Church & Dwight Pursues Market Share In New Year After Strong 2012

Church & Dwight will increase its marketing spend in 2013, focusing on the launch of innovative, premium products under power brands, the firm reports during its fourth quarter and full year 2012 analyst call Feb. 5. Firm invested more than $100 million in marketing in fourth quarter, up nearly 3% over the prior-year period.

Church & Dwight plans to increase its marketing spend in 2013, which will help it capture market share and deliver full-year earnings per share on the high end of previous forecasts, it says.

Increased marketing will be “focused behind the launch of innovative new premium products [under] our power brands, which we expect will continue to drive share gains,” CEO James Craigie states in a Feb. 5 release outlining the firm’s financial results for the 2012 fourth quarter and full year.

In the fourth quarter, Church & Dwight invested $108.7 million in marketing, its highest spend of the year and 2.9% more than in the comparable quarter a year ago. The firm credits the move for the market-share gains it saw across its eight “power brands,” six of which make up 80% of the firm’s sales and profits.

Seven of the company’s power brands, which include oral-care provider Arm & Hammer, grew market share in the fourth quarter, according to Craigie, who addressed investors during a same-day earnings call.

The exec said that while power brand Nair had a “great” year in terms of sales, it lost market share due to a new competitor in the hair-removal category.

In 2013, Church & Dwight aims to reassert Nair with a new offering, wrapping the three products in the brand’s Brazilian Spa Clay line into a single package called Trio. Spa Clay launched early last year with a roll-on wax inspired by “luxurious” Brazilian spa treatments (Also see "Church & Dwight Launches First Arm & Hammer/Orajel Toothpaste" - HBW Insight, 13 Feb, 2012.). The lineup later expanded with a body cream and face cream.

With Trio, “you get in one little package how to prepare your skin, how to remove the hair and how to moisturize the skin all at once,” Craigie said.

The firm will grow its toothbrush portfolio with a musical toothbrush under the Arm & Hammer Tooth Tunes electric toothbrush range that was developed through a partnership with British boy band One Direction, the exec noted.

Church & Dwight began shipping products under its Tooth Tunes line in July 2012. Developed from technology the firm acquired from Hasbro toy company, Tooth Tunes brushes entertain users for the recommended two minutes by pumping music from artists such as the Black Eyed Peas, Queen and Rihanna through the jaw to the ear (Also see "Church & Dwight Forecasts Ambitious Gummy Supplement Growth In 2013" - HBW Insight, 12 Nov, 2012.).

In hair care, Church & Dwight’s recently acquired Batiste dry shampoo business, which the firm picked up from U.K.-based Vivalis Ltd. for $64.8 million, will be expanded to new markets, according to Craigie.

“This business has grown from a 4% share to 6% share in the last 12 months, [so it’s] really a hot product, and we're in the process of expanding this around the world,” the exec said.

Optimistic About 2013

Church & Dwight's total personal-care sales in the fourth quarter soared 42.7% to $252.3 million, attributed largely to the firm’s acquisition of Avid Health in October 2012, which added L’il Critters and Vitafusion gummy supplements to its portfolio. For the year, personal care grew 9% to $745.6 million.

Sales in the firm’s domestic consumer business reached $609.4 million for the quarter, representing growth of 17.3%. For the year, the division’s sales advanced 9% to $2.12 billion. Organic sales were up 5.5%.

Reported net sales for the quarter advanced 10.8% to $809.7 million, and for the year grew 6.3% to $2.92 billion. Increases were partially offset by lower sales of products including Arm & Hammer toothpastes, according to the firm's release.

Church & Dwight noted that its outlook for 2013 is positive despite an economic environment that continues to prove challenging, with consumer spending and category growth still weak.

“We believe we are in an excellent position to continue to deliver value to our shareholders with our balanced portfolio of value and premium products, the launch of innovative new products, increased distribution in many major accounts” and aggressive cost-cutting, Craigie said.

The company, which recently moved its headquarters from Princeton, N.J., to Ewing, N.J., anticipates that EPS for full 2013 will be $2.79, the apex of its previously announced $2.74-$2.79 projection, while organic sales growth is projected to be 3% to 4% for the year.

“I can tell you right now, based on what we know from what accounts have said to us, and have guaranteed us to do, it's going to be a terrific year in 2013,” Craigie said.

In a Feb. 5 report, Deutsche Bank Securities analyst Bill Schmitz notes that the company's management team deserves credit in “leading with strong innovation, capitalizing on U.S. consumer trade-down over the last several years and adeptly using [mergers and acquisitions] to secure earnings and growth flexibility going forward.”

However, the analyst warns that much rides on the U.S. macro environment in 2013, considering the majority of Church & Dwight’s business is in the U.S. Schmitz notes that if trade-down slows and commodity costs continue to rise, the firm could incur some negative effects. On the flip side, if U.S. consumption improves, the firm is well positioned for fast growth in its personal-care business.