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

For our next session, I am thrilled to welcome Church & Dwight back to the conference. As you know, Church & Dwight is a leading household and personal care company, not only in the U.S. but increasingly internationally as well, achieving over $1 billion in non-U.S. consumer sales last year. With us representing the company is President and Chief Executive Officer, Rick Dierker; newly appointed Chief Financial Officer, Lee McChesney; and our Executive Vice President of International, Mike Read. The guys are going to run us through a presentation for the first 25 minutes or so of the session, and then we'll use the balance of time for Q&A. And with that, I will turn it over to Rick.

All right. Thanks, Steve. Thanks for the invite. Always good to be in Europe. We've been here for about a week, traveling to Germany and Italy and London. So good use of time. So let's kick it off. Here's our normal disclosure statement. Please read this and take your time as we make forward-looking statements. We remain confident in our future despite a volatile environment that we're in. We have a balanced portfolio. We'll go through that detail in a second. We're driving share gains. Our latest acquisition brings a lot of growth -- a lot of opportunity for growth. And the last 2 that we've done are also growing in a big way. Our online business is accelerating. Innovation remains core of what we do. And we're seeing strong international growth, and Mike will talk you through that. And then we're confident about the evergreen model in the future, and Lee will give you some thoughts. So a $6.1 billion company, about 75% of it is U.S. and the balance is between international and SPD. We have 7 power brands. They make up about 70% of our sales and profits. We're balanced from a household and personal care perspective, so about 50-50. We're also balanced from a value personal -- value and premium perspective as well. And when you think about our portfolio and take a big step back, it all started with ARM & HAMMER baking soda. We were founded in 1846, and this has been just the core of the company, and it's enabled us to do many, many things over the years. But this ARM & HAMMER brand is in so many different categories. It's in personal care, it's in household. It's in -- plays premium at times, it plays value at times. Cat litter, laundry detergent, toothpaste, it's known for deodorizing, refreshing. It's known for home remedies. It's known for cooking and baking. And this brand, if you look away back, back in the year 2000, was about $1 billion. So from 1846, all the way to the year 2000, we were around $1 billion of the ARM & HAMMER brand. And then over many, many years, that $1 billion has turned into $2 billion. So a strong brand that goes across many categories has been growing close to a mid-single-digit CAGR for many years. And then that's enabled the company to do acquisitions. And so we bought other brands and businesses. And now when we look up, we have a $2 billion ARM & HAMMER portfolio, and we have a $4 billion of a collection of other brands and businesses. Let's move to the categories. So categories, we talk about 7 power brands that compete in 8 categories. ARM & HAMMER computes in laundry and litter. And we have a great track record of growth for our categories. If you look back not just 5 years but even longer than that, 10 or 15, our categories tend to grow between 2.5% and 3%. Now recently, there was a lot of discussion about category growth as the world is in turmoil and volatile these days. But for us, our categories are a good cross-section of the U.S. consumer. And our categories grew about 4.5% in early first half of 2024. They grew 2.5% in the back half -- I mean, sorry, in the front half -- yes, in the back half of 2024. And then January grew, February was growing, decelerated a bit. And then March was flat. And on the earnings call, I said that April was actually negative for the first couple of weeks. And then what happened? A little bit more certainty arrived, Consumer confidence improved a bit, and we were actually positive for the month of April, and we're positive for the month of May, our categories again. So that's a good early sign. Now categories are only half the equation. The other half is what we're doing in terms of share. And I'm proud to say that more often than not, when you look back over 10 years, about 2/3 of the time, we tend to gain across our portfolio and 5 of 7 of our power brands were gaining share in 2024. So let's talk about a few of the categories, FABRICCARE. So the category was largely flat for liquid laundry detergent in Q1 and we grew a little bit above 3%. So we're gaining share there. We actually hit an all-time share high, 14.7%. When you look -- your eyes go across the page, remember, we started at a 5 share. And we have stair-stepped over many, many years to a 14.7% share. And ARM & HAMMER again, it's one of the core pieces of this company. And the benefit is if we advertise on ARM & HAMMER laundry, it helps liter, it helps toothpaste, it helps across the different categories. The other thing helping ARM & HAMMER laundry these days is our good, better, best strategy. We are -- we have the base ARM & HAMMER SKU, which is good. We have ARM & HAMMER with Oxi, which is better. And then we have deep clean which is our best product yet. Moving to Cat Litter. Cat litter, the category has been growing around 2%. We're growing a little bit faster than that. So taking a little bit of share. Over a long period of time, we continue to have share gains, and that's largely driven through innovation. Euro, this is a really exciting story. This is acne. For a long time, this category was a $500 million category. And then the new forum was introduced by HERO largely in the U.S., and that category now is closer to $1.5 billion. So it's not just a household penetration story for HERO and for patches. It's also when you find the right brand, it can grow the category in a big way. So acne in the quarter was actually flat to down slightly, and acne HERO business had double-digit consumption growth. And share gains are following, right? It's growing at a very high clip all the way from 1% to 20% plus from a share perspective. And we believe that there's still a lot of room to run for HERO, not only TDP growth but we have distribution opportunities, we have ability to -- in my mind, double or triple our shelf set because these are such fast-moving SKUs. Sometimes they run out over the weekend. We want multiple points of display. So that's the story that we're talking to with retailers these days. Our household penetration is around 9 and the opportunity for the acne category is closer to 30. THERABREATH mouthwash, again, flat category growth, but we're growing the category because of THERABREATH, more often than not. So double-digit consumption growth all-time share highs, which is fantastic. And again, we believe we have more room to run here, not just TDPs, but we're not just the #1 or #2 non-alcohol mouthwash anymore, we're the #2 mouthwash in the U.S. And so we're going back to retailers with the story on share of shelf, right, and how much room we deserve. But household penetration is also a fantastic runway. We have about a 10 share on household penetration and the category itself is around 65%, so optimistic. And here's transition over time, again, hitting a 20-plus share as the #2 mouthwash. Our latest acquisition. So this is new news today. This is our Touchland acquisition that we just announced the signing of a few weeks ago. It's one of the fastest-growing brands. It's actually the hand sanitizer business. We think there's a lot of parallels between the acne category that was maybe an old study category that hadn't grown much over the last decade. We believe we can drive category growth here. It's the #2 hand sanitizer in the distribution channels it's in. Purchase price is $700 million of cash plus $180 million of an earnout. Trailing sales are $130 million to hold that thought. I'll show you some math on HERO and THERABREATH as well, and we expect to close that in the next few weeks. And this brand will become our eighth power brand. So Touchland is really -- if you think about Touchland and the experience for hand sanitizer, I've been telling a lot of investors, it's really about -- the current products are medicinal, right? You go to the hospital, it has a smell. It's not a good consumer experience. This makes it a great consumer experience. It has fragrance. It has moisturizer. It's in a package that is premium. It's on the go, all the things that attract consumers. Consumers are choosing to use hand sanitizer more often than not. And Touchland is bringing new users into the category. It's in a couple of different categories right now. It's in hand sanitizer in early days in body mist, it's $640 million category, as I said before. Household penetration is 6 and hand sanitizer is around 37. And then here's my favorite slide that we put together. Just as context, when we bought HERO and THERABREATH, they were around $100 million businesses from a trailing 12 months perspective. After a couple of years, those businesses are 3 to 4x larger than they were and we have some more expectations over time for Touchland. And then my last slide before I move on a bit is really Sephora. These -- the Touchland brand is only in Canada today. They're now launching in the Middle East. And actually, this past weekend, they were at the #1 store in the world, Sephora in Dubai. And this is just a fantastic display and support. So really excited about this business. In a similar way that Mike and his team on the international side have really blown out distribution. We're in 50 countries for THERABREATH and HERO within 12 months. We believe -- while we're going to be a little bit more purposeful on what partners we go after, we believe we have an advantage here as this business grows. Online is a core competency for Church & Dwight. We've moved from 2% of sales to 23% of sales. How do we do that? More often than not, we're gaining share. We have record online shares for ARM & HAMMER laundry for THERABREATH and there's ZICAM. It's not just a U.S. competency. It's a global competency. And then innovation is a big reason why we can grow organically year after year after year. Half of our company's 4% organic growth last year came from new products. That's an exceedingly high number and it gives us a lot of confidence. We've built the muscle. We went through that during the Analyst Day. It's not just a 1- or 2-year initiative. It's really -- we have 4 or 5 different vectors that new products come from now. And in 2025, we launched a few variants on Deep Clean, FREE & CLEAR. We got behind vitamins in a much bigger way, Power Plus, a new body SKU for HERO and a new variant for BATISTE. All right. Well, with that, I'm going to turn it over to Mike, and he's going to talk to you about how confident we are in the future for international.

Great. Thanks, Rick. And thanks, Steve, and Deutsche Bank for another great conference. All right, I'm going to talk about Consumer International and our Specialty Products division. So as Rick mentioned, about 18% of our sales in total comes from international, and we aim to grow our business 8% organic year-on-year. We're a little over $1 billion in size. And if you think of the -- we're split into 2 ways, we operate through what is now 7 subsidiary markets. We added Japan with the acquisition of a longtime partner GRAPHICO in Japan in 2024. So about 2/3 of our business is direct through subsidiary market. The remaining 1/3 is operated through what we call our Global Markets Group. We partner with about 400 distributor partners across the globe and operate in more than 100 countries. We've had a long-standing track record of high single-digit growth, and that informs what is our 8% CAGR rate and that will continue as we move forward. When we talk about 18%, that's a far cry from many of our peers in the CPG space. So we're still very early in our global expansion, 18% of revenues. Many of our peers are in the 40%, 50%, 60% range. So we have a lot of global expansion, a lot of white space from a geographic perspective. I think most importantly, as we have brands that travel really, really well. So it's just that intersection between white space geography and brands that will expand into new markets is why we have so much confidence in our growth ahead. We kind of think about it in a few different ways. One is we've got a good track record of taking large U.S. brands like ARM & HAMMER and OXICLEAN into global markets, we also have a largely personal care and OTC portfolio that is unique to our International division, as well as we've done a much better job of taking recently acquired acquisitions and blowing them out. So as Rick mentioned, we've got into over 50 countries, both HERO and THERABREATH in a really quick period of time. That's not a muscle or capability we had a number of years ago that's kind of newer to our business. And that gives us a lot of excitement, certainly, about the addition of Touchland will have a sort of similar pace. And as Rick said, we'll be selective about where we do that. But our ability to get it out into multiple geographies is encouraging. So just from an international perspective, the way I kind of summarize this is an exhaustive list, but we're making a lot of investments to continue to grow our business. We made the acquisition in one of the largest geographies in Japan. We've added an ERP system to support our global markets group. We've widened out a lot of our regulatory and IT infrastructure. We've expanded offices that support our Global Markets Group in Panama, in China and Singapore. We're much better, as I mentioned, on rapid expansion of our acquisitions. And we've quite purposely put some M&A resources both in Europe and in Singapore to start getting into the deal loop from an international perspective. Historically, we've been largely taking U.S. brands and taking them globally. We are on the hunt for looking at international opportunities to help build scale in key geographies. As we move to specialty products. Similarly, we've got our evergreen model. We aim to grow 5% organically from our specialty products division. This is a little bit smaller of the group, $300 million broken up into 3 parts. The main part of our business is almost 60% is animal nutrition. So prebiotics and probiotics, largely for the beef, poultry and swine space. We've got about 1/3 of our business is what we call performance products, which are specialty chemicals, everything from baking to water treatment to kidney dialysis. And then our smallest division is actually our fastest growing one, which is our commercial and professional. So this is where we're taking our consumer brands into the B2B space. Similar to our consumer portfolio, international expansion is a key focus. This is largely our Animal Nutrition business is now almost 30% of its sales comes from non-U.S. markets. We've made some divestitures within our SPD business, but most importantly, is we've had a bit of a up and down from an organic perspective, but we've now got that as we've repurposed the portfolio, and start to expand globally. We do now have kind of 5 straight quarters of growth and a much more stable growth pattern. So expecting some good consistent growth ahead for our specialty products. And with that, I'll pass over to Lee.

All right, Steve. Thank you again as well. Good week. As Rick talked about, we got to travel across Europe, and we spent a nice day with Mike and his team yesterday hearing about our Europe plan. So as you just talked, some good momentum there. So let's start with -- for the financial update, really a view -- just a reminder of our evergreen model. I mean the foundation that really is our approach running Church & Dwight. This model has served us well and it keeps the team focused on the right priorities and certainly aligned across the globe. First up in the model is certainly our focus on delivering 4% organic growth. That's made up a 3% organic growth in the U.S. domestic business, 3% for international and then 5% for SPD. And how have we done? Well, certainly, it looks pretty good there. We've averaged over 4% over a number of years despite a lot of macro events. So it's certainly not something new for us, and it's what we've been doing for year in and year out. Next up would be gross margin. So just a hallmark for Church & Dwight, we believe that gross margin expansion is one of the most important objectives there is. Gross margin expansion leads to EBITDA growth, which drives free cash flow, which is what we really think valuation is based on. And while new to Church & Dwight, gross to margin is certainly a topic that Rick and I have had a long career of driving in our respective businesses. Each year, we ensure our teams drive a series of actions to drive 25 to 50 basis points of improvement. So as you can see on the slide, we've ended the last year about 45% after driving programs to really offset the headwinds we've all faced coming out of COVID. We also call out marketing in our evergreen model as it's fundamental to driving our brands in the marketplace. It's a short, medium and long-term investments in our brands. We've really ranged anywhere from between 10% and 12%, but 11% is really a sweet spot as a specialty company as we grow in size. And then for SG&A, we're focused on driving leverage from sales growth, but also continuing to make incremental investments in areas like international and e-commerce. And those elements, in the end, are what makes up our model growth -- target growth of 8% EPS growth. And when you look back at 2017, a lot has happened in the world. Our evergreen model has delivered above that objective, with a nice mix of high single-digit and low double-digit growth. So as we pivot to '25 here, it's certainly been a bit volatile. And not only like a couple of those years you just saw and what we walked through. This year, some days felt, frankly, a little bit like the stress points of COVID in the first round of global tariffs. And the tariff news certainly drove consumer sentiment to decline. It was challenges for our retailers and our resilient categories actually slowed and went negative for a few weeks. However, we have remained focused on what we can control. Our growth across the globe, we're poised to deliver another year of record productivity and our innovation of brand investments continue to drive sales growth and share growth. That combination will still be a positive for 2025 as we communicated on our May 1 earnings call. So on May 1, we talked about 0% to 2% organic growth. We did talk about a gross -- adjusted gross margin was down 60 basis points. That's primarily from the inflation in tariffs and the timing associated with the tariffs. Marketing again, still 11%, still investing in the brands. SG&A is slightly lower and then adjusted EPS growth of 0% to 2%. And then cash from operations just about $1 billion. Now in May, we also conveyed an update that we were discontinuing or divesting 3 businesses. SPINBRUSH, FLAWLESS and WATERPIK showerheads. This was a culmination of a review that has been conducted with the Board in 2024 and their potential tariff pressure in early '25, just frankly accelerated a decision for us. These businesses represent 2% of our sales, and we're positioned to drive 45% of our company tariff exposure. Now we also conveyed that our tariff exposure on May 1 was about $190 million. But after you focus on the discontinuation of the 3 businesses, and completing the next phases of the WATERPIK water flusher manufacturing shifts out of China, we shared our net exposure was between $30 million and $40 million, which we will mitigate through supply chain actions over the next 12 months. Now let's look forward from a cash flow perspective. Our 10-year average has been a best-in-class 119% free cash flow conversion. This enables us to deliver meaningful capital allocation, and cash flow really represents true results as we get there through the focus on the EPS and on working capital management. Now the sustained cash flow certainly comes through in our investment-grade balance sheet, again, over a period of time when many hurdles came at all businesses we've still delivered and it provides us strong flexibility. Now back in January, we shared a potential for $6 billion of acquisition firepower. That means the close of the Touchland acquisition in 2Q leaves us plenty of dry powder, over $5.5 billion available to do additional acquisitions, certainly in 2025 and beyond. And that is what our stated top focus of the use of free cash flow is. We think the #1 value-creating opportunity is looking for the next business or brand to bring into Church & Dwight. We certainly will remain disciplined as we go through that process. That's what you've certainly seen us do that over the last couple of years. Beyond that, certainly, we continue to invest in organic, whether it's CapEx or organic growth, our productivity programs and certainly NPD. Number 4 is debt reduction. And then certainly, we have a great track record of paying dividends and buying back shares to return cash to shareholders. And this chart is certainly one of my favorites a long track record of 124 years over a century of paying dividends. Credibility, consistency no matter the environment is certainly what Church & Dwight is known for. So I'll end with where Rick started us. We're in a good place despite the volatile environment. We have a balanced portfolio. We're driving share gains. Certainly, the Touchland acquisition is a nice opportunity for us in the back half of the year as we think it will close in the second quarter. The online channel continues to grow in significance for Church & Dwight. Innovation is certainly driving our record NPD, and as we just talked about the international business is a nice growth opportunity. So we're certainly confident about the strength of the evergreen model even when you have some volatile periods that we just went through here, the start 2025. With that, Steve, over to you for Q&A.

Great. Thanks. Right on time. Just like you said, Rick. Okay. So Rick, I guess, maybe as you said, things have picked up since consumption levels anyway have picked up since early April. As we think about the progress in the second quarter, acknowledging there's still work to do. Any call-outs in terms of consumption versus shipment expectations for Church & Dwight specifically? Any known disconnects that we should be thinking about, whether it's destocking or just timing dynamics?

Yes. I think that's a fair question. Like walked through in the beginning, consumption for our categories is a little bit better than we had seen early on in the quarter. And that's always encouraging. I said on the earnings call that our category, when we flip to negative that it's not normal, it wouldn't be -- we didn't think it would last very long. And I'm glad to say that the volatility of the world today and sometimes that drives consumer confidence in categories. Shipping to consumption, when you have that volatility in the world, and then that leads to consumers being volatile, it also leads into retailers. And there's agita when that happens. And I think choices are made and people retrench a bit, foot traffic is down in some cases. And that leads to ripple effects on inventory. Some of that happened to us in Q1. I would say -- I would just repeat what I said during the Q1 call is we think there's a little bit of that in Q2, but not nearly to the extent that we saw in Q1. I think maybe back in January, we thought that would bounce back. We're being a little bit more conservative these days and say, you know what, this is kind of a new world we're living in. So we're just -- we're more enthused than ever that April turned positive and May was positive as well.

Okay. Mike, the -- speaking of agita, the tariff trade environment, obviously hugely dynamic. As you think and map out the longer-term opportunities and ambitions for Church & Dwight internationally, how does the evolving trade policy regime globally impact that? In terms of your reliance on export models in a world where a tariff that has ripple effects, so have you rethought at all the path towards international expansion?

Yes, I think there's rethink on specifics, but I'd say we are already on a natural progression to start scaling up in certain regions and moving away from purely and export into establishing infrastructures and local manufacturing where it made sense. We already do that today in some regards. And I think it just helps inform kind of where we have to up that office in certain areas. But yes, I think it validates what we've already started, and it's just we'll continue to pick up the pace. But I think for us to be consumer insightful and competitive in global markets and not just rely on sort of the U.S. export mentality is just the natural stuff that we're taking as a global organization.

Okay. And Lee, the new on the block fitting right I guess, a little bit more of your impressions or your first and half impressions. We've heard from you a little bit on this topic. But just you're welcome into the Church & Dwight organization and kind of what imprint you hope to leave as you go forward?

Yes. Thank you. So I mean, obviously, I joined because I was impressed by Church & Dwight. That's what I would say the view on the outside was in my -- I guess we're now rounding into the third month. I continue to be impressed with the quality of the team at multiple levels throughout the organization is interesting. Probably the most common experience I have is when I meet someone new from Church & Dwight, they want to tell me what they're not doing. And it's always an interesting perspective. Let's look at what you've already done over the last whether it's 1 year, 3 years, 10 years, which is great. And that speaks to the culture. We're just constantly focused on improving. Now my mindset is, yes, I've got to experience. I've been through, certainly, one organization, went through rapid growth from a couple of billion dollars up to double digits, and there's lessons learned. So hopefully, I can bring some of those to the fold here. But I do have the fortune. I've done many financings, a lot of M&A, a lot of operating roles as well. So just hopefully, we can make a few less mistakes and probably I have learned from the past and pass it on to the team here and just keep us on our journey here. There's a century of success here and certainly the last 20 years has been pretty impressive.

Great. Here on THERABREATH, consistent, your optimism in those brands' ability to continue to grow. When you think about the drivers of growth, maybe there was more than this. But if I think about sort of distribution opportunities on the base business, just marking brand awareness, marketing awareness opportunities and then incremental innovation and adjacency expansion. How do you stack up those drivers? It's probably a little combination of all of the above, but -- where are they in terms of maturity?

Yes. There's -- it's not one. There's 3, 4 or 5, right? And it's household penetration. That's why we showed that in the presentation. It's further distribution opportunities. Innovation is doing fantastic as well, especially on THERABREATH as we widen that lineup. I think international is one that you didn't quite mention but maybe 5 or 10 years ago, if we would have bought THERABREATH or HERO, would have been a $5 million opportunity. It's tens of millions of dollars already. And I just think that it has such potential as it's such a great story for not just Church & Dwight, but for retailers, for the category, for a country's category growth. So I think international is a big one as well.

Yes. Okay. Good. Now you put up the slide in terms of the analogies of HERO and THERABREATH getting the 3x, the original size, alluded to Touchland doing the same or aspiring to do the same, what's the path to 3x on Touchland? Because it seems like the starting point in terms of retail footprint and the path to get there is probably a little bit different. So what does that -- what are the differences? And where is the confidence lie that you -- that that's a fair aspiration?

Yes. There are similarities and there's differences. So the example I gave earlier was for the category, right? HERO, $0.5 billion category, new problem solution brand and form comes in, and it's $1.5 billion today. I do think that will be a driver hand sanitizer. I think it's -- people are choosing new consumers who are coming into the category, that's a big deal. I think it's household penetration, like I said earlier, 6% or 7%, going to 37% for hand sanitizer. And what we found is the young consumers are loving the brand. But they're bringing their parents into brand. And the research we really did is we spent time on what those consumers are doing. And there's a great loyalty rate and repeat rate for people between the ages of 20 and 55. And so as that brand builds, because remember, they don't really spend marketing today. It's unpaid endorsements over time. As we build that brand and yes, EBITDA margins will come down from the 40s, but we're going to build the brand for the long term. And over time, as Touchland goes into other categories, and body mist is a good example, already off to a fast start. That will build again just awareness penetration, that cachet and that premium prestige brand will do really well in the U.S. And we think there's a lot of opportunity globally as well, like I mentioned before. So all those things together, I think, are why we believe in that business is growing by leaps and bounds.

Mike, what's the time line in terms of -- I mean, you got to close the deal first. But like in terms of slotting Touchland into your playbook, how far up the ladder does that fall?

Yes, we're going to do similar to what we did with here on the THERABREATH is we're going to first understand kind of the regulatory pathway of getting into different markets. And then it's really just about finding the right markets where we can be selective and find the right retail partner. It's gone to market a little bit differently in the U.S. through a very select set of customers. We're going to try to replicate that playbook into -- in international. But I would say our ability and our reach to do that is far more advanced today than it was a number of years ago. So we're already kind of laying out that thinking in order to kind of accelerate as quickly as we can.

Okay. What's the average price point on the core hand sanitizer like $10?

Yes, $10 for the hand sanitizer, $10 for the body spray.

How has growth powered through the first part of this year with consumers being increasingly value sensitive and a bit skittish overall? Has it proved to be more durable? Or is it proved to be more discretionary at that price point?

No similar to a THERABREATH or a HERO. When you have a great problem solution brand, consumers are choosing to go that direction because it solves a need. And so there's momentum, there's acceleration still.

Okay. Vitamins. Been at the point of struggle, kind of '24 into '25, lots of initiatives in the hopper as the year started and kind of progressing as we go. And yet -- but at the same time, the consumption trends are still lagging. Where is your confidence in the program for '25 relative to the start of '25, and just your overall outlook on vitamins, both the category and -- sorry, Church & Dwight's place within it?

Yes. Sure. So vitamins, we've been very transparent like we always are. I think we're more transparent than most. Look, the category for a long time was a mid- to high single-digit grower. It attracted a lot of competitors. When we entered the business, there are 6, now there's 100 competitors. Vitamins, gummy vitamins back in the day were maybe a little bit nuanced and now they're almost ubiquitous, right? You go and buy vitamin D, you want -- if you don't have this brand, you're going to go to the next brand. And so we've been really focused on trying to build the brand over the years, but our efforts have been fragmented. And so 2 things that we've really been focused on is fast forwarding really 2 or 3 years of innovation in the last 12 to 18 months. And so -- we've launched a better tasting formula across the whole lineup, Power Plus, which is our most powerful vitamin, and then 80% of the SKUs have a sugar-free alternative. When you do -- that's how you build brands over time. You got to have a consumer leading innovation. You also have to be talking to the consumer and the right consumer correctly. So we put a lot of time, effort and energy into those 2 things. All those efforts are hitting May, June, July. So we're going to make an assessment of that business post that period, and I'm optimistic that we're going to have some green shoots. Are we going to go from minus 20 consumption to positive? No. But that's not what I'm looking for. I'm looking for incremental improvement because as I said, maybe I said it publicly or not, but there's only a 9% loyalty rate really to the vitamin business these days. And so we have a great opportunity to go grab some share back, to get those folks, those consumers reengaged and to learn to love the best tasting vitamin again. So I'm going to kind of hold comments until probably August because that's -- I want to see those KPIs. The good news is our new vitamin, the Power Plus variant has phenomenal reviews on Amazon, it's early days.

Okay. Great. In the ARM & HAMMER portfolio, laundry and litter, in laundry, there's been some choppiness both for the category and for the kind of relative brand performance. In litter, we've been talking about monitoring kind of promotional battles, not for, I guess, over a year essentially. When you zero in on both of those categories in you position them, what are you seeing from a category dynamic in terms of just level of competition, rationality, consumer loyalty to brands or not? And just your relative optimism as you go forward?

Yes. The laundry and litter, any brand that falls -- any product that falls under the ARM & HAMMER brand, we always have a lot of confidence in. Like I said before, even the CAGR over the last few years for the whole ARM & HAMMER brand is mid-single digits. So it's fantastic. Laundering litter, when we promote, we're promoting behind innovation. So lightweight litter, a hardball and Deep Clean laundry detergent, that's where our dollars go because we want to go drive trial, drive trade up, drive repeat and loyalty over time. And that's working well. And I just showed you the first quarter we gained share in both of those categories. When we talk about promotional levels, household is the only real business that we talk about promotion that is laundry and litter. I would say they're still a relatively bounds within historical levels. It helps when the category starts to recover a little bit, which it has done over the past few months. So overall, I would say it's still rational.

Okay. Mike, on your slide, you talked about -- you noted the ERP rollout. I think there's been a lot of investment in the IT infrastructure and sort of quietly transition this ERP. How do you guys think about the technology journey inside Church & Dwight? And I guess, why isn't it a bigger proactive narrative from the company as opposed to something behind the scenes, it's just a quiet enabler?

Yes. I'll have a few comments, if either one of you guys want to add, that's fine. Look, it is a key enabler. And actually, under the hood, it is probably one of the great reasons why we have a competency in integrating and growing brands through acquisition. To have a North American ERP system that I can get daily sales on every single day we've both come from other companies where that is not the case. And so to have information free flowing that quickly is fantastic, to be able to have people in the organization that have been doing integration for not 1 or 2 years, but for a decade or longer. And the same playbook happens because you have a normal and a clear ERP system way to do it is fantastic. It's a repeatable process. So I think we tend not to highlight our IT spending as the strategic direction of the company, but it certainly is an enabler for us. We have an SAP system in Europe. I think the SAP system we just added for our GMG business is key. We added one for China as well. So I guess the message is we've laid the groundwork. We've laid the investment so that when we scale, we can do so in a modular way that's easier.

Okay. It wouldn't be a Church & Dwight session without talking about M&A. We've got a minute left. So Lee, sort of organization's readiness for M&A above and beyond Touchland. And then Mike, the relative priority international M&A plays, especially in kind of a global volatile market?

Well, certainly, I mentioned we have the balance sheet for capacity. But as you talked about also the organizational capacity. You think about the model we look for when we're finding acquisitions, we're looking for things that enhance the portfolio, but in particular, they're asset-light. We're not bringing in factories. We're not bringing in thousands of employees. So we have experienced people who have been doing this for many cases, decades. So we certainly have the ability if something was to come available in the back half of this year, we could handle it, probably capacity maybe 2 to 3 on maybe every 12 to 18 months. But again, we're going to be disciplined and make sure it hits all the marks on our filter.

I think from an international perspective, the criteria is the same. I think the additional one is we're trying to look for things that allow us to scale up in select countries. So that wouldn't -- we wouldn't sort of throw out the criteria in order to do that. But where those 2 things meet then there's an opportunity to kind of think differently about starting internationally and building scale through acquisition in select markets.

Okay. Right at 0. Thanks, guys. Appreciate it. Thanks, everybody, for joining.