Inflation expectations aren’t moving much at all. Ethylene is down a little bit. HDPE is up a little bit. But net-net, we’re right where we were when we talked three months ago. So we don’t have — if there’s a theoretical question of if there’s inflation, what do we do? I would tell you our productivity program is very strong right now and we think that’s going to be evergreen as well.
Matt Farrell: Just to add to that, Nik, as you know, we’ve got a portfolio of value brands. So to the extent that interest rates stay where they are, we have some defense against that. We have found that HERO and THERABREATH are really high rings. But we’ve really been unaffected by any decline in consumer sentiment over the past few quarters. So they seem to be somewhat resilient. Those are some of our bigger growers right now. So, I still think we’re pretty well-positioned at least for the remainder of 2024.
Nik Modi: Great. Thanks, guys. I’ll pass it on.
Matt Farrell: Okay.
Operator: Our next question will come from Peter Grom with UBS.
Peter Grom: Thanks, Operator. Good morning, everyone. Hope you’re doing well. I was hoping to just follow up on the 2Q organic sales outlook. Rick, you mentioned fully lapping pricing. You touched on the couponing many times throughout this call. So within that 4%, can you maybe unpack what we should expect from a price versus volume perspective? And then kind of the same question for the full year. I think previously the expectation was that volumes would be two-thirds of the full year organic sales growth. Has that changed or is that still the right expectation? Thanks.
Rick Dierker: Yeah. Thanks, Peter. In Q1, it was 70% volume and 30% price. And I just made the comment that on a go-forward basis, Q2, Q3, Q4, they’ll likely be closer to 100% volume and minimal price if anything. And if you rewind the clock, pre-COVID, you go back 10 years ago, and that was our track record, 100% volume-driven growth. And actually sometimes in the past, it was maybe 110% volume-driven growth and a little bit more trade as we went national for some of our brands. So that’s the expectation as we look forward and so for the full year, I probably wouldn’t change the outlook we gave you on the mix.
Peter Grom: Great. And then maybe just a quick follow-up on Dara’s question. Just kind of on WATERPIK and the fact that you expected to kind of reverse and grow for the year, a pretty nice rebound. So just maybe thinking about the sales from a brand perspective, just in that you over-delivered versus the full year outlook despite that drive, what really gets worse from here? Is it simply just cycling the top comps and moderating growth and HERO and THERABREATH or are there other brands where you’re kind of expecting things to slow sequentially?
Rick Dierker: Look, we think not much changed from our original outlook. We beat the quarter on organic sales growth despite some of these things that were dragging us down. It’s just early in the year to call any incremental upside and we typically don’t do that. So let’s see how consumption goes and we continue to do well on a share perspective. And I think we’re very optimistic about the year and the topline.
Peter Grom: Thanks so much. I’ll pass it on.
Operator: Our next question will come from Anna Lizzul with Bank of America.
Anna Lizzul: Hi. Good morning. Thank you for the question. What’s the solid volume growth that you saw in Q1? I was wondering if you’re seeing a more significant benefit from trade-down. I think you mentioned some in laundry in response to Chris’s question, but wondering if you’re seeing this elsewhere as well? And then we’ve been hearing from some companies this earnings season that the lower-income consumer appears to be more challenged. I was wondering how you’re thinking about the broad health of the consumer across your different income tiers in relation to your categories and volume growth?
Matt Farrell: Well, with respect to the consumer, you’ve probably heard us say on other calls that our big barometer is always unemployment and unemployment has been consistently low. Yeah, interest rates have risen, but they’ve been high now for a while, so we don’t see any change, other than maybe people are disappointed that they’re not coming down as fast. Yeah, and there’s — we all know that student loans started to restart as well, so there’s other pressures on the consumer. The credit card debt is rising, delinquencies are rising. We’re all looking at the same data, but it doesn’t seem to be translating down into consumption for our products since you’ve seen the first four months of the year. I think that’s probably because of you’ve got to go category-by-category and brand-by-brand. So, like I said earlier, I do think we’re well-positioned for the remainder of the year. Yeah, what was the first part of your question?
Anna Lizzul: I’m just wondering if you’re seeing broad trade-down. You mentioned some in laundry. Any other categories?
Matt Farrell: Yeah. Well, look, the predominant portion of our portfolio that is valued is laundry and litter. And in laundry we have ARM & HAMMER, but we also have XTRA. XTRA grew in the first quarter. It was in my prepared remarks, so you’ll feel real good about that. That may be an indication of more pressure on the consumer when you see the deep value brand growing. And then over in litter, we have both a high-priced litter, meaning premium litter we call the black box and we have the orange box, which is value. We keep people in the category. So we may — people may trade down, but they’ll trade down with an ARM & HAMMER, which actually supports our topline. So, like I said before, we have some good dynamics in those two big categories that we think are going to help us for the rest of the year.
Anna Lizzul: Great. Thanks very much.
Operator: Our next question will come from Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: All right. Thank you. Good morning. I had a quick follow-up on laundry. Curious to hear how you guys think about managing the balance between driving share and profitability. I guess I’m thinking about as you step up trade spend and also as you — especially as you look at it in the context of curtailing some of the ineffective promos you mentioned earlier.
Rick Dierker: Hey, Bonnie. It’s Rick. I just want to be really clear. In Q4 of last year, we didn’t repeat some bad promotions and that carried over a little bit into January and we were pretty palms up about that. We have a great balance between what we think the right trade spending is and the right growth, and we’re just getting back to what we would say was normal before we cull some of those bad promotions. So it’s not like we’re hiking up trade spend to be above category levels or anything like that. We are just bumping it back from an artificial low.
Matt Farrell: Yeah. Our practice generally is we’re generally below the category average in liquid laundry from a sold-on deal perspective.
Bonnie Herzog: Okay. That’s awesome. I just had another question on International business. Your sales growth in the quarter was quite strong at nearly 9% and the growth really seems pretty broad-based and balanced. I’m just curious to hear how much of the volume growth was driven by distribution expansion versus just maybe strengthen your existing market? Thanks.
Matt Farrell: Yeah. I think one of the things to point to in International, and you’re right, that all six subsidiaries grew, as well as the GMG. Clearly ran the table. What we’re seeing the benefit of is that we’re being very selective about what brands we’re going to support and what retailers we want to grow with and we use — we’re leveraging revenue growth management far more than we had historically and that’s true in the last 18 months and it’s really showing up in the first quarter. In the past, you may have heard us talk about Global Markets Group. It’s grown 15% annually for a lot of years. And there’s a Global Markets Group that generally would be driving the international number. That’s not true in Q1. Q1, it’s the subsidiaries that are driving it and it’s for those three reasons that I gave, being selective with respect to brand, with respect to retailer and using all the tools of revenue growth management.
Rick Dierker: The second thing that’s helping international is a couple of these new brands, HERO and THERABREATH. And typically, it takes us two years to three years to get new brands, new acquisitions out internationally. We’re doing it rapidly and there’s been a great response to many countries and many distributors for those brands.
Matt Farrell: Yeah. We think that’ll build throughout the rest of the year. But that’s a nice tailwind on top of what I said in my earlier remarks.
Bonnie Herzog: Okay. Thank you.
Operator: Our next question will come from Olivia Tong with Raymond James.
Olivia Tong: Thanks. Good morning. I wanted to ask you about the Graphico acquisition and what drew you to that. There are other markets that have distributed relationships and does that seem like an area where you may be interested in more deals? And just thoughts on the M&A environment overall, particularly in goods, what you’re seeing and interest there? Thank you.
Matt Farrell: Yeah. Well, if you go back a few years, the way we got established in Germany was we had a very small distributor that had introduced BATISTE into Germany. That wound up being the basis for starting a very small subsidiary in Germany, which has grown over time. This one is different in that Graphico is a public company in Japan, obviously a micro-cap. But they have been working with OxiClean for 25 years, even before that Church & Dwight bought the business back in 2008 and they have a very capable team that’s driven the brand to be number one pre-wash additive and powder in Japan. And so we benefit then from buying a critical mass of talent in Japan that now we can introduce our other products into Japan. The thing to keep in mind is oftentimes we have multiple distributors in a country, because some distributors are households, some are personal care, they’re experts in different areas and this enables us to concentrate our brands through one subsidiary.
Will there be other distributors in Japan? Yeah, there could be a couple others, but this is one where we can have a base of operation. We should have a — this should be a really big business for us, given the size of the economy and the population in Japan. But also, it’s a really nice beachhead for us in Southeast Asia from which to grow. So we’re really enthusiastic about it. We’ve got a great team that’s coming on Board as a result of this acquisition.
Olivia Tong: And just thinking through about the M&A environment overall.
