All right. Good evening and good afternoon, everybody. I'm Steve Powers. I'm the head of Deutsche Bank's U.S. Consumer Goods Research, and I'm thrilled today to welcome back Church & Dwight to the conference. Joining us today from Church & Dwight are Matt Farrell, Chairman and Chief Executive Officer, Rick Dierker, Chief Financial Officer, and Barry Bruno, Executive Vice President of International. Matt, Rick, Barry, thank each of you for joining us. Before we begin, just a logistical point for those listening in. If you're joined via the conference portal, you should see the ability to submit some questions in the window in front of you. Please feel free to make use of that at any time, and I'll do my best to integrate your questions into the conversation as we go. With that, thank you all for joining us.
Matt, maybe we'll open the meeting, just to get us going, and just have you reflect a bit on the last 12 to 18 months. Maybe summarize with some hindsight for those meaningful ways in which the pandemic has impacted your business. I say that with acknowledgement that we're still not through it, but I'm curious just to see how you think your business will progress from here. Contrasting some of the businesses and brands that saw demand tailwinds over the past year, things like gummy vitamins and baking soda, versus those that have been facing more headwinds, like water flossers and condoms and dry shampoo.
Yeah. Okay. All right. It's a big question. If you look back over the past year and a half, almost, many operational changes were made. We pulled back on promotions, focused on the online class of trade. We did things like we narrowed the VMS assortment, so we didn't make the shorter run SKUs in order to increase our capacity last year. That's behind us now. We converted Tide to Arm & Hammer Liquid Laundry over XTRA because we really couldn't meet the demand for both, particularly in the second and third quarters. With respect to new products, we pulled back on new product support because consumers were less inclined to really try new products last year. Different this year.
We had to qualify a lot of new co-packers and suppliers because we had to slow down production in some of our plants due to the need for social distancing. We still have some of those co-packers. We did increase the inventory levels so that we'd be able to react to surges in demand. As far as going back to the office, it's an ongoing question. We're not back yet. We have about 600 people in our corporate office. One thing we did was we reviewed all the positions. We concluded that about 20% could be permanently remote. That's the way it looks right now. As far as our categories go, there were three or four categories we thought we'd stay at an elevated level in 2021. They were gummy vitamins because of the wellness trend.
If you look at the first quarter, the category was up 19%, and it's up again. Not as much, so far, mid-quarter, gummies are still up versus a year ago. Additives is another one, that's OxiClean. We expected that also to stay at an elevated level, which it has. Cat litter, we also mentioned this on our most recent call, there's a 6% increase, I should say, of households that have cats. A lot of people were going to the adoption centers last year. That's helping keep the litter category elevated. Finally, the deodorizers, which is Nair. A lot of people were focused on at-home solutions last year, Nair's still doing well in 2021. The things we thought would decline, like baking soda, are declining. The first quarter was down.
PEGA was down at 7%, down double digit in the second quarter. That's happening. Cold shortening, which is the Zicam business that we bought. If you're following cough and cold, you know cough and cold is down significantly. Is Zicam. We've lowered our expectations for Zicam for 2021. Pregnancy kits, we also expected to fall back. That hasn't happened just yet. Generally, pregnancy kits fall back when you're in an uncertain economic environment. I think with the strength of the economy, the strength of the consumer balance sheet, et cetera, that has affected the consumer interest in expanding their families. The ones we thought would recover are recovering. Dry shampoo, condoms, these are things that are directly tied to consumer mobility. Dry shampoo, condoms, water flossers, even in the first quarter, women's grooming was up 2.5%.
The ones we thought were going to be steady state year-over-year category-wise were laundry, toothpaste, toothbrushes, and that's sort of playing out so far. That's the way it looked through the end of April when we had our last earnings call for Q1.
Yeah. We were talking earlier. I think you said July 19th is when you've earmarked staff to start coming back to the offices at headquarters. Which symbolizes the resumption of social mobility and resumption of relative normalcy. First of all, how does that compare to where we are now to where your expectations were coming a couple months ago? How does that likely impact some of the dynamics you just described over the balance of the year?
Are you asking me, is a return to the office a surrogate for what's happening in the larger society?
Well, a little bit. Yeah, more just in the larger society. However you want to answer the question, Solomon.
Well, society is opening up differently state by state. I think the biggest issue that employers are dealing with right now is how to deal with wearing masks. That's something that's an internal issue for a lot of companies. Some people make personal decisions. They don't want to wear a mask, and I think OSHA is saying you don't have to wear a mask in a plant if you're vaccinated. We're following OSHA as well. Yeah, as far as the society opening up, I think it's going to continue. I'm not expecting, this is a personal opinion, I'm not expecting a resurgence at the end of the year because the number of people getting vaccinated continues to rise. That's something we track as well within our company. We're encouraging everybody to get vaccinated.
Great. Barry, internationally, how does the lay of land compare, and how are you thinking about your investments from here in terms of where you're going to double down on growth versus continue to tread a little bit more lightly?
Sure. Yeah. It's been a little different experience for us internationally, right? Asia in particular went into lockdown ahead of the U.S., so Q1 a year ago was a really tough time for us, led by China, and it's emerged faster as well from lockdown. We got a little bit of a different experience there. To go back to your question for one sec on kind of society as a whole, our team in China has been back in the office for a year now. Likewise, we've seen personal care categories there really rise. If you look at it as an analog of what might happen in Western Europe and the U.S., I think you can say, yeah, probably that's what's about to happen. Anyway, our experience was a little different. We went into lockdown earlier in Asia. We emerged a little earlier.
We look a little different too because our portfolio is 80% personal care in international. We don't have some of the benefits of laundry or household in the same way. Overall, international business is healthy. We grew high single digits last year. We're seeing a really nice rebound in emerging markets in particular, which was surprising to me that they have performed so well, China, Latin America. If you're asking where we might double down on investment, it's really emerging markets for us, which are the big story, where in the last few years we've built teams, whether it's in Singapore or Panama or more recently in India. We're going to keep investing there because we believe in household income that's growing and populations that are growing, and our brands are being really well accepted there. That's kind of the future for us.
It's not a deviation of our strategy. It's just a continuing investment, particularly in emerging markets.
Great.
Barry, it's also fair to say you've had intermittent lockdowns in some of the European countries that are affecting you.
Yeah. It's hard to give you one answer, Steve, because even Australia, for example, just went back into lockdown. Melbourne or Victoria, which is 20% of the population of Australia, back in lockdown a few days ago. Malaysia back in lockdown. Parts of Europe back in lockdown. It's been a little lumpy, to be honest. We're in over 100 countries. I can't give you one answer just because it's been so varied. China's been back for a year. Australia's back in lockdown last week, just for a comparison.
That contrasts a little bit with how Matt described what is, I think, the base case in the U.S. for not retrenching. Internationally, in terms of how you just allocate capital and make your planning, how impactful is that or how hesitant are you? What are you not doing that you would do if you had more conviction that we were through it?
Yeah. It's a good question. Before we get to capital, from kind of an investment standpoint, from a marketing investment, we want to make sure we're not over-investing in markets where people literally can't make it to retail. We can dial that back relatively quickly and be flexible. From a capital allocation standpoint, we're really leveraging third parties and contract manufacturers. We're not making big capital investments right now. To be honest, we haven't reached the scale that's required to do that yet. It's not really impacting our strategy. We're still leveraging third parties and co-packers. Longer term, beyond a five-year horizon, that's when we'd be looking at more capital investment in terms of manufacturing. The good news is it's really more impacting our marketing investment than in capital allocation, if that answers your question.
Yeah. Okay. Given the supply constraints that built up over the course of the pandemic and now this resurgence, we're seeing a lot of inflationary pressure across all end markets. Rick, what's the latest and greatest inflation outlook for Church & Dwight? Probably the question you're very used to getting, but just how are you thinking about the different levers to offset that, whether it's list price and depth and breadth of promotion and just revenue growth management versus productivity and other mechanisms?
Yeah. We gave some clarity on inflation during the last call, and I'd say it's largely unchanged. Resins are still extremely high year-over-year, and ethylene is as well. That was kind of the backdrop as we went to market for about 30% of our product portfolio globally for price increases. Not only commodities are up, but labor's up and transportation market is tight and has inflation as well. We get back to, well, why are we confident on expansion, right? Our guidance is flat for the year, and that implies up 235 basis points in the back half. Why do we think we-
We can expand, partly it's the pricing takes effect in the back half. We have latitude on our trade promotions. We actually were higher than most a year ago in the back half. Many of our competitors had already ratcheted it down in the back half a year ago. We have higher personal care sales. You heard from Matt Farrell, those categories are recovering, so that's a tailwind for mix. Our vitamin business is doing really well. It's higher than corporate gross margins. That is a tailwind. At no time in our history have we had as much volume going through our plants as we do now. That's a tailwind from a production perspective. All those things. COVID costs.
As we seek to open up and as incidents are lower, our COVID costs in terms of manufacturing are lower, certainly versus a year ago, and so that's a tailwind. Those are like four or five reasons why we think and have confidence in gross margin expansion in the back half.
Great. Of those different levers of inflation, you mentioned transportation, you mentioned raw materials and packaging and labor. Maybe it varies over the course of time, but does one of those buckets concern you more than another one? Or are they relatively equitable in your thinking?
Well, of course, the biggest part of the pie is the commodity piece versus labor or versus transportation. The transportation market's extremely tight, higher costs for trucks, containers. Over time, we've seen that movie before, it gets back in balance, supply and demand. Labor, again, it's certainly very important, but inflation, it's happening across the country. That's a relatively small part of our cost of goods. It's really the material piece. Even as new capacity's coming online, demand remains strong. The Texas freeze that happened had ripple impacts across those supply chain that are still not fully recovered. Right? It's just one event like that has an extremely adverse impact.
Matt, you've got 13 core power brands at this point. Just, I guess, what's your relative level of satisfaction and optimism with respect to those brands and their positioning as they stand today? Both in terms of what you're seeing now in the marketplace, but also which of those brands do you think have the most power behind them as you think about the medium term?
Okay. Well, we have 13 brands we call power brands that make up 80% of our revenues from profits, all of them are number one or number two brands in our category, they have strong brand equity. As Church & Dwight continues to add power brands, I think when I joined the company, we had six or seven. We have 13 today, we say 13 today, 20 tomorrow. We think that using our cash for acquisitions is the highest and best use of the cash. As far as the standing of those brands, if we look at the first quarter, eight of 13 brands gained or held share. That's a good target for us. If we have eight or better holding and gaining share annually, that's a good thing, that's a sign of a healthy business.
We have gotten questions about laundry shares more recently. They've been impacted by our exit from OxiClean with the laundry and also our exit of XTRA from the drug class of trade. We also discussed on our Q1 call that we had supply constraints on Unit Dose, which impacts share. We're bringing Unit Dose in-house, so we expect that's going to improve over time. As far as Arm & Hammer laundry, those shares would be impacted by a change in promotional activity, by step up in promotional activity by competitors. Not to historical levels, but certainly above a year ago. If you think longer term, as far as brands that are kind of growing, not just domestically, but also international, and Barry can jump in here. Vitamins for sure, the transition from pills and capsules to gummies was accelerated last year. That's going to continue.
We also think that Batiste, which has been a great grower for us, will continue to grow both domestic and internationally. Waterpik and Flawless, we see upside in the future, both domestic and international. Barry, you can add if you'd like.
Sure. Yeah. Waterpik is just a great brand for us. We've already doubled it internationally, Steve, since we bought it. As you might imagine, that category, water flossers, is still really new in a lot of markets. We've got 70 clinical studies. We're building relationships with hygienists around the world. A lot of room to run for Waterpik in particular. We're seeing Asia, Middle East really boom right now. Batiste dry shampoo is still a new category in a lot of these markets. Low awareness. We're the number one player globally. That's got a lot of room to run as well. Flawless is still really brand new internationally.
Part of the reason we bought it is because we have a much greater footprint than the seller did, and we're seeing sales really jump in high level digits right now as we're bringing it around the world. I'd say those are three of the power brands I get particularly excited about. A lot of room to run, margin accretive, and those are the three probably I'm most excited about right now.
Okay, cool. Just sort of back on laundry, because it is a topic that investors have been talking about with respect to Church & Dwight lately. The Arm & Hammer share progression and the promotion relative to competitors, how much of that is unexpected from your perspective? How do you think it plays out? Maybe we'll start there.
Yeah, we don't get too excited about what happens in a quarter, Steve. Remember, Arm & Hammer in laundry is a value brand, and the thing that we have going for us is that it's an advertised brand. There's no other brand in value detergent that is advertised. That's going to halo Arm & Hammer, not just in the past obviously, but also in the future. The Unit Dose and XTRA and OxiClean that I described, those are known issues. We knew that was going to affect our shares this year, particularly in the first half, but less so in the second half. We still think we're in great shape through innovation and the brand equity that the business is going to continue to grow.
And in terms of-
Promotion levels, Steve, we said they were going to be higher for the category because year-over-year they were depressed. They're still not back to historical levels.
Given on the one hand, you've got a pretty vibrant consumer backdrop demand. Savings are up, demand is still pretty high. The other hand, you've got rising cost baskets that are broad. The whole economy is inflationary right now. When you think about positioning of the Arm & Hammer brand in a category like laundry, does that become a tailwind for that brand and its value positioning in terms of trade down? Or is this cycle different in your view because the consumer's going to be more resilient and more accepting of the pricing that is coming through?
Yeah, you're referring to-- Well, trade down typically is something we expect when we're in uncertain times or a recession, which is not what we have right now. That wouldn't be a driver with respect to the consumer. We see the consumer balance sheet being healthy. Personal savings rates the last few years have been extremely elevated. There's a lot of pent-up demand. The unemployment is under 6%. Labor wages have increased over the past year. I do think actually, when you think about the price increases that are happening across lots of categories, that the consumer actually is in a position to absorb those increases.
Yeah. Infer from that gives you confidence to take some of the pricing actions you're taking.
Yeah.
Does that also bias you towards investing in more premium aspects of your portfolio? Some of the personal care and other things that are poised to re-accelerate, or is the investment disbursement relatively equitable, value versus premium?
Yeah. Well, as far as advertising right now, there's just such a strong demand across so many categories that is not driven necessarily by advertising. It's just driven by consumer mobility. That's going to continue for a few quarters. That does give you a little bit of flexibility with respect to your advertising, that you can move the money around to some categories with higher margin, like personal care categories. You're right, Steve, that is a lever that's available to us in the second half.
Okay. I guess maybe for Rick, I think Matt, you mentioned earlier that the 13 Power Brands going to 20. Just in terms of readiness and appetite for adding a 14th or something in the near term, where is Church & Dwight in its thinking on that? Then, Barry, I'd love to hear your perspective, too, as to both whether you think. You mentioned a little bit earlier about some of the Power Brands exist, the runway that they have overseas, or what the likelihood is that the next, what is it, seven Power Brands, are those biased to be U.S.-based that expand internationally, or is it in your thinking that you can actually go source those Power Brands increasingly from overseas?
Well, I would like the next seven to be international.
Me too.
Matt, do you want to talk about M&A first?
Yeah.
That would work. Yeah. With respect to our appetite, yeah, we have a consistent appetite for acquisitions. We have looked at a couple already this year that we passed on that just didn't meet our criteria. We generate a lot of cash, and acquisitions are the highest and best use of cash. That's our job is to deploy cash to increase the shareholder value. Our acquisitions generally take us into new categories, and that will continue in the future. Just think about the ones we had, our vitamins, our water flossers with great success. Women's grooming is still a work in process, but we see that as a future grower. Zicam fits into cold shortening. We have number one or two brands in all of our categories that we compete, and our acquisition criteria really helps ensure we make a sound investment.
We have done, even this year, one of the two businesses we looked at was an international brand. It didn't really pass muster. Both domestic and international is where we're hunting right now. Ben, you can add to that.
Well, I would just say that we introduced a slide two years ago at your conference, just about the strength of our categories. People were always asking why do we have confidence in our model? It goes back to how picky we are on deals, and what deals we buy determines what categories we go into. Our category average growth rate was above 3% for a long time. We even said on the April call that 10 of our 16 categories were growing. Right? It's a great thing when you have tailwinds on categories and your brands are growing share, and that all is derived back to our M&A model and how picky we are and the time we spend up front on this financial filter, but also on the category dynamic.
Alive and well, and we spend a lot of our time doing it. Barry, if you want to talk about internationally.
Yeah, sure. We've built, I think, Steve, a real competency at accelerating acquisitions internationally. If I go back to Batiste, which is around when I started, that business has grown five times since we acquired it internationally, right? Then we brought it to the U.S. and it's grown there as well. In terms of our ability to grow Waterpik's another example, we've doubled it internationally. Flawless is growing. I feel really good about our capabilities. It's a credit to our team. They're hungry for more acquisitions internationally. It adds scale to us. It gives them new opportunities to grow. Absolutely internationally, and there are some that we, as these guys have said, we've just looked at that are primarily international brands that we would then look to bring to the U.S. We're certainly able to do that.
They have to meet the same criteria as a primarily U.S. brand. We're pretty picky as you know, pretty choosy. We think absolutely, we're prospecting internationally. We're hungry for it. We really look forward to the scale that that can add to certain businesses as well, that allows us to then reinvest in the business. That's how I'd answer that question. There's a lot going on, a lot of good momentum on acquisition acceleration internationally already, and a lot planned for the future. We're keeping our M&A team of one very busy.
M&A team of one. Got it.
Yes.
Can we talk a little bit about capital investment now, first, before I get to the more operational investments. The capacity additions that you're making, Rick, can you just give us an update on how that's progressing and refresh us in terms of the benefits you expect to derive from that.
Sure. For a long time, we've always said, we're about 2% or less of sales from a CapEx perspective. We're going to bump up the next two years a little bit higher than that. Those investments are centered around largely laundry, litter, and vitamin capacity, as well as technology, new warehouse management system, those types of things. The investment returns are great because it's really enabling us to serve incremental volume or bring some supply back from the outside inside. Right now we're running, I think Matt Farrell gave the example late last year, we had a new laundry line come on in April, and it was fully sold out within six months. All these investments aren't necessarily a drastic bet on the future.
We see the next two or three years, and it gives us the capacity we need to react, right? It's not just in times, it's also having the flexibility to meet surges as we discussed.
Okay. Barry, do you see, on the medium-term horizon, a need to, a CapEx cycle that's burgeoning in your I mean, your markets are varied depending on how vertically integrated you are versus how distributor centric they are. As you realize the growth that you're pursuing, does it get to a stage where you need to step up from a capital perspective?
I think not in the short term, Steve. Right now we're leveraging co-packers. We're not at a scale where big capital investment is required. We can get closer to the consumer, we can manufacture locally, but we can do that through 3PL, through co-packers without a big capital investment. I think over the three to five-year horizon, for sure, we keep growing in an asset-light way. There's not big capital investment required. Laundry and litter are very small for us internationally, we wouldn't be looking to replicate any of that's typically where a lot of capital is required. I'd say not in the short term. Longer term, when we get closer to, let's say, our fair share, we're 50% of the business, Asia's a big driver, we'd have to be manufacturing locally then.
We'd probably want to do that ourself, but that's still a ways down the road. We've got a lot of growing to do before we hit the scale necessary to do that.
Okay. Matt, what about less on the CapEx side, but just more discretionary capabilities-based investment, capabilities building? You guys have always invested at a healthy rate in terms of advertising and increasingly in R&D and innovation. Are there other capabilities, digital and the like that you're investing more now than you might have even expected to be six or four months ago?
Yeah. There are a handful of areas that are of focus for us. Certainly Asia Pacific infrastructure is one that Barry would be familiar with. Social media teams, we could use more people like that, so we have expanded the investment there. Automation has been really big within the company, not just in the factories, but also automating non-plant processes in the offices, transaction processing that we can automate. We have some big projects going on right now in IT to modernize our logistics and as well as our financial systems. Something we've talked about in the past is predictive analytics. We've got into predictive analytics in sales and also in the marketing over the past couple of years, and we expect it to expand that supply chain, but we have analytics projects as well.
That'll give you a sense for the types of investments we would be making both in 2021 and into 2022.
Okay.
Yes. Matt mentioned Asia, right? Getting people on the ground in Asia, that's been a focus for us, so we now have offices in Singapore and Shanghai. We're hiring our first employee in South Korea, for example, to support a region that's growing really, really fast. Ultimately, we see China as becoming our second largest market right behind the U.S. I'd say if there's an investment we're making, certainly internationally, that's where the primary investment's going.
Yeah, top of the list.
Top of the list. The social media investment that you've been making, I don't know, seven years ago, I think you were, maybe characterize yourself as behind the curve and not really that focused at all on anything that was social media, digital, e-commerce. You've invested a lot. It seems to me you've caught up, if not, in some cases, gotten ahead of peers. Where does that rank on the list of what you just described? How important is that? It's buzzworthy externally, but from your perspective, just how critical is that?
Yeah. That's a good one. Just give you some perspective. Yeah. Back in 2015, 1% of our sales were online. It's like $35 million. It was a peanut, and that became a priority for us over the past five years. Last year, thanks to COVID, it was 13% of our sales. The year before that was 8%. Went from 8 in 2019 to 13% last year, expected to be 15% this year. That's online sales, and that excludes order online, pickup in store. That's harder to measure, but let's say that's another 5%. That would suggest that 20% of our sales are ordered online by consumer and not in store. We do expect that over the next five years that that could double, the combination of online delivered to your house or online pickup in store.
We're no longer what we're often referred to as a fast follower. This is something we put our minds to, and I do think we're clearly first quartile with respect to ability to compete. We're gonna keep investing. I think the first quarter, it was 14.8% of our sales were online. Clearly, 15% looks like it's in the cards for this year. As far as the incremental spending that might be available to us, would be going to social media teams, for example.
Do you think your abilities and your insights in that domain are now value added when you talk to your retail partners who, across the omni-channel type of considerations? Are your retail partners searching for some of the insights that you've been able to derive and the extent you can deliver them that it gives you an advantage?
Well, yeah, sure. If you look at online sales, this used to be true, I'm not sure it's true anymore, but if you went back a couple of years ago, about half of a lot of companies' online sales in the U.S. were through Amazon. The other half was through other major retailers, walmart.com, costco.com, et cetera. I think we are shifting a little bit, so that does give us the ability to share with the buyer, what our learnings are with respect to consumer behavior. Also all the consumer research that we do with consumers also, we provide those insights for the retailers as well. It's less developed internationally, as Barry can comment.
Yeah, sure. From a kind of leveraging synergy, Steve, we're taking all those learnings from the U.S., we're sharing them internationally to make sure we're kind of amplifying them. An interesting thing we're doing is, you know how important distributors are to our business. We're training our distributors on both digital marketing and e-commerce. Historically, they've been really good at bricks and mortar, but not so good at e-com. We're training them to be successful because we're not successful if they don't win. They're coming to us for insights. They're coming to us for value add, to your earlier question, we're able to leverage that from the U.S., bring that to them. As a result, we're seeing sales go up really, really dramatically. China and Southeast Asia are probably the biggest beneficiaries.
Western Europe's in a little bit of a different place, where it's not quite as reliant on e-com just yet. That's how we're kind of amplifying success in the U.S. and adding value around the world, by leveraging those insights and that knowledge.
Okay. One last question on this, just so I am aware. I am not aware. How are you organized around e-commerce and digital? Are these separate teams, separate functions dedicated to that domain, or have you integrated into just more generalized brand teams and innovation teams?
We have a digital team that's sort of our center of excellence. Within the businesses, they're embedded. The expectation is that each of the businesses will not only be managing the bricks and mortar, but also the online sales. We haven't segregated it if that's where you were going, Steve.
Yeah. Okay. You talked about some of the simplification efforts that you made coming into the year, just around portfolio simplification, SKU simplification in terms of where. As you look ahead, caveat by all of our earlier discussion. You think about the pipeline planning for 2022 and beyond, does that complexity start to come back? If so, does it come back in a different way than it was pre-pandemic? How are you thinking about the innovation pipeline post-COVID?
Well, look, our innovation pipeline is something that we usually can look out three years. We got a pretty good handle on what we would be launching in 2022, 2023, and 2024. Some of that is informed by what we've learned during COVID, but we wouldn't necessarily share what our new product launches might be in the future. Does that help you, Steve?
Yeah, no, I guess I was curious as to just the rate of change in the portfolio, how impactful. You had a 2023 plan coming into COVID. You still got a 2023 plan. How different is today's 2023 plan versus the one that used to be, and how different is that different than any kind of normal innovation pipeline update?
No, I wouldn't say that it's dramatically different. Within our new product group, we have about 20 people we have dedicated to new products, and within that group, there are a couple of people that they get dedicated to rapid commercialization. We're doing more test and learns right now. Some of the products that we might launch in the future, we might launch them just online, to get a read and get feedback from the consumer with respect to the products. That would be a twist we would be doing.
I would just add to that's exactly what I would say is rapid commercialization. Like OxiClean Sanitizer that we launched, that wasn't really in the docket pre-COVID, but we were able to react fairly quickly. We're trying to build that strength and leverage that, especially in our vitamin business, which is a fast-moving innovation business.
Yeah. Test and learns become more important.
Yeah. Is there a way to quantify that sort of the speed, the iterative nature of R&D and how that's evolved? How much faster are you today than you were a couple of years ago? How do you measure that?
Well, I guess one example would be, last year, we launched the second half Power Zinc, and it's because there was great interest on the part of consumers in zinc, because of belief that it ability to retard the development of a virus in the human body. Zinc products were just shooting off the shelves. In about, I guess, an eight-week period, we went from idea to having a product that we could ship. Historically, we were slower than that. We might say, All right, we're going to launch that next year. Because there was a need for it, we thought, Hey, we can do this. Let's do it quickly, and we did. That's a muscle we expect to be using more in the future, Steve.
Yeah. Hey, Matt, give them the example of the sanitizer that we did in the U.K.
Yeah. That's a great one. Yeah, we never made hand sanitizer, and we didn't have a formula for it. We got ahold of one of our suppliers. They helped us with a formula. We had to reconfigure the plant, and I think from idea to first ship was six weeks. We then shipped hand sanitizer to all of our plants around the world. We also made it available to hospitals and healthcare centers near all the plants. About 20 hospitals got hand sanitizer from the company. As another example of how we were able to move very quickly as a company.
Cool. Zicam is your latest addition. Can you talk just a little bit, just update us on your thinking as to how you're going to grow that business as presumably cold and flu season will return one day and end market will naturally redevelop. Then Barry, if you could weigh in just in terms of the applicability of some of those products and that brand in general to your markets.
Sure. Yeah. We acquired Zicam in December of 2020, so it's pretty recent, six months ago. In looking at that business, we knew that the demand for Zicam, which is zinc based, was elevated in 2020. We kind of haircut our expectations, but it wasn't a big enough haircut. Cough and cold brands have been way down, the entire category, due to masks and social distancing. Zicam will also be way down in 2021 versus 2020. The silver lining is Zicam will contribute meaningfully to organic growth in 2022 versus 2021 when things get more back to normal. In the meantime, it has maintained its 70% plus market share in cold shortening. I think what Barry's going to tell you is it does not have legs to go internationally for a number of reasons, Barry, you can jump in.
Yeah. Sure. Waterpik, yes. Flawless, yes. Batiste, yes. All growth. Zicam, less so. Really for regulatory and claims reasons. There are different classifications internationally, so less applicability for Zicam specifically. Everything else would be more of an opportunistic pursuit for international for Zicam.
Okay. In the context of your Evergreen model, it's. Well, you can tell me, Rick, or whoever, if this is the wrong way to think about things, but I think you've got these normalized category growth rate realizations and historicals that underpin the confidence in that Evergreen top line to keep going. As we talked about, a lot of your power brands lead in categories, Zicam, as you said, 70% share in cold shortening. In some cases, you define the category growth. As you think about the improved innovation process we talked about and the faster speed to market, do you see opportunities to accelerate some of the category growth rates that we may have become accustomed to in the past, given your own personal capabilities and your share of the categories you lead?
Yeah. Any time you're dominant in a category and you are the category, you do have to carry the flag, and oftentimes it's innovation that's going to expand the category. The other thing we have available to us is to go take a brand into adjacent categories, which we can do for brands like Trojan. Even Zicam may have some ability to go to adjacent categories. Are you going to jump in, Rick?
Well, yeah. I was just going to say, look, if you look at our track record on organic growth over the long term, we've consistently hit, met, or exceeded our evergreen model. It's been a virtuous cycle, right? Our evergreen model works well, 3%. We get to 8% EPS growth. We do deals and leverage that on top, and it works, and it kind of feeds the machine, which is great. What the evergreen model tells us, though, is we only have to grow at 3% in order to hit all those metrics, and we only have to do it domestically 2%. It just gives us more latitude to make investments, to lay the groundwork for the next three, five, seven years, each and every year, and that's what we do well. We continue to lay the groundwork for the future every single year.
Yeah. Steve, I'd say the Evergreen model is based on 2% U.S., 6% international, and 5% SPD. We revisit it annually, and it's proven to be a durable business model. The more brands and categories you enter, the more you spread your risk and the more opportunities you have to grow. In fact, the last couple of years, the last three years, we beat the organic target of 3%. We're going to do it again this year, where our expectations is 4% to 5% outlook for organic growth for 2021. The rest of the model is around free cash flow. Free cash flow conversion is historically above net income. Our cash earnings is underappreciated because typically the focus is on book EPS. We have a reliable dividend. Our financial metrics are simple. Our long-term incentives are tied to the share price.
We do have what we think is a really good model from an investor perspective.
Thank you for that. I did want to end on cash, and maybe just to build on what you just said, Matt. Rick, the free cash flow conversion, what are the puts and takes in your mind? Are there any sort of cash tax benefits or amortization cliffs that are coming up that would make that conversion less strong than it has been? Conversely, are there opportunities to improve it even further? How should investors think about the free cash flow conversion profile of the company?
Yeah. No, we've averaged, on average, over 120% for the last 10 years. And I did say when we had tax reform, the book rate and the cash tax rate would converge, and I thought we would float down a little bit. That hasn't happened, partly due to stock option exercises last year. Overall, free cash flow is strong. Strong plans for working capital improvement, which is the other piece of how you drive cash flow in excess of net income. We have a long path to go down there still, a lot of room compared to our peers. No real cliffs coming from an amortization standpoint. A lot of those deals recently have been stock deals, but we still have a long runway for the amortization for most of the other deals.
Great. Well, we're at the end of our allotted time, so we're going to have to wrap it up there. I thank each of you. I thank Church & Dwight for attending the conference, and thanks to all of you who are listening, and enjoy the rest of the event. Thank you.
Thanks, Steve.
Thanks, Steve.
See you.