Brand Overview and Growth Strategy for Heavy Duty Liquid Detergent

By:

Company Overview: Church & Dwight Co.1 Founded in 1846, Church & Dwight earned its initial fortune selling the branded product that it is most known for today Arm & Hammer Baking Soda. Over the next century, however, the company expanded into other consumer products and more than 80 brands, of which eight account for more than 80% of consumer sales. These power brands include Arm & Hammer, Trojan (#1 condom brand), OxiClean (#1 laundry additive brand), Spinbrush, First Response (#1 branded pregnancy kit), Nair, Orajel and Xtra (leading deep value laundry detergent). Of these power brands, the undisputed leader is Arm & Hammer, which accounts for 35% of the companys domestic consumer products sales and has been one of the most recognizable and trusted brands in the world for several generations. In fact, the company claims that there is an Arm & Hammer product in more than 90% of American households. The other seven power brands were added to Church & Dwights portfolio, via acquisition, since 2001. Financial Performance Church & Dwight Co. saw net sales increase 6% to $2.748B in 2011 with gross profit margin holding steady at approximately 44%. The company believes that its balance of premium and value brands (60% vs. 40%) will help it weather the ongoing economic malaise. Church & Dwight Co. is traded on the New York Stock Exchange under ticker symbol CHD. Brand Overview: Arm & Hammer2 The Arm & Hammer brand was trademarked in 1867 by Church & Dwight co-founder James A. Church. The iconic logo depicts the hammer of Vulcan, the Roman god of lava, fire and smoke. For more than 100 years, the Arm & Hammer logo appeared on every yellow box of Church & Dwight Co.s signature product, baking soda. It was not until the 1970s that the

Church & Dwight 2011 Annual Report: http://www.churchdwight.com/investors/financialreporting/annual-reports.aspx 2 http://en.wikipedia.org/wiki/Arm_%26_Hammer 2

company began to stretch the iconic brand into household cleaner and personal care products, including laundry detergent and toothpaste. The brands long history and trustworthiness, coupled with its association with cleanliness and odor-fighting, made Arm & Hammer a credible entrant into a variety of categories where those attributes are valued. For example, Arm & Hammer can now be found in fabric care, pet care, and personal care categories (see Appendix 1 for a complete list). Today, Arm & Hammers laundry detergent business is the largest (by net sales) in Church & Dwights vast portfolio. Arm & Hammer detergents are available in both liquid and powder forms, and are marketed as value products, priced at a discount below market leaders such as Tide. Additionally, Church & Dwights Xtra brand is positioned as a deep discount detergent and is priced below Arm & Hammer, as well as significantly below the price points of the category leaders. Category Overview: Laundry Detergent3 The U.S. home laundry detergent category is filled with numerous product variations and features a very competitive landscape. The need to compete in this heavily contested market has spurred the need for differentiation. Born from this are new types of laundry products that include, but are not limited to, liquid detergents, powder, single-use products, and ultra concentrate all innovations driven by different customer needs (convenience, stain fighting ability, desire to keep clothes looking new, etc). The hope is that these innovations will increase pleasure in cleaning and result in more cleaning being done. Sales in 2012 were flat compared to the year before, at just under $9.2 billion, and the future outlook continues to be challenging. The 2008 economic crisis has affected overall home care and the laundry category has struggled along with it. People have cut back their spending in all categories, but whats troubling is the home laundry segment has not recovered its
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Mintel, Home Laundry Products September 2012 and The Gale Group, Soap and Other Detergents, Except Specialty Cleaners 3

momentum after the economic crisis, which has resulted in flat growth. Retail channels have been changing as well, as supermarkets have seen a 1% decrease in home laundry product sales between 2010 and 2012. Meanwhile, other channels such as drug stores, mass merchandisers and dollar stores have increased their share. Despite the lag in sales, consumers continue to wash their clothes. 98% of households use laundry detergent, and this number has changed little from year to year. Although the products that are used might change, it seems clear that most households need detergent. The households that use the most laundry products are families aged 35-54, which is likely due to more individuals in the household and more laundry to do. In general, these users agree that it is more important to do the laundry right than to do it more easily. While time-saving products are important, the number one goal is to clean clothes properly. As such, these consumers are focused on brands and products that clean effectively, while also keeping price and savings on their radar. See also: Appendix 4: Laundry Detergent Sales and Market Share See also: Appendix 5: Leading 10 liquid laundry detergent brands sales (U.S.) in 2011 Qualitative Research Overview To learn more about consumer perceptions of the laundry detergent category, the team conducted interviews with a sample of 19 people ranging in age from 26-86. We intend to use this initial qualitative survey to guide our strategy and narrow our focus for additional research. Our key findings (see Appendix 2 for complete survey results): All survey respondents used liquid detergents. Most respondents purchased their detergent every 1 - 2 months from wholesale clubs (15.8%), big box stores such as Target and Wal-Mart (26.3%) and grocery stores (63.2%). Tide is consistently top-of-mind for consumers and appeared in 79% of unaided sets, while Arm & Hammer was mentioned by 47.3% of consumers interviewed.

Economic considerations played a key role in consumers choice of brand, as more than half of the respondents (52.6%) mentioned price, discounts and coupons as key criteria in their purchase decisions.

Some common themes emerged during our qualitative interviews, such as: Concerns about the environmental impact of laundry detergents, Seeking out free and clear hypoallergenic options, Effectiveness/quality is still a key concern, as 42.1% cited cleaning power or effectiveness as a top purchase consideration. The two Arm & Hammer brand enthusiasts (the only two respondents who currently use

the brand) in the survey set mentioned that baking soda helps with odors and the Arm & Hammer with OxiClean was an important feature and an excellent value. Aside from these two respondents, the most common sentiment about Arm & Hammer was that it is a lesser brand of inferior quality. Additionally, people seemed to think of Arm & Hammer in the past tense (I used to use it or I used it many years ago or No, I dont use it anymore). Our survey set yielded two people (10.5%) who currently use Arm & Hammer, six people who have tried it at least once (31.6%), and eleven (57.9%) who have never used it. Strengths and Opportunities for Arm & Hammer Based on the consumer familiarity with baking soda and the perception of baking soda as a natural odor reducer, Arm & Hammer may have an opportunity to stretch its brand equity to free and clear or odor-neutral offerings. While Arm & Hammers portfolio currently includes a detergent for sensitive skin, a free and clear offering would assure consumers that irritating chemicals are not in the detergent. Furthermore, capitalizing on the odor-reducing qualities associated with baking soda would allow the brand to offer a unique detergent that kills odor and does not have a strong scent. Weaknesses and Challenges for Arm & Hammer

The 68.4% of consumers who explicitly stated their negative perception of Arm & Hammer often pointed to the brands performance issues. 30.7% of those with negative brand perceptions of Arm & Hammer specifically stated that they saw Arm & Hammer as an inferior brand or product. The perception that Arm & Hammer had weaker cleaning performance was the most frequently stated reason for the negative brand perception; however, strong scent, animal testing and lack of environmental friendliness were also deterrents to purchase. Moving forward, Arm & Hammer must address the following challenges: how to change the consumer perception about the brands ineffectiveness and how to strengthen its environmental friendliness. Research Limitations Though the teams research provided some useful insights into consumer preferences in the laundry detergent category and consumer perceptions of Arm & Hammer, there were some limitations to the sample. Only 15.7% of the sample was male; it is possible that more qualitative research on male consumer preferences in the laundry category would yield valuable insights for the Arm & Hammer brand. Furthermore, a sample size larger than 19 people might provide a broader view of category and brand-specific trends. Future Research To build on the exploratory research conducted thus far, we will leverage Nielsen data in the descriptive research stage. This will provide us with industry data and allow us to examine whether Arm & Hammers sales reflect the initial category and brand perceptions we observed in our exploratory research. Depending on what the descriptive research yields, we may need to examine our exploratory research further and potentially expand the size or composition of our initial sample. See also: Appendix 6: Importance of laundry detergent attributes from Mintel

Appendix 1: Arm & Hammer Brand Portfolio

Product Portfolio: Segments Deodorization: Baking Soda; Household Deodorizers Fabric Care: Laundry Detergent; Fabric Softeners; Plus OxiClean Stain Fighters; Power Pak Detergents; Fine Fabric Wash; Laundry Boosters Personal Care: Toothpaste & Whitening Systems; Antiperspirants & Deodorants; Nasal Care; Wound Care & Eye Care Pet Care: Dog Care; Cat Care

Arm & Hammer Branded Household Products: Laundry Detergents ARM & HAMMER Powder and Liquid Laundry Detergents ARM & HAMMER Power Gel Laundry Detergent ARM & HAMMER plus OXICLEAN ARM & HAMMER Laundry Detergents for Sensitive Skin ARM & HAMMER CRYSTAL BURST power packs All Other Household Products ARM & HAMMER Pure Baking Soda XTRA Powder and Liquid Laundry Detergents ARM & HAMMER Carpet & Room Deodorizers ARM & HAMMER Cat Litter Deodorizer ARM & HAMMER Clumping Cat Litters ARM & HAMMER FRESHN SOFT Fabric Softeners ARM & HAMMER Total 2-in-1 Dryer Cloths ARM & HAMMER Super Washing Soda Arm & Hammer Branded Personal Care Products: ARM & HAMMER Toothpastes ARM & HAMMER Deodorants & Antiperspirants

Appendix 2: Qualitative Survey Data Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase Sydney Sarah Female 26 Social Work Tide, A&H, All, Wisk, Purex, Generic brand Sydney Mom Female 66 Retired Tide, Wisk, All, A&H, Era Aaron Anna Female 28 Student Tide, Cheer, A&H, All, Era, Caldrea, 7th Generation, Mrs. Meyers Y Liquid

Y A&H with OxiClean (liquid) Target or Wal-Mart Once every two months (80 load size)

Y Liquid

Sam's Club or Target Every two weeks

Grocery Once every couple of months Scent, natural (sensitive skin), price

What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H?

Are you still using this brand?

What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

1) Likes to keep clothes The power to remove bright and clean, 2) stains is at top of list, scent, 3) price doesn't like oversized containers (obnoxious to lift), buy Tide almost exclusively because it cleans better and also because P&G always coupons so she can get it competitively priced Yes and yes. Have used it, but don't use it regularly. And if gets something other than Tide, usually gets A&H. A&H OxiClean is more Biggest reason is it affordable but gives doesn't work quite as quality clean and likes well as Tide. It's second the way it smells. best. Wisk and others Really likes the have fragrance issues. OxiClean - it gives an extra boost.

No

I don't.

Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand?

Aaron Mom Female 49 Waitress Tide, Gain, Surf, All, Purex, A&H Y Liquid

Aaron Gram Female 86 Retired Whisk, Tide, Era, A&H

Aaron Kate Female 57 School Social Worker Tide, All, Gain

Y Liquid

N Liquid

Sam's Club or BJ's Every couple of months Scent; I also check to see how much you need to use per load. I'd rather pay more and use less. I always check to see how many loads I get out of a bottle. No

Stop & Shop (grocery) Every two months. Not the price so much. I like Era because it cleans well. I know it's a heavy duty detergent. Also, something that's good for the environment.

Meijer (grocery) Once every 6 weeks. Brand (Tide)

What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

A&H seems like a lesser brand.

I love A&H. In fact, I have a container downstairs. I also use the baking soda in my fridge. It helps with the different odors because of the baking soda. I like it as a laundry product.

I almost named A&H - I could visualize the yellow box but couldn't remember the name. I feel like it's good for the environment because of the baking soda - more natural.

Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand?

Aaron Auntie Jane Female 56 School Teacher Era, Tide, Whisk, Woolite N Liquid

Brian Kate Female 27 Marketing Research Tide, Arm and Hammer, All

Brian Julianna Female 29 Graduate Student Ariel, Persil

Y Liquid

N Liquid

BJ's Wholesale Club Every 6 -7 weeks. Brand (Era), stain removing power - use it as a stain-lifter and overall cleaner. Also, no one is allergic to Era. I also like a little bit of scent, but nothing too flowery. A long time ago. 15 20 years.

Albertson's (grocery) Twice a month "Brand/Cleaning Performance/Price/No perfumes or dyes"

Pick N Save "Every 3 months maybe." "1. Price 2. Scent 3. Brand "

"Yes, I have used Arm and Hammer, I am no longer using it"

What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

I think its an inferior product.

"Likes: Price- tends to be less expensive than Tide Dislikes- Cleaning performance, Husband has sensitivity to scents and dyes and can't use Arm and Hammer"

"They really manufacture laundry detergent? I thought they were a kitchen cleaning / de-clogging brand." Don't know.

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Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase

Brian Elena Female 30 Marketer "Method, Tide, Gain" N Liquid

Sydney Sara Female 27 Contracts Negotiator Tide, Purex, A&H

Brent Amber Female 31 History Professor Seventh Generation

Y Liquid

N Liquid

Target Once every month or two. 1. Chemical-free 2. Sustainable formula and packaging 3. Brand

Grocery Store 5 months worth at a time (every 5 months) 1) Chemical Free, 2) Brand, 3) Price

Target Every couple of months Not tested on animal, natural, non-toxic

What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand?

What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

I have used Arm & Hammer laundry detergent, but am not still using it. "I didnt feel that it was effective detergent and it wasnt very environmentally friendly."

Just tried A&H Free and clear but hasn't used it before Didn't like that it always had very heavy scents - don't like laundry coming out with a smell.

Nope

Tested on animal.

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Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand? What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

Sydney Aunt Marsha Female 63 Retired All, Purex, Tide, Gain, Ivory (for babies) N Liquid (Purex, A&H)

Brent Beth Female 61 Software Engineer Tide

Brent Greg Male 33 Entrepreneur Tide cold water

N Liquid

N Liquid

Kroger 120 load bottle every other month 1) Free & Clear, 2) Price

Giant Every couple of months Lots of coupons and discounts, husband collects coupons

Safeway Every few months It's what family used

Yes, but not recently Liked price and liked that it wasn't heavily scented and washes clothes well.

Nope, but used to use powder detergents A&H reminds me of brand that is powder and is cheaper

No It's not as popular as Tide

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Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy - powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase What are the most important factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand?

Brent Tammy Female 55 Stay at home mom Gain

Brent Jason Male 29 Engineer Arm+Hammer

Nhien Apurva Male 30 Student Tide, Arm+Hammer, Era, Our Family Y Liquid

N Liquid

Y Liquid

Wal-Mart Every month It cleans better and the smell is nice

Shaw's Once every couple of month Because allergy reasons made Arm+Hammer a better

Copps Once every 3months probably (32 loads, HE) Price, sale promotion, package design

No

What do you like/ don't like about A&H? (brand, price, scent, power to remove stains, package, other)

Because Gain is better.

Making laundry detergent at home, which is more hypoallergenic No reason, have time to make detergent at home now

No

Probably don't use A&H because I think it is an expensive brand, never seen it on sale

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Survey Administrator Survey Taker Gender Age Profession Name all of the detergents you can think of. A&H unaided mention? What form do you typically buy powder, liquid, pods? Where do you usually buy detergent? Frequency of purchase

Nhien Tram Female 30 Marketer Tide N Liquid Grocery Once every couple of month

What are the most important Cleans better, scent factors you consider when making a detergent purchase (brand, price, scent, power to remove stains, package, other) Have you used A&H? Are you still using this brand? No What do you like/ don't like Tide has the best quality about A&H? (brand, price, scent, power to remove stains, package, other)

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Appendix 3: Laundry Detergent On Shelf (Arm & Hammer in yellow packaging on right)

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Appendix 4: Laundry Detergent Sales and Market Share 52 weeks 52 weeks ending June ending June Sales change Share 12, 2011 Market share 10, 2012 Market share 2011-12 change $ (millions) % $ (millions) % % % point 2,702.00 52.5 2,698.90 52.4 -0.1 -0.1 549 550.5 277.3 254 4,332.70 10.7 10.7 5.4 4.9 84.1 584.2 558.2 279.4 244.3 4,365.10 11.3 10.8 5.4 4.7 84.7 6.4 1.4 0.8 -3.8 0.7 0.7 0.1 -0.2 0.6

Manufacturer Procter & Gamble Church & Dwight Co. Inc. The Sun Products Corp. Henkel Group Clorox Co. Subtotal

Source: Source: Mintel/based on SymphonyIRI Group InfoScan Reviews

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Appendix 5: Leading 10 liquid laundry detergent brands sales of the U.S. in 2011

Sales of the leading 10 liquid laundry detergent brands of the United States in 2011 (in million U.S. dollars)
Brand Tide Arm & Hammer Gain All Purex Private label Xtra Wisk Era Cheer Brightclean Million U.S. dollars Values 1,269.40 248.90 239.90 227.20 145.80 127.60 99.90 84.40 55.40 55.40

Source: Grocery Headquarters, State of the Industry Almanac 2012, page 64, April 2012

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Appendix 6: Importance of laundry detergent attributes from Mintel Neither important nor Very Important unimportant Unimportant unimportant % % % % % Power to remove tough stains 44 47 6 2 Format (eg, tablet/powder/liquid/gel) 26 45 22 6 2 Works well at low temperatures 26 45 21 6 2 Scent/fragrance 25 42 21 8 4 Not tested on animals 23 27 34 10 5 Antibacterial element to kill germs 22 41 26 8 3 Formula for sensitive skin 21 32 29 12 6 Formulation for colors 20 46 27 5 2 Concentrated formula 17 43 32 6 2 Ingredients kinder to the environment 17 40 31 8 4 Recyclable packaging 14 34 35 12 6 Packaging made from recycled materials 12 31 39 13 6 Base: 1,754 internet users aged 18+ who bought laundry detergent in the past six months Very important Source: Mintel, Home Laundry Products - US - September 2012 - Laundry Detergent Attribute Importance

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