Church & Dwight Pricing Spineometer: 5 of 5 Vertebrae

Church & Dwight, a consumer packaged goods company known for the Arm & Hammer, Trojan, Nair, and Water Pik brands, had a strongly positive Q1 2023. Revenue rose 10% to $1.4 billion while earnings before interest and taxes rose 3.9% to $291 million over the same period last year.

What role did pricing excellence have in this result and does Church & Dwight have the pricing capability to sustain performance?

CEO Mathew Thomas Farrell and CFO Richard A. Dierker demonstrated a high level of awareness of the importance of price management to financial performance in their 27 April 2023 quarterly earnings call.

On price increases in 2023, Dierker stated “we expect pricing and productivity to more than offset inflation” for FY 2023.  Farrell clarified that, concerning profit growth driven by pricing versus volume, “We were out of the gate early in some of our categories with respect to pricing [in 2022], and so consequently, the passage of time, pricing is going to have less of an impact on us and volume, greater.”  Combined with other comments, we learn that management has a grip on pricing, expects prices to increase over 2023, but price inflation in 2023 to be both lower than it was in 2022 and have a smaller impact on profit growth over 2023 than in 2022.

Other comments by management demonstrated a knowledge of the importance of investing in brand marketing and managing trade promotions to drive both volumes and profits.

Research into the quality of Church & Dwight’s pricing team yielded positive results.  Pricing professionals could be found at the analyst, manager, and director levels.  Pricing professionals were engaged with marketing analytics, commercial strategy, sales operations, revenue management, product management, category management, brand management, and finance.

The review of pricing at Church and Dwight left open a few lines of inquiry: (1) Considering the revenue of Church and Dwight, we expected to find more people dedicated to pricing.  (2) Considering the geographies served by Church & Dwight and the large variation in market conditions and commercial behavior, we expected to find a greater dispersion of pricing professionals.  (3) Considering the changes in pricing challenges between list pricing, commercial policy, promotion management, and overall corporate strategy, we are unsure if pricing specialists are engaging these challenges with their peers in other functions at the appropriate strategic level.  There are limits to what can be detected with public sources.

Given the importance and capability of pricing at Church & Dwight as indicated in financial reports, management comments, and our pricing team research, and given their performance, we have come to the following conclusion as of June ‘23.

Church & Dwight Pricing Spineometer:  5 out of 5 Vertebrae.

CHD (Church & Dwight Co., Inc.) rose from 92 on the day prior to their earnings call to 97 one week later. FY 2022 revenue of $5.4 B with an 11% operating margin and P/E ratio near 31.

Currently, a 1% improvement in price would yield a 9.0% improvement in EBIT holding all else constant for Church & Dwight.

Hear the latest Pricing Spineometer insights and commentary at the next Pricing and Profit Management Luncheon near you.  Visit wiglafpricing.com/events/ for more details.