Church and Dwight Case Analysis

Key comparisons

According to Church & Dwight's financial statements from 2003 to 2005, net sales grew a dramatic 38.8% from 2003 to 2004 and profits grew 67.7%. From 2004 to 2005, net sales and profits continued to grow sure to the many acquisitions made by of the company. In October 2003, C & D purchased three brands from Unilever; in May 2004, it completed the acquisition of Carter-Wallace's consumer brands; and Spinbrush was purchased from Procter & Gamble in 2005. Furthermore, when compared to its major competitors, C & D realized higher sales growth rates from 2003 to 2005. However C & D still had some problems and issues, which included:

* Lack of brand recognition compared to the competition in International markets

* Carter-Wallace line of products had a very small market share in the fast growing Asian consumer product market.

* Geographically limited access to raw materials could have hindered growth in other markets.

Strategic Factors

Internal Factors:

1) Church and Dwight underwent a change in management philosophy, during the Robert Davies acquisitions era. This led to a tripling in the size of the company. James Craigie, the then-current CEO was focused on developing a strong portfolio of competitive consumer goods products and expanding into the international arena. There were numerous changes made in key senior positions - especially in marketing. The company strengthened its marketing expertise in consumer goods by bringing in people from big brand name consumer goods companies.

2) Church & Dwight successfully introduced many products using the renowned Arm & Hammer brand name. In the period from 1995-2004, the company made many acquisitions which transformed a once-small company into a major competitor across numerous product segments. The acquisition spree and the renewed focus on consumer goods products led to reduced sales growth from C & D's core sodium bicarbonate business.

3) Church & Dwight was able to prevent leveraged buyouts and hostile takeovers by maintaining majority control of its outstanding common stock. The Board of Directors was set up so that it was able to provide the best results for the shareholders. The company had also entered into employee severance agreements with key officials.

4) The company had strong control over its production processes and raw material ingredients. The primary ingredient in sodium bicarbonate, Trona, was produced from the company's mines in southwestern Wyoming. This capability provided C & D with a distinct competitive advantage.

5) The company expanded its presence in international markets by acquiring DeWitt Corporation. This provided Church & Dwight access to production facilities abroad.

External factors:

1) The immediate buyers of Consumer products were mass merchandisers like Wal-Mart and Walgreens. Thus, buyer power was high in the industry. Church & Dwight's low cost strategy kept it sustainable in this market.

2) Church & Dwight was dominant in the specialty products industry. The key ingredient in these products - sodium bicarbonate, was produced by the company itself from materials extracted from its mines in Wyoming. Therefore, the supplier power was low in terms of Church & Dwight buying these ingredients. It controlled the supply of its key ingredients.

3) High transportation costs and low brand awareness were the two major hurdles to success in international markets. Acquisitions helped the company increase brand awareness and reduce transportation costs.

4) There was a high threat of substitutes to the consumer goods products industry. Church & Dwight should have focused on new product lines and always maintained focus on improving its existing products.

5) The degree of rivalry was high within the major brand names in the industry. The low- cost strategy and brand awareness made it possible for Church & Dwight to be sustainable over the long term.

Strategic Alternatives

The long term corporate objectives for Church & Dwight were listed quite clearly in the case. The company wanted to create a well-balanced portfolio of household and personal care businesses while continuing to achieve sustained earnings growth (10-12% EPS) on an organic basis, excluding acquisitions. Moreover, the company continued to seek growth through expanded uses of sodium bicarbonate while pushing more aggressively into international markets. With net sales growing as a result from recent acquisitions and the company still figuring out how new products integrated with the portfolio, strategically it didn't make much sense to deviate too far from then-current strategies. The strategies implemented by Church & Dwight shaped the scope of the enterprise and, although it wasn't as big a market force as Procter & Gamble, the company should have considered only minor alternatives and tweaks in strategy.

To begin, the management team, in its then-current state, possessed extensive international experience and expertise in marketing, which was ideal because the international consumer product sales accounted for 17% of Church & Dwight's sales. Obtaining superior leaders with knowledge and experience in international business was an approach that fit perfectly with C & D's corporate growth objectives. Furthermore, that principle likely trickled down to other functional areas as corporate strategy evolved and new skilled personnel were required in other areas. The main drawback to focusing on marketing and international business within the management team was that international sales were more product driven and less marketing sensitive, so even with great experience and knowledge of international markets, success was not guaranteed. The prohibitive transportation costs that existed might have suggested that management ought to have sought out an expert in international logistics as well. A superior management team was a valuable asset going forward, but developing quality products and possessing a strong, broad portfolio of competitive consumer products still needed to be the main objectives when looking at international growth potential.

By continuing to create value through acquisitions, the company built a strong portfolio of competitive brands that was positioned to stay relevant with consumers. Drawbacks to the growing product line included potential consumer confusion and loss of marketing power that came with placing its Arm & Hammer

...