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

Okay. Good morning, everyone. Welcome to the 32nd Annual Barclays Global Consumer Staples Conference. As always, it's awesome to see so many familiar faces again, although my eyesight has worsened. So if I look a little confused in [indiscernible] it's my eye is not that I don't recognize you. But we're also happy to welcome all the new faces that have joined our Staples family over the past year. I'm Lauren Lieberman. I cover the U.S. Household and Personal Care and Beverages stocks at Barclays. And joining me up on stage, we have Iain Simpson, our European HPC Analyst; Alex Sloane, our European Ingredients Analyst; and Justin Kantrowitz, is our [ USA ] based Analyst; Andrew Lazar, who leads U.S. Food Coverage of Nextdoor introducing the conference over there in ABI, along with our global teammates, Warren Ackerman, Ben Theurer, Ron Wyatt, James, Patrick Folan, Mandeep Sangha and Rabover in [indiscernible] we come in big force. So as I mentioned, this is the conference's 32nd year. For some context, when it began, George H.W. Bush was U.S. President, Internet had just been made available for commercial use and Guns N' Roses and Metallica were the 2 most popular rock band. The average cost of a new house was $120,000 and the Dow Jones average top 3,000 for the first time. So a lot has certainly changed since then. But thankfully, our conference has endured and thrived. We certainly do not take the credit. We appreciate all the hard work that our management teams have put in to be here and to continue to prioritize attending the conference. So too, would like to thank everyone at Barclays, the event team for their hard work and late night deep into the summer to make this event a success. So we hope everyone is well rested, well caffeinated, and we are pleased to bring another great lineup in front of all of you today and the rest of the week and to generate some productive conversations over the next few days. So in keeping with tradition, you'll find our teams at the hotel lobby bar over the next few evenings and another apology for me if it looks like I'm watching the U.S. Open rather than talking to you. I might be watching the U.S. Open, but really enjoy seeing everybody and look forward to connecting. And with that, we're going to get us started. So we've got Church & Dwight, presenting and kicking off in the lead off spot today. Last year, the company made our train ride up to Boston rather hectic, but it's been a complete and positive round trip since then. So thank you for the much smoother start. We're fortunate to have the company's CEO, Matt Farrell; CFO, Rick Dierker; and Chief Marketing Officer, Barry Bruno with us this year. So guys, thanks so much for being here.

Okay, gang. Great to be a lead off [ pair ] at the conference. Here is a safe harbor statement, encourage [ you all ] to read it after the class and here's the agenda for today. So I'm going to kick it off with who we are and why we're winning. Rick's going to cover financials. Barry, who's President of our U.S. business, [indiscernible] the category outsides and trends and then I'm come and come back and wrap it up. Okay. Here's how our real history that, the work [ over we ] start. [indiscernible] 2022, we had quite a rugged year last year, but if you look on the right there, as of Friday, we were back up 19%. So we've had a [indiscernible] over the past year and we [indiscernible] it's upwards from here. As you know, we remodel. You know our story. You know that we try to hit 3% again from top line and 8% bottom line. And then on the [ revenue ] we're going to keep marketing flat around 1%. Our gross margin up 25 basis points. And we had leverage as big as we grow. It is a story to how you've been doing with your reported growth. Over the past 10 years, our reported growth has been in excess of 6%. And this year, we're calling 80%. Organic growth, remember evergreen target is 3%. Our 10-year average is around 4%. And this year, we're calling out 5%. We have 14 power brands for the company. Lots and lots of brands that we're approaching that are our primary. They account for 25% of our revenues and profits. Here's how we split geographically in the larger U.S. business. So you see [ 77% ] domestic; 17% international and [ 6% ] specialty products. The 17% on internationals is where we have significant room to run and remember that 17%, you'll hear it again a little later on. We have a nice balanced portfolio between value and premium products we've 40% value, 60% premium. The interesting thing is that over the past 15 years, that percentage has stayed pretty much the same, and we actually 4 things that we consider a win. First is the fact that we're balanced between Household and Personal Care, almost 50-50. We have a lower private label exposure. It's been around 12%. Right now, we do just look back over time, it's generally between 12% and 13%. Here are all the categories, where we have significant private label exposure. If you look at the slides, you can see what those lines are pretty steady over time. Strong consistent innovation. So remember that 3% organic growth that we shoot for. The 1% to 1.5% of our organic growth annually, we target from good product introductions. And we are a very acquisitive company. It's the primary destination for the considerable cash flow that we generate year-after-year. So this will give me kind of a look back at 2004. Virtually every year, we've acquired a business. 13 of the 14 power brands that we have today have been acquired since 2001. In fact, the all-in power brand we had in year 2000 was ARM & HAMMER. But we have very specific criteria. I think this enables us to look at brands and businesses that are for sale very quickly and turn the weather or not there for us. I'll just kind of run through them. #1 and #2 brands, high growth, high margin, need to be fast-moving consumables. Asset Light is very important to us. One, be able to get cost synergies by leveraging our manufacturing and distribution. And finally, he has had a sustainable competitive advantage. Most recently, we entered 2 more, [ $1 billion ] categories. They're simple there. Near the boom you see mouthwash $2 billion category and an acne treatment that's over $1 billion. The two recent ones I'm referring to is one, was December 2021 was TheraBreath. This is the #5 most of [indiscernible] brand by January onto numerator. And a lot of opportunity to grow here, and it's coming from different division in the U.S. You all know we own Water Pik. So we're using our Water Pik hygienist, who call high-volume dental offices to also [indiscernible] the brand and we also have significantly performed national-wide. Our [indiscernible] is the #1 most loved brand by Gen Z. So we say and tell a lot of investors, but virtually require TheraBreath, it's sort of we're sort of the cool kids right now. This business is going to grow significantly. Why? Because of new distribution, internationals and the international expansion. In fact, this brand was built -- essentially, we target, alter and that was on and now expanding into all other classes of trade. Those short story with respect to our acquisition program will be the 40 brands today and 20 tomorrow. Now we'll bring up Rick. He's going to cover financials.

All right. Thank you, Matt. So first off, Matt, I welcome everybody [indiscernible] onto the little bit more detail, but just to know why 3-year model for us. This was an evergreen model. So this is what we're aiming for each and every year, organically like-for-like revenue growing 3%, gross margin expanding through productivity, through M&A, through mix, marketing [indiscernible] of higher dollar to [indiscernible] the same percentages and the next would be leverage, if we can grow that at half the rate of our top line, we leveraged SG&A. Or a good operating margin of plus 50 basis points and EPS growth of 8%. So a year ago, we were -- as Matt said, we had 3x, we took our outlook down. This year, we've taken our outlook up twice. And so as of July 28, we said reported sales growth was 8%. We're gaining sales growth of 5%. Gross margin expanding rapidly, up 200 basis points, and an adjusted EPS plus 6% and cash from operations are approximately $1 billion. We've got a long track record of organic growth. So our [ regular module ] is 3%. Our 10-year average is 4% and then our outlook [indiscernible] 5%. So behind that, it's good to call out what's happened between volume and pricing and mix. And if you look backwards over the last decade or so, we're a volume-driven company, and probably we're further than that, always been a volume-driven company. And then in 2022 and first half of 2023, we have negative volumes as we're having to price through the inflation. But in the first half of 2023, we had a slight decline in volumes, and we expect it to inflect in the back half of 2023. Gross margin is a hallmark of this company. An expansion of gross margin matters in the big way. Gross margin expansion drives the EBITDA expansion. EBITDA expansion drives cash flow. So it all starts with gross margin. We've expanded by about 200 basis points as of our expectation for 2023 to 43.9%. And if you look back to the high water mark of 2019, it means we have another 160 basis points to go to get back to pre-COVID levels. And just for some context on inflation, for many, many years, our inflation was around 2% of COGS. And on the graph, is 2013, 2019 is 2%. During the COVID years of 2020 to 2022, we average around 8% of COGS. And then in 2023, we're about 4%. So we're rapidly kind of recovering back to normality, which is good. Marketing spend, big investment this year. We called out at the beginning of the year that we were going to spend back $30 million to bring back marketing to 10.5%. We called out last earnings call that we were actually going to spend back another $30 million. So $60 million year-over-year to get back to 11%, which we think is a great number for this business. And then consistently strong EPS growth over the long period of time, double-digit or high single-digit. In 2020, we had [indiscernible]. In 2023, we're up 6% to $3.15. indiscernible] the EPS. Turning to cash flow. Free cash flow conversion, again, this is one of the key metrics for Church & Dwight over 10 years with average close to a year of 20%. In 2022, around 97% that was because we have elevated CapEx for [indiscernible] vitamin. [indiscernible] conversion is [indiscernible] well because we have a great track record with working capital. We've gone from 52 days of cash conversion cycle all the way down to 19 days. [indiscernible] is a little bit elevated because we went back to that and provide a big way in 2022. With a very strong balance sheet, 1.7x [indiscernible] is our expectation [indiscernible] with our cash flow. As an example, we think we could do a $3.5 billion deal instead maintain our BBB investment-grade rating. So looking at capital allocation, how do we think about that? If I step back, I think one, part away, and there are some time that [indiscernible] investors, #1, 2, 3 our TSR accretive acquisitions. That's where the focus of the management team for the company. That's how we drive value. We're very tricky in materials we do there. #1 is TSR-driven bank with huge CapEx and you hear me say a few months ago, we're investing CapEx for capacity [indiscernible] vitamins. #3 is NPD. You heard me talk about how important it is for our organic growth. #4 is debt reduction, #5 is return cash to shareholders. We're not a [indiscernible] capital, if you [indiscernible]. We're about 2% of sales, and we had [indiscernible] between 2023 and in 2024, and that should return to normal in 2025. At the end, I'm going to talk about capacity investments. Finally, we announced a 4% dividend increase in 2023. Long track record. Really long track record, 122 years of consecutive years of dividend. And now I'll turn it over to Barry.

Good morning, everybody. I'm Barry Bruno. I'm responsible for our U.S. business, and I'm going to take you through a little bit around the key categories we compete in, some insights from those categories, a little bit into some new product news that we have for you and then what's going on in the e-commerce standpoint at Church & Dwight. So I'll show at our largest and most important category, laundry detergent. And the way to read this slide is look to the left. That's how the category is performing in consumption over the last 2 quarters, Q1 and Q2. On the right-hand side, in this case, it's ARM & HAMMER, and it will be all Church & Dwight brands going forward. So liquid laundry detergent growing 3.7% in Q1, 2.8%. But ARM & HAMMER performed really well to -- well up 10% in Q1 and 9% Q2. And a key driver that we would have talked about with you in the past is the consumer trade down from premium laundry detergent to value laundry detergent. As a reminder, ARM & HAMMER placed squarely in the value tier of laundry. And when consumers have stretched -- it's stretched like we are right now, you can see that there's a definitely premium to value. But that's only one driver of our performance. And why particular in this slide is it's a long-term trend of share expansion for Arm & Hammer and laundry detergent, we're at a 5 share back in 2006. We're at a 14.4 share today. In good times and bad, consumers try ARM & HAMMER, and they stick with us both for value and performance. So a great trend, [ success ] is very important category for us. One way that we're telling consumers about this value that we offer, not just in laundry, but in detergent categories overall. It's given the Hammer master brand template. We launched this in January for the first time we've been airing it throughout the year to remind these [indiscernible] of great value. And let's look at it to give you a look. [Presentation]

I think, we had a lot of fun [indiscernible]. 6 categories into 1 spot, but we did it there, and it's all about the value. And let's see. Hold on. I think, maybe when you see us [indiscernible] switch. I was going to talk about Cat Litter, talk to you about it briefly. Cat Litter has been growing at double-digit really in the last 1.5 years, driven by price primarily. ARM & HAMMER has been growing to 12%, 13%, 14% range for a long time from another category, where we have a value offering as well as a premium and the Cat Litter continues to grow as the other category continues to grow. Slightly different story there was a slight [ on ] right here. [indiscernible] supplements. What you're looking at is the Gummy subsegment, it is little over the last 4 quarters. And what's going on in Gummy Vitamins is the category has more than doubled since pre-COVID, but now it's flattened out to 1.5% growth approximately in the last 3 quarters. Vitafusion though haven't performed as well as the category. And you can see that we're really struggling in '23 as a consequence of '22 supply-related issues. And to take a look at that, on the left-hand side here, you can see price fall over the last several quarters or so. Even as recently at Q1, we were struggling at 77% from a case fill standpoint, but we're back at 98% now. And when you're back in distribution, you're allowed to start advertising again. We've got e-packaging. We've got great display and a whole new advertising campaign team that we call [indiscernible] that talks about how [indiscernible] helps you groom your day, so let's play that spot. [Presentation]

From this spot, we just [indiscernible] last week again as we're back in supply and rebuilding distribution. I'll talk to you about 2 more categories now. The first is alcohol-free mouthwash. And as a reminder, Matt showed you the mouthwash category is $2 billion. It's split evenly between alcoholic engineering products and alcohol-free. So $1 billion each. And you can see that alcohol-free is growing at 18.6% and 20% [indiscernible], respectively, mainly driven by TheraBreath. Outstanding performance of 71% in Q1, over a 100% growth in Q2 . And when you're growing that fast, you're absolutely gaining market share. And this chart is an interesting one. When we acquired the brand, we're at 14 share. Fast forward 18 or 19 months or so, we're at 29 share. So gaining 1 percentage point from then to a 29 share and now as of 1st of August last month, we take over the #1 spot in the alcohol-free mouthwash subsegment. So a great trend of growth. And really, what got us excited, when we're looking at buying the brand, [indiscernible] distribution to take it to far more retailers. And you can see it in the last quarter, our distribution is up 52% versus the same quarter a year ago. So we're building, but there's a long runway ahead of us if we look at where some of our larger competitors are. So a great conversations we're having with retailers now as a premium price player in the category that's contributing to growth about how to keep building distribution there for the long term. And Acne Treatment is a similar story. This is a category that is a slow grower for a while, 3%, 4%, 5% grower. Now 20% in Q1, 21% in Q2. And similar to TheraBreath, Hero is driving great growth [ for ] 44% and 66%, respectively. So outstanding growth, again, built around great distribution. You can see we're up 200% in the last quarter versus the same period a year ago and a similar story, a long, long way to go to catch up to our fair share of category. And then just one more slides here. And this is the household penetration of Acne Treatment. They're in about 20% of households today. Acne patches, which are the new form of extended preferred form are only in a 11% of households. And Hero, the category leaders is just 5%. But now with national distribution, we're steadily increasing. And for the first time, we've got a national advertising campaign. We had a lot of fun creating this. We call it pop me. I think you'll understand why in a second. Let's play that spot. [Presentation]

A lot of fun with that regarding great category growth. So I'm going to talk about innovation now. We're going to show just 3 today. But remember, we [indiscernible] between categories, so there's a lot more innovation we're unable to capture here. We'll talk about a bunch of it at our Analyst Day in January, but I want to stick with 3 of the categories that we compete in right now that I just talked about. The first is ARM & HAMMER Power Sheets Laundry Detergent, not dryer sheets, laundry sheets. No drips, no spills, no plastic bottles, just a powerful clean. This is a new from of unit dose that's growing really rapidly. The category is about $100 million in laundry right now. We've approximately a 10% share of that only 30 days after launch. So really fast grower for us. And since we have so many consumers, we've created a quick spot to help people understand what a laundry sheet is. We call it "Talk like a boss." Let's share that spot. [Presentation]

So a great new form. They do new online move now, really in the last 30 days. We have a lot more to talk about laundry sheets going forward. Another innovation is on TheraBreath. So TheraBreath distribution actually has been growing. That's been largely adult-driven. We're also growing in travel and trial and sample sizes, but in kids as well. And so we've got a new range that we're operating highly in kids of ages 6 to 12 years old, dentist-formulated rinses, it's free of dyes that made with certified organic flavors and they taste great as well. So rounding out our wins are offering now offering the kid's line of products as well. And then Hero is the same story, right? So Hero's Mighty Patch Micropoint XL for Blemishes, it's all about targeting early-stage blemish clusters. So the life cycle will simple from early-stage blemishes all the way through post-tooth [ triple ] treatment. This is a fertile for us to keep growing. This particular product is a contoured to fit jawline, cheeks and chin. So for those of you who remember, acne days, you remember that's where the blemish cause those often Blossom and Hero is perfectly targeted for that product with our new Mighty Patch Micropoint XL, so just 3 innovations. Digital is growing really rapidly at Church & Dwight. If you look back to 2016, e-commerce represented 2% of our sales. And today, we're up to 18%. So really rapid explosive growth that we see going to 2025 perspective in north over time. And the good news is we've got a portfolio that's really ideally suited for e-commerce. So on the right is 9-or-so of our power brands that are #1 in their respective categories on Amazon. So whether you're talking about ARM & HAMMER and baking soda or [indiscernible] or acne or Trojan condoms, either 1 brand in Amazon flowing like [indiscernible] growth for today and tomorrow. [indiscernible] 75% of our spend is now on digital channels, driven by Connected TV by retail media networks by social. We're launching products online first like laundry sheets that I just showed you awhile ago. You got the learnings [indiscernible] from consumers. We're using social as a primary tools, sometimes as exclusive tool to reach consumers in hyper targeted web and our digital center excellence is educating everyone within Church & Dwight around the importance of e-commerce and how to grow profitably there. So lots of good stuff going on in the U.S. We compete in great categories. We're building share. We've got some really new innovation coming in e-commerce is exploding. So it's a good U.S. story. And now I'll turn it back to Matt to talk about the International story.

Thank you, Barry. Okay, International is where we have see significant opportunities for growth going forward. Remember that we said that our organic growth model is 2% for the company, but it goes 2%, 6% and 5%, 2% from [indiscernible] 6% International, 5% specialty brand. This is how we're set up today and this is important to look on the left-hand side of the slide, the global markets group. We market our products to about 8 countries around the world. That's 1/3 of our business. And up until 2022, that business was growing 15% a year. So doubles every 5 years. That's where it's a significant opportunity resides. So we have 6 subsidiaries, we have 5 global market groups around the world. We've put a lot of investment into APAC and to Singapore over the last couple of years because we think that's where the greatest opportunity is for us. Now here's our historical organic growth for International and we said that's 6% is our evergreen target, where we've averaged 7% over the past 10 years or so. And this year, we're also probably a little bit about 6% from a quarterly basis. And if you think about the portfolio, we're in the middle of this slide, we've brand to see, let's say about BATISTE that are [indiscernible] where we saw [indiscernible]. Those were born in International. So that's our International portfolio. We know that BATISTE came to the U.S. as well as now a significant brand for us globally. But that's the core for International. And then on the left-hand side, you can see the right of the brands, we can take this around the world, actually through our global markets growth, but also through the subsidiaries. And then on the far right, you see the most recent acquisitions Water Pik, TheraBreath and Hero, live opportunity to introduce those internationally. Now we're at 17%, we talked about earlier, 17% of our sales was international. [indiscernible] What other really the top 10 CPG companies average, it was 60% of the sales are international. So we're a several decades behind our CPG piece with respect to taking their products internationally, but this is going to be a big avenue for growth in the future. So a short story with the Internationals. We get a lot of runway for our existing brands, both the U.S. and International brands. Most recent acquisitions, we have the opportunity for it as well. TheraBreath, Hero, Water Pik. Our GMG, that's 1/3 of the business that we market our products in countries around the world, lots of opportunity there. And we put in a lot of global at it, lots of people, lots of investment, ERP systems lots at the U.S. Great foundation for growth. And these are specialty products business. This is the original business. So that [indiscernible] drive. We expect that system grow 5% annually. The way that it's split 70-30 between animal nutrition and speciality chemicals. Speciality chemicals is improved by sodium bicarbonate. And we have nutrition business, we got into back into the 70s, we found that [indiscernible] we sell bulk [indiscernible] having it in the feed so that [indiscernible] factors to these comps. And then we got to pre-biotics, pro-biotics and food nutritional supplements, which will all [indiscernible] but all of these products are [indiscernible] ARM & HAMMER so that people would recognize it. Actual products grow to last year agreed between 3% and 4% [indiscernible] is going backwards. So you know [indiscernible] second quarter, the U.S. business at 6%, international at 6%. And the second quarter, we were down in the SPD business, but you see why we got low-cost imports returning that we're absolutely [indiscernible] times and also the agricultural markets as soon as they have in the past, but we're very confident this business can [indiscernible] consumer trends of pro-biotics, [indiscernible] raise the animals with pre-biotics and pro-biotics go up. [indiscernible] is now at the virtual of plant that's going to go [indiscernible] second half [indiscernible] century so [indiscernible] protein going forward. All right. Let's see how we run the company. We'll start with the dark boxes or the SBUs, the business units that we have in the U.S. to propel the brands, so we have to [indiscernible] after each one of those blue boxes. Internationally, you see a lot of the International brands [indiscernible]. Internationally, we have witnessed to 6 [indiscernible] markets growth. So we have lots and lots of [indiscernible] acquired new businesses. But we're trying [indiscernible] really talk about a points a quite a bit. I wanted to move to frame the [indiscernible]. We have a long history of a friend of the environment. So if you went back to the 19th century, we were putting pictures of birds in the yellow ARM & HAMMER box that said they are the planets [indiscernible] planet. So the people who founded this company were just seeing the environment of long before everybody can spells sustainability. Since 1907, we started using recycled paperboat, and our product which is kind of unheard of. And then just going from left to right, you see where the home response for the first Earth Day. Interestingly in 1990, 20 years later, we are still the only corporate sponsor of Earth Day. We've started planting trees in 2017. Our goal is to plant enough trees so that we have up to 100% of all the carbon that we put into the atmosphere annually. So that's not good enough the reason people sign up for Science-Based Targets is to now reduce the amount that you're putting an apron to the atmosphere by changing your equipment and how you process and manufacture your products. We have targets like everybody else. So air, water and non-solid waste. So we are 100% carbon neutral. We offset [indiscernible] planting trees. We plant millions of trees in the Mississippi River Valley annually. 10% reduction of the water used annually and then we want to hit 75% of recycling out of our plants. And there was lots of agencies out there that are measuring various companies with respect to ESG. We are squares over the last few years. We see we're going to stuck at AA, but it's a good place to be and shooting for AAA. All right, leverage people. We believe we have some of the most productive people on the CPG industry. And we think this is a very underappreciated statistic, but we have over $1 million of sales per employee. We don't have the scale sales-wise that all those other companies have, but we have a great deal of products with the current algorithm. We have very simple compensation structure. There's 5. As you see on that page, net revenue, gross margin, cash EPS and strategic initiatives, 20% each, and the management is required to be helped and invested in the company's strat, just like you. Gross margin is 20% of our employee's annual bonuses. We're finding out some very important within our company. We really promote financial literacy. So when everybody in the company kind of has heard gross margin over and over again, I know it's 20% of their compensation and they know how gross margin influences the rest of the P&L, everybody gets interest to that and everybody wants to know how more we can improve a product. And there's sort of 4 ways. Obviously, good to great at some of our continuous improvement program. Supply chain optimization, active automation, et cetera, new products, new products that we launch generally have a higher gross margin with products that they replace in on shelf. And then finally, acquisition synergies in the prior business. We've expand the gross margins post-acquisition. Okay, I would ask. Assets, but very important part of Church & Dwight's operating model, and that is we're asset-light. And if you can see, we shoot for about 2% of sales [indiscernible] earlier. We have a spike between the '22 and '23, '24, and that's because we're adding capacity for laundry, litter and vitamins because we see a lot of growth there going forward. And then finally, number five, is leverage acquisitions. If you do the first floor well, we get good returns. If you can lay around half of that a good acquisition program, you get great returns. It would be accepted in 2022 we have consistently improving high-TSR to our investors year-after-year-after-year. So expectations from another streak here in 2023. You saw this slide earlier, 1.5 at 2004, 5.8 in 2023. And as we still put a question mark on that [indiscernible] from businesses. And with that, I'll turn it over to [indiscernible].

[indiscernible]

Okay.

[indiscernible] up here.

Everybody is always surprised that we can get through 100 slides and have time left.

Just on the -- on vitamins we're curious. On vitamins, when you first acquired the business, you talked a lot about the transition from hill into gummy in terms of a big driver of category growth and the opportunity to for Vitafusion. So I was curious [indiscernible] how much runs you see after that category transition piece? Still there's been a lot of growth in the powder format, which sort is a bit different in terms that to be an area with a lot of activity. I was curious on your thoughts there. And then also, when you think about rebuilding, I mean, how are the conversations with retailers going to [indiscernible] about all the new activity to something to market behind as you come back into supply. But category volumes that we see in Nielsen, what was the kind of back to 2019 level approaching new dollars are stronger? So just a thought again, kind of category consumer appetite to take growing in the category in terms of consumption also?

Yes. Well, the gummy category has stabilized over the last 3 or 4 quarters. It's fair to say that one of the reasons why we're going backwards this year, which we saw in Barry's slide is that we didn't, we couldn't supply for [indiscernible] in 2022. So we really got punished by our retailers with respect to our distribution in 2023. So we lost a lot of distribution this year. So consequently, we're going backwards in the first couple of quarters. The good news though is that we have our fill rates back up into the high-90s, and we've got new products on the way and has been in point we have new advertising, new graphics, et cetera. So I think that's going to bode well. Yes, the question about other forms, our focus has been gummies that we are aware that not just powder, but also liquid has made a comeback as well with some new Indie brands, so I'm sure all of you remember when you were kids maybe at least I'm old enough that we had liquid form in a spoon back in the 1960s. That seems to be making a comeback as well. But right now, our focus is on gummies. And we think not only gummies in the U.S. but internationally because we're putting in the capacity, we're going to be able to take advantage of taking our brands around the world in Vitafusion. What's the first part of your question? Did I get them all?

In terms of category growth trends [indiscernible]. Just the unit growth, let's call it, to the category and your commitments there.

Yes. So the category is the percentage of gummies -- vitamins that are sold and gummies that are sold [indiscernible]. And it was low single digits. So it has grown quite a bit over time. We expect that will complete [indiscernible] that's because of aging population. I don't know if you would prefer them taking gummy rather than a pill or capsule. So we do expect that, that still is going to be opportunity for us. And in other markets around the world, gummies just don't exist. It's most capsules even more for us.

Time for one from the audience, if somebody wants to jump in. Okay. I'm going to ask a question marketing then. So marketing spend going up a lot this year. You've spoken about it and then even more than originally planned at the start of the year. But one thing that struck us as interesting is you've been spoken about looking at your marketing spend relative to units, the volume relative to growth in dollars of sales. And that's different than what we've heard from some other companies. So I was curious if you could talk to why you take marketing spend relative to units is the right way to manage the spend?

I'll let Barry take this one, we start cheeks marketing a lot.

Sure. Usually, talk a bit as a percentage of net sales, right? And we've used that 11% percentage as a target, we've reinvested this year. I think it's not an arms race to spend more in dollars necessaril, right? It doesn't have to be [indiscernible] when you're getting more and more [indiscernible] you're targeting and more mission, it becomes less about how much dollars you're spending and about the other KPIs and measures you try to send. So whether it's volume or whether it's looking specifically at other KPIs that we measure, we think we've grown pretty well in 11% range. So it's not in arms race is what I would say.

Yes. And then the bellwether is really how you're doing on share. And how is the business performing? And business is performing really well across the different categories, different brands. And categories you're growing and our share is growing and we set the marketing numbers.

Okay.

And we'll wrap it there, we'll go to breakout, but thank you all team being here and Lauren kicking off.

Thanks for the time.