Church & Dwight Co., Inc. (NYSE:CHD) Q2 2023 Earnings Call Transcript

Page 5 of 10

Matt Farrell: Yes. Well, let’s start with FLAWLESS. We haven’t said a word about FLAWLESS, nor will we, it’s a small brand for us now. First, WATERPIK, just remember, we enter the year, if you go back six months, we said, hey, the first six months, we’re going to be choppy here. We had inventory in the channel that we had to work through. We had an imbalance out there that’s behind us now. So that obviously has a direct impact on our sales in the second half. And same with vitamins. That was our biggest problem child when it came to supply in 2022. We got punished for that by suppliers where we lost displays, some cases lost distribution. So consequently, we took that on the chin in the first half, but that started to improve in the second half as far as the number of displays we’re able to get in.

And some of the variants that we weren’t able to make last year that we’re going to start introducing backend example, a magnesium gummy for example. So for those two businesses, we would say, hey, there’s reasons to believe that there’s going to start inflecting in the second half.

Rick Dierker: Yes. And so I’ll just give you a couple comments too, Andrea. In the back half of 2022, those businesses were down. So we expect those businesses to be really, like Matt said earlier a little – a couple of them a little positive in the back half and really flat for the year. But when you add up all those three businesses and the impact they’ve had on the company, I’ve quoted it a couple times, but in Q4 it was a 4% drag, in Q1, they were a 3% drag. In Q2, they were only a 1% drag, and we expect them to be flat in the second half. So it’s already improved, I guess, what we’re saying.

Andrea Teixeira: Okay. Thank you.

Operator: Your next question comes from Steve Powers from Deutsche Bank. Please go ahead.

Steve Powers: Thanks. On VITAFUSION, just maybe a little bit more detail on your visibility into stabilization and kind of winning back those retailers and consumers? Just kind of where you are in the process and how long you think it will take?

Matt Farrell: Yes. Well, a lot of work’s been gone into this business. We’re relooking at our packaging, our graphics, our messaging, the black eye we got last year gave us a chance to stand down and take a hard look at the brand and look ahead. I think over the next 12 months you’re going to start seeing some changes on shelf and how we go to market. I wouldn’t disclose any more than that right now. Anything to add, Rick?

Rick Dierker: Yes. I mean, for vitamins, I think it’s – when we have our TDPs get impacted a little bit because we’re in the penalty box for supply and we got to do what Matt alluded to. We’re going to get – we’ve gotten more displays, we’re adding advertising, we’re looking at our messaging, and then it takes nine months or so to make that case for the retailer so you can get the distribution back into a leading position.

Steve Powers: Okay. Okay. Thanks. Thanks for that. I guess, just going back to maybe kind of the question Dara raised and that Lauren brought up on the reinvestment rates. I think the reinvestments you’re doing now were very well telegraphed and as you’ve articulated, necessary for lots of reasons. But I guess, the idea, Matt, as you outlined it, the history of the business has been when things are good, you reinvest kind of get ahead. I guess to me, there’s a little bit of tension between that dynamic and then the other side of it trying to catch up from sort of a lost year in 2022. So as you go forward, do you – is the philosophy to run the business as you have from here forward, which effectively means we’re kind of getting back to more of an evergreen mentality off of this newly established base?

Page 5 of 10