Church & Dwight Company (CHD)

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Top Contributors Jonathan Sheets Related Articles Ecolab (ECL) Colgate-Palmolive Company (CL) Costco Wholesale (COST) Exchange Rates Net income

In 2007, favorable exchange rates boosted Church & Dwight's international revenue by $19.5 million.^[4] Also in 2007, Church & Dwight's sales to Wal-Mart Stores (WMT), its largest customer, accounted for 22% of the company's revenues giving Wal-Mart Stores (WMT) increased power to negotiate prices and volume discounts with Church & Dwight as well as exposing to company to decreased demand from the retailer.^[5] In addition to facing pricing pressure from Wal-Mart Stores (WMT), Church & Dwight faces competitive pressure when raising prices. In 2006 the company raised the prices of some products 4-10%.^[6] The price raises were partially negated because they resulted in decreased volume.^[4] The company's consumer products compete with similar products from companies like Procter & Gamble Company (PG), Colgate-Palmolive Company (CL) and Unilever NV (UN) while its specialty products compete with those produced by companies such as Ecolab (ECL).

[edit] Business Segments

CHD 2007 Revenue by Segment^[7]

[edit] Consumer Domestic (71%)

Consumer Domestic contributed 71% of Church & Dwight's 2007 total revenues. Consumer Domestic manufactures and markets branded household and personal care products within the United States.^[1] The segment's household products include Arm & Hammer baking soda and deodorizing products, Brillo cleaning pads, Oxyclean detergents and Orange Glo household cleaners as well as several other branded cleaning products.^[1] Consumer Domestic's personal care products include Arm & Hammer branded toothpastes, Arm & Hammer branded deodorants, Trojan condoms, Rigident denture adhesives, First Response pregnancy tests and Nair hair removal products as well as other branded toothpastes, deodorants and other personal care products.^[1] Consumer Domestic sells its products through supermarkets such as Safeway (SWY), mass merchandisers such as Wal-Mart Stores (WMT), wholesale clubs such as Costco Wholesale (COST) and similar retail outlets.^[3] Church & Dwight's Consumer Domestic products compete with store brands as well as branded consumer products companies like Procter & Gamble Company (PG), Colgate-Palmolive Company (CL) and Unilever NV (UN).

[edit] Consumer International (17%)

Consumer International generated 17% of Church & Dwight's 2007 total revenues. Consumer International makes and markets branded personal care and household products for international markets.^[8] Consumer International's household brands include Arm & Hammer, Oxiclean, Orange Glo and others.^[8] Its personal care brands include Trojan, First Response and Nair.^[8] Consumer International sells its products through grocery stores, convenience stores, pharmacies and similar retailers.^[9] Church & Dwight's Consumer International products compete with store brands as well as branded consumer products companies like Procter & Gamble Company (PG), Colgate-Palmolive Company (CL) and Unilever NV (UN).

[edit] Speciality Products (12%)

Specialty Products earned 12% of Church & Dwight's 2007 total revenues. The segment makes specialty chemicals such as chemical grade sodium bicarbonate, animal nutrition products such as feed grade sodium bicarbonate and commercial cleaning products for hotels, business buildings, restaurants and other facilities.^[2] Specialty Products sells its chemicals, nutrition products and cleaners mainly through direct sale.^[10]

[edit] Business Financials

CHD Revenue by Geography^[11]

Church & Dwight Total Revenue, Operating Income and Net Income^[7][12]

[edit] Key Trends and Forces

EUR to USD Exchange Rates^[13]

[edit] Favorable exchange rates boosted international revenue by $19.5 million in 2007

When foreign currencies depreciate, the USD value of Church & Dwight's international revenue decreases. On the other hand, when the USD weakens (foreign currencies appreciate), the dollar value of Church & Dwight's international revenue increases. Between June 18, 2007 and June 18, 2008 the U.S. dollar depreciated in relation to the euro.^[13] Since 22% of Church & Dwight's revenues came from abroad, this resulted in $19.5 billion boost to Church & Dwight's 2007 international revenues.^[4]

[edit] Church & Dwight's sales to Wal-Mart Stores (WMT), its largest customer, accounted for 22% of the company's 2007 sales

During 2005, Church & Dwight's sales to Wal-Mart Stores (WMT) accounted for 18% of the company's total sales.^[14] In 2007, the percentage of Church & Dwight's sales to Wal-Mart Stores (WMT) increased to 22%.^[14] Church & Dwight's dependence on Wal-Mart Stores (WMT) gives Wal-Mart Stores (WMT) increased power to negotiate prices and volume discounts with Church & Dwight as well as exposing to company to contract reductions from the retailer.^[5]

[edit] Stiff competition from other branded consumer goods companies and store brands makes it hard for Church & Dwight to raise prices without losing sales

Because Church & Dwight faces stiff competition from other consumer products companies and store brands, when the company increases its prices it often receives lower demand. Church & Dwight faces especially strong competition from store brands because of 40% of grocery sales at Wal-Mart Stores (WMT) (Church & Dwight's largest customer) come from the company's store brands.^[15] During 2006, Church & Dwight raised prices on products representing 35% of the Consumer Domestic segment's sales by 4-10%.^[6] This increase in prices resulted in a 3% increase in the company's total revenues in 2006. However, the price increases made Church & Dwight's products less competitive with those produced by other consumer products companies and with store brands offered by retailers such as Wal-Mart Stores (WMT). As a result, decreases in volume caused by the price increases caused in a 2% decrease in the company's 2006 revenues, partially offsetting the revenue gains from the new prices.^[4]

[edit] Key Competitors

Church & Dwight competes with other branded consumer products companies as well as store brands from retailers such as Safeway (SWY), Wal-Mart Stores (WMT), Walgreen Company (WAG). Church & Dwight's main competitors include:

• Procter & Gamble Company (PG) makes and markets branded household and personal care products as well as snacks, baby care products and batteries. The company's household and personal care products compete with those produced by Church & Dwight's Consumer Domestic and Consumer International segments.^[16]
• Colgate-Palmolive Company (CL) makes and markets branded oral care products, other personal products, household products and pet nutrition products. The company's oral care, household products, and personal products compete with those produced by Church & Dwight's Consumer Domestic and Consumer International segments.^[17]
• Unilever NV (UN) is a Dutch company that produces packaged foods and branded products for the household and personal care markets. The company's household and personal care products compete with those produced by Church & Dwight's Consumer Domestic and Consumer International segments.^[18]
• Ecolab (ECL) offers its customers industrial sanitation and cleaning products and services. It's industrial cleaning products compete with those produced by Church & Dwight's Speciality Chemicals department.^[19]

Church & Dwight and Key Competitors 2007 ($ in millions)

Note: Data forUnilever NV (UN)were converted to U.S. dollars using the average USD-EUR exchange rates for 2007.^[20]

[edit] References

1. ↑ ^{1.0 1.1 1.2 1.3} CHD 2007 10-K Item 1: Consumer Domestic, pgs 2-4
2. ↑ ^{2.0 2.1} CHD 2007 10-K Item 1: Speciality Products, pgs 6-7
3. ↑ ^{3.0 3.1} CHD 2007 10-K Item 1: Distribution for Consumer Domestic, pg 6
4. ↑ ^{4.0 4.1 4.2 4.3} CHD 2007 10-K Item 7: Consolidated Results 2007 compared to 2006, pg 27
5. ↑ ^{5.0 5.1} CHD 2007 10-K Item 1A: Risk Factors, pg 12
6. ↑ ^{6.0 6.1} CHD 2007 10-K Item 7: Consumer Domestic, pg 31
7. ↑ ^{7.0 7.1} CHD 2007 10-K Item 8: Segment Information, pg 78
8. ↑ ^{8.0 8.1 8.2} CHD 2007 10-K Item 1: Consumer International, pgs 4-5
9. ↑ CHD 2007 10-K Item 1: Distribution for Consumer International, pg 6
10. ↑ CHD 2007 10-K Item 1: Distribution for Speciality Products, pg 8
11. ↑ CHD 2007 10-K Item 1: Geographic Areas, pg 10
12. ↑ CHD 2007 10-K Item 6: Selected Financial Data, pg 20
13. ↑ ^{13.0 13.1} EUR to USD Exchange Rates
14. ↑ ^{14.0 14.1} CHD 2007 10-K Item 1: Customers and Order Backlog, pg 9
15. ↑ Wikinvest: Private Label Trends
16. ↑ Google Finance: PG
17. ↑ Google Finance: CL
18. ↑ Google Finance: UN
19. ↑ Google Finance ECL]
20. ↑ Monthly Average Graph (American Dollar, Euro) 2007