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Free Example of The Household Products Industry Essay

The household products industry was derived out of sheer necessity to keep families and their homes sanitary. Throughout this paper, we will examine Church & Dwight Co., Inc. and their competitors, Colgate-Palmolive Co. and Procter and Gamble, to measure their viability as a prospective investment. A brief introduction of Church & Dwight and chosen competitors will be provided followed by an examination of Church & Dwight and their competitor’s financial statements, stock valuation and capital structure. Finally, concluding with an opinion of the following assessment.

Industry

Household products are consistently used in our daily lives may it be inside or outside our home. These wide ranges of products include the following but are not limited to toilet paper, laundry detergent, tooth paste, pet-care products, contraceptives, deodorant and cleaning products. The organizations that produce these essential goods are usually large conglomerates offering a wide array of generic and brand name merchandises.  Diversification of new and old products is essential to maintain and increase sales. Characteristically household product companies seek to obtain smaller product lines, sell or spinoff lines no longer lucrative in order to remain competitive. Mergers and acquisitions can alter organizations marketing strategies as well as improve operating efficiencies. The household products industry is in the mature stage of the business cycle where growth is minimal and sales and earnings remain steady. Household products companies are considered low risk investments due to constant demand regardless of economic conditions.

S.W.O.T Analysis

Strengths

Few industries have longevity and the ability to maintain constant demand regardless of market conditions.  While demand may decrease at times, as experienced with 2008 stock market crash, it will never cease to exist, as consumers cannot live without their necessities. With longevity they have developed, acquired and/or merged with strong brands establishing consumer loyalty that has extended through generations of families. Brands such as Arm & Hammer, XTRA, Brillo, Trojan, OXICLEAN, Arrid and Aim have proven to be profitable for Church & Dwight.

Weakness

Since this industry has been in existence for quite some time, it is not surprising that it is in the mature stages of the business life cycle. This is a weakness for this industry as growth will not be substantial. Though growth is minimal, the potential is not totally eliminated. Innovation is essential to bring new life to a product or introduce to a new market.

Opportunities

Today, most household product organizations are multinational corporations and are finding themselves suffering in the highly saturated domestic market for the industry. As developing nations are becoming more affluent, they are able to afford products that were previously unable to be purchased. As these nations expand their economies and increase disposable income, this provides much potential for growth.

Threats

Rising commodity and operating cost are increasing at a rapid pace. The recent influx in commodity pricing is due to an increase in demand especially in emerging markets. It can be argued that monetary policy has also had an in influence by creating excess liquidity in the market. As commodities increase so would operating cost such as energy expenses and raw materials would decrease profits.

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Church & Dwight Co., Inc.

Established by Austin Church and John E. Dwight in 1846, Church & Dwight Co. Inc. develops, manufactures and markets an array of items. Church & Dwight is headquartered in Princeton, NJ with currently 3,500 employees generating $2,749 billion in sales during 2011 and holding $6.9 billion of the market share. Church & Dwight emerged into a conglomerate through multiple acquisitions and mergers and are behind brands ARM &HAMMER TROJAN, OXICLEAN, SPINBRUSH, FIRST RESPONSE, NAIR, ORAJEL and XTRA.  These power brands consist of 80% of the sales and approximately 35% are domestically sold under ARM & HAMMER and its spin-off trademarks. Church & Dwight is divided into three segments; consumer domestic, consumer international domestic and specialty products. The consumer domestic and international divisions offer a variety of household and personal care product globally. The specialty products segment sells sodium bicarbonate along with other inorganic chemicals for an array of industrial, institutional, medical and food uses. According to Business Insights, in the baking soda market, obviously Church & Dwight is dominating this with 75% market share while also being market leaders in the male contraceptive arena with 75% market share and accounting for 78% of the condom markets (Lazich and Burton).  As per ValueLine as of March 30, 2012, Church & Dwight has a P/E ratio of 20.6, dividend yield of 2.0%, stock price of $48.72 and BETA of .60 (E. A. Antonson) In 2011 Church & Dwight domestic sales of household and personal goods were $1,979.1 million and international sales were $509.1 million as per the 2011 S.E.C. 10-K filing.

Recent News

In response to consumer demand, beginning March 2012, Church &Dwight is rolling out a Dishwashing Booster via its OxiClean brand. Church & Dwight noticed consumers were not pleased with the cleanliness of their dishes and in response has produced the OxiClean Dishwashing Booster. The Dishwashing Booster is being marketed as “first of its kind”(OxiClean(R) Launches Powerful, First-of-its-Kind Dishwashing Booster: New OxiClean Dishwashing Booster Brings the Trusted Cleaning Power of OXICLEAN(R) to Dishwashers Everywhere) enhanced dishwashing detergent for dishwashers. Church & Dwight developed the powerful “two squirts” (Aubin) detergent as of result of the 2010 U.S. government regulation that prohibited the use of phosphate as an ingredient used to make dishwashing detergent. OxiClean Dishwashing Booster is designed with a multi-action formula to remove the cloudiness dishes acquire during the rinse process. Also, in recent news Church & Dwight has “entered into a pre-arranged stock repurchase plan under which it will repurchase shares of its common stock as part of the Company's previously announced $300 million repurchase authorization” (Church & Dwight Inc.) Church & Dwight stated the reason for the repurchase is the belief that the company could become exposed to risk and is looking for additional security. Europe has also followed suit and in February 2012 has banned phosphates usage in composition of laundry and dish detergents.

International Presence

Armkel is Church & Dwight’s international division which markets their most recognized brand, ARM & HAMMER household cleaning and personal products in various regions of the world. Armkel operates in Australia, Canada, Mexico, United Kingdom, France and Spain. In these regions, Armkel markets their depilatories, oral care products, and home pregnancy and ovulation test kits. Currently, Armkel is expanding its exports of oral care, ARM & HAMMER® baking soda and pet care products to the Caribbean, Eastern Europe, Asia and the Middle East. Additionally, in selected markets, Armkel is marketing antiperspirants, skincare products, professional diagnostic test kits, and over-the-counter pharmaceuticals.

Colgate Palmolive

Colgate – Palmolive is also one of the oldest household goods company around. Founded in 1804 and like Church & Dwight became a conglomerate through multiple acquisitions and mergers. Palmolive Co. acquired Colgate & Co. in 1928 and have since successfully acquired many businesses in over two hundred countries. Based in Manhattan, NY with 38,600 employees, Colgate holds $45.9 billion of the market share and in 2011 generated 16,734 billion in sales. Colgate is divided into two segments; oral, personal and home care and pet nutrition. Colgate – Palmolive manufactures and markets such brands as Ajax, Colgate, Irish Spring, Speed Stick, Murphy’s Oil Soap, Fabuloso, Palmolive, Softsoap and Mennen. Their pet nutrition division provides specialized dog and cat food under the trademarks Hill’s Science Diet and Hill’s Prescription Diet. In 2011, Colgate’s pet segment generated 13% of company sales and is known worldwide. As of March 30, 2012, Colgate – Palmolive has a P/E ratio of 18.4, dividend yield of 2.6%, BETA of .60 (Kaplan) Colgate – Palmolive has the second largest market share, at 30% in the toothpaste maker market. During 2008 Colgate dominated China’s oral care market, having the lead market share at 26%.

Recent News

Since 1895, Colgate has been issuing dividends and it is no surprise the board of directors has announced an increase dividend of seven percent effective second quarter 2012. Along with increasing dividends, Colgate has announced that they have elected a new member to its board of directors, Nikesh Arora. On another note, Colgate received the 2012 Energy Star Partner of the Year Award by improving efficiency by three percent. This was achieved by independently implementing their own energy program, building their own energy efficient facilities, evaluating their own manufacturing & technology sites, educating suppliers and contract managers and creation of Site Energy Coordinator Network. (Polack)

International Presence

As mentioned previously, Colgate has operations in over 200 countries, Brazil, South Africa, Russia, United Kingdom, Mexico and China. Their international operations accounts for seventy five percent of sales with 2011 companywide sales total of $16.7 billion. In 2011, Latin American sales accounted for 28%, in the Europe South Pacific region sales were 21% and in Greater Asia/Africa region sales accounted for 20%. In 2011, each of these regions, Colgate experienced sales growth between nine to twelve percent. The key to Colgate’s international presence has been promoting consumption and making their products available to customers.

Procter & Gamble

Established in 1837, Procter & Gamble is a major conglomerate within the household products industry. Like its competitors, Church & Dwight and Colgate – Palmolive, Procter & Gamble has made a variety of mergers and acquisitions over the years. Procter & Gamble is based out of Cincinnati, OH with 129,000 employees. Their market share as of March 2012 is $185 billion and in 2011 generated $87,100 billion in sales (E. A. Antonson). Currently, they have on-the-ground facilities in approximately eighty countries and sells to consumers in over one hundred eighty countries. Procter & Gamble has two global business units divided into six segments; beauty, grooming, health care, snack and pet care, fabric and home care and baby and family care. Within the beauty and grooming segment their main brands are Head & Shoulders, Olay, Pantene, Wella, Braun, Fusion, Gillete and Mach3. Health care brands include Always, Crest and Oral-B. Procter & Gamble other major brands are Iams, Pringles, Ace, Ariel, Dawn, Downy, Duracell, Gain, Tide, Frebreeze, Bounty, Charmin and Pampers. As per ValueLine, Procter & Gamble has a P/E ratio of 16.6, BETA of .60, dividend yield of 3.1% and for 2011 an EPS of 3.93. During 2010, Procter & Gamble held more than half of the market share of top liquid detergent makers. In 2011, they had the majority market share of the top deodorant makers at 36.80% (Lazich and Burton).

Recent News

With the U.S. market lagging, and the company not performing up to par, Procter & Gamble has suffered staggered growth and earnings recently. In search of its “second wind”, Procter & Gamble is setting their sights on emerging markets. Capitalizing on household industry opportunity, Procter & Gamble is focusing on Brazil and India.  Previously premium brand goods were exported to India making it very costly for Procter & Gamble. Now, they are looking to produce and sell goods locally. The company’s Chief Financial Officer, warned investors’ growth that will be slower than anticipated due to the increase cost of raw materials. (Bennett)

International Presence

Aside from vamping up operations in India, Procter & Gamble has a global division referred to as Market Development Organization (MDO). The MDO is organized in the North America, Western, Central and Eastern Europe, Middle East, Africa, Latin America and Asia which caters to its retail consumers and trade. Emerging markets accounts for 34% of P&G sales and are expecting to increase foreign sales via aggressively attacking these markets.

Conclusion

After careful analysis and consideration of the three stocks analyzed, I choose Church & Dwight as my investment choice. While it will not make you a rich person, performance during downward economic time has proven to be resilient and profitable for the company and shareholders. This stock would be a long hold and a good offset to a portfolio.

Code: writers15

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