Church & Dwight Company (NYSE: CHD) recorded 2007 total revenues of $2.2 billion. The company sells branded consumer products in the United States and abroad. The company's brands include Arm and Hammer and Trojan. The company sells its consumer products through retailers such as Wal-Mart (WMT) 
In Q3 2008, falling consumer spending helped to increase purchases of Church & Dwight's value oriented products. Also in 2007, Church & Dwight's sales to Wal-Mart Stores (WMT), its largest customer, accounted for 22% of the company's revenues giving Wal-Mart Stores (WMT) increased power to negotiate prices and volume discounts with Church & Dwight as well as exposing to company to decreased demand from the retailer. In addition to facing pricing pressure from Wal-Mart Stores (WMT), Church & Dwight faces competitive pressure when raising prices. In 2006 the company raised the prices of some products 4-10%. The price raises were partially negated because they resulted in decreased volume. The company's consumer products compete with similar products from companies like Procter & Gamble Company (PG), Colgate-Palmolive Company (CL) and Unilever NV (UN) while its specialty products compete with those produced by companies such as Ecolab (ECL).
Church & Dwight produces consumer products under the Arm & Hammer, Brillo, Trojan, Nair and other brand names. The company also sells speciality chemicals, animal nutrition products, and commercial cleaning products. Consumers buy Church & Dwight products at supermarkets such as Safeway (SWY), mass merchandisers such as Wal-Mart Stores (WMT), wholesale clubs such as Costco Wholesale (COST) and similar retail outlets.
|Revenue and Income ($ MM)||2008||2007||2006||2005|
During 2008, Church & Dwight's total revenue increased by 9.1%. 1.6% of this increase was due to the acquisition of Orajel while the rest of the increase resulted from increased volume and higher selling prices. During the same period of time, gross margin increased from 39.1% to 40.1% as a result of increased prices and cost reduction programs. Between 2006 and 2007, Church & Dwight's total revenue increased by over 14%. 8% of this increase was due to the acquisition of Orange Glo International and Spinbrush. Another 5% of the increase in total revenue was due to increased sales volume while the remaining increase was due to favorable exchange rates. Between 2005 and 2006, Church & Dwight's revenues grew 12%, 10% of which was due to acquisitions.
During Q3 2008, real consumer spending fell 3.1%. Normally, a decrease in consumer spending results in consumers trading down to less expensive goods. However, trading down helps Church & Dwight because value oriented products comprise over 30% of the company's consumer product offerings. Thus, decreases in consumer spending lead to increases in sales of Church & Dwight's value oriented products as consumers seek less expensive alternatives. This effect helped Church & Dwight achieve organic revenue growth of 4% between Q3 2007 and Q3 2008 despite the shrinking U.S. economy.
During 2005, Church & Dwight's sales to Wal-Mart Stores (WMT) accounted for 18% of the company's total sales. In 2007, the percentage of Church & Dwight's sales to Wal-Mart Stores (WMT) increased to 22%. 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.
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. During 2006, Church & Dwight raised prices on products representing 35% of the Consumer Domestic segment's sales by 4-10%. 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.
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:
Church & Dwight and Key Competitors 2007 ($ in millions)
|Company||Total Revenues||Net Income||Net Profit Margin|
|Church & Dwight||2,221||169||8%|
|Procter & Gamble Company (PG)||76,476||10,340||14%|
|Colgate-Palmolive Company (CL)||13,790||1,737||13%|
|Unilever NV (UN)||55,084||5,329||10%|