Church & Dwight Extends In Hair Care, Vitamins, Sizes Up Market For More
This article was originally published in The Rose Sheet
Executive Summary
The health, personal and household care product firm in 2018 is adding "Naughty" and "Nice" choices to its Batiste dry shampoo line and probiotic versions of its Vitafusion adult and L'il Critter children's gummy vitamins. Both lines are among C&D's sales drivers, the 11 "power" brands that it projects nearly doubling in number through acquisitions.
Church & Dwight Co. Inc. is extending its dry shampoo and vitamin lines, categories it entered through acquisitions, while it projects making deals to add enough brands to grow its lineup of sales drivers from 11 to 20.
The health, personal and household care product firm in 2018 is adding "Naughty" and "Nice" choices to its Batiste dry shampoo line and probiotic versions of its Vitafusion adult and L'il Critters children's gummy vitamins. Both lines are among C&D's sales drivers, which it calls "power" brands.
Probiotic vitamins for adults are "an $800 million category that we're not in. We're introducing both in adult and in children to probiotic," said C&D President and CEO Matthew Farrell on Feb. 23 at the Consumer Analyst Group of New York Conference in Boca Raton, Fla.
Batiste is the firm's "juggernaut" as leader of a category growing by double-digit percentages annually, Farrell said. He said Batiste annual sales have grown from $25m when C&D acquired the brand to more than $150m.
"The game here is we keep building it out," Farrell said. "We also have been expanding our share at the same time the categories are growing. So, if you want a dry shampoo to match your mood, you can have Batiste Naughty or Batiste Nice in 2018," he added.
Market research is bullish on dry shampoo, as well as unanimous about C&D as the leader, estimating the category's global compound annual growth through 2025 at least 5% and as high as more than 10%. North America sales for the category are particularly strong, forecast to grow from an estimated $853.4m in 2017 to $1.2bn in 2025.
Farrell said Batiste and other dry shampoo brands target a consumer need that previously was largely unmet. "Because 80% of women don't wash their hair daily, they look for other solutions," he said. "Another wave" of consumer demand C&D is riding through acquisitions is the hair-thinning solutions category, the CEO said.Toppik added in 2015 and Viviscal in 2016 are the firm's alternatives to drug and chemical products offered as hair-thinning remedies; sales for both during the current quarter are up 30% from the year-ago period, he said.
Batiste has paid off as perhaps C&D's must successful addition to its portfolio since it acquired the brand from UK firm Vivalis Ltd. in 2011 and brought it to the US. (Also see "Church & Dwight Leveraging Batiste Success To Grow US Dry Shampoo Market" - HBW Insight, 6 Nov, 2015.)
In addition to brands strong in specialty hair-care categories, with both Toppik and Viviscal C&D gained businesses making most of their sales online, bringing e-commerce expertise it would leverage to its other lines. (Also see "C&D Viviscal Deal Adds Supplement, Hair Care And E-commerce Heft" - HBW Insight, 31 Jan, 2017.)
Its Vitafusion and L'il Critters track record, though, hasn't been on an entirely upward trajectory since acquiring the brands from Avid Health Inc. in 2012. An interruption in manufacturing and surging competition for gummy-format vitamins, minerals and supplements have kept total revenues lower than the firm expected. (Also see "Craigie’s Coda At Church & Dwight: Vitamin Production Capacity Boost" - Pink Sheet, 11 May, 2015.)
11 Today, More Soon?
The Ewing, N.J.-based firm's latest "power" brand acquisition was WaterPik water flossers and shower heads along with manufacturer Water Pik Inc. July 2017. (Also see "WaterPik Whitening Flosser Puts Shine On Church & Dwight's Bright Results" - HBW Insight, 6 Feb, 2018.)
C&D doesn't expect that investors will expect the firm not to make additional deals, Farrell said. "We have 11 brands today, 20 tomorrow. It's a simple way to think about what this company is about," he said.
The hair care and vitamin lines along with WaterPik and other oral care brands and personal care, sexual wellness and household care products in C&D's 11 sales leaders account for 80% of its revenues. Before 2001, its portfolio included one of the 11, Arm & Hammer household, personal and oral care products.
"We are an acquisition platform. So we acquire lots of brands, big and small," Farrell said. "Over time, it's become a competency of the company."
For 2018, C&D forecasts 16% to 18% adjusted earnings per share growth on 8% reported revenue growth, with 3% organic. It acknowledges increasing costs for materials and for transportation, including fuel and services.
In 2017, it reported total net sales up 8.1% to $3.8bn on 12% growth by its personal care lines to $1.2bn and 8.5% to $2.5bn for its consumer products business, with 6.6% growth in the US to $2.9bn and 18.3% internationally to $621m. Adjusted earnings per share for the year increased 10% to $1.94.
Deutsche Bank analysts tracking consumer products firms in North America, in a Feb. 26 summary of presentations at CAGNY, described C&D's strategies as "unchanged, yet attractive," particularly due to its "strong/niche positioning in core categories, as well as key contributions from new businesses like WaterPik."
The firm's international sales growth, which it began emphasizing in 2017 on the heels of beginning to expand its e-commerce business, has key drivers in the brands it adds in acquisitions, the Deutsche Bank analysts said.
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