our CMO.
Speaker Change: Fight Effusion vitamins are this is this is a business that has declined.
Speaker Change: <unk> declined a bit but let's take a step back here is the category the category doubled over the last two or three years went from $1 5 billion to 3 billion and stabilized and was flat now for these last three years whats happening now we're down a bit were down double digits. The good news is the category is starting to inflect right. That's a green shoe.
Speaker Change: That's happening and what are we going to do about it.
Speaker Change: We brought forward them.
Speaker Change: And rapidly we broke glass in the organization to move innovation at a very fast clip. So we're launching an entirely renovated in the portfolio. This goes across all of our Skus in terms of new and improved Formula. That's number one number two we're launching our most powerful vitamins ever this is power plus multi might.
Speaker Change: Stacy will go into a little bit more detail and then third there's a real need for sugar free in the category and so many of our variance will be available sugar free. So those are these arent me two innovations. These are gonna be large investments and innovation and we're going to support that with the marketing that it needs to be supported with this as our in my opinion. This is what's going to help drive that business forward.
Speaker Change: And new products, so with that I'm going to introduce Stacey who's our new CFO and she's going to tell you that what we have an untapped for 2025.
Stacy: How are you.
Stacey: I am so excited to be here and to talking about our new products. So we're going to have a little bit of fine. Okay. So let's start first with a review of what just happened in 2024.
Speaker Change: <unk> mentioned that our new products drove 50% of our incremental growth for the company. So what you see here are three of our heaviest hitters. So let's talk first about deep clean when Barrick and running deep we want you to clean.
Speaker Change: Or and you do this with deep clean and our consumers absolutely did that in 2024.
Speaker Change: Keep clean established that best here category, but also drive incremental growth for the brand.
Speaker Change: So next up we have arm <unk> hammer power sheets, and that's really married the arm <unk> hammer clean with the convenience as well as that the mask free format of the power of sheet. So this allowed us to tap into the fastest growing segment and long.
Speaker Change: And last and certainly not least we had arm <unk> hammer hard about arm <unk> Hammer hard ball is our technologically advanced hard ball lightweight litter and so that makes cleaning your letter I breathe.
Speaker Change: So what I love about this story is one there is a tremendous amount of runway with these items. So we're gonna definitely invest in grayling awareness and trial of these items. So we can drive incremental growth in 2025, but Furthermore arm.
Speaker Change: We're going to expand on each of these in 2025 and when I take you through some of that okay.
Speaker Change: Alright, but before we get to our first innovation for 2025, let's take a look at the free and clear segment within the laundry category. This is a huge segment at $1 3 billion and it has absolutely been skyrocketing over the last couple of years now we already had some.
Speaker Change: Ex that fit within the space, but we have identified an opportunity to capture an additional over $20 million and incremental opportunity.
Speaker Change: I'm going to talk you through how we're going to do just that.
Speaker Change: Alright, so our first new product for 2025 is arm <unk> hammer deep clean that says are free and clear detergent and so as you would expect this is catering to the consumer with more of a sensitive skin and it's certainly free of all of what you would expect but the.
Speaker Change: Real game changer with this item is that we are the only brand with the skin safety certification and this is something that's very meaningful to consumers as it gives them the assurance on product quality and safety.
Speaker Change: Right so.
Speaker Change: With that theme I'd like to introduce you to our arm <unk> hammer power sheets, and a fragrant feet format.
Speaker Change: So this is what I call Uncompromised clean. So this is Jeremy allergist tested its freedom guys and her fans, but the real breakthrough is that this item has 50% more cleaning than leading value brand because our consumers do not want to.
Speaker Change: Compromise with their product choices.
Speaker Change: Alright last but not least we have arm <unk> hammer plant power. This is our clumping litter and what's the scoop. The scoop is this we are bringing our hard ball technology into the Naturals segment and this is why this is such a big deal consumer.
Speaker Change: Two by natural letter.
Speaker Change: Feel that it doesn't do as good of a job to control odors and that's because many natural letters will use additives and those huntington's lean too mushy or brittle clumps, so with our hard ball technology, we do not use additives and our Nacho version for superior.
Speaker Change: Air Clumping. So we really think that this is going to do very well in the natural segment.
Speaker Change: And believe if labor to get our fair share of this could be over $30 million for this product launch.
Speaker Change: Right and that would be incremental.
Speaker Change: So moving on and yet wreck stuff and then my Thunder here, we are going all in on <unk>.
And and we have three new initiatives planned for 2025, and we really are moving at lightning speed to make this happen. We are first going to introduce a new and improved formula.
Speaker Change: People. This is gonna take taste to the next level. So I want you to imagine a burst of flavor mm valve Eddie Smith texture. This is with our innovative heat resistant formula and softer chew so not only that we have also given our multi byte kick.
Speaker Change: With 10% more vitamin E C and E. So really excited about this launch.
Speaker Change: Alright, what's up next we've got Vida fusion power plus multi right. This is our most advanced formula we have formulated with 100% daily value or more 10 essential ingredients. This is more than any other gummy <unk>.
Speaker Change: In the market and then we've supercharged our advanced Formula for adult Maltese with calcium we've given the women's multi a boost of choline and last but certainly not least we've given our mens multi a boost of co Q10, So really excited about getting this item in <unk>.
Speaker Change: The market place.
Alright. This is another teaser slide this is where we're going next sugar is the biggest barrier and preventing non users from using gummies and it's no surprise then to see that sugar free gummies are really taking off in the last couple of years.
Speaker Change: So we plan to expand on our sugar free segments and portfolio of products. So this year, we're launching power C as well as men's multi when you add those two products to our suite of sugar free items. This is going to represent.
Speaker Change: More than 60% of white infusion sales and a sugar free variant because make no mistake consumers do not want to compromise we want to give them that same great update to the taste experience, but in a sugar free and free form.
Speaker Change: Mueller.
Speaker Change: So we know this one's gonna go over really well alright switching gears.
Rick: Rick talked about hero and how much hero is a key contributor to growth.
Speaker Change: For church and Dwight So it's no surprise, we're going to continue to innovate for hero and specifically I'd like to introduce you to our hero 90 patch body patch. So I may be able to speak for all of you, but body acne is a real pain in the butt.
Speaker Change: It's also a pain in the chest and the back and so forth. So it makes sense that we launch our largest patch we call. It our double X L patch, which is over three times the size of our next biggest patch, which is the surface patch, but again the real game changer here.
Speaker Change: Is the Natchez that we've built into this patch and so with these matches it's for better adherence to your curved body parts also when you move it adheres to your skin. So it stays put exactly where you want it and still gives you that same.
Speaker Change: That absorbing gunk within six to eight hours that we're known for with our Mighty patch Penpal patch, but now we can take care of that back knee and chesney and so forth. So we're really excited about this item. So the last new product that I have for you and this is just for the first half of this year is I'd like to.
Speaker Change: Introduce each you, but teased light dry shampoo, because some days do call for a lighter dry shampoo like day three day, four but even more importantly, we know that non users do you not want that white residue or that grid eat.
Speaker Change: Texture that they can get sometimes from a dry shampoo.
Speaker Change: I'm going to say to you that this is a triple threat or batiste light dry shampoo has no white residue a lighter film and a beautiful soft soft fragrance and our mellow Mellon and matches and flavors. So again consumers don't want to have to.
Speaker Change: They're going to get the same great superior, but teased efficacy, but now in a lighter formula. It's I'm really excited about this one all right. So I feel like I could not be leading marketing for church and Dwight without showing you a spot or two so I do have two.
Speaker Change: Reactive spots that are finished there ready to go so you'll be seeing them first before anybody in the marketplace and we are launching the teeth light dry shampoo with these two new spots. So if the people behind the scenes could play the video.
Speaker Change: Okay.
Speaker Change: Wait.
Speaker Change: Flight actually leaves no wait residue.
Speaker Change: Wow, I guess I gotta take dry shampoo have much fragile your what I see.
Philip: Hi, Philip.
Well, if all of those things actually were not forever.
Philip: Oh, that's just my act okay.
Philip: You just can't.
Philip: I know, but he's like dry shampoo lightweight finished with no late residue.
Philip: Batiste It goes on like dry shampoo now for me.
Philip: You used to say that now.
Speaker Change: I know you've been just every night, yeah, it's but she used to like dry shampoo. It refreshes your hair and leaves no light rather do they.
Speaker Change: Okay.
Speaker Change: Now I'm hooked.
Speaker Change: The teeth late dry shampoo lightweight finished with no wait residue someday.
Speaker Change: Sometimes my job can be a lot of fun. So we have a good time with that one.
Speaker Change: Right. So I mean and leave you with this this is just your teaser for 2025. This is what's launching in the first half of the air guys. We have more coming in the back half of the year and so if I were you you might be asking so what's behind the magic that makes innovation this innovation.
Speaker Change: And that I'm going to say is my intro for Carlos linear S. Who's Gonna, who heads up our R&D and he's going to walk you through just exactly how this innovation comes to you all in the marketplace. So thank you that's what I've got for you.
Speaker Change: Okay.
Speaker Change: Yes.
Thanks Stacy.
Speaker Change: Tough act to follow is the marketing.
Speaker Change: And the edge alright, yeah. So I'm here to talk to you a little bit about how we think about innovation and how we've kind of transformed innovation.
Speaker Change: The quick thing about myself, but we haven't been in in these forums, but so I've been doing R&D innovation for now.
Speaker Change: Close to 40 years.
Speaker Change: Company about 20 years, Procter J&J and then let some smaller mid sized companies.
Speaker Change: In both beauty and home so it keeps the churches by about seven and a half years ago are attracted by the brands the culture and really kind of an invitation to innovate differently.
Speaker Change: So my kind of key messages today as I go through this as we have transformed how we innovate at church and Dwight I'll show you some of that.
Speaker Change: Also our unique approach that we've developed for for church <unk> Dwight So it is not a smaller version of what you may hear from some of our bigger competitors. It is unique and that's why we think it's sustainable.
Speaker Change: So let me first talk about.
What are we doing to create differently. So Rick mentioned this before we've gone from one innovation sourced in a sense two five.
Rick: And not only are they additive really be used the challenge here is how do you make them complementary and not competing and I think that's part of what we do differently.
Speaker Change: At Church <unk> Dwight so I'm kind of give you a couple of different levels of why this a couple of entry connection is very different for us. So when I joined the company you kind of look at our portfolio and it continues to grow a lot of brands are diverse spread a lot of diverse categories and yeah. We're very proud of our revenue per employee so that that's a challenge when you look at across the.
Speaker Change: So over time, we looked at it.
Speaker Change: Via highs, how do you flip that model into the advantage it to a strength. So our advantage today is we really want to connect a lot of these diverse thoughts would you really lease innovation better that others do and probably in ways that others can't because we know personally I know what the big companies can and can't do and they really can't break the silos the way that we can cause.
Speaker Change: Because of our size and our culture. So.
Speaker Change: So let me give you a kind of a very concrete example.
Speaker Change: Last year, we introduced batiste.
Speaker Change: Sweat activated how do we get there. So if you go across Oregon or across our brands.
Speaker Change: Brands in our categories.
Speaker Change: Your control order reduction is a common consumer needs right, whether it would be or oral care laundry litter women's health deodorants, David that's a very common need.
Speaker Change: So rather than attack that individually by R&D department in a sense. We create these platform teams that go across.
Speaker Change: You're right. It creates scale. So the idea is hey, if you're looking at order talk to each other across the organization and connect those dots better than others and when we go talk to the outside World and our partners, which we go to them as a company not as an individual business unit. So that the T story as we you know one of our part has identified some things some technologies that we're really existing other.
Speaker Change: <unk> and we were the first to bring them over into hair care, others could've, but they never did because they're not really talking to each other right there, they're very vertical and how they do it so that's kind of a bit of our magic with with.
Speaker Change: Connecting these diverse competencies.
Speaker Change: And if you kind of elevate that to these five innovation of sources, it's kind of the same story other people could do this but in most companies they've got one kind of dominant work stream for innovation. We've got these are not really competing they're really complementary. So today kind of end result is more than 50% of our pipeline is coming from these new innovation sources.
Speaker Change: So not only are we adding in terms of the contribution for the total pipeline is actually now much better than it ever was before.
Speaker Change: So kind of once you have a great robust pipeline since now it's about making choices. So this is our other unique way of looking at the at our innovation across our categories, which is this very simple grid around science based innovation versus business growth, but this is really driving our behavior. When we have a good strong portfolio is how do you make them bigger.
Speaker Change: The arrows here, so whether it be choosing where do we make the marketing investments where do we leverage these across different channels or what are your leverages across the international it's really about creating a scale. Once you find something that you really really like so you step back today, our innovation portfolio is more balanced than it's ever been before across all types of innovation we have.
Speaker Change: More transformational innovations, which are what we call our blue boxes, the upper right hand side Stacy.
Speaker Change: Stacy mentioned a few of those are we're very proud of all of those are there are huge in particular.
Speaker Change: Never seen a product where from early development all the way to launch the consumers love them all the way through we've never had a negative reaction to that product is really intuitive and loved and we've got more coming. So unfortunately, we're here at the beginning of the year. There are some things that will reveal later on in the year, because it's too soon but we've got a very strong pipeline coming.
Speaker Change: And the last thing is we've got bigger bets and that's just kind of the top of this of this grid here. We've got a lot of products that Stacy has mentioned a few of these I'm not going to go through the list and then Mike is going to talk a couple of these in the international portfolio too.
Speaker Change: Okay. That's just talk results. So basically if you look at all these together.
Speaker Change: We have now increased and accelerated our incremental net sales from historically was one to one and a half to 1.5% to 2%.
Speaker Change: Our metric for innovation is.
Speaker Change: Incremental net sales. So it is not other people measure it differently. This is not a gross sales. This is not this is post cannibalization. So we're not just looking at replacing our products every time, we're looking at innovation. We're looking at how does it grow and how does it add to the company's growth.
Rick/Matt: As Rick and Matt mentioned last year, we were contributing half of the growth was pure incremental growth from innovation.
Rick/Matt: Back and say, okay. What do we kind of started this in 2017 or so versus today given the size of the company that changed from one to 1.5% to 2% is really almost a forex and incremental dollars every year right because the company has grown so the challenge becomes bigger every year as we drive that we're looking at four times what it was.
Rick/Matt: Seven years ago.
Rick/Matt: So and it's also.
Rick/Matt: It's working but it's also a sustainable rate, we think 'twenty 'twenty four was our best ever 2025 is continued momentum you you said, you've you've heard a couple of these but I truly believe that the model because of the way it's working for US we think there's going to continue to contribute long term.
Mike: And then one last piece to cover before I hand, it over to Mike.
Mike: You know kind of our global footprint, we've got global Southern global centers.
Mike: Four of which are outside of the U S.
Mike: He doesn't have very clear.
Mike: The responsibilities, we have no overlap with tools to lead to have overlapped with within our categories. So you see the big flags there our southern global centers and then we also have six regional sites, which are kind of the smaller ones and this is really more about putting.
Mike: The basic whether it be the technical folks our regulatory folks to help Mike and his team grow across around the world.
Mike: The next thing kind of back to the connective sorry, all of these folks now if you look at it's a big OID products packaging development and so forth.
Mike: Regulatory people feeding the global structure, our plants quality people and our innovation folks from marketing, they're all under one roof at one R&D organization. So that's why for US you know that that power of that that connected team again, it's another thing that probably the big guys can't do they're there they're much more vertical the smaller guys don't have that.
Mike: Luxury either so it's another one of the advantages everybody's now marching forwards are are really humming.
Mike: Innovation engine to be honest, so as we look at this we feel we've transformed R&D and innovation, but given where we're at today, we really feel confident broker continue to do that going forward.
Mike: And with that I would just.
Mike: Read heading up our international team.
Speaker Change: Good afternoon. My name is Mike Reed I lead our consumer International Division as well as our specialty products group and I'm delighted to have <expletive> ton shovel with us here today, so he'll take us through the the SPD business in a few moments I'll focus on the international story.
Speaker Change: As you know our our evergreen model for international is 8% organic growth per year and just to ground everyone. We're about 1 billion won in size, we operate kind of in two parts, but just under two thirds of our businesses through our subsidiary markets with six subs that we run Canada, U K, France, Mexico, Germany, Australia, and the rest of the the 37% we went to our G.
Speaker Change: <unk> businesses are global global markets group, and we operate with over 100 countries and we worked through almost 400 valued distributor partners around the globe and we support that with five regional offices, one in Shanghai, one in Singapore, one of them by London in Panama in those offices continue to grow and add resources in order to support the growth that we've got in the in those respective.
Speaker Change: <unk>.
Our 2024 was an outstanding year, and certainly capped off with a great Q4, our submarkets grew almost 5% and our gmg business grew 19% I'd point to a few things certainly over the last couple of years, we've had increasingly better service levels and that's that's one one key part of it but more importantly, as we've had.
Speaker Change: Really consistent growth across the market strong portfolio management, and we've really leveraged some of our new acquisitions, particularly here on thorough broth had been really strong drivers for us.
Speaker Change: Most importantly, if you look back a couple of years, but throughout the year, we've had really consistent growth across the quarter. So we're seeing broad based growth across brands across markets and across quarters. So just again just to reinforce the momentum and the confidence we have in and are planning our strategy. We've seen some really consistent growth and we see that continuing moving forward.
Speaker Change: If you look back over the course of the last 10 years, we had a little bit of a blip certainly during kind of COVID-19 and some of those kind of tougher years, but kind of ex thought we've had really strong consistent growth for a really long period of time and we now have elevated our evergreen model to 8%, which were really confident in.
Speaker Change: This this came up earlier around we have about 18% of our businesses International and that's still a fraction versus many of our competitors that have been on their international journey, a lot longer than we have as a company.
Speaker Change: So this really gives us the kind of the opportunity and the momentum to keep growing there's a lot of runway both from a geographic point of view and also from a brand expansion point of view, we see this not as a as a bad thing, but I can see is a real opportunity for us to grow and we're growing at a really fast clip I think most notably is our brand portfolio travels extremely well and.
Speaker Change: We are leveraged kind of three parts. One is we do leverage our U S power brands like arm <unk> Hammer oxiclean by diffusion et cetera, those performed strongly across the globe in their respective categories. We also have a unique set of brands that are are there internationally only are largely been built out of international.
Speaker Change: Mostly OTC.
Speaker Change: OTC and personal care brands like Batiste term, our farm fresh gravel et cetera, those are really high performing brands and in many many markets and I think we were doing an increasingly good job of accelerating our.
Speaker Change: Acquisitions, and getting to market quicker and having them a bigger part of our growth story here on cerebral certainly of the other two notable ones there.
Speaker Change: Speaking of hero. So last time when you were here, we talked about kind of how quickly were going to rollout a hero to over 40 countries. In 2023, we moved to 12 pretty quickly where we could get registrations. We've moved to over 40 in 2024 will be in over 50 early in 2025. So this is the fastest we've rolled out a brand.
Speaker Change: Acquired from our U S business and taken a globally and that'll be that'll become the blueprinting the playbook for us on future acquisitions, but a really great job of getting this to market really quickly and we're seeing a really strong success as a result.
Speaker Change: Starmer, which we haven't talked a lot about in the past is one of our biggest brands internationally. It's.
Speaker Change: In over 90 countries. This year, we're celebrating our 15th anniversary, but really hike a CAGR for us we have a very strong portfolio within the natural nasal hygiene space. This is a really important brand internationally that continues to grow and is a really important part of our portfolio, there's a little bit different than what you'll hear from the U S domestic team.
Speaker Change: Stacy touch on the importance of innovation in Batiste, we've certainly a benefit of that on our on our active skus with sweat and touch activated they've been really incremental additions to our international portfolio Batiste is the world's largest dry shampoo brand widely distributed and a really strong grower for us, but our innovation is a critical part of that.
Speaker Change: And we're seeing some really strong results in all of our key markets.
Speaker Change: Oxiclean has been a really great driver for us in focus and it's not a element a lot of markets yet, but we will continue to grow in terms of market expansion, but.
Speaker Change: 20% growth last year, and that's increasing our CAGR over the last few years, we are the number one powder brand in both Canada, and Japan, and we've just launched into the liquid segment and enter Japanese market. So a really exciting opportunity for oxiclean to continue that momentum it's got a long runway ahead.
Speaker Change: And then finally on from a brand point of view I'll just touch on power sheets. So we don't have a liquid laundry in many of our markets around the world and for parachutes is something we have pushed into it certainly gives us an opportunity to establish a new segment and in many of the worlds geographies are.
Speaker Change: We got into 12 markets in 2024, we're gonna be in more than 25 by the end of 2025, we're already number one on Amazon and Mexico, and there's really good momentum where we've got distribution. So this will be continue to be a focus and will learn to see what we can we can do will also pick up a good amount of the innovation pipeline from the U S. Mark.
Speaker Change: As well, so really a great opportunity to lift and shift and and so you wouldn't get some momentum in the category. We really haven't played in a traditionally on a on a global scale.
Speaker Change: So we've got lots of things we invested in in lots of confidence in where we're growing as a brand as a division rather a what I would point to is there's a few things here that's not an exhaustive list, but I think there notable ones in the middle of this year, we made an acquisition of a longtime valued partner and are in Japan, which is the graphical team we.
Speaker Change: We see Japan scaling up over that over the next number of years as we add additional brands to the portfolio. We have implemented a major global ERP system. So it's easier for us to kind of work with on a global basis and as we grow our partners and can kind of grow with us.
Speaker Change: We widened our regulatory and infrastructure quite significantly in that and that is kind of winds up with the other regional offices, we have around the globe.
Speaker Change: We've expanded offices in Panama, and Singapore is the team's widened and as the business grows we touched a little bit on here here on <unk>, a really strong acquisitions for us I think I would add just leveraging NPD from other markets. The those two things combined had been a really big part of the growth story.
Speaker Change: And lastly, and.
Speaker Change: Matt and Rick touched on earlier, we are we have put resources from an M&A perspective in both Europe, and APAC and orders start to get into the deal flow. So we can look at international acquisitions that would be in addition to leveraging any acquisitions, we make from a U S perspective. So this is as I say not an exhaustive list, but a lot of investment a lot of support going into our international growth.
Speaker Change: Certainly responding we have a long runway ahead, so with that I will pass over to Serbia Brookfield. Thank you.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: The thing you all today, our introduction said, we book Fiat I lead all things digital ecommerce media and optimizations, such as Android I'm Super excited to represent are might be batch of digital growth team at church <unk> Dwight.
Speaker Change: Okay.
Speaker Change: So this is a mighty badge I speak about this is if I might I'll state that we were drilling there the U S. Olympic team realized that just tells you the kind of caliber we have not enjoying button digital for sure.
Speaker Change: These are all in the Northstar direction of accelerating E Commerce and media for the organization.
Speaker Change: This is truly you know industry's best of breed talent that we have acquired in the company in recent years.
Speaker Change: Let's talk business model.
Speaker Change: Both alluded to the person days off our business that is from E. Commerce today. It is 21 point something percent.
Speaker Change: They had to show I don't know that it also from a lot of our competitors. We are you know.
Speaker Change: If not the top tensile top quartile for sure in all of CPG E Commerce I don't want it in mind that you know.
Speaker Change: We are not in the business of calculating how much of our business is from ecommerce would be just I'll present wherever I can.
Speaker Change: Humorous prevent.
Speaker Change: Especially after COVID-19 the convenience of buying online right whether it is two am mirliton them you need with your last mile or all your cat litter box that needs to be delivered at your front step because people are just loves convenience and we're riding that wave and making sure our products show up wherever they need to show up. So this is that incredible trajectory as you look at it.
Speaker Change: Earnings from other retailers, even you will notice a lot of them have started publicly speaking to the amount of growth that they see from E. Commerce. So you can connect the dots there of where the retailers are getting bulk of their business and their manufacturers like us on making sure. We are getting a lot of our business as well.
Speaker Change: Let's talk sure. So we have seven power brands that in off four out of the seven power brands have done incredibly vote in 'twenty 'twenty four but we are not.
Speaker Change: Just maintaining but growing share.
Speaker Change: The biggest one in particular I'm in hammer laundry laundry is a big part of it.
Speaker Change: It contemplates a con to the growth of the organization. So V. One online should not just in liquid laundry, but sheets unit dose boosters and that speaks a lot because laundry is typically considered a category that is meant to succeed in brick and mortar, but how we manage Saturday and just to qualify.
Speaker Change: Sure. It does not just mean Amazon share for us it means the target dot com Walmart dot com grow their dot com all of that combined is very <unk>.
Speaker Change: And all of these four brands.
Speaker Change: Aside from the Florida, seven brands, where we are and I can shed 70% of our off the brands that contributed 70% of the sand they are winning in each of them in terms of one nine share some notable ones being zicam en masse.
Speaker Change: Breath of course, you don't have phenomenon.
Speaker Change: You don't have been to our story. He has been a digitally native brands are doing much more successful being much more successful as we get bigger and bigger brick and mortar distribution.
Speaker Change: I'll class service actually just by league rounding off in terms of what other approaches I like I said, we are here in this at all of connecting content and Commerce, you will not a lot of retailers are.
Speaker Change: Ryan to steam into trying to be more social and community builders for the for the for the community for the consumers at large but a lot of social channels also have aspiration to be retailers. So the lines are blurring between various content, Sean and various commerce happening and we want to stay at the intersection of both commerce and content. So that's our product.
Speaker Change: One second everything's buzzing, yeah, I am surprised on the first one on stage to speak about it but I'm sure. You are also falling a lot of news on this.
Speaker Change: We want to look at AI, which is not a hammer looking for Neil but which is clear in terms of what's the business problem or contacts you are solving and how can EA.
Speaker Change: I just had a couple of examples, especially in marketing creative and as you walk the halls.
Speaker Change: From you guys to have more conversation on that.
Speaker Change: Lastly in terms of E Commerce global footprint, Mike spoke clearly how we are just 18% of our company's business comes from global today.
Speaker Change: A little bit behind where our competition is and there's a ton of aspiration, we have especially in expanding with respect to ecommerce and she had a couple of examples of how our new launches are doing amazingly well in every market that we launched.
Speaker Change: Speaking to our first pillar with respect to content and Commerce right. You are super familiar how social has become what I call. It the top shelf of discovery physical shelf in store, there's a digital shelf that you go online and try to shop and socialist sometimes you're not even trying to shop, but are you doing.
Speaker Change: A lot of serendipitous, two am kind of shopping and social so we are there at that moment of truth, whether consumer discolors, thus vice she's doing the analyst call we are superb.
Speaker Change: Pencil about making sure we partner with both micro and key opinion leaders, Influencers, who who impact how consumers make their decisions today, you'll see a couple of examples here be that Alex It girl are Sunni lead the Olympic gymnast and a lot of life seeming shopping that we have been doing in China for years now.
Speaker Change: The notable thing to see here is not just that 10 or 10 of our brands have the highest number of video views on picked up across all categories. We operate in but it's not just about the views and followership a lot of our content has industry leading engagement.
Speaker Change: And what engagement rate means that our people the consumers not just liking and following on our brands that are commenting on our post data sharing golf balls that are interacting and building community with us. So that's super meaningful for us because that's a long term loyalty and intimacy that we want to create with our consumers.
Andrea: We are super careful that we don't want to leave media as a dead Andrea do you want to make sure that once the consumer is inspired by seeing an ice block either on TV or tech talk there's an ability for them to shop. Our products. So we are making sure that over 90% of every media that you see be it Youtube pig talk Instagram or anywhere else.
Andrea: We will lead you to a card and wanted to duplex if you have the desire to shop by products.
Andrea: This is an example of one of the initiatives. We are leading you know there's a concept of aspect ratio right. You can shop on your six inch mobile phone, but you can also show up on your 60 inch television.
Andrea: AI is helping us make sure that creative is conducted in a way that there is less human touch and why and making sure that creative is valid for the six inch screen under 16 screen. So you'll see a couple of snippets.
Andrea: And if it's here both for arm <unk> Hammer.
Andrea: And our partner would like to talk and Google to make sure that the grade us to tell us how we are performing with respect to their expectations on showing up a creative really well.
Andrea: So yeah, it's super important not just in terms of showing up as well on social creative we also know that as the consumers shop for us online you'll spend no more than five seconds and all kind of what I call low considered isn't categories. So if you land on an Amazon or Walmart Dot Com page, we have to make sure that the.
Andrea: Secondly, you spend looking for arm <unk> hammer laundry sheets, we make the right impression on you that you are inspired to add up to the court. So look at these examples you know the score at the bottom left you know goes from 85 to 87 point for all that means is this is AI, helping us do eyeball truck tracking on lookalike audiences to make sure.
Andrea: Or that the creative we put out has the maximum I eyeballs on it and that five second time on the retail of PDP and this has done wonders for us because the more the clarity of a sticky the higher chances are that the consumer buys the product.
Andrea: Finally speaking with a global footprint, Mike spoke eloquently toward tableau, Bret Mighty patch hero and policies have done a lot for us. These are what I call category, Disruptors and even cow degree career doors, we launched them in market that there were no sheets existed and no actually parts of existence and within six to 12 months, they're ranked number one.
Andrea: On spot in several online retailers that I've read in particular, you will notice an interesting retailer here not many might be familiar with olive young in Korea is our number one beauty retailer with kind of read quickly garner the spot one similarly, mighty pass across France, Germany, Mexico became number one really really quickly so our products travel well literally.
Andrea: Quite literally.
Andrea: Finally, I'll wrap it up by saying pay some growth on digital has been quite phenomenal industry, leading truly but we are very focused on being clear about where to play and how to win on that we haven't got the leading e-commerce growth, but we are an aspiration and in truth I'm, making it as profitable as.
Andrea: We can't so we already choice about what we sell online when we sell online and where we sell online we have unprecedented online market share today, and we get on track to keep growing it. We're also super conscious about best Ottawa on our media spend I may not have mentioned, but about 82% of our marketing dollars today on digital media, which is why.
Andrea: You see all the media there and we struggled to give you D V. You know.
Andrea: But in spot that we used to have it back in the past. So we have to bring them, especially for these kind of events. So we have to make sure that our retail media dollars stretch the highest return on investment of that is super critical for us.
Andrea: In terms of category leadership in digital penetration like I said, having adopted market launches like we did for heat all without a breath and sheets, it's critical and launching them online for US gives us early bibs and what the consumer is feeling and gives us an opportunity to tweak them as needed as you do broader brick and mortar launches in those markets.
Andrea: We can do a lot more on AI and technology, both in Martech and AD Tech and we lean on.
Andrea: Not both large and smaller third party technology partnerships and that's one big area of emphasis for us in the coming years I'll close by saying you know the best way to predict the future is to create it and we are hard at it all.
Andrea: Along those lines to the big business typically have specialty products Division and I welcome should that's how about to share more on that turnaround story.
Andrea: Thank you.
Andrea: Yeah.
Andrea: Good afternoon, everyone. My name is your pet.
Andrea: I'm. The later part of our specialty products Division.
Andrea: Really my honor and excitement to share with you the b to B arm of the company because so many of you maybe a question why does the CPG company, even have SPD I don't want to show you, what we're doing and how they're contributing to the growth of the company and how we'll keep growing and be a growth accelerator for the overall organization.
Andrea: As you all know our evergreen model target is 5% so let's see how we did last year.
Andrea: Last year as a division we delivered over $300 million in revenue, it's split ive, 60% on our animal nutrition business and roughly 40% under a specialty chemicals division.
Andrea: But let's take a moment to look under the Hood, what really is SPD specialty products Division.
Andrea: Specialty products Division has three businesses the largest business we have is animal nutrition.
Andrea: I can ask you around what how to church and Dwight enter animal nutrition, it's very very simple.
Andrea: We sell our Manhattan or hopefully all of your user of our arm <unk> Hammer, which is the baking soda you see samples here.
Andrea: Chemically that sodium bicarbonate that same sodium bicarbonate. The company started feeding many many decades ago, the dairy cows. It helps with food digestion as well as better milk production. That's how we entered the world of animal nutrition and now you fast forward.
Andrea: We are manufacturing both feed supplements marketing and selling but also pre and probiotics.
Andrea: There are lots of companies that say this health probiotics. So what's special about US we are truly unique.
Andrea: What we do where you can buy if you're running a dairy operations are a poultry farm you can buy probiotics everybody will ship you in a bag and that's their probiotic sample, but what we do we go to your operation, Let's say you're running a dairy farm will come to your operation. We collect samples we send the samples to our lab in Wisconsin, where we are.
Scientists analyze those samples.
Andrea: It against our library of Probiotics, we ever were 82 houses and probiotic streams.
Andrea: And then we match that for your unique need and create a truly customized solution and we sell that under over subtle as Brian. It's a great product that we're very very proud off and you're going to see more about it.
Andrea: Our second biggest business is performance product. This truly is the core of the company performance product is very sell again arm <unk> hammer sodium bicarbonate and remember the same begging sort I talked about.
Andrea: Where are we selling it instead of selling into half pound bag or a pound bag that you buy or you may buy at a large box Jane Smith five pound, we sell like a 50 pound box I guess, you're on the screen here or maybe up to 1000 kilo taught we're selling it for large b to b obligation industrial pool, but even life saving.
Andrea: Obligation like hemodialysis, which truly amazing what's sodium bicarbonate can do and the number of application attached.
Andrea: The third business that you may not have heard a lot about is other b to B business. This is where do we take all the amazing brand. The company has church and Dwight we customize their packaging and we sell them for commercial and professional obligations in different channels from Janssen food services hospitality, it's small, but I'm confident this business is poised for.
Andrea: Growth and you'll hear a lot more about not just today, but in coming years from us.
Speaker Change: So SPD you know I joined the company roughly two years back and when I came and analyze the results as you can see we've had inconsistent performance. So one of the very first thing we did as a leadership team we looked at it and we said what is our strategy going forward, we created a new vision for SPD and we launched a new strong.
Speaker Change: <unk> S. P. D re imagined so I'm very excited to say that if you look at our results from last year after launching the strategy.
Speaker Change: We had an amazing turnaround we went from negative 8% in 2023 to plus 7% organic sales growth in 2024 now how did we do that as I said, we have an amazing group, we have a very talented team of individuals, but we did four pillars of our strategy first we divested the non strategic non core assets I think you've heard about.
Speaker Change: We have done over a mega life, which was a dairy supplement business in Q1, we exited our food safety business in Q2, and what did that do that allowed us to focus on portfolio optimization simply put across the three businesses, we could focus on brands that drive profitability and channels, where we can do more higher.
Speaker Change: Profitable growth and that really helped us.
Speaker Change: Then next we shifted just like the broader company you heard from Mike International.
Speaker Change: International International is a huge growth opportunity for SPD.
Speaker Change: And we are focusing on key countries both in Eurasia Avalanche Latin America last year actually we hired new sales leader for our Latin America business and part of our Eurasia business. So we're very excited the results we're seeing from that.
Speaker Change: And then we invested in marketing and innovation and acceleration and you'll say what did you invest again when I joined I was very surprised to see that we are part of a CPG company and we had no in house marketing right you heard from Stacy ever CMO. So just like marketing is core for CPG, it's essential for B to B business also.
Speaker Change: from both the right brand messaging, brand positioning and doing the omni-channel marketing because the B2B customers are everywhere, just like we are.
And what did that do?
Speaker Change: Here's a great example I'm excited to share. We launched our Sirtilis, remember the probiotic I talked about, the customized probiotic. We launched two new products last year, called Hatchville and Moova.
So what are these products?
Speaker Change: So we have, as I said, over 80,000 strains of probiotics.
Speaker Change: Our scientist and our technical service team identified one of our poultry operators were having issues with the poultry chicken.
Speaker Change: They were dealing with mobility issues. The chicken couldn't walk to get the water and the food where it is.
Speaker Change: and guess what this was called. Before our marketing team this product was called Sertillus, Entrococcus, Sicorum, something. You all need to be a PhD to understand what this product is.
Speaker Change: And this is where we rebranded it, and we said, well, what does it do? Move well. Even I get it. When you hear the word move well, it's your chicken can move well, it can have a better quality of life, and our production partners, they have higher productivity.
Speaker Change: Both these products, Hatchwell and Movewell, have been great success for us, and we're seeing a lot of engagement from our customers that is helping us grow again with our innovation acceleration and our portfolio optimization.
Speaker Change: International. International, we have a huge runway of growth. Last year we grew 7% and now international represent 28% of our sales in our animal nutrition business.
Speaker Change: But we have gained, we're continuing our product registration for our pre and probiotics So Tilsitilis, Salmanax, AMAX, our brands and just last year alone, we added 15 new countries So we're rapidly expanding where we're going to enter with these countries and keep growing hopefully much stronger than the average market growth rate
Speaker Change: So to summarize, I'm very excited, hopefully you can hear that, that SPD is going to be, as Matt said, a perennial growth driver. We're going to keep driving 5% based on these pillars. We're focusing on the right brands that will drive the portfolio optimization.
Matt: international is a key and we are excited with the growth we are seeing there and building on the whole strong marketing team that we have created in innovation acceleration so it's going to really lead the way.
Speaker Change: With that, I'll pass it back to our CEO, Matt Farrell.
Okay, thank you.
Untertitelung Avowlung
Speaker Change: Hey, many of you know I've been with the company for 18 years.
Speaker Change: And the one thing that's remarkable about Church and Dwight is its consistency.
You may wonder, how does that actually happen?
Speaker Change: And what we're known for is execution. And what that means is...
Speaker Change: We do what we say we're going to do. That's the difference between a company that's consistently successful and one that is not.
Speaker Change: So there's lots of analogies between sports and business. People roll their eyes when they hear them. But one thing that is true is that the teams that have the best players win. So when you're investing, you're investing in people.
Speaker Change: This Analyst Day, it's the one time a year you get a peek under the hood. You see some of the leaders of the company, and they come up and kind of talk. I have the pleasure of working with these people every day.
Speaker Change: We have exceptional leadership in this company. These are understated people, low ego, massive technical skill.
Speaker Change: And it's not just at the top, it's throughout our plants, it's in our laboratories, it's in our sales offices, it's throughout the company.
Speaker Change: And a lot of companies will say things like that and you'll be checking your watch or looking at your phone. But, you know, if you're trying to figure out why is this company so successful for so long, that's it.
Speaker Change: It's the culture of this company, the kind of people we attract, the kind of people we recruit to the company. And, you know, many of you know I'm going to be leaving here, you know, in April 1, April Fool's Day.
Speaker Change: and but this company is in such great shape starting at the top with Rick and the management team that you've seen here today and the strength that we have throughout the company so it's a good time for me to walk off the field
Speaker Change: So I'm going to move on now to how we run the company. If you've owned the stock for a long time, you can check your phone right now.
Speaker Change: But we have five operating principles, right? You've heard this before, and that's the thing about Church and Dwight. Many of the things you hear from us, you've heard last year, the year before, you hear it down here at the Socket Stands, you hear it at Cagney.
Speaker Change: That's because we have an operating model, and we stick to it, and we execute it. Again, the fact is, do you do what you say you're going to do? It's a personal commitment that we feel, not just to the company, but to each other. We say, this is what we're going to pull off this coming year.
Speaker Change: So you heard a lot about our brands, about leveraging our brands. We've got great brands around the world.
Speaker Change: Second thing is friend of the environment. A little bit about that, you know, that's very important to, not just to our employees, but it's also important to our consumers, it's important to our retailers.
Speaker Change: And we have a long heritage, and we're really proud of, you know, starting back in the 19th century. You've heard me talk about bird cards before. I'm going to show one of them in a minute.
Speaker Change: But I always take a little bit of time to talk about our heritage here. If you look at early 20th century, we were using recycled paper.
Speaker Change: We were the first to take phosphates out of liquid laundry detergent. We've been planting trees since 2017. We've planted millions of trees to take CO2 out of the atmosphere. You remember all that from fifth grade, right? Go to synthesis.
Speaker Change: 100% of our global electricity is offset by green energy. And then we started, we signed up for science-based targets so we have these projects to take CO2 out of the atmosphere because we use a lot of CO2 when we're making baking soda.
Speaker Change: Here's one of those bird cards that we used to put in our yellow boxes, and I don't know if you can read it very well, but it says, Useful Birds of America, and at the very bottom it says, For the good of all, do not destroy the birds.
And for those of you who are interested...
Speaker Change: You can still buy these. These are the original bird cards. They're available on eBay.
Speaker Change: So buy now. This is not an advertisement for eBay, I just want to tell you. I know many of you are very enthusiastic about the Armhammer brand. It's just something I don't look into.
Speaker Change: All right, ESG, everybody gets measured on ESG. You can see we've got great scores consistently, 22, 23, 24.
Speaker Change: Third thing to talk about is leveraged people. We have a really lean shop. We've always had a really lean shop. Why is that important? It's because it forces you to prioritize, you know, and work on the stuff that matters.
Speaker Change: And as Surabhi took us through, we're world class when it comes to e-commerce.
Speaker Change: And we got there because we put our minds to it. We knew we were bottom of the barrel in 2016, and now we're ahead of the pack.
Speaker Change: We really believe in a simple compensation structure, so everybody kind of knows where they are at all times.
Speaker Change: We don't get involved in EVA or some of these complicated esoteric measurements. It's straight up net revenue, gross margin, cash, EPS.
Speaker Change: And it's unusual for a company to have gross margin as part of an incentive comp. What that does is promote financial literacy. When it's going to hit your pocketbook, you're going to say, hey, what is gross margin, how do I get it? And that just kind of galvanizes the company. And the ways we get it, you know, good to great, you know, we like to joke within the company.
Speaker Change: This is the book everybody's heard of but nobody's read, but that is the name of our Continuous Improvement Program.
Speaker Change: supply chain is our bedrock when it comes to finding ways to save money. New products, we try to launch new products that have a higher gross margin than the ones they're replacing and then when we buy a business we try to find a way to grow the expand their gross margins as well.
Speaker Change: Now you've heard us talk about being an asset light. That's very, very true. We want to buy businesses that don't have plants.
Speaker Change: But for a long period of time, our average cap-exit percentage of sales is 2%.
Speaker Change: And the other thing to keep in mind too is close to 30% of our finished products right now are made by third parties. So that also helps continue to be asset light. And finally, leverage acquisitions. You do those first four right, you get good returns.
Speaker Change: If you're good at acquisitions, which we are, which Rick took you through earlier, we're good at identifying, targeting, acquiring, and integrating. And you can blow it on any one of those three.
Speaker Change: You know, you pay too much, or you don't integrate it, a disaster can happen. Alright, you've seen this slide before, long history, a bit of a drought, 23-24, but not for lack of trying. And now Rick's going to come up and take you through the 2025 outlook.
All right, so let's turn to the 2025 Outlook.
Rick: We announced today that we're going to have a top-line expectation of three to four percent organic 25 basis points for gross marginal expansion
Rick: You'll hear we have a little bit higher than historical inflation, more like 3% versus 2%. Marketing 11% plus, probably in the range of 11 to 11.4. So it's incremental because we're driving share gains.
Leverage SG&A!
Rick: and seven to eight percent EPS growth. And we expect to generate, again, 1.1 billion or so of cash flow out of CFO.
Rick: So we have a long track record of this growth, two and a half to three and a half percent is our outlook, but if you look at the track record, it's six percent. Why is that? It's M&A. We historically also do M&A.
Organically, expectations 3 or 4, tenure average is 4.
Rick: And that 3 to 4 is largely volume-driven. And that's been the case for not just one year or two years, but for over a decade. It's our history. It's volume-driven growth.
Rick: I mentioned this earlier, gross margin expansion in 2025, 25 basis points, it gets us right back to 2019 levels. We believe we have more room to run as we have.
Speaker Change: This productivity program, it's a muscle, similar to how Carlos described the MPD and
Rick: It's analogous to how we do productivity. And we also have some fast-growing acquisitions that have higher than corporate margins.
Rick: Speaking of margin, I'll talk about 2025 real quick. Volume and mix largely give you a little bit of a benefit of 30 basis points is our expectation. A drag of 150 basis points and then offset by a large degree to productivity. That's what gets us to the 25 of expansion.
Speaker Change: perspective, and that's ethylene and resins are up and natural gas is up, but more so it's also depreciation for new capacity. It's putting in new 3PL in the Northeast. It's other higher costs for our partners, co-packers, as Matt mentioned.
Marketing spend 11% plus is the expectation in 2025.
Speaker Change: and then SG&A's leverage. Leverage while making investments for what matters in terms of building capabilities, e-comm, international.
Speaker Change: And then we've had a long track record of high single-digit or even double-digit EPS growth, and we expect 7 to 8 percent in 2025.
Speaker Change: And we put this in the release as well. There is some phasing, right? We're supporting some innovation with marketing in the front half of the year. We have a little bit higher revenue growth in the back part of the year. And so that's why there's a little bit more phasing of EPS growth in the second half.
Speaker Change: This is my favorite slide at the CFO, and it's probably still going to be one of my favorite slides in the future. And why is that? It enables us to do a lot of things. 115% free cash flow conversion means we can go do capital allocation, right? Cash flow matters more than most.
Speaker Change: And we get there a few different ways, but one of the ways we get there is we have a strong, tight way we manage working capital. We've gone from 52 days down into the 20s. We expect this to further improve as we look forward.
Speaker Change: And our balance sheet's never been stronger. One and a half times debt to EBITDA.
Speaker Change: And that means we have this is the highest number we've ever had on this page to over six billion dollars of firepower This is dry powder to do M&A
Speaker Change: This is fantastic and this leads to what is our use of free cash flow. What's our capital allocation? Well, number one is M&A
Speaker Change: Just because we haven't done a deal in the last 12 months or 24 months doesn't mean we're not working really hard at looking at deals. I would tell you that the ELT spends a lot of their time looking for the right deal. We think the number one value-creating opportunity is looking for the next business or brand to buy. But we're going to be picky and fussy as we go through that process.
Speaker Change: Number two is CapEx, number three is NPD, number four is debt reduction, although that's hard to do when you've prepaid all your debt. And so now we just have fixed debt, and so we're waiting for a great acquisition to go borrow some more one day. And then return cash to shareholders.
Speaker Change: Matt covered this. We're not a capital-intensive company. This matters when you look at free cash flow conversion.
Speaker Change: And then finally, dividend increase. Long track record. I don't know what's longer than long, but 124 years is decades, you know, a century or more of paying a dividend. Credibility, consistency, that's what Church and Dwight is known for.
Speaker Change: Now, before I ask everybody to come up, I do want to acknowledge
Speaker Change: that we have a huge amount of confidence in our future, okay? And that you heard it from each person today, whether it was Mike on international, Surabhi on digital, I talked to the U.S. business, I talked about our outlook for M&A.
Speaker Change: And the nuance there, it's just not in the U.S. We're looking at M&A both domestically and international. You know, a year ago, when Brian was here...
Speaker Change: who happens to be sick today, we told you that his team increased by 300%, right? So he went from one person to four people. So we have people in Europe, we have people in Singapore and Asia. So the focus on M&A is alive and well.
I also want to acknowledge
Matt.
Speaker Change: And Matt has been here for 18 years, right? And we just did a quick montage of New York Stock Exchange.
Speaker Change: He embodies the culture of this company, okay? We are where we are because of Matt Farrell, to a large degree. You just heard him talk about people, you just heard him talk about leadership. We are unique and different, and Matt's a big reason why.
Speaker Change: Here's a quick look back. So Matt joined the company back in 2006, a two billion dollar revenue company. Now it's a six billion dollar company.
Market cap was $3 billion, now we're $26 billion.
But more than that...
Speaker Change: He's added capabilities, right? Capabilities like e-comm, like pricing, things that we do that we take for granted. One of the great things about our culture is we're not insular. If there's something that we see that we think we can go after, we're going to run as fast as we can with speed and urgency in order to execute it.
Speaker Change: And a lot of that, again, Matt certainly did that. So with that, I'll invite everybody else up, and we'll take questions.
and many more. Thank you. Thank you.
Thank you.
Go ahead, give us your sign.
Anywhere.
Thank you very much.
Speaker Change: All right, why don't we start with Rupesh. Do we have microphones?
One second.
Rupesh: We got another seat. There we go. Thank you. Alright. Okay. Thanks for taking my question. So maybe to start with the vitamin business. A lot of enthusiasm on the innovation, and I know I think you ended the year with a double digit decline. So how do you think about the vitamin business from a sales perspective this year?
Rupesh: Yeah, so the vitamin business is one where look like I said in the comments. We really did break glass. We're moving with these aren't
Rupesh: little i innovations. These are big i innovations in our opinion. So we're going to put the whole full force of the company behind that to launch them the right way. You know our new CMO Stacy's right working with our leader Bruce to really make sure that we're telling the consumer the real core benefit again. So look it's do we think the business is
Rupesh: likely going to decline a little bit for a little bit longer? Yeah, we do. But what we want to see is an inflection point. And these innovations are going to help give us that confidence for an inflection point.
Speaker Change: Great, and then maybe my one follow-up question, just on HERO, so you're in 40 countries going to 50 countries, just curious if anything surprised you, and then as you look at consumption growth within international markets, like how that's trending versus your expectation.
Speaker Change: To go out, usually it takes us two years, two to three years to roll out a brand from the U.S. acquisition to our international subs and distributors, but to do this within such a short time to be in 40 countries is fantastic. Mike, you want to talk about some of the opportunities?
Mike: sort of the core suite of introductory SKUs. We haven't even tapped into the innovation pipeline yet.
Rupesh: So many of the 40 countries that we've talked about, those are really early days. We're seeing really strong excitement and really good takeaway off-shelf. So the consumption rate is where we expect it to be actually much further than that, and that's before we've introduced NPD. Yeah, I would tell you a quick story, Rupesh. I've been traveling a lot with Mike, and we have brand camps all over the world. And we had one in Vietnam, we had one in South America, I think in the Dominican. Punta Cana. Oh, Punta Cana, yeah.
Rupesh: And the distributor for South Africa was there, and he was one of the first to launch. And he was giving just case studies after case studies on Hero to all these other countries.
Rupesh: because he represents many other companies as well. Number one SKU by far across all the companies that he represents. So I think that little microcosm is going to play itself out in many countries.
Yeah, Dier.
Thank you.
Thanks.
Rupesh: So, Rick, Matt spent a lot of time talking about how the organization's in a great place, but...
Rupesh: There's always a chance under new leadership to refocus in specific areas or emphasize different areas.
Speaker Change: I'm just curious, any initial thoughts under your leadership as to maybe where you'll double down on or areas you'll emphasize more?
Speaker Change: and then also just a specific question on the light effusion side.
Speaker Change: Given all this great innovation versus, you know, a tough couple of years. Do you expect to gain shelf space this year at retail? When does that sort of play out in terms of how you think about shelf space for the brand? Yeah, so I'll take the second one first and then Carlin has anything to add as well. Look, when the business is in decline, you're not going to go gain shelf space.
Speaker Change: So we've got to make sure we have inflection points, and then we can go do the sell-in. We've got to go show the retailer our strategy, and then we can go ask for more shelf space. So I don't expect to gain any more shelf space in Vitamins.
Anything you would add?
Speaker Change: We're definitely at an inflection point, so we've got to get the credibility, build that back up. We've got some great relationships with the retailers, so they're in it for the long game with us.
Speaker Change: Yeah, so what would I do, you know, what would I double down on or maybe different? Look, our strategy is working extremely well. We have a long track record of just fantastic growth and building capabilities.
M&A, everything.
Speaker Change: Two or three things come to mind, this is iterative, but I would say not because it's me, but because it's the right time, our international investment and our international growth. I thought Mike did a great job showing how we have these big aspirations.
Speaker Change: There are bigger bets. Carlos just walked you through how we innovate, and Stacy talked about what we innovate.
Speaker Change: there are bigger bets to be made on innovation. Too often, I think, companies of our size and bigger don't put enough chips behind. But when we believe there's a needle moving innovation, we should get behind it in a bigger way. So we're going to try that a few times, right? And then maybe the third is...
Speaker Change: There are a handful of brands that we own. We own 80 brands. There's a handful of brands, in my opinion, and then we're going to work through this as a team on which ones they are, that they could be bigger. They are poised for more success. But stay tuned on that one.
Yeah, Andrea.
Andrea: Thank you and congrats to both of you again on the new chapter.
Speaker Change: The appropriate, like a lot has been in CPG, thought about the appropriate level of investment and given that you are correctly branching out to more categories or in a way a lot of more international, is 11% appropriate?
Speaker Change: as it was in the evergreen model up until the level that you are now. And then I have a question on M&A. What are the capabilities that you want, capabilities or categories that would rather have developed by externally or internally?
Yes, so on the marketing investment.
Speaker Change: I care the most about how our shares are doing. Shares are...
Speaker Change: The marketing investments and input, the scorecard is how our shares are doing.
Speaker Change: If you look back at our track record, it happens to be that we've spent between 10.5%, 11.5% more often than not, and our shares are healthy and gaining more often than not. So my scorecard is shares. I think 11.5%.
Speaker Change: Four, how we ended the year, 11 to 11.4. All those numbers are interesting, but it's healthy. Some brands we spend in the 20s. Some brands we spend 5%.
Speaker Change: But it kind of matters for that brand. Either it's a household, personal care, it's different. So that's that one. M&A. M&A capability, Andrea, we don't ever go look at a category.
Speaker Change: That's just not how we work, right? We can only buy what's for sale.
Speaker Change: We become, you know, this is the team that becomes rapid experts when we go find a deal to look at. And we've probably spent
hundreds
Speaker Change: of this team's time, hundreds of hours, on due diligence this year. And more often than not, we're walking away because of the category dynamic that we learned about, high exposure, private label, where a company has a claim that they can make that is only a matter of time before they get in trouble for making that claim. And so
We go do all that research after the fact.
Speaker Change: Capability building, you know, I really like as an example what Hero did for us. You know, Hero's digital proudness in terms of content creation, their speed and urgency to go test and bring innovation, but I don't know if Surabhi or
Speaker Change: Carlos, if you guys want to talk about hero capability or what acquisitions can do for us on capabilities. I'll add to what Rick was saying, right? Just a small anecdote, the average age of the hero employee when we acquired them was between 25 to 28.
Speaker Change: that just tells you the amount of time and the amount of energy and the amount of background expertise they have that is more social and digitally savvy than the typical talent we had. So that's the kind of ingestion of talent we had through Hero, and we percolated that through the ecosystem. And similarly, we had similar things on GNPI that Karl can speak on.
Speaker Change: Yeah, I was just well, I was very quickly on the hero one I mean, I think every acquisition teaches you something and it's certainly you know from the speed the innovation and the partnership They've got very strong partners outside that took them very long time to get there and we've continued to leverage it So we maintain that For the acquisition and then we leverage it across other brands as appropriate
I want to add something to that.
Speaker Change: I was at a party out in Brooklyn last night, and Hero has a little party every June and every January, summer and winter.
Speaker Change: And I think one of the things we've learned, and credit to Stacey.
who managed the HERO integration.
Speaker Change: And one of the things we've learned over the last few years is...
is how do you interact and integrate?
Speaker Change: a business with a very different culture in Churchill and Dwight, which started up...
Speaker Change: That's almost a virtual business with really world-class digital marketers. How do you preserve that?
Speaker Change: and two of the three founders were there last night too.
Speaker Change: and Andy and you know they helped us preserve the magic and I think a lot of companies struggle with with doing that so we learned a lot from that over the last few years and I think that positions us well then in the future to also acquire startups.
Chris.
Can I just ask about category growth going into 2025?
Speaker Change: I think sitting here a year ago, you established a 4% evergreen target. The outlook for this year, 3% to 4%.
Speaker Change: What are you embedding from a category growth perspective? Is that a little bit different from how you saw the world a year ago? I would assume yes. You also talked about, you know, dry powder to respond to competitive activity, I think, over the summer, going into the back half of the year. So just in the context of this category growth.
Speaker Change: dynamic, the outlook for 25, what you had said about competitive activity but we haven't really heard about that. How do all these things fit together in your view over the next 12 months and I guess
the sanctity of 4% and how flexible that is.
Yeah, it's a good question.
Speaker Change: Rewinding the clock, a year ago, remember we said January through May categories, not us, categories were growing four and a half percent, right? That's kind of a different window from where we are right now, but categories were off and running. Then in the summer we said categories in general were growing closer to two and a half percent. That's what happened for the balance of the year, two and a half percent, and you just saw the category slide that I put up.
Speaker Change: and overall categories grew 2.7%. I would say our fundamental baseline of understanding is categories are going to grow around that 2.5% growth rate next year. And we're going to continue to take share and that's how we get to a range of whatever it is. Could be better, could be worse, but that's why we gave you a range of 3-4%.
Speaker Change: From a promotional perspective, I would say actually, you know, laundry as a good example, but laundry is pretty consistent, as you look sequentially a bit, litters up.
Speaker Change: a little bit, driven by a competitor who's still trying to get some of their share back, happy to say that
Speaker Change: We kept over 50% of our share a year ago when that issue happened for them, so I'm really happy where we ended up. So promotional levels...
are back to normal, is what I would say.
Speaker Change: from the pre-COVID perspective, and all that mixes in, and that's why we gave you a range of 3% to 4%. And if categories do better, we'll do better. If our shares do better, we could do well also. Anything you'd add? Yeah, I'm sort of the old man, the macro environmental guy.
Speaker Change: So when we look at the U.S. consumer, we may have a different point of view than maybe some of the larger peers.
Speaker Change: And we don't think anything's changed. We think that prices on shelf are high. Wages have not kept up with price increases. And that's not just CBG, it's food, beverage. We're all reading about the cost of rent, cost of insurance.
Speaker Change: We've read in the last couple of days that consumer confidence...
Speaker Change: has declined a little bit. And interest rates are still high. So we'd say things really haven't changed from our point of view earlier in 2024. And we said, hey, we see an inflection. We think things are turning down a bit. And we think all those arrows and things that we considered when we said that are still in place.
Speaker Change: So that's why we said, hey, this makes sense to call 3% to 4% top line for $25.
Thank you.
Speaker Change: Maybe just to follow up on that, just, you know, kind of the phasing of the growth, right, so...
Speaker Change: 1Q 2% organic sales growth pretty decent step down from what you just delivered in the fourth quarter
Speaker Change: In the data that we can see, it doesn't look like that's kind of playing out. So, you know, what's really driving that? Are you just being conservative? Is there something we can't see?
Speaker Change: And then just kind of following up to Chris's point, just on the phasing, right, you know, given a 2% start, 3 to 4% for the year, what kind of gets better from 1Q? Are you assuming the category kind of re-accelerates as you kind of cycle easier comparisons or is there something else that's driving that?
Speaker Change: Yeah, I would probably simplify it to say there's two things. One is our international business, the GMG piece of it's a little lumpy sometimes, historically speaking, but it's going to be a little bit lighter in Q1. It'll be a little bit heavier in other quarters.
Speaker Change: I would also say there were some club promotions that move around, you know, between Q1, Q2, and Q3, so that stuff is kind of normal. It's also an untracked channel, so you're not going to see that as much, but that's a simple answer.
Anna.
Anna: Hi, thank you. I just wanted to focus more on Hero and TheraBreath. Maybe I can ask in a different way on the international opportunity for Hero.
Speaker Change: You know, is this kind of like, basically, should we think about it in a similar way to how the U.S. market was a few years ago? Or are there more formidable competitors in those local markets where you're expanding?
Speaker Change: And then on TheraBreath, you mentioned significantly more household penetration is possible. So I was wondering if you have a better breakdown there of maybe the zero alcohol mouthwash opportunity versus the alcohol mouthwash opportunity there. Thank you.
Speaker Change: Yeah, Mike, do you want to talk some more about hero opportunities? Yeah, so just on balance across the international, we're seeing a very similar play out for the brand across most markets. There's no question there's different levels of competitive intensity, particularly more in the Far East where a lot of the patches kind of were born, so there's more competition there.
Speaker Change: We broke it in quite successfully there. We have a really strong brand, we have really strong assets, and we have a really strong pipeline. And so, early indication is we'll be able to compete quite successfully there.
Speaker Change: But certainly, as we've entered markets where we're the introductory patch, we're able to gain a lot of share and a lot of momentum really quickly. It'll just be different competitive landscapes, market by market, but really confident in the brand and the pipeline.
Speaker Change: You know, on the mouthwash side of it, I understand the segmentation of alcohol-free and alcohol.
I think...
Speaker Change: We're starting to think about it a little bit differently now, right? You know, sometimes when we do deals and you convince yourself that you're number one or number two brand in a segment of a sub-segment.
Speaker Change: We're saying, you know, we're the number two overall player now. And so we believe we can play in all aspects of the entire category and do well and gain share and drive household penetration. Here's a little bit of some numbers because, you know, we're maniacal about numbers. The mouthwash category grew three percent.
Speaker Change: But you look at alcohol and non-alcohol. So non-alcohol is growing seven.
Speaker Change: and alcohols down one. That's the math. So all the growth is on the non-alcohol side and that's where we sit and that's where the category is growing.
I love you.
Speaker Change: Thank you, and congrats to both of you. I want to talk about gross margin a little bit and a more muted gross margin expansion target for this year. So can you talk about the building blocks there?
Speaker Change: It seems like a lot of the innovation is more premium-end, so what are the offsets that's holding back further expansion, particularly since it's part of the comp structure?
Speaker Change: It's not material for you, but have you assumed more headwind from tariffs? It just came across the wires that it's 25% Canada, Mexico, 10% China, so if you could talk about maneuvers to offset that, that would be great. Thank you.
In terms of supply chain and gross margin,
cross-margin
Speaker Change: higher than normal inflation we think is really good. So remember, historical inflation for us...
Speaker Change: is 2%. You can go back for a decade or longer and see that. Then COVID happened and it got a lot choppier.
So, yep, innovation is premium, yes, we have...
Speaker Change: fast-growing businesses at a higher margin, but the headwind is still inflation, and it's moderate inflation, is the word we used in, I think, the release and elsewhere. So we're doing, really, in my mind, a really good job by offsetting inflation with productivity. Our productivity program is...
Speaker Change: is running on all cylinders. Rick Spahn or Carlos, what do you guys want to talk about? Anything from a cost perspective that you want to highlight?
Yeah, so just from an input cost standpoint.
Speaker Change: Inflation we're seeing is largely from a commodity standpoint on ethylene, which impacts high-density polyethylene for us, post-consumer regrind as well. Natural gas is up. So those were headwinds that we had. But as Rick referenced, our productivity program is alive and well and more productive than it ever has been. We had a fantastic year last year.
Speaker Change: Yeah, and then your second question really on tariffs, tariffs are, um, no.
Speaker Change: We've been moving for years to limit our exposure, right? We've said our outlook excludes any impact from tariffs, as many competitors would say the same, and we are less exposed than others is what I would kind of handicap.
Speaker Change: We're going to continue to focus on local manufacturing when we can and do things with productivity to offset.
Speaker Change: as best we can. And we'll see. These are volatile situations, so we'll see how long it lasts and what happens, but we have a culture and a capability to be more reactive than we need to be.
Javier?
Javier: If you could expand in two categories, again, vitamin, sorry about that one, but hopefully from a different angle, to what extent what is happening in drug stores
Speaker Change: best or the mid-tier, something that you tried before, now you have it, it seems that it's getting a lot of traction.
how much it sells, it's the incremental net cannibalization.
and that is beating...
Speaker Change: all of our metrics on incrementality. So it is working. The consumer is really pleased. Our reviews are really strong. Carlin, anything you would add on just your assessment of deep clean and the acceptance?
Carlin: Yeah, I think on the laundry side with Deep Clean we're very very pleased with what we're seeing. The retailers are pleased as well. So you know this was a you know
Carlin: A piece of innovation that we worked for quite a while on. It wasn't just us developing it and taking it in. So we were very collaborative in how we approached it. And I think the consumers are definitely speaking in terms of where we're picking up the incrementality piece, probably to a greater extent than we even expected.
Thank you.
is applicable to classes of trade.
Carlin: A part of it is definitely the online strategy as well. Half of all vitamins are sold online. A third of all gummies are sold online. And so to win in the category, you can't just look at bricks and mortar and circana data. You really have to be a little more broad than that.
Carlin: That is a big future for the gummy businesses, what we do online.
Leave powers
Speaker Change: Thank you. Two questions, if I could. The first one, just to kick the tires a little bit on the ERP upgrade that you called out in the release.
Carlin: I'm assuming those costs are cash, just clarify that. And then any risks or timing that that may impact on sales cadence throughout the year as that rolls through? And then the second question is actually for Carlos.
Carlin: I don't know if there's a way to do this, but maybe of all the innovations that Stacey laid out for us for the first half, are there one or two that you would highlight that sort of uses a case study that says, just exemplify the new product development and kind of highlight capabilities that exist today that maybe you couldn't have brought that product to life five, six, seven years ago?
Thanks.
Carlin: So on the ERP upgrade, no revenue recognition issues in 2025. That project won't go live until Q1, Q2 of 2026.
Carlin: So, Kevin, anything you want to add on SAP and the ERP system? No, the SAP system is the lifeblood of our operation and it's what enables a lot of what we heard about today. Technology drives our ability to acquire and grow.
Yup, Carlos.
Carlos: Yeah, we talked a little bit about Batiste. I talked about, you know, how we got there, so that'll be one, but I think...
Carlos: You know, that blue box to the upper right, that's what we get excited about.
Carlos: I mean, hardball to me is another example, but the litter, that's extruded sorghum. It's not the clays that are typical in this category. So that's a great example of open innovation. We went outside, found a partner that had the technology. We needed to change it and adapt it. For Bird in the House, added our expertise on top of that, some of the aesthetics and fragrance work.
Carlos: And the other example is, you know, it's really it was about grains and again that that team
was used to dealing with plays.
Carlos: But we've got food people, we've got food nutritionists in the building that say okay, we know how to technically extrude grains and put those together. So it's identifying it, bringing it up, and then meshing some of those things together. So it's almost like that number I threw out, the 50%.
Carlos: Everything's got a little bit of a story, and sometimes, frankly, it's hard to pinpoint one of the innovation sources as why the innovation worked. It's how they kind of come together. So I think those are two, and you can go down the list.
Carlos: You know, we talk about Sheetz as the first branded product out there with Sheetz.
Carlos: But we were doing that internally, and a lot of design thinking and working with the consumer directly, and they just kind of led us to that form. So that's another skill set of doing R&D work with design thinking with the consumer that got us to a form that is really delightful for them.
We have Bonnie?
Carlos: All right, thanks. I just wanted to ask about international. Rick, you sounded very excited about the growth and the opportunities there. So hoping for a little more color on the differences of growth that you're seeing in Global Markets Group versus the subsidiaries.
Carlos: and then maybe where you see the most upside. And then a second part of this is as you think about expanding and getting into new markets.
Carlos: You know, how do you evaluate the risk getting into some of these new markets and opening them?
Carlos: and any learnings that you've had from past, you know, and what you're doing maybe differently and doing better.
Carlos: Thank you. Yeah. Okay. Well, you read me right. I am excited about it. And, you know, it's broad-based. It's, you know, geography and the countries we go into, the brands that we're bringing, some brands that we're going global with.
Carlos: OxiClean is the example that Mike gave in the deck, and I thought it was a really good one. The distributor that we bought in Japan. There's other countries just like that story that will play out in my mind over the next five years. And it's all about...
Carlos: We're probably 20 years behind most CPG companies on their way.
Carlos: You can get there if you have a great brand portfolio like we do. We get a lot of acceptance when we go to a country where we have new news, new brand for a retailer.
Carlos: But that's also why we put M&A high up there on the list for international. Like, for the first time ever, we're going to say, yeah, you know what, we want to buy incrementality, we want to...
Mike: Mike anything you want to add? Yeah, what I'd say is I think from our current position is We're encouraged because we've got broad-based growth across across the network So and I'd probably think about it in three ways. There's we've got kind of established subsidiaries that are kind of more mature That are that are growing faster than than market rate. So that's that's good news Those are kind of the Canada's, the UK's, the France's We've got a couple subs that are newer like Germany and Mexico that are seeing double-digit growth So those are really strong contributors for us
and Richard Markets.
from a global markets group perspective is
Mike: We're seeing good broad-based growth across multiple regions. For 2024, I'd point to LATAM and probably Eastern Europe as being two kind of standouts. But we've had great growth rates in the Indian Middle East, and we've had pockets of growth country by country. But I think to answer your question around how we evaluate is every country is a little bit different. Our route to market, how we partner, the competitive intensity market by market, that's all going to be a little bit different. What brands we can register, which ones we can't.
Mike: So we're quite thoughtful about where do we have the right to win from a portfolio perspective, what brands can open the door and create scale. And there's more commonality than not, but there's going to be nuances market to market. But that's the way we're approaching it.
The End
Thank you.
Thank you.
Speaker Change: Thank you So Rick you talked about your 2025 guidance being mainly volume driven and that's the history of the company over a long period of time But if you were to see further commodity inflation from here partially, maybe because of tariffs, would you consider price increases in the US and Bigger picture how you see in a competitive environment in the US from a promotional activity. Thank you
Speaker Change: you know, price increases are not really anything that's being discussed.
Speaker Change: The consumer is exhausted. And so companies, including ours, we're working extremely hard.
Speaker Change: then time will tell on what has to happen, but if it's anywhere within normal bounds, companies are going to offset that.
Over here, Rick.
Rick Spahn: Hi, thank you. I'd like to touch a little bit on the great growth that you've seen with some of your newer brands, Hero and TheraBreath. You're obviously expanding internationally, but that we will get to a point where you're going to have to start tough.
Transcription by CastingWords
Rick Spahn: Yeah, I think we we have we still have a great growth profile for Hero and TheraBreath for years to come
Okay, yeah, when you look at those explosive consumption numbers...
Rick Spahn: are at their strengths, and we're going to get behind them in a big way.
Rick Spahn: Yeah, I think Rick just mentioned something really important and that is, you know, our unaided and aided awareness are still fairly low for both of these brands.
Rick Spahn: So, I could not be more confident that our jobs are just to get out there and...
Rick Spahn: Drive awareness on both of those brands so that we can attract new users and drive velocity to the products that we have at shelf.
and I'm also thinking about our acne portfolio.
Rick Spahn: the Batiste launch, like all of our innovation, you know, the vitamin innovation, we're putting dollars and investment behind all of those.
You don't think I'd answer that, do you?
Rick Spahn: A lot of written about, hey, Heroin TheraBreath, they're pulling the train so much for...
Rick Spahn: for Church and Dwight. And it's a little bit like the Olympics, you know, you take out the highs and you take out the lows, and then how's the core doing? And you've got to keep in mind our vitamin business has been dropping, big business, double digit, and yet we're still growing over four percent on an annual basis. So you always got to look at context when you start pulling things in and out.
All right, Matt, you want to close this?
Yeah, any other questions?
Alright.
Rick Spahn: So this is my final trip to the Stock Exchange. A few people have asked me about how's that going today. And my response is that it feels like it's happening in slow motion.
Rick Spahn: So when you do this every year, it's sort of like you have something to do, and then you know, you're thinking about the next quarter and the year.
and Cagney and what not.
But not for me.
This is the last time for me.
Rick Spahn: So I'm going to enjoy it today. So thank you all, many of you have become friends over the years. Many of you I'll see at Cagney, I'm looking forward to that. But then April Fool's Day, April 1, will be my last day with the company.
Speaker Change: for the investors, is very strong in the company. We've got a super strong balance sheet, lots of cash, got this competency to acquire businesses. This is a great company to bet on. So, meeting is adjourned. Thank you.