Church & Dwight Co., Inc. (CHD) Earnings Call Transcript & Summary

Good morning and good afternoon, everyone. I'm Steve Powers, Deutsche Bank's lead U.S. consumer packaged goods analyst. And today, I'm thrilled to welcome Church & Dwight back to the conference, a company that has put up impressive returns and results for many years, even decades at this point. Joining us today from Church & Dwight are Chairman and CEO, Matt Farrell; CFO, Rick Dierker; and Executive Vice President in charge of International and Global New Products Innovation, Steve Cugine. Welcome back to the conference, guys, and thanks for being here. We're going to break form a little today. I know many of you look forward to Church & Dwight's rapid-fire PowerPoint presentations, but we're going to give the guys a break and run today's session entirely as Q&A. If you're listening to the session via the conference portal, feel free, please, to submit your questions on the bottom left of your screen, and I'll do my best to work those in as we go. But with that, thanks again, guys, for being here.

And maybe we'll just start with a general question on the current state of play that I'll throw in Matt's direction. You can take it in whatever direction you like, and then we can delve deeper. But in general, Matt, just how are things going from your perspective across the business?

Okay. That's a pretty wide open question, Steve.

It sure is.

I can anticipate what's on most people's minds. So we'll kind of start with what are our priorities right now. So employee safety is obviously something that all CPG companies have been focused on. So we've been taking extraordinary precautions, much like others. We have 4,800 employees, 3,000 of which are in our supply chain, so plants and warehouses. And we have another 1,800 that are working remotely. And the people who are working remotely won't be returning until October, so we kind of already made that decision. As far as COVID cases go, we've fared well. We believe we've had 28 cases globally, 24 of which, the employees have returned to work, so doing a good job on employee safety. It's expensive. I can comment on that a little bit later about what the COVID costs are, but employee's safety is good. At the moment, our plants are running well. The -- we've had intermittent shutdowns of suppliers and co-packers due to COVID cases. And even for our own cart, our own plants from time to time have had reductions in production lines running in order to enable us to make sure that our employees were safe. So obviously, that would affect our ability to produce. The big priority right now is with retailers. Because of the huge panic buying and pantry loading in March, we've been spending a lot of our efforts in replenishing distribution centers and store shelves. And the plants that are running particularly hard right now would be laundry, vitamins and baking soda. Laundry had a huge spike in March, a huge amount of pantry loading. It was up 50%. But then April and May, I think, were down around 6% to 8%, both in April and in May consumption. So while consumption's fallen off to -- the manufacturers of laundry detergent are still scrambling to replenish distribution centers and store shelves. And it's -- so that's -- one thing I'd probably add to that is the consumer. So if you look at consumption, both measured and non-measured channels, in April, we said that we were slightly positive all in. May were positive, for sure, so May is stronger than April. And it's kind of a mixed bag when you look at consumption, the things that would be up would be things like vitamins, which just rocketed. ORAJEL, which is oral analgesics, baking soda. FLAWLESS would be another one. Going the other way would be things like BATISTE and TROJAN, which have suffered because of quarantining and sheltering at home, et cetera. WATERPIK as well has been down from a consumption standpoint. I mentioned laundry because of the reaction to -- laundry and litter have gone backwards in consumption in the second quarter, largely because of the big spike in March. So those are kind of general statements upfront, Steve, to give you a sense for the business. I'd add to that, internationally. International had a pretty good month in April, but things have gone the other way in May. The international business is mostly personal care. So it's faring far worse in the U.S. We don't have a big vitamin business or baking soda business or even big laundry business outside the U.S. There's some laundry, but those are some of the categories I mentioned had been spiking from a shipment perspective. We don't see that internationally. So -- and Europe is particularly hard hit. China, on the other hand, is starting to recover. So that may bode well for other countries since they went in first and come out. They logically would come out first, but May was weaker for us for international. And then finally, the Specialty Products business, where a big part of that business is still dairy, and milk prices in the first quarter were around $17 per 100 weight. And if you look at what happened in the -- April and May went down to $12. And now in June, it seems to be back to pre-COVID pricing. So that's a good trend. But Steve, that's sort of a quick roll-through of each of the businesses and what we're seeing so far.

Okay. That's great. Because I think a lot of investors, in general, just are tracking -- or trying to track the business through Nielsen and IRI data, which we know is always erroneous or incomplete, I should say. And --.

Yes, incomplete is what we should say.

Yes. And then you've got this very difficult shipment versus consumption timing dynamic that you spoke to. So is that -- so consumption -- so if I understood you correctly, you said shipments were net positive April and May? Or was consumption net positive April and May?

Yes. I'm talking about just consumption.

Yes. Okay. So you're clearly getting a benefit from online and in tracked channels relative to what we see in the Nielsen, IRI. I guess, two questions, let me provide -- just to ground us, and then we can branch off. But your share trends, vitamins looks very healthy. But as we look at the businesses, like detergents where you're sort of scrambling to get back to full inventory, shares look a little softer, at least again in the tracked channel. Can you speak to how your share at retail is trending across these -- some of your big power brands, all channels? And then any comments on the cadence of shipments relative to that consumption and the catch-up in the categories where you've fallen behind?

Yes. As far as laundry goes, sure many investors know we have 3 brands, that would be ARM & HAMMER, OXICLEAN and XTRA. And when you're looking at shares, what you have to keep in mind is what we said at the beginning of the year, and that was we were exiting the drug class of trade with the XTRA brand because of the low profitability in that class of trade. So that's a portion of the share change. The other is OXICLEAN. OXICLEAN detergent is a more premium detergent. We're going to pull back promotions on that. So we're going to deemphasize that. So both XTRA and OXICLEAN were deliberate changes on our part -- decisions on our part that were going to -- we knew were going to impact our shares. ARM & HAMMER is a different story, though. ARM & HAMMER is juts out of stocks. So we just got wiped out in the month of March. So we've been playing catch-up ball ever since. So pretty relaxed about when we look at the share data because I think a lot of it is artificial right now until we get into later in the year. We've going to have an even playing field. We just -- that was a 2-parter, though. What was your other one, Steve?

Just any color on the cadence of shipments relative to that consumption, especially in the categories where you had fallen behind coming out of Q1?

Yes. One thing we did say on the Q1 earnings call was that it would probably take us until the end of the quarter to catch up and get things back on shelf. It could take a little bit longer that -- to the extent that consumption starts picking up, but it's probably the best way to describe it right now. We're still not out of the woods for laundry or for baking soda, and vitamins spiked in March and then consumption is up huge still in April and May. So that probably takes even longer to catch up for vitamins as a result.

Is that -- is any of this leading you to rethink just capacity and thinking about incremental build-outs, especially in something like vitamins where the trends have proven stronger for longer? Or is it more just -- you think we're just going through a spike and we're going to catch up based on the capacity we have and eventually will normalize more towards what you guys thought starting the year?

Yes. I think broadly, I think one thing it makes us rethink is the whole just-in-time concept and that probably better-off carrying higher inventories, maybe even long term. Certainly, short term, if there's going to be a resurgence in the second half, then it would be natural for us to want to build inventories for the next 4 to 6 months, just in case. So instead of just-in-time, you've got just-in-case inventory. But I think longer term, I think that is going to be more of a trend, certainly something that we're looking at. As far as capacity goes, we had the good fortune of having a new line come on for laundry. But I think that's -- another decision is longer term, you bring on capacity not exactly when you need it because that's when this one was scheduled, but we would be -- start doing things maybe 6 months before you need it in the future. We have the good fortune in vitamins to have 2 captive plants. We have one in York, Pennsylvania and one in State of Washington. And both of those are running flat out right now. And I think the longer this high consumption continues and the more purchase cycles that we go through with consumers, the more the behavior will stick and that there will be an uptick in the usage of gummy vitamins in the future that will sustain into 2021.

Okay. So that -- I guess, that brings two questions to mind. The first one is you mentioned at the top working hard with retailers to get inventories back in balance. As you think about carrying more safety stock, have you started to have conversations with retailers about they also carry more safety stock, so the level of inventory you need to catch up to is actually higher than what it was to start? Or has that conversation not started?

Well, I think the amount of space that's available is finite. So I wouldn't expect that that would be something that would be a near-term fix, nor have we had those kind of conversations. I think generally, the retailers would want us to carry the inventory just as we would want our suppliers to carry the inventory, just in case we wanted to access it. And we're talking -- in my example I'm talking about, [ raw in ] packaging material suppliers. So I think you always want to pass [Technical Difficulty] your balance sheet.

Yes. Okay. And then, Rick, the implications, as you think about managing to that from a -- just from a cash flows perspective, which has always been a hallmark of your company, cash flow conversion, cash flow productivity, whatever the terminology you want to use is. More inventory drag on cash, at least as you go through that, maybe more capacity seems like a drag on cash. Is -- just, I guess, how are you thinking about that in terms of managing 2 cash objectives over the next 6, 12, 18 months?

Yes, that's a good question, Steve. This is the new normal, most likely. But we're building the capacity potentially for higher sales, right? And as Matt said, the CMS is really a higher new normal. If laundry, we were going through the consumption numbers with you, right, minus 15% in March, minus 6%, minus 8%. But that implies that usage is actually up. And so if demand is up, then we have no problem laying incremental capital out there and incremental cash out there. And it's a cost of doing business, but I think it's going to be a little bit better than that at the end of the day. But time will tell.

Okay. If we step back, you started talking about -- a little bit about how your thinking has changed. But as you -- you've been running a pretty consistent strategy for a long time. And I guess, just can you comment on how that strategy did or didn't ready you for this moment relative to your peers or relative to what you would have hoped? And then aside from the inventory conversation we just had, are there any other changes that come out of this current crisis that you're thinking about as a go-forward to, on the edges, tweak that strategy?

Yes. Well, look, I think the poster child for -- what was a surprise was the 50% increase in consumption in 1 month for our largest category being laundry. So that's not something that we were prepared for. And we just had the conversation about carrying larger inventories in the future so that you can handle surge capacity. So I do think that resilience will trump cost in the future. So I do expect that we would have more free capacity in the future than we've had in the past. The working remotely is probably going to affect us as well. I talked a little bit about 1,800 people that are -- that [ will work ] remotely extremely well since this started in March. And so where we recruit is probably going to change, where people -- the amount of leased office space that we need is probably going to decline. So we are thinking, long term, about how does the structure of the company react to this, as you say, new normal. At the same time, there's always a threat to the culture of any company when you're not seeing each other every day, and we have a very unique culture in the company. But if you go back to the financials, nothing's changed there as far as our evergreen model, meaning we try to get 3% organic growth on the top line and 8% on the bottom line year after year after year. So that won't change, Steve.

No. Steve, one thing that we did strategically, and that really made a focus in the last few years was e-commerce. And we're benefiting right now because of all that work we've done over the past few years, right? We were 1% of sales 5 years ago, and we were 9% of sales this past -- 8% in this past year, 9% in Q1. We've done a lot of blocking and tackling on pricing and tax sizes and digital assets, and organizationally, how we're set up. And so we are able to flex up to be in the mid-teens with not very many issues. And some categories we're seeing are doubling the amount of e-commerce that they had pre-COVID. So that is an example of maybe a strategy that we -- that really Matt had laid down, and it's really paying off right now.

Yes. And I was going to -- great because I was going to go there next. I guess, because -- you're right, that is a strategy that -- I think you've even said this before, that you were probably lagging on relative to peers. You started the decade, even in the middle of the decade, and you've rapidly caught up. I guess, as you -- and scaled up in the current environment. As you go forward, does it -- how much further can you go? How much further, how much faster you can go? And does it require a lot of rethinking and a lot of retooling and investment? Or is it something that -- is that a part of the business that you can continue to scale up and accelerate based on the momentum you've already got?

Yes. I think if you think about the online classic trade is, it's a -- it's just that, it's just a classic trade. As Rick points out, we went from the basement in fourth quartile to first quartile in a short period of time. So having the investment in-house in technology and digital analytics, the type of people who understand social media and creation of digital assets is we have the foundation in place. So consequently, we were able to take advantage of the significant shift of consumers that have now started to buy online. A lot of people that casually were users of ordering products online have now discovered it and now are regular users. So there's been just a huge uptick. And I would think that our percentage of sales would be -- 5 years from now, our online sales will be 25% versus -- I think this year will easily be 10%. So that trend is all ahead of us. And Steve, you can't -- the retailers, the dot-coms, they don't put you online. You have to put yourself online. You create all the product descriptions, the pictures, the videos, the creative assets, the works, you have to do all that listing and put yourself on every retailers' dot-com. And that's the work that has been done and continues to be done.

Yes. And that's where I was getting, that foundation that -- of digital enablement, broadly, you feel is in place and you're already planning on that -- on it scaling up to 1/4 of the business being online. So I think the takeaway there, as I hear it, is you feel pretty good about the ability to continue to scale that without a lot of change in strategy. Fair?

Yes, fair. Whereas I beat ourselves up because we got slammed with the demand for laundry. But on the digital side of the business, we were more than ready for that move.

Okay. The other thing that -- the other topic that's been relatively hot, I guess there are 2. I'll take them in order. The first one is we've seen -- I guess, they're somewhat tied, so I'll lay them out. We've seen so far a general trend towards big #1, #2 brands in their categories, in their price tiers winning relative to smaller brands or even private label in a lot of cases. At the same time, there's a lot of talk of looming recession and what that looks like, how deep, how long? I guess, as you think forward, 2 questions. One is do you think that trend towards big brands winning the day can continue, assuming the big brands do their jobs? And then secondly, how are you thinking and framing the prospects of recession as we go forward back half of the year and into next year?

Yes, I'll start with the recession question first. The stimulus is going to -- the extra $600 a week is going to end at the end of July. And so we don't -- we have sort of an artificial environment right now. So right now, you have a stimulus package going on. At the same time, you have all -- particularly on the household side, all the major brands pulling back on sold on deal. So laundry is down 33% sold on deal. So the last 13 weeks ended May compared to last year, litter, down 25% sold on deal in the last 13 weeks. So normally in a recession, you see the opposite effect, Steve, you see people discount. Well, that's not happening right now. Why? Because of the panic buying and you don't want to be promoting to -- empty shelves. So fast forward to the end of the year, so let's assume that you don't have the same stimulus that you have right now, more people are unemployed. So now -- so you got to start thinking ahead to, say, Q4 and do you have the right pack sizes and price points. So that's where our heads are, looking into Q4 and then into next year. As far as the -- is there a recession or this is an annum one. So our own perspective is that, yes, there's going to be a recession, all the people and services that were laid off will not be returning to their jobs very quickly. So it's going to go at least until early '22 would be our perspective. So we have to act accordingly. What was the first part of your question, Steve?

The tendency for big brands to be winning at least in the first few months.

Yes. I think that's wishful thinking. If you look at historically, there are always new entrants into categories. You'll see brands with PE backing, really good -- great graphics, good story. And we'll always be entering and catching the eye of the consumers. So what the big brands have to do is to start acting more like those with respect to how they appear on shelf and how they talk to consumers, both on pack and through advertising. So they've got to learn from what those small brands have -- how they have been successful. But I think it's wishful thinking to think that big brands, they're not going to carry the day and that big brands are more bullet proof than in the past.

Okay. Let me get Steve involved. Matt had mentioned some of the volatility, Steve, internationally that you're seeing in the business. You had started the year with a lot of momentum over the past couple of years and you had layered on a margin target as well as the top line target for the international business. How are you thinking about the business differently, if at all, today versus -- June versus January? And is the level of investment that's going to international in the near term, has it changed, I guess, from the start?

Yes. Thanks, Steve. Appreciate the question. So I would start with strategy and saying if this COVID situation has our strategy for international growth fundamentally changed, then the answer is clearly absolutely not. We posted strong growth in Q1, consistent with what we've done in the last 5 years. And we believe our brands have a lot of runway for growth. So our brands are strong. Q1 was quite strong, particularly in our domestic markets. We had a real big slowdown in Asia, and in China, in particular, when COVID hit in Q1. But we navigated that storm quite well, and so finished Q1 strong. And Q2, as Matt already alluded to, that -- we would say that we actually started April quite strong, and we had a significant decline in May as a result of Europe shutting down. Matt also mentioned the fact that we are about 80% personal care OTC and only 20% household. And so we are more affected by COVID and the shutdown than the U.S. has experienced. So I would say that we also see week-on-week improvements in the weakest market in Europe. So we see the business coming back, and we have high expectations for Q3 and Q4 post COVID.

Okay. And has the -- has what you've experienced at all changed, even on the margin, how you're thinking about the medium term, next 1 to 3 years internationally?

No. As I mentioned, I think we have real good growth prospects on the base business. Our GMG business continues to drive double-digit growth. And so we're excited about its growth in particularly emerging markets like China for us. Southeast Asia, Latin America, are all posting very strong growth.

What about from an R&D -- sorry.

It's Rick. I would just add to that. I think Steve has done a great job with the portfolio. And WATERPIK and FLAWLESS are going to be -- were a key part of the strategy and are still going to be a big part of that strategy of growth going forward. And FLAWLESS, having great consumption growth these past few months is just a good tell for the international expansion that we expected to have. Just wanted to throw that in there.

Yes. Does that -- so no change in the investment behind those initiatives from what you were planning before? Is that what that implies?

Correct.

Yes. Steve, when you think about WATERPIK and FLAWLESS, both of them have very -- particularly FLAWLESS has low household penetration internationally. But there's still plenty runway for WATERPIK in the U.S. And FLAWLESS is benefiting from the trend right now of at-home grooming. And just like vitamins, the longer this sort of goes on, the longer, more likely, that the at-home grooming trend is going to stick and plus FLAWLESS' products, both for face, brow, legs, total body, et cetera. So -- well, we think that this actually is going to help that most recent acquisition get its footing in the beauty space.

Okay. Great. And I don't -- I'll just throw this out there and whoever wants to jump on it can. But from an R&D perspective, given what we've been talking about, the recession you're preparing for, the different consumer dynamics that we've been talking about, has any of that changed how you think about the medium-term runway for R&D investments? And I guess, specific derivative question off of that is, do you see yourself having a bigger role to play in disinfecting, to the extent that disinfecting, in general, becomes a trend that has more staying power?

Yes, that's a good question. We're not really big in cleaners, at least at sprays. We have a brand called Kaboom, which has done extremely well because of COVID. But OXICLEAN is obviously a prewash additive, so it would be natural for any of the products that we have to include an antibacterial claim going forward. I think that would be true of just about anybody that's in laundry or in the cleaners space. So -- and that, of course, is regulated, and you can go through, in some cases EPA, in some cases FDA for those types of approvals. And oftentimes, you've got to get them by state. Yes, R&D will definitely play a role there in the future. Our R&D spend is typically around 2% of sales. It's pretty sacred. So that won't be -- that's never a place where you're going to look to cut. But I do think that there's opportunity, at least in laundry, fabric care and also for cleaners going forward, Steve.

Okay. And Steve, any other changes to what you were thinking about from a new products innovation standpoint, again June versus January?

No. I would say that our new products pipe goes out several years. We feel that our brands in U.S. and globally need a continuous pipe of innovation. I think what we'll pay very close attention to is the shifting consumer trends and need states. Matt talked a little bit about antibacterial, that's pretty straightforward. But we think about how consumers' behaviors are changing, how they're interacting at home and what other need states are going to emerge that we can tap into. So that's kind of how we're pivoting to long-term capitalize on the changes in consumers' behavior. But I would say, short term, our goal and objectives are clear. We have to continue to provide a regular ongoing pipeline of innovation to make sure that our brands stay healthy and relevant in any condition.

Great. Matt, you had mentioned that -- you alluded to incremental COVID costs at the top of the discussion. Rick, maybe just ground us in what those incremental COVID costs are? What portion of them as you go through that you think are going to be -- likely to be more structural versus those that are more temporary? And is there anything you can do to help investors parse between the 2?

Yes, sure. What we said on the earnings call was about $4 million for the month of March was the COVID-related expenses. And there are 2 different buckets in there, right? It's labor efficiency, as an example, because we typically have people floating between lines. We're not doing that. They're working more in pods. It's distribution inefficiencies. We're not shipping full truckloads in some cases because you're just trying to get as much products as fast as you can back to shelf. Of course, sanitization and cleaning costs. So the list goes on, those are a few different buckets. And some of those, like you said, will be transitory. And as we get back in stock, we'll probably get back to shipping full truckloads, right? But on the other hand, the new normal of sanitization and cleaning is going to be with us for a while. Yes. So anyway, hopefully that helps. And I would also say that that March number of $4 million a month is kind of the run rate that we're still seeing in Q2.

Okay. And it doesn't sound like you necessarily see that tapering off anytime soon. You're kind of still assessing. Fair?

Well, as Matt said about -- when we get back to in-stocks, right, it depends. We had said previously that by the end of Q2, we'll be back largely in stock for a lot of our key products. Vitamins demand keeps on going up and up, so that will actually get pushed. But as those in-stock levels get back to normal, then we won't have to ship partial truckloads as an example, so that would go away. So hopefully, that helps.

Yes. And can you talk a little bit more about how you're tactically managing the advertising and promotional investments as you go through 2Q, which hopefully is the worst of the headwinds? And then how you're thinking about layering that investment back in as we finish off the year and move forward?

Yes. Let me take a swing at that, and then Rick can kind of jump in. You may -- you'll recall, Steve, that we moved advertising out of March when we saw what was happening. And we said on our earnings call that we're moving a significant amount of advertising out of Q2 into later in the year. And that's consistent with what I said earlier about trade promotions, sold on deal being way down. Advertising is the same reasons, you don't want to be advertising -- trying to drive consumption when you have out-of-stock situations or people just sheltering at home just don't want to buy the product. An example would be BATISTE dry shampoo. So yes, low advertising and marketing as a percentage of sales in Q2 and then still have flexibility in the second half, to the extent that those conditions continued into third quarter, we'd make the same call. We continue to stay flexible. Anything to add to that, Rick?

No, I think you hit it. Flexibility is the key, and we're going to continue to adapt based on the situation that we see.

Yes.

Okay. Obviously, a big part of the Church & Dwight story has been -- continues to be M&A, which is a critical part of your operating model and your go forward strategy. As you reflect on the portfolio you've built, going through what we're going through now and thinking about a coming recession, just, I guess, give us a sense for your comfort, your level of happiness and satisfaction with the portfolio as it stands today? And then how you're thinking about bolting on that 13th, 14th through 20th power brand? And when do you think the environment will allow you to be a little bit more assertive on that front in terms of actually entertaining M&A, if you're not already?

Yes. Well, look at the -- if you look at the portfolio, Steve, 2009 versus 2020, with a lot of acquisitions along the way. Back in 2009, we were 60% premium, 40% value. Today, we're 63% premium, 30% value. So we look a lot like we did last time, especially for going into a recession. Our largest business still is detergent and we're a value detergent, just as we benefited in 2009 for a trade-down. So we would expect the same to happen were we to have a prolonged deep recession again for the next couple of years. As far as trends goes and the fact that we bought a vitamin business back in 2012. Back then, that was in some minds, it was sort of a fad, something that was emerging. Well, now it's really stuck. So we're in great shape there, having the #1 gummy vitamin, particularly when we see the up surge for the last couple of months. So I think we're well positioned there as a result of that acquisition. And look at the other things that I mentioned, like the at-home grooming trends, FLAWLESS is going to benefit from that. And WATERPIK has got such low household penetration internationally. It's still got a lot of room there. So if you look at the portfolio and you kind of go brand-by-brand, there's reasons to feel good about our prospects. And remember, we focus on buying #1 and #2 brands. And generally, when we buy these brands, we expand share over time. So -- yes, and looking forward to #13 and 14, yes, we are because we are not just a shopper, but we're actually a buyer. We do get all the books of what's for sale, virtually anything U.S. and some international, we're less in the flow there. But our criteria hasn't changed. And because we can make so many different things, we're open to buying into different categories. So I'd kind of leave it there.

Okay. And it's still the -- is it the vectors of convenience and self-care that are your priority, which I think lends itself to personal care versus home care? But maybe you can clarify.

Well, we wouldn't say there would be any one category that would -- we'd focus on. You know what our criteria is, Steve, right? Number one, number two, it needs to be able to grow 3% or better. Our organic growth algorithm has to be our corporate gross margins, but -- and asset light. And finally, it has to have a competitive advantage. So is it going to be here 10 or 15 years from now and why are things that we ask ourselves. So I wouldn't specify any one particular category that would be more of interest than others. But certainly, because we have such a broad portfolio, the fabric care, home care, personal care, oral care, we do have a lot of expertise so we can look in a lot of directions.

Okay. And no relative change in the preference prioritization of -- for the U.S. versus incremental overseas additions?

Yes, we'd love to add more internationally. When you think about the profile of the company, in 2009, international was 16% of our sales. And today, it's -- in spite of the fact that it has had huge growth for the last 5 years, it's 17% of our total sales. And that's because a lot of the businesses that we brought were more U.S. than international. So, for example, WATERPIK is 80% U.S., 20% international. But I do think that over time, because of so much opportunity internationally, that we'll start -- we're not going to close the gap between international and U.S., but I think international is going to be a bigger -- much bigger part of our business relative to U.S. in 5 years.

Great. And before we close, there was a question that I had missed from the audience. I apologize. Just going back to the -- your capacity planning thoughts going forward. Just the relative use of third-party manufacturing, how you think about that relative to build-your-own? And has your preference at all changed in terms of how you think about leveraging co-packing versus building-your-own in-house capacity?

Yes. The -- well, co-packing lends itself more to the personal care side of the business than to the household side of the business. So household, you have things like laundry detergent, cat litter, baking soda. We've got big assets associated with those. That also -- there are barriers to entry to those categories because of those assets. So I would say that we are definitely amenable to -- even a higher percentage of our sales being made by co-packers because we're much more focused on adding cash earnings, even if we have to pay an upcharge, and very focused on not owning plants.

You feel comfortable you haven't experienced any notable disruption that gives you pause in that -- in going in that direction?

Well, the only disruptions we would have would be because of COVID, to the extent that we've had partial reductions in our lines and our plants as a result of COVID. But absent COVID, we're very comfortable utilizing a large network of co-packers because one thing that we're really good at is managing complexity. So we've got 100 co-package, co-manufacturers that make over 20% of our consumer products.

And I guess to close, every company is trying to not only get through the current environment, but to emerge from it stronger. What are the top 1 or 2 things that you're thinking about that you really need to either hammer home and get right as we go forward in the next few months, few quarters to put yourself in a position to emerge stronger?

Well, you have to be able to react quickly, and we do have that advantage because we have so few employees in our company. So assuming that this is going to be a recession, getting the price points and pack sizes right for Q4 and later is going to be important. That's number one. Number two is going to be digital. So I said earlier that the consumer will be buying more and more online. So we have to make sure that our -- the right products are online and the right -- again, the right pack sizes and price points are online because you'll have a price-motivated consumer in the future, particularly if you're going forward, there are higher taxes to pay for this big stimulus package, meaning lower disposable income and higher personal taxes. And then the lower employment, to the extent that this low -- high unemployment persists. Our laundry business is well positioned. We -- our share of laundry has almost -- for ARM & HAMMER liquid, has almost doubled since 2009. So we're way stronger going into this recession than we were last time.

Okay. I think we're going to have to leave it there. We're out of time. But Matt, Rick, Steve, thank you all for joining us. Thanks, everybody, for listening in. Church & Dwight, you're welcome back any time. Thank you so much.

Thanks, Steve.

Thanks, Steve.