Church & Dwight Company, Inc.

The safe harbor statement. I recommend that you read it at your leisure. We have an entire management team on the call today available for Q&A after the formal pitch. We have a lot of slides and several presenters, but I'm going to give you the short story up front. 2020 was a turbulent year. We emerged from 2020 much stronger as a company. We like to say that we do our best work and we're in a jam. That's true for 2020. We protected our people. We found a way to run the plants and warehouses safely. We set production and shipping records. We figured out how to make hand sanitizer in our UK plant. We operated the company with 2,000 remote employees. We pivoted our marketing messages to support a 60% increase in e-commerce sales. We installed new packaging lines with the assistance of off-site engineers using Google Glasses. We added overflow warehouses. And we validated new suppliers and co-manufacturers. In our communities, we delivered masks and hand sanitizers to hospitals where we live and donated to food banks. And recently, our Mason City, Iowa plant loaned an ultra-cold freezer to a local hospital to store the COVID-19 vaccine. Consumer demand drove huge sales growth, which enabled us to overcome significant incremental COVID costs and incremental U.S. government tariffs. But it also gave us the opportunity to invest in our future, which we did in the second half. Looking ahead to 21, we are optimistic that the vaccine will help the global business environment. We operate in many categories, and we do expect pluses and minuses depending on the category. All in, we expect to deliver 3% organic sales growth and 6% to 8% EPS growth in 2021. And this is on top of almost 10% organic growth and 15% EPS growth in 2020, which exceeded our 2020 outlook when we last spoke in October. Our evergreen model is intact. Before we start the formal part of the program, here is a brief video that is a look back on 2020. Thank you. Okay, here's today's agenda. I'm going to begin by describing who we are as a company. I'm going to be followed by Britta Baumhart, who's our Chief Marketing Officer. Britta's going to talk about the categories, how they performed in 2020, and how we expect them to perform in 21. Steve Cugini's going to come up and tell us about our new products in 21. Steve Cugini, by the way, will be retiring in the middle of 21. Steve has had a spectacular career with Church & Dwight, spanning over 20 years. For the past seven years, he's been running our international business, which has been a stellar performer. And Steve is going to introduce Barry Bruno, who has been with the company for a number of years, and he has been Steve's right-hand man in growing the international business. So give him a warm welcome today. I'm going to come back and talk about the animal productivity story, as well as how we run the company, and also talk about our M&A platform. We're going to wrap up with Rick Durker, our CFO, to run us through the financials. Now, who we are. Whether you've been a short-term, one-year shareholder of Church & Dwight, three, five, ten, or 15 years, you're very pleased with our performance. We have been a stellar performer in the CPG space for many, many years. We're known for our consistency. And one of the reasons for our consistency is our evergreen model. Every year we expect to grow our top line organically 3% and our bottom line 8%. That's true in 21. It will be true in 22, 23, 24, 25. You might ask, how's that been working out for you? Well, if you take a look back over the last 10 years, you'll see that we've exceeded the 3% target every year except 2013 and 2017. With respect to 8%, 8% EPS, you can see over many, many years, we're consistent. So, Church & Dwight is a consistent performer. We have an evergreen model that is very familiar to all of our existing shareholders, 3% top line, 8% bottom line. Now, where does the 3% organic growth come from? Well, 2% from the U.S., 6% from international, and 5% from specialty products. This is our evergreen target, but it also happens to be the target for 2021. We expect to deliver these three numbers for each of those divisions in 21. We focus on power brands. We have 13 power brands in our company that are displayed here on this chart. And those 13 power brands deliver 80% of our revenues and profits. And we're very balanced as a company. About half of our consumer business is in household and half is in personal care. And we have a small specialty products business, which is a combination of bulk sodium bicarbonate and animal productivity products. We have a nice split between premium and value, 58% premium and 42% value. What this means is we operate and perform well in virtually any economic environment. With respect to our geographic split, we have a lot of room to grow internationally. We're largely a U.S. company. Only 17% of our consumer business is international. So lots and lots of runway. That's going to generate a lot of growth for us in future years. One of our big advantages is that we're nimble. We're small. We only have 5,000 employees. We have the highest sales per employee of any CPG company. And it helps us three ways, quick decision-making, easy communication, and ability to adapt. And the ability to adapt was highlighted in 2020 when you saw how we reacted to the pandemic. We have a long history of growth through acquisitions. If you went back to the year 2000, the only brand we owned was Arm & Hammer. We were only $800 million in sales in the year 2000. In 2021, we're going to cross $5 billion. And of those 13 power brands, 12 of them were acquired since 2001. If you go back just a few years in 2015, we were a laggard when it came to online sales. Less than 1% of our sales were online. At the end of 2019, it was 8%. At the end of 20, largely due to COVID, it's over 13%. So we regard us as a leader now with respect to e-commerce. We have a low exposure to private label, only 12%. And if you look at the categories, there's only five of our 17 categories where we have significant private label share, and those shares have been pretty stable over the last five years. Now I'm going to bring up Britta Baumhardt, our Chief Marketing Officer, to take us through the categories in the U.S. business.

Welcome to our biggest business, Consumer Domestic, with over $4 billion in sales. As you have heard from Matt, we plan to deliver another year of growth in 2021 on top of an outstanding performance in 2020 and in line with our evergreen model. There are five distinctive drivers for our growth in 2021. Number one, tailwinds on vitamin gummy category growth. accelerated by a strong brand, VitaFusion. Second, Waterpik. Despite dental offices and many retailers being closed for part of the year, we sold slightly more power flosses in 2020 than in 2019. Removing these roadblocks, growth will be even stronger. Three, flawless sales will benefit from new products, a great influencer boost, and a rebound of footfalls. Four, some brands will rebound where social distancing really impacted sales. With vaccines coming, consumers will socialize more. And five, last but most importantly, we strengthened our brands and improved our media spend effectiveness. We create brands consumers love. 2020 was a year with dramatic changes how consumers use media, which allowed us many test and learn experiments feeding our predictive data models and giving us confidence that our media dollars will be again more effective in 2021. But let's start with tailwinds. We are in the right categories. We saw growth in 12 of our 17 categories, average 9.8% overall. We saw an over 50% growth in vitamins, double digit growth in baking soda, and single digit in many other categories. The only category with double digit decline is power flossers, and that is in the Nielsen universe. This is important as Nielsen only measures about one quarter of power flosser sales, and I will show you numbers from the whole universe later. We have high expectations for category growth in 2021, and I will speak to them in more detail. Four categories will stay on elevated levels. Five categories will come down from COVID peaks, but some to higher levels. Five categories will bounce back from COVID impact. Three categories will be steady. The underlying trend for category growth is household penetration. As you can see in this chart, 11 of our 17 categories increased household penetration. This means More consumers are buying this category. It wasn't only consumers buying these categories. They bought our brands in unprecedented numbers. We added 8.6 million households to Arm & Hammer. More power to you. 2.4 million to OxiClean Stain Fighters. And in the second half alone, VitaFusion added 3 million more households. We know that we have category leading repeat rates. This means once these households experience our brands, they enjoy them and come back to them, laying the foundation for strong growth in 2021. Let's look at some of the category behaviors one by one. Vitamins grew an amazing 58% in consumption. You can see the original stock up peak in March but also that the increased levels continued for the rest of the year. It takes 66 days to form a new habit, and consumers clearly form new habits regarding taking vitamins. 20% of consumers started taking vitamins. 57%, that means more than half, are now taking vitamins daily. So it's not only more consumers taking vitamins, they also take them more frequently. And another one-third of consumers plan to add more types of vitamins to their baskets, planning to add immune strengthening, for example. Last but not least, when taking vitamins, consumers prefer gummies over other forms. You can see that the share of gummies on total increased by nearly one-third. That is, it is now 23%. And who would be better placed to profit from that growth than the number one vitamin gummy, VitaFusion. Let's look at the category of power flosses. Nielsen only captures about one quarter of category sales. That is why I show you unit sales across all classes of trade, and you can see that after the decline at the beginning of the year with the lockdown, there was a strong rebound. In total for 2020, we achieved slightly more unit sales than in 2019. despite dentists and certain retailers being closed for significant periods of time, which also means that we came out strong by the end of the year and this momentum will continue and only accelerate with more dentist offices opened up and resuming higher traffic. There's only upside. Women's grooming saw two opposing trends. On one hand, retailer stores closed or with reduced foot traffic reducing sales. On the other hand, spa closures and COVID concerns driving do at home movements and increasing sales. Our flawless team quickly spotted the trend and turned it around with spa at home products, which have just launched. We now offer solutions for women who do not want to go to a beautician and get a face massage, or do not want to visit a nail salon. And as nail salons and spas have closed down due to COVID, we believe that women will continue to prefer at-home treatments. So here are two of our exciting new products. A facial massage cleanser and a salon nail toolkit. Steve will talk more about them later. Moreover, we have secured an icon to speak for the brand, Howley Berries. who will be even more popular, if that's even possible, in 2021 due to the launch of her new film, Moonfall. In addition, we have Ashley Graham, Amelia Hamlin, and Duff Cameron as enthusiasts promoting Flawless. It will be an exciting year for Flawless. Flawless means being perfectly you. Be you, be Flawless. Now to our biggest category, laundry. As you can see, laundry grew 5.5% in 2020, but with a lot of swings due to consumer stockpiling and changing habits. Being more concerned about germs and being home, allowing for more time to do laundry, that will continue as tailwinds for 2021. Cat litter will also benefit from changed habits that continue. It is hard to get good statistics on cat ownership, but we do know that 6% more households bought cat litter in 2020, leading me to believe that this is the minimum of additional cat owners. What this number won't capture is the households who got additional cats. And as consumers want to spend more time with their cat instead of going to stores, we've seen a significant increase in online sales. which are not captured in these Nielsen sales. Then there are categories which are impacted by social distancing. We call these the social interaction categories. One of them is dry shampoo, where we have seen category decline due to store closures and left browsing in store. Here, the advance of vaccination and the associated expected increase of socializing will bounce back the category. And even more eagerly awaited bounce back of sales is in the condom category, as condoms mean pleasure. 18 to 24 year olds can't wait to get their social lives back. And with college campuses reopening, 2021 looks promising. Now that we've gone through the different categories, let me summarize change consumer behaviors due to COVID that we think will stay and help our business. Number one, self-care at home for our hair care and removal hair businesses like Nair and Flawless. Cat ownership for cat litter. Higher consciousness of germs and cleanliness benefiting Arm & Hammer, OxiClean, Extra, but also Kaboom. And four, a wellness trend with a regular daily intake of supplements VitaFusion, Little Critters, and VizSkill will benefit, and Waterpik for gum health. It is not only category growth that will drive our business, it will also be the strength of our brands and the ability to win market share, which we have proven year over year. We have brands consumers love. In 2020, a year with difficult supply situations, the majority of our brands which means seven out of our 13 power brands have grown share. We are set to continue our market share winning streak. Let me get back to what I outlined at the beginning as growth drivers, brand equity and media effectiveness. 2020 was a year where consumers radically changed consumption, but also media behavior. This is a marketeer's dream because it allows for a lot of test and learn and very distinctive data sets. As you're familiar with data analytics, we now have great input to our media effectiveness models and are confident to drive even better ROIs in 2021. Let me just share one area. It is not only consumers who love our brands, it is influencers as well. We have more than 500 influencers globally enjoying and recommending our brands. We have reached more than 200 million consumers via those recommendations, and this number will definitely grow in 2021. What will the influencers write about? About some of our exciting new products. I hand over to Steve Cugini to share what we are launching. Enjoy.

Church & Dwight has delivered consistent new product innovation year in and year out in support of our global growth objectives. 2021 is no different. We have a super lineup of brand-building innovation. So much so, we do not have the time to take you through the full list, so we have curated a few of our favorites. Every new product is born from a consumer insight. 79% of consumers want germs removed from their laundry. Introducing OxiClean Laundry and Home Sanitizer. This product kills 99.9% of bacteria and viruses. It also removes germs, odors, and stains. Check out this video.