Church & Dwight Co Inc (CHD) September 2026 Conference Transcript

Okay. So next up this afternoon, we are pleased to welcome back Church and Dwight. We're fortunate to have the company's chief executive officer, Rick Durker, chief financial officer, Lee McChasney, and executive vice president and U.S. domestic president, Chuck Rapp, with us. Rick, I know you have a lot of slides to get through, so no long introduction, and I will step away. Thanks so much.

All right. Thanks, Lauren. She's right. We have a lot of slides to get through. It's always good to set a new record each and every time we come to Boston. All right, so first and foremost, here is our Safe Harbor Statement. Please take the time to read this. We do have forward-looking statements on our website. Okay, who we are. Look, our evergreen model is alive and well, and I'm especially pleased that in 2026, despite the volatile world that we live in, And we've been able to have an outlook that encompasses the organic sales growth, evergreen model, and adjusted EPS growth. So fantastic. Now, remember, this is the output. Like, there's so many things that go into this that make this work. And it's our productivity program. It's our innovation program. It's the way our sales and marketing teams go to market. So Lee will go through this a bit more, but just really, really pleased with how we've hit our Evergreen model this year. We have strong performance over a long period of time, whether it's 10 years, 5 years, 3 years, 1 year for TSR. We're typically industry leading. Last year we took a step back like many in the industry did. This year we are taking a big step forward. But how do we do that? We've talked about this briefly before, but what makes Church & Dwight unique and different? Well, one of the things is we do our organic growth fantastically well, right? And we have the ability to identify, acquire, integrate, and grow acquisitions. We can do both. And so if you look at net sales up and to the right over the last 20 years, same thing with earnings, same thing with free cash flow, up and to the right. Organic growth that entire time has been about a 4% CAGR. So we can do both of those well, and it creates value. We're a $6.2 billion company, about three-quarters in the U.S., 18% international, and 5% for SPD. We have seven power brands, and those seven make up 75% of our sales and profits. That's why we talk about those more than any others. We have a winning formula, a balanced and diversified portfolio. We typically do well in any economic environment. Low private label exposure. It was low previously. Now it's even lower. Online success, strong, consistent, categorically innovation, and we're an acquisitive company. So about half of our business is household, half of it is personal care, about a third of it's value, two-thirds of it's premium. So again, we do well in most economic environments. Low private label exposure. I think, you know, really if you take a big step back, one of the threats to consumer goods and really food, different industries, is the rise of, I don't even call it private label, I call it store brands. And the good news for us, we were industry leading with our weighted average exposure being around 11% or 12% for many, many years. After we sold our vitamin business, that dropped all the way down to 5%. So we are positioned well versus the rest of the industry against private label. Number three, online success. We've gone from laggard to leader. 2% of sales back in 2016. Now 25% of our consumer sales are sold online. Strong, consistent, category-leading innovation across categories. TheraBreath toothpaste, Hero cleansers, Arm & Hammer laundry, Cat Litter, Stain Fighters, Trojan. So just a really broad base of category-leading innovation, and that is why we tend to get great distribution points. This year we were number two across the entire industry on distribution points gained. And a big reason for that was our innovation pipeline.

We're an acquisitive company.

We really do. We have an ability and a competency of identifying, acquiring, integrating, and growing brands. And many companies want that strategy, but we have decades of experience doing it. We want primarily number one or number two share brands. We want high-growth, high-margin brands that are fast-moving consumables, asset light. and we want to leverage our internal Church in Dwight manufacturing, logistics, and procurement capabilities. And we also want to deliver sustainable competitive advantage. And we've gone from about a $1.5 billion company back in 2004 to a $6.2, $6.3 billion company today. And I want to provide a brief update today on our most recent acquisition, which is Miss Mouth. so this is a broad spectrum of of brands right we have a a portfolio um for for miss mouth we have sprays we have refills we have pens wipes shoe cleaner and laundry detergent as a small business so we just think this is uh such a fantastic brand look at household penetration Miss Mouth is 2.5% household penetrated. 50% is the category. 25% is OxyClean. So we just have a lot of room to run. Distribution points, similar story. It was really only distributed online a year ago. Now it's in two other bricks-and-mortar retailers. But we really believe we can use our distribution muscle to help expand this to other classes of trade. And it has a great category story, not just for retailers, but for consumers. I mean, it's growing the stain-fighter category. Category is up 10%. It's because Miss Mouth is up around 50%. And here's the point about bricks and mortar. It's been largely incremental as we've expanded this business, right? A year ago, it was only in one online retailer. Today, it's in three. It's actually a 13th share at one retailer already. And, look, this is a real problem-solution brand. When we were doing diligence on this business, we came across this video that they shared with us, and over 25 million views, and I just want to share this magic moment on Miss Mouth, so please roll the video.

All right. Oh, is that some Missy? Yeah, yeah, yeah, I saw that. Miss Mouth, you know. No, not safe. Legit. I would not say this.

Oh my gosh.

Shut up. No way. I've seen that on Instagram. Are you serious? Boom, baby. That's a scene. Gone. Gone. How did it do that? I've seen that and I had to do it.

Get yourself a photographer who knows how to get stains out.

Isn't that a fantastic... Some of the best advertising you ever see is unintentional. And that is unintentional. And there's a bride stills Weinstein on her wedding dress right before they're going to take pictures, and that wedding photographer fixes it in a minute. And not only is it a problem solution, it actually is a magic moment. You can see it before its eyes. And so we just think that's fit for a purpose. Okay, back in January at Cagney, I walked through some of the growth initiatives, and I said, look, U.S. category growth was slowing in general. Our categories have grown around 3% for many, many years, and partly because we've got to choose what categories we entered as we did M&A. But if categories were slowing to be 2% or 2.5%, we said, look, consumer confidence is also weak. Those two things put together, we want to make sure we're owning our future. And so even if categories slow, we want to be able to make sure that we're growing and hitting or beating our evergreen model. And so we put these three initiatives in place. The first one was to grow our Army Hammer business. Our aspiration is to go from $2 billion to $3 billion. We want to drive our oral care expansion from $1 to $1.5 billion. We want to scale our international business from $1 to $2 billion. And so here's a quick check-in on those initiatives just to re-discuss it again, but we're going to provide a more detailed update in January at our Analyst Day. so over a long period of time I usually use this slide to talk about M&A you know we had one power brand in the year 2000 it was Arm & Hammer and then all the green bars are all those businesses that we've bought and brands we've bought over the past 20 years or so what's unique though is the orange bar the orange bar is Arm & Hammer so it's gone from 1 to 2 billion over 2 billion plus over the last 20 years or so and so now the journey is about going from 2 to 3 And we're going to do that a few different ways, but we have a lot of reasons to believe. It's proven that Arm & Hammer equity can go across categories. We've launched into these big categories, and we've been very successful. We have a master brand that is so well-known. It has brand equity that's right up there with these other common brands that you see in your everyday life. And then finally, we have some Arm & Hammer halo effect for advertising. When we advertise laundry, it helps toothpaste. When we advertise toothpaste, it helps our litter business. So Arm & Hammer advertising is so synergistic. And many companies want a mega brand that can go across these different categories, and that's the strategy. I would say we already have one. We have a brand that goes across categories. It's known for cleaning, known for deodorizing. It's premium in some categories. It's value in others. It's personal care in some categories. It's household in others. So it's really an eclectic brand that can do many, many things. And so I said, hey, here are the four areas we're focused on. One is we're going to grow the core, and we're going to keep doing what we've been doing for many years on laundry and litter. We're going to invest in innovation, invest in distribution. We're going to continue to grow that business. Number two, we're going to round out the portfolio on good, better, best. In certain areas, we need to make sure we're playing at different price tiers. And then number three is really the work we've been focused on the last year or so, is all the new category work. And then four is when it makes sense, what brands get launched by a third-party partner, a licensee, and then they get to such a scale that then we take back and grow exponentially from there. Remember, the most common uses of baking soda, there's over 100. It's not us trying to put and drive consumer behavior. Consumers are already using baking soda for all of these needs, whether it's cleaning, deodorizing, in the kitchen, the bathtub, in the toilet, removing stains, and the list goes on, deodorizing. And so kind of the brief update is we took three different groups of people. One group was our NPD team. And they spent a lot of time doing the drill sites of the category, where we have the right to play and when. The second group was kind of a high-potential mid-level management group within Church and Dwight. And, again, they spent months and months on this problem statement and came back with some recommendations. And then third, we had a third-party external consulting firm come in and do the same thing. And the good news is with all that work, they kind of coalesced around a similar handful of ideas. And I think what I would leave you with today is we're going to launch into one new category in 2027, and we'll go through a lot of the detail on that in January. But we're super excited about all the work that's gone into this, and I can't wait to share more. We're driving oral care expansion through TheraBreath. That's the second growth initiative. And look at this. Mouthwash is a 12% household penetration for TheraBreath these days, and it's 65% for the category. So, again, a lot of room to run. And even as the number two mouthwash, we still have upside on distribution as well. We wanna be in large categories, toothpaste and mouthwash. 2.4 billion for mouthwash, 4.8 billion for toothpaste. We wanna, we care a lot about getting a share point in these types of categories. And we're off to a good start. And our target for 2026 was to get a one share in TheraBreath toothpaste and we've done that. And Chuck will talk through some of the success we're having. And then finally, international growth through M&A. Everyone knows our story on international growth. Really consistent, high single-digit growth organically for a long time. We've been able to scale some of these brands like Hero and TheraBreath. We're working on scaling touchline. It takes a little bit longer because of regulatory requirements. And we think we can also scale in this mouth globally, not just here in the U.S. And I'm probably, I alluded to it on the last earnings call, what's different? And one of the things that's different is the way we do M&A internationally. You know, two years ago we put some M&A folks in Europe and Asia, and for the first 12 months we didn't make much progress. What changed? We changed the accountability and responsibility of M&A to the country leaders. And when we did that, and then the M&A folks support that, but when we did that, all of a sudden the paradigm shifted, And we've gone through almost 100 different deals through the filter in Europe and Asia now. We have a good cadence of going through the pipeline. So I'm really optimistic about international M&A. It's not a matter of if, just when. Okay, let me turn it over to Chuck to walk you through the categories and the brands.

As we look at the U.S. portion of Church and Dwight's business for our evergreen model, we're targeting 3% organic sales growth. And where this growth is going to come from is the seven power brands that Rick just talked about. Now, what's really fantastic about these power brands is the fact that they play in very strong categories that have shown historical growth. And in fact, through the front half of 2026, the average growth rate across these categories has been about 3%. Now, not only are we playing in advantage categories, but we're also able to grow volume, which is very difficult to do in an environment where the consumer is pressured and there's heightened competition. In addition to that, we're leading our peer set in distribution growth. And so as we look at our TDP growth year to date, we see that our TDP percent change through the front half of the year is second amongst our peer set. And not surprisingly, but very encouragingly, this performance has led us to great success with our customers. So in 19 out of 20 of our top accounts, we are growing sales. So let's take a look at some of the categories that are driving this performance. First in laundry, through the front part of the year, we've been able to grow shares slightly and outpace the category 2.5%. Now, we were able to do this in an environment where promotional activity went up for the category, but we actually went down for Church and Dwight. And this strong performance has led us to historical share levels of 14.5%, which has enabled us to retain our position as number one in wash loads. Now, that's exceptionally important because if you think about that, that really underscores the strong role that we have in the everyday lives of our consumers. And as we move forward to delight our consumers and deliver superior value, we're going to leverage our good, better, best strategy. And so at that base good tier, we'll continue to deliver that great fundamental arm and hammer clean. And the better tier, what we're doing is we're adding value through things like OxyClean addition to the formula. And then we're offering premium products like DeepClean in that best tier. Moving on to litter. We're having a great year on litter and we're strongly outpacing the category. And what that's really behind is twofold. One, we are doing well in our good, better, best strategy and litter as well. And in our better tier, we introduced a product called Dual Defense, which offers superior odor management. Additionally, in our lightweight segment, we have our hardball product, which is a superior product versus a competition. The hardball product has a 49% repeat rate, which is 15 points above the competition. And so as we look to continue to drive hardball, hardball is at about an 8.5% share of lightweight litter. Just moving up to 27.5%, which would be our fair share of lightweight litter, represent a $75 million opportunity. Moving on to TheraBreath. As Rick said, TheraBreath is the shining star in our portfolio. And through the front half of the year, we've grown about 21%. And so we are the ones that are driving category growth. this performance has led us to historically high share just under 25 percent and as rick talked about we have significant upside in driving brand awareness capturing additional shelf space and driving therabreath penetration up to category levels and for our pace launch we're very happy with the results that we're seeing in pace a few key statistics first 65 percent of our sales are incremental the category and so what that shows is consumers are willing to trade up and pay more for a premium oral care product like TheraBreath. Additionally, we're a number 10 toothpaste brand already. And then for our online scores, we're at a 4.6 out of 5 stars, which is very strong. So it's great to see that instant positive consumer feedback. Moving on to Hero. For the acne category, the acne category showed strong growth through the front half of the year, growing about 5%. And that's about where Hero was, just a little bit below. Now, what we have seen is that there's growth, strong growth, in products outside of acne patches. And that underscores why our strategy to meet consumer needs across the acne life cycle is very important. And so what are we doing with that? Well, we just launched our cleansers. We have products like our MicroPoint that's for that initial red bump before you fully get the pimple. We have our Mighty Patch Original for when you actually do have the pimple. And then we have products to address the discoloration once the piplina is gone. And so what we're going to continue to do is to drive these products and also innovate and find new ways to meet consumer needs across that acne life cycle. In addition, we still have Upside to drive that Mighty Patch original and continue accelerated growth. And so as we look at it from a share perspective, we're right at about 10%, where the acne category is at about 30, so a ton of headroom. Additionally, given Hero's performance, we warrant more shelf space than we have right now. So much like TheraBreath, there's upside in capturing shelf space that's more representative of what our brand delivers. Moving on to Touchland. So for Touchland, we're a bit behind where we thought we want to be. But the fact is, we're very excited about this brand. And there's a lot of reasons to be enthusiastic about Touchland. First, it's number one in hand sanitizer. Second, it's at a 6% penetration. The category is at nearly a 46. So there's tremendous headroom to drive penetration. And as we've gone through this presentation, you can see that when we get a hold of a brand where there's significant upside and penetration and to really drive a brand forward, we do quite well. Additionally, aided brand awareness is at 23, but there's other brands within this hand sanitizer category that's more up in the 70 and 80 level. So there's more room to drive our aided awareness for TouchLint. And then finally, we're continuing to grow our TDP base, which shows that customers are interested and driving the category with their breadth. And then as we move outside of the U.S., we're going to see accelerated international growth, and you're going to see more of that international expansion as we push forward into early 2027, and then we'll continue to do that in future years as well. Moving on to innovation. Innovation is a significant part of our growth algorithm. And really what we've done to make sure that we're delivering strong innovation is to revamp our innovation model. And so we used to use a single-source innovation model. But what we've done over the past couple years is we've gone to a multiple-source model. That includes things like third-party innovation, classic MPD, white space, and open innovation. And what this enables us to do is to, one, identify new consumer occasions that we can meet to drive accelerated growth. It also lets us find new ways to meet those new consumer occasions. And this approach has really worked because over 50% of our current innovation now has been identified and it's developed through these other sources of innovative thought. And then as we look in market, our new approach to innovation or upgraded approach to innovation is really working. So we used to average about a point, a point and a half of incremental net sales contributing to our top line growth. It's now around 2%. So in market, we're seeing those stronger results and we're seeing the incrementality of our innovation. And we're very excited about the products that we have in market. So we've talked about TheraBreath toothpaste, new products in litter, and also what we're doing for Hero. But we also have innovation that's supporting initiatives like our Good Better Best strategy in stain fighting and laundry. And what that looks like is things like baking soda fresh in laundry and also power sheets with OxiClean that give the consumer a heightened experience. Additionally, we're developing and really marketing our MaxForce item on OxyClean. And what that does is that takes our stain-fighting power to a whole new level. So across our portfolio, our innovation algorithm and our way of working is really delivering. And we'll continue to leverage our innovation model to drive new innovation across all of these categories moving forward, ensuring that we have a strong innovation pipeline as part of our evergreen model. So with that, I'm going to turn things back over to Rick to talk about our international business.

All right, thanks, Chuck. So same algorithm for this division, 8% is what we target. And remember, our international business is about $1.1 billion. Our aspiration is to get it to $2 billion over the next few years. But today, about a third of that is our global markets group, which goes through distributor. The largest sub is Canada. international has a long track record of just success from a high single digit perspective and we're still under indexed i think you know we're early still in the early innings of international growth about 18 of our sales many other companies are a lot higher than that as we take these brands across the world they're starting to scale we're at scale in many of these countries. So Waterpik, Arm & Hammer, OxiClean, we're leveraging from the U.S. Batiste, Deremar, Femfresh are brands that are really in our international business and do really well. And then TheraBreath, Hero, Touchland are ones that we are rapidly scaling. Hero, for example, we've already distributed out into 75 different countries. We're the number one patch in many countries already. Touchland's next in line. You heard Chuck kind of go through that detail. We have a lot of demand pulling for Touchland globally. And as we've evolved international, we're starting to get to the point where we can really do not just local manufacturing, but local insights. And we have great use cases in China, as an example, that we're doing Batiste and dry shampoo for that market specifically. In Japan, we're doing liquid OxyClean made for that market. and then as we move on, SBD is a 5% evergreen model for growth and that business is about two-thirds animal nutrition and about one-third specialty chemicals, $300 million business and just a reminder, a couple years ago, this was a very cyclical business and it was up one year, down the next but we shut down about two years ago a business that was a lot of revenue but not much profit And once we did that, you can really see the core of SBD is not just consistent, but just the definition of consistent. Ten quarters of growth through all this turmoil and volatility over the last few years. Okay, how we operate. I've gone through this slide many times, how we leverage brands. Chuck talked about our categories and our brands, how we're a friend of the environment. We've walked through how we were one of the original sponsors of Earth Day, How we leverage people. We're a lean company. One of the benefits of being lean is fast decision-making. It enables execution. How we leverage assets. We're an asset-light model, typically. And then how we leverage acquisitions. And good returns become great returns over many, many years as we have the ability to acquire businesses. But all of these things are also being enabled today with AI. You know, first and foremost, we're training the entire organization. We have 101, 201, 301 classes. We've gotten each and every salaried employee access to the latest LLM models. And we're letting individuals really do their work in a more effective way. And then next, we're also doing massive projects across the enterprise. We're doing one on revenue growth management. We're doing one on content creation. We're doing one on R&D to help with formulation. We're doing some stuff in supply chain. So I'm glad to say that we're off the starting blocks. And I remember how we really attacked our e-com sales years ago. We went from 2% to 25%. I really feel like now that we're off the starting blocks, we're going to make this a big advantage for the company. And with that, I'll turn it over to Lee to walk through the financials.

Okay, so I'll bring us home with a financial story of Church and Dwight. And for this, just like Rick talked about, it starts with the Evergreen model. And, you know, this is the foundation of really, you know, Rick talked about all the inputs that go into this wonderful output. For those who are new to our story, you know, it's really about balance. We're pursuing 4% organic growth and 8% EPS growth. So we're looking for that growth and the leverage to come through as well. um so that's what the evergreen model calls for these sessions we like to talk about just the scorecard of how we're doing against this so i'm going to start i'm going to do it not just from a a one-year two-year look i'm going to look back an entire decade here of how we're doing so organic growth again four percent goal we've delivered four point one percent on average over the past decade and all the things that happened and in our july 31st outlook we shared an update for the outlook for the year for 26, and we're actually at 4 to 5%, so actually slightly higher than our average market. When you click into what drives us, all the things you just saw from Rick and Chuck, this also shows through when you take that organic down to just a volume perspective here. So you look at this consistent volume-driven growth to organic growth. It's really about making sure you have the right categories, the right innovation, the right way of going to market. This is how you drive steady, volume-based organic growth.

Then we go to adjust the gross margin.

So the Evergreen model calls for 25 to 50 basis points of improvement. If you think about what happened kind of post-COVID, you see the momentum we've had with gross margin come to light. It's all the different tools in the toolkit. And then this year, as you think about 100 to 120 basis points in our July 31st outlook, it's also the benefit of our strategic portfolio actions last year. So the combination of those are driving this really good story of the gross margin. Now, as I said, within the Evergreen model, every year we're looking for 25 to 50 basis points. And we have an entire toolkit that we bring to life every day to drive that performance. So whether it's classic productivity, it's NP, it's the acquisitions and what they do from an execution perspective, RGM. and then it's built into our incentive plans. Across the organization, improving gross margin isn't for a portion of the organization. It's for the entire organization rallying around that. And that's why you've seen the progress you've seen over the last several years. With that background on sales, on gross margin, we make a steady, consistent investment in marketing of approximately 11%. And you think about the opportunity we have here. We have seven brands, again, driving 75% of our sales. We can make really smart investments in these brands and really drive wonderful returns out of them. And, again, it's in categories. Chuck, talk about this. These are categories that are growing, so there's really strong returns on this investment in marketing. We're always looking to do at this level, and if there's opportunities between sales, gross margin, we'll even do more. Now, SG&A, the Evergreen model typically calls for kind of flat to 25 basis points of improvement in our outlook for the year from July. It's an outlook of being higher, and that's really driven by two things. We have the strategic portfolio actions, which, again, is about $400 million of sales coming out of the portfolio, so you have a little bit of that effect. And then you had Touchland, Touchland's amortization and SG&A. And then as part of our July outlook, we also have Mismouth in the SG&A for the year. Now, you think about this, again, the Evergreen model, and this is a decade scorecard on EPS. Evergreen targets 8% and that's what we've done for the past decade despite all the macro events that go on in the world, the formula that we have here, all those inputs that Rick kicked us off with, that's driving a consistent 8% growth over the last decade. So specifically for 26, I've mentioned this a few times, we updated our outlook in July. Our organic growth went up to 4% to 5% before it was 3% to 4%. and our EPS improvement improved to 6% to 8% versus 5% to 8% before. So, you know, we had, based on the first half of the year, we had two quarters with 5% organic growth. You know, that momentum going to the back half, we also had mismatch acquisition, all those elements driving to this improved outlook for the full year. So if we move from there to just what the performance of the Evergreen Monitor does, we have a wonderful cash flow. So for the past decade, we have 119% multiple. You know, most people target below 100. This is an incredible strength for us. It gives us so much more opportunities to invest in our business. And that also shows through the debt to EBITDA. So, you know, today we're sitting in this 1.5, 1.6 level. That's after doing touchline. That's after doing mismal. That's after doing $900 million a share buybacks last year. just really speaks to the cash flow generation of Church and Dwight. So today we have over $5 billion of capacity after all those actions, all that progress over the last several years. And where are we going to focus that? Well, our prioritized use of cash flow, it's pretty consistent. I like to say 1A, 1B, 1C is really investing in TSR or creative M&A. From there we certainly invest in organic growth and productivity. new product development, when there's opportunities to pay down debt, we do debt reduction. Today we just have fixed rate debt. And then ultimately returning cash to shareholders. The strength of that cash flow and really the prioritization here also shows through when you think about it from a dividend perspective, 125 years of consecutive dividend and 30 years of consecutive increases. As we think about where we are in this outlook we gave in July, we have confidence in that outlook, and we have confidence as we look forward here. whether it's the categories we're in, the innovation you heard from us, it's what we're doing with our acquisitions, the growth opportunities, that gives us all confidence as we look forward in our return to our portfolio. With that, one minute for a question.

If you want to do one question, you can, but if not, that's fine too. Up to you. Yeah, so the question is really about higher freight costs that people are seeing. I would say one of the things about our companies, we're super transparent, and I feel like we had that conversation in July, and we kind of pointed to transportation costs, even in the second quarter being a little bit of a headwind. So I feel like we've kind of contemplated that. And as costs go up, we're going to do our best to offset that with ProTivvy, like we said we were going to do two quarters ago, and we're doing. So state of the consumer really quick in 10 seconds or less, I would say. Look, you know, consumer confidence is low, but the consumer is resilient, too. Consumer spending has actually held up pretty well, and it depends what categories you're in. And for our categories, they've been relatively healthy, still between, you know, 2% and 3%. So we continue to execute well.

Great. We'll end there and go to breakout, so just please join me in thanking Church and Dwight for being here.