Okay, good morning, everyone. Welcome to the 32nd annual Barclays Global Consumer Staples Conference. As always, it's awesome to see so many familiar faces again, although my eyesight has worsened, so if I look a little confused, my eyes, not that I don't recognize you. But we're also happy to welcome all the new faces that have joined our Staples family over the past year. I'm Lauren Lieberman. I cover the U.S. household and personal care and beverages stocks at Barclays, and joining me up, up on stage, we have Iain Simpson, our European HPC analyst, Alex Sloane, our European ingredients analyst, and Justin Kanciruk is our U.S.-based analyst. Andrew Lazar, who leads U.S. food coverage, is next door, introducing the conference over there in ABI, along with our global teammates, Warren Ackerman, Ben Theurer, Laurence Whyatt, Gaurav Jain, Patrick Folan, Mandeep Sangha, and Rupert Trotter.
We come in, in big force. So as I mentioned, this is the conference's 32nd year. For some context, when it began, George H.W. Bush was U.S. president, the internet had just been made available for commercial use, and Guns N' Roses and Metallica were the two most popular rock bands. The average cost of a new house was $120,000, and the Dow Jones average topped 3,000 for the first time. So a lot has certainly changed since then, but thankfully, our conference has endured and thrived. We certainly do not take the credit. We appreciate all the hard work that our management teams have put in to be here and to continue to prioritize attending the conference. So too, we'd like to thank everyone at Barclays, the event team, for their hard work and late nights deep into the summer to make this event a success.
So we hope everyone is well rested, well-caffeinated, and we are pleased to bring another great lineup in front of all of you today and the rest of the week, and to generate some productive conversations over the next few days. In keeping with tradition, you'll find our team at the hotel lobby bar over the next two evenings. Another apology from me, if it looks like I'm watching the U.S. Open rather than talking to you, I might be watching the U.S. Open. But really enjoy seeing everybody and look forward to connecting. And with that, we're going to get it started. So we've got Church & Dwight presenting and kicking off in the lead-off spot today.
Last year, the company made our train ride up to Boston rather hectic, but it's been a complete and positive round trip since then, so thank you for the much smoother start. We're fortunate to have the company's CEO, Matt Farrell, CFO Rick Dierker, and Chief Marketing Officer Barry Bruno with us this year. So guys, thanks so much for being here.
Okay, gang, great to be our lead off batter at the conference. Here's the safe harbor statement. I encourage you all to read that for points, and here's the agenda for today. So I'm going to kick it off with who we are and, and why we're winning. Rick's going to cover financials, Barry, who's the head of our U.S. business, category insight and trends, and I'm going to come back and wrap it up. Okay, here's how we really start with our historical TSR. Look at 2022, we had quite a rugged year last year, but if you look on the right there, as of Friday, we were back up 19%. So we've had a over the past year, and we think it's upwards from here.
As an evergreen model, you know our story, know that we try to hit 3% organically top line and 8% bottom line. Along the way, we, we want to keep marketing flat, around 1%, gross margin up 25 basis points, net leverage, as we grow. Here's our story for how you've been doing on your reported growth. Over the past 10 years, our reported growth has been in excess of 6%. This year, we're calling it 8%. Organic growth, remember, our evergreen target is 3%. Our 10-year average is around 4%, and this year we're calling it 5%. We have 14 power brands in the company, lots and lots of brands, but we have 14 that are our primary. They account for 85% of our revenues and profits. Here's how we split geographically.
We're largely a U.S. business, so you see 75%, domestic, 17% international, and 6% Specialty Products. The 17% international is where we have significant room to run. Remember that 17%. You'll see it again later on. We have a nice balanced portfolio between value and premium products, see 40% value, 60% premium. The interesting thing is that over the past 15 years, that percentage has stayed pretty much the same. We look at four things that we consider a winning formula. First is the fact that we're balanced between household and personal care, about almost 50/50. We have low private label exposure. It's been around 12% right now. If you just look back over time, it's generally between 12% and 13%.
Here are all the categories where we have significant private label exposure. If you look at the slides, you can see that those lines are pretty steady over time. Strong, consistent innovation. So remember that 3% organic growth that we shoot for? The 1%-1.5% of our organic growth annually, we target from new product introductions. And we're a very acquisitive company. This is the primary destination for the considerable cash flow that we generate year- after- year. So this will give you kind of a look back to 2004, and virtually every year we've acquired a business. Thirteen of the 14 power brands that we own today have been acquired since 2001. In fact, the only power brand we had in the year 2000 was Arm & Hammer.
We have very specific criteria. I think this enables us to look at brands and businesses that are for sale very quickly and determine whether or not they're for us. Just to kind of run through them. number 1 and number 2, brands, high growth, high margin, need to be fast-moving consumables. Asset light is very important to us. We want to be able to get cost synergies by leveraging our manufacturing and distribution, and finally, have a sustainable competitive advantage. Most recently, we entered 2 more billion-dollar categories. They're circled there. Near the bottom, you see mouthwash, $2 billion category, and acne treatments, over $1 billion. The two recent ones that I'm referring to is, one, is December 2021, was TheraBreath.
This is the number 5 most loved brand by Gen Z on the Numerator, and a lot of opportunity to grow here, and it's coming from new distribution in the U.S. You all know we own Waterpik, so we're using our Waterpik hygienists who call on high-volume dental offices to also pitch the brand, and also have significant growth internationally. As Hero goes, it's the number 1 most loved brand by Gen Z. So, you know, we say, I tell a lot of investors, the virtue of acquiring TheraBreath materially, we're selling the cool kids right now. This business is going to grow significantly. Why? Because of new distribution, international and international expansion. In fact, this brand was built essentially with Target, Ulta, and Amazon, and now expanding into all other classes of trade.
The short story with respect to our acquisition program is we have 14 brands today and 20 tomorrow. Now I'm going to bring up Rick, he's going to cover the financials.
All right. Thank you, Matt. So, first off, Matt talked about the evergreen model. I'm going to go a little bit more detail. This isn't a one to two -year model for us. This is an evergreen model. So this is what we're aiming for each and every year. Organically, we'd like for, like, revenue growing 3%. Gross margin expanding through productivity, through M&A, through mix. Marketing spend $100 to improve the same percentages, and then SG&A leverage. If we can grow that at half the rate of our top line, we leverage SG&A . All to get operating margin of +50 basis points and EPS growth of 8%. So a year ago, we were, as Matt said, we had two times we took our outlook down. This year we've taken our outlook up twice.
And so as of July 28th, we said, reported sales growth was 8%. We're getting sales growth of 5%. Gross margin expanding rapidly at 200 basis points, and an Adjusted EPS +6%, and cash from operations of approximately $1 billion. We've got a long track record of organic growth, so our overall model is 3%, our 10-year average is 4%, and then our outlook for these days is 5%. So behind that, it's good to call out what's happening between volume and pricing and mix. And if you look backwards over the last decade or so, we're a volume-driven company, and probably even further than that, always been a volume-driven company. And then in 2022 and 20...
First half of 2023, we have limited volumes as we're having to price through the inflation. But in the first half of 2023, we had a slight decline in volumes, and we expect it to inflect in the back half of 2023. Gross margin is a hallmark of this company. An expansion of gross margin matters in a big way. Gross margin expansion drives EBITDA expansion. EBITDA expansion drives cash flow. So it all starts with gross margin. We've expanded by about 200 basis points. That's our expectation for 2023 to 43.9. And if you look back at the high-water mark of 2019, it means we have another 160 basis points to go to get back to pre-COVID levels.
And just for some context on inflation, for many, many years, our inflation was around 2% of COGS. On the graph, it's 2013, 2019 is 2%. During the COVID years of 2020 to 2022, we averaged around 8% of, of COGS, and then in 2023, we're about 4%. So we're rapidly kind of recovering back to normalcy, which is, which is good. Marketing spend, big investment this year. We called out in the beginning of the year that we're going to spend back $30 million to, to bring back marketing to 10.5%. We called out last earnings call that we're actually going to spend back another $30 million.
So $60 million year- over- year to get back to 11%, which we think is a great number for this business. And then, consistent strong, EPS growth over the long time. Evergreen with the highest single digit. In 2020, we had a fourth, in 2023, we're up 6% to $3.03, $3.15. So that's EPS. In terms of cash flow, free cash flow conversion, again, is just, one of the, the key metrics for Church & Dwight. Over 10 years, we've averaged close to 20%. In 2022, we, around 97%. That was because we had elevated CapEx, for a while, we lowered vitamins. Free cash flow conversion is done, well, because we have a critical track record of working capital.
We've gone from 52 days of cash conversion cycle all the way down to 19 days. Two days is a little bit elevated because we went back and deployed a big way in 2022. We have a very strong balance sheet. 1.7 times levered by returns our expectation, so we have a lot of flexibility with our cash flow. As an example, we think we could do a $3.5 billion deal and still maintain our triple, you know, triple B investment grade rating. Looking at capital allocation, how do we think about that? You just cut back, I think one far away, and sometimes I joke with investors, number one, two, three, and four are TSR accretive acquisitions. Those are the. That's what the focus is for the management team, for the company.
That's how we drive value. We're very picky on what deals we do do. Number one is TSR accretive. Number two is CapEx. You heard me say a few months ago, we're investing in CapEx for capacity, working with other vitamins. Number three is NPD. You heard Matt talk about how important it is for our organic growth. Number four is debt reduction. Number five is return cash to shareholders. We're not a capital company. We're, if you look at more over time, we're about 2% of sales, and we had a spare step up in 2023 and in 2024, and that should return to normal in 2025. Again, I talked about capacity investments. But finally, we announced a 4% dividend increase in 2023.
A long track record, really long track record, a good 22 years of consecutive years of dividend. Now I'll turn it over to Barry.
Good morning, everybody. I'm Barry Bruno. I'm responsible for our U.S. business, and I'm going to take you through a little bit around the key categories we compete in, some insights from those categories, a little bit into some new product news that we have for you, and then what's going on from the e-commerce standpoint at Church & Dwight. So I'll start with our largest and most important category, laundry detergent. The way to read these slides is look to the left. That's how the category is performing in consumption over the last two quarters, Q1 and Q2, on the right-hand side. In this case, it is Arm & Hammer, and it'll be all Church & Dwight brands going forward. So liquid laundry detergent growing 3.7% in Q1, 2.8%.
But Arm & Hammer performed really incredibly well, up 10% in Q1 and 9% in Q2. And a key driver that we've talked about with you in the past is the consumer trade down from premium laundry detergent to value laundry detergent. As a reminder, Arm & Hammer plays squarely in the value tier of laundry. And when consumers are stretched as stretched as they are right now, you can see that there's a definite move from premium to value. But that's only one driver of our performance. And what I particularly from this slide is it's a long-term trend of share expansion for Arm & Hammer and laundry detergent. We were at a 5 share back in 2006. We're at a 14.4 share today.
In good times and bad, consumers try Arm & Hammer, and they stick with us both for value and performance. So a great trend of success in this very important category for us. One way that we're telling consumers about the value that we offer, not just in laundry, but in categories overall, is our Give It the Hammer master brand campaign. We launched this in January for the first time. We've been airing it throughout the year to remind consumers of great value, and let's look at it to give you a look.
Give it the hammer. Give it the hammer. Stuck in the muck? Give it the hammer. Hard times, no times, when times get tough. Give it the hammer. Arm & Hammer, more power to you.
So we had a lot of fun hard to fit six categories into one spot, but we did it, fair, and it's all about the value. Let's see. Hold on. I think maybe we're missing a slide, but we'll switch it. I was going to talk about cat litter. I'll talk to you about it briefly. Cat litter has been growing really in the last year and a half, driven by price primarily. Arm & Hammer has been growing at 12%-14% range for a long time. Another category where we have a value offering as well as a premium, and cat litter continues to grow as the category continues to grow. Slightly different story, though, with the slide we're on right here. Vitamins and nutritional supplements. What you're looking at is the gummy subsegment, clearly the last four quarters.
And what's gone on in every vitamin is the category has more than doubled since pre-COVID, but now it's flattened out to 1.5% growth, approximately the last three quarters. vitafusion, though, hasn't performed as well as the category, and you can see that we're really struggling in 2023 as a consequence of 2022, supply-related issues. And to take a look at that, on the left-hand side here, you can see case fill over the last seven quarters or so. Even as recently as Q1, we were struggling at 77% from a case fill standpoint, but we're back at 98% now. And when you're back in distribution, you're allowed to start advertising again. We've got new packaging, we've got great displays, and a whole new advertising campaign that we call Inner Goddess that talks about how vitamins helps you rule your day.
Let's play that spot.
Well, I bring the vitality of sun and I just squeeze. I took the kids to length at the final second, and crush my sales call. What were you saying? So you are Inner Goddess, the vitafusion expertly crafted assortment of delicious nutrition. Oh, I got this.
So we thought that we just started airing last week. Again, as we're back in supply and rebuilding distribution. I'll talk to you about two more categories now. The first is alcohol-free mouthwash. And as a reminder, Matt showed you the mouthwash category is $2 billion. It's split evenly between alcohol-containing products and alcohol-free, so $1 billion each. And you can see that alcohol-free is growing at 18.6% and 20% in Q2 respectively, really driven by TheraBreath. That's steady performance of 71% in Q1, over 100% growth in Q2. And when you're growing that fast, you're absolutely gaining market share. And this chart's an interesting one. Just look at when we acquired the brand, we were at a 14 share. Fast forward, 18 or 19 months or so, we're at a 29 share.
So gaining a percentage point per month up to a 29% share. And now, as of August last month, we've taken over the number one spot in the alcohol-free mouthwash subsegment. So a great trend of growth. And then what got us excited when we were looking at buying the brand is building a good distribution to take it to far more retailers. And you can see looking at the last quarter, our distribution is up 52% versus the same quarter a year ago. So we're building, but there's a long runway ahead of us if you look at where some of our larger competitors are. So the great conversations we're having with retailers now as a premium price player in the category, that's contributing to growth about how to keep building distribution there for the long term. And acne treatment is a similar story.
This is a category that was a slow grower for a while, 3%, 4%, 5% grower, now 20% in Q1, 21% in Q2. And similar to TheraBreath, Hero's driving great growth, growth 44% and 56% respectively. So outstanding growth. Again, built around great distribution. You can see we're up 200% in the last quarter versus the same trade year ago, and a similar story, a long, long way to go to catch up to our fair share category. And just one more slide here. This is the household penetration of acne treatments. They're in about 20% of households today. Acne patches, which are the new form, a consumer-preferred form, are only in 11% of households, and Hero, the category leader, is in just 5%. But now with national distribution, we're steadily increasing.
For the first time, we've got a national advertising campaign. We had a lot of fun creating this. We call it Pop Me! I think you'll understand why in a second. Let's play that spot.
I see you looking at me, your zit.
No, don't do it.
You can't just ignore me. But you know what you can do? Pop me! Oh, my. Pop me. It's a perfect solution. You will just not regret it. Pop me. Pop me. Pop me. Oh, my!
Don't pop it, patch it. Mighty Patch Pimple Patches reveal clear-looking skin overnight. Pimple, meet your Mighty Patch.
A lot of fun with that one, driving great category growth. So in terms of our innovation, now we're going to share just three today, but remember, we play in 17 categories, so there's a lot more innovation than I'm able to capture here. We'll talk about a bunch of it at our Analyst Day in January, but I want to stick with three of the categories that we compete in right now that I could talk about. The first is Arm & Hammer Power Sheets, laundry detergent. So not dryer sheets, laundry sheets. No drips, no spills, no plastic bottles, just a powerful clean. This is a new form of unit dose that's growing really rapidly. The category is about $100 million in laundry sheets right now. We've got approximately a 10% share of that, only 30 days after launch.
A really fast grower for us. Since it's new to so many consumers, we've created a quick spot to help people understand what a laundry sheet is. We call it 'Toss Like a Boss.' Let's share that spot.
Meet the sheet. Toss the sheet. Detergent has a new body. New Arm & Hammer Power Sheets laundry detergent dissolves quickly with the same type of powerful cleaning ingredients as Arm & Hammer liquid detergent. Toss like a boss with the new Arm & Hammer Power Sheets.
So a great new form available online only now, really, in the last 30 days. We'll have more to talk about, about laundry sheets coming forward. Another innovation is around TheraBreath. So TheraBreath distribution, I showed you, has been growing. That's been largely adult-driven. We're also growing in travel, and trial, and sample sizes, but in kids as well. And so we've got a new range that we're offering targeted kids ages six-12 years old. Dentist-formulated rinses, free of dyes. They're made with certified organic flavors, and they taste great as well. So rounding out our range, we're now offering a kids line of products as well. And then Hero is the same story, right? So Hero Mighty Patch Micropoint XL for blemishes. It's all about targeting early-stage blemish clusters.
So the life cycle of a pimple from early-stage blemishes all the way through post-pimple treatment, is fertile area for us to keep growing. This particular product is contracted to fit jawline, cheeks, and chin. So for those of you who remember acne days, you remember that's where these blemish clusters often blossom, and Hero is perfectly targeted for that product with our new Mighty Patch Micropoint XL. So just three innovations. Digital is growing really rapidly at Church & Dwight. If you look back in 2016, e-commerce represented 2% of our sales, and today we're up to 18%. So really rapid, explosive growth that we see going to 20%-25% and more over time. And the good news is, we've got a portfolio that's really ideally suited for e-commerce sales.
What you see on the right is nine or so of our power brands that are number one in their respective categories on Amazon. So whether you're talking about Arm & Hammer, or baking soda, or Hero, or acne, or Trojan condoms, number one brands in Amazon, fueling that growth today as well. And then we have global capabilities here. 75% of our spend is now on digital channels, driven by connected TV, by retail media networks, by social. We're launching products online first, like laundry sheets that I just showed you a moment ago, to get learning quickly, to get direct from consumers. We're using social as a primary tool, sometimes as an exclusive tool, to reach consumers in hyper-targeted ways. And our digital center of excellence is educating everybody within Church & Dwight around the importance of e-commerce and how to grow profitably there.
Lots of good stuff going on in the U.S. We compete in great categories, we're building share, we've got some great new innovation coming, and e-commerce is exploding. It's a good U.S. story. Now I'll turn it back to Matt to talk about the international story.
Okay, Barry. Okay, international. International is where we have significant opportunity for growth going forward. So remember that we said that our organic growth model is 3% for the company, but it goes 2%, 6%, and 5. 2% for the U.S., 6% international, and 5% special products. This is how we're set up today, and this is important. If you look on the left-hand side of the slide, the global markets group. We market our products to about eight countries around the world. That's a third of our business, and up until 2022, that business was growing 15% a year. So it doubles every five years. That's where significant opportunity resides. So we have six subsidiaries. We have five Global Market Groups around the world.
We're putting a lot of investment into APAC, into Singapore over the last couple of years, because we think that's where the greatest opportunity is for us. Now, here's our historical organic growth for international. And we said that 6% is our ongoing target. Well, we've averaged 7%, over the past, 10 years or so, and this year, we're also targeting a little bit above 6% on a portfolio basis. And if you think about the portfolio, if you're in the middle of this slide, those brands you see listed there, Batiste, Stérimar, Gravol, Curash, and femfresh, those were born international.... So that's our international portfolio. You know that Batiste came from the U.S. as well as now a significant brand for us globally. But that's the core for international.
On the left-hand side of the page, you see a lot of the brands we can take these around the world, largely through our global markets group, but also through the six subsidiaries. On the far right, you see our most recent acquisitions, Waterpik, Hero, a lot of opportunity to introduce those internationally. Now, remember that 17% we talked about earlier, 17% of our sales is international. When you look at the top 10 FMCG companies average, it's where 60% of their sales are international. So while we are several decades behind our CPG peers with respect to taking our products internationally, but this is gonna be a big avenue for growth in the future.
So the short story with international is we get a lot of runway for our existing brands, both U.S. and international brands. Most recent acquisitions, we have opportunity for it as well. TheraBreath, Hero, Waterpik, GMG, that's a third of the business. We want to market our products in 80 countries around the world. Lots of opportunity there, and we're putting a lot of build behind it. Lots of people, lots of investments, ERP systems outside the U.S., to lay the foundation for growth. And these are Specialty Products business. This is the original business of Arm & Hammer. We expect that business to grow 5% annually. The way out, it's for the segment between animal nutrition and specialty chemicals. Specialty chemicals is simply bulk sodium bicarbonate.
The nutrition business we got into back in the 1970s, we found that dairies were selling bulk baking soda back to where the dairies, and they were putting it in their feed. So that a great time. We went through a phase where we sold it to those accounts, and then we got into prebiotics, probiotics, and early nutritional supplements, which are all basically happening. But all of these products are, you know, sold under the brand Arm & Hammer, which you obviously wouldn't recognize the brand. Those special products growth, as you last year, grew between 4%-5%. I'd say that we're going backwards. So even though it improved in the second quarter of U.S. business, up 6%, international, up 6%. In the second quarter, we were down in the SPB business. But you see why.
We got low, low-cost imports returning that were absent during the COVID times, and also dairy culture markets aren't as strong as they have been in the past. We're very confident this business can grow in the future. Number one, because we have a long-term brand. Assuming a lot of consumer trends with prebiotics, raising animals with prebiotics and probiotics. A lot of species now, the population of the planet is gonna grow from 7.5- 9.5 by the 21st century. So it's a lot of animal protein going forward. All right, this is how we run the company. These, those dark blue boxes are the SBUs, the business units that we have in the U.S. We call the brands, so we have people under each one of those, blue boxes.
International, you see that a lot of the international brands are much bigger. But within international, we have up to six markets, in the five Global Markets Group. So we have lots, lots and lots to work with around the world, but this makes it very impactful. Not only manage your existing portfolio, but also acquire new businesses. So the five operating principles, you can... Page one, two. I've already talked about the principle a bit, and I want to go to friend of the environment. We've had a long history of being a friend of the environment.
So if you went back to the nineteenth century, we were putting up pictures of birds in the yellow Arm & Hammer box that said, "Serve the planet," or sorry, "The birds serve the planet." So the people who founded this company were interested in the environment long before anybody could spell sustainability. You see, in 1907, we started using recycled paper board in our products, which is kind of unheard of. And then as you go from left to right, you see we were the only sponsor for the first Earth Day. Interestingly, in 1990, 20 years later, we were still the only corporate sponsor of Earth Day. We started planting trees in 2017.
Our goal is to plant enough trees so that we have offset 100% of all the carbon that we put into the, into the atmosphere annually. But that's not good enough. The reason people sign up for science-based targets is to now reduce the amount that you're putting into the, into the atmosphere by changing your equipment and how you process and manufacture your products. We have targets like everybody else, so air, water, and solid waste. So we're 100% carbon neutral. The offsets are through planting trees. We plant millions of trees in the Mississippi River Valley annually. 10% reduction of water use annually, and then we want to hit a number of 35% of recycling out of our plants. And there's lots of agencies out there that are measuring various companies with respect to ESG.
Here are our scores over the last few years. We see we're kind of stuck at double A, but it's a good place to be and shooting for triple A. All right. Leverage people. We believe we have some of the most productive people in the CPG industry, and we think this is a very underappreciated statistic. But we have over $1 million of sales per employee. We don't have the scale sales-wise that all those other companies have, but we have a great deal of productivity in the company. We have a very simple compensation structure. There's five items you see on that page: net revenue, gross margin, cash, EPS, and strategic initiatives, 20% each, and the management is required to be heavily invested in the company stock, just like you.
Gross margin is 20% of our employees' annual bonuses. We pointed out, it's very important within our company. We really promote financial literacy. So when everybody in the company kind of has heard gross margin over and over again, and knows 20% of their compensation, and they know how gross margin influences the rest of the P&L, everybody gets interested in that and wants to know how well we can improve on it. There's four ways, obviously, good to great. That's some of our continuous improvement program, supply chain optimization, automation, et cetera. New products. New products that we launch generally have a higher gross margin than the products that they're replacing on shelf. Then finally, acquisition and synergies. When we buy a business, we expand our gross margins post-acquisition. Okay, leverage assets.
This is a very important part of Church & Dwight operating model, and that is that we're asset light. If you can see we shoot for about 2% of sales, as we had earlier. We have a spike in 2022 and 2023, 2024, and that's because we're adding capacity for laundry, litter, and vitamins, because we see a lot of growth there, going forward. Finally, number five is leverage acquisitions. If you do the first four well, you get good returns. If you can layer on top of that a good acquisition program, you get great returns. I would be excited for 2022. We have been consistently delivering high TSR to our investors year- after- year after year. So expectations were to start another streak here in 2023.
We saw this slide earlier, 1.5 in 2022 to 2,004, 5.8 in 2023. I guess we should have put a question mark on the last slide. We're always on the hunt for new businesses. With that, I'll turn it over to Lauren. Yeah. Okay. Everybody's always surprised that we can get through 100 slides and have time left.
Just on vitamins, I'm curious on vitamins, when you first acquired the business, you talked a lot about the transition from pill into gummy in terms of a big driver of category growth and the opportunity for vitafusion. So I was curious, I think, one, how it runs to see on sort of that category transition piece. Two, there's been a lot of growth in the powder format, which I know is sort of a bit different in terms of... That's proved to be an area with a lot of activity. So just curious on your thoughts there. And then also, when you think about rebuilding, I mean, how are the conversations with retailers going to create, because you've got all the new activity to, you know, something to market behind as you come back into supply.
But category volumes, at least as we see it, in Nielsen, movements are kind of back to 2019 levels, or approaching. I know dollars are stronger. So just thought, again, on kind of category development, you know, consumer appetite to stay growing in the category in terms of consumption also.
Yeah, well, the gummy category has stabilized over the last three or four quarters. It's fair to say that one of the reasons why we're going backwards this year, which you saw on Barry's slide, is that we couldn't supply last year in 2022, so we really got punished by the retailers with respect to our distribution in 2023. So we lost a lot of distribution this year. So consequently, we're going backwards in the first couple of quarters. The good news, though, is that we have our fill rates back up into the high 90s, and we've got new products on the way. And as Barry pointed out, we have new advertising, new graphics, et cetera. So I think that's going to bode well.
You had a question about other other forms. You know, our focus has been gummies today. We are aware that not just powder, but also liquid, is going to come back as well with some new, new indie brands, folks. So I'm sure all of you remember when you were kids, maybe, at least I'm old enough, that we had a liquid form in a spoon back in the 1960s. That seems to be making a comeback as well. But right now, our focus is on gummies, and we think not only gummies in the U.S., but internationally. Because we, we're putting in the capacity, we're going to be able to take advantage of taking our, our brands around the world in vitafusion. What was the first part of your question? Did I get them all?
Just in terms of category growth, because I, you know, we're-
Oh, yeah. Yeah, right.
Which is the category unit growth, let's call it, for the category and your views there?
Yeah. So the category is the percentage of gummy vitamins that are sold in gummies in the 1990s. And it was you know, low single digits. So it has grown quite a bit over time. We expect it will continue to grow, and that's because of you know, aging populations. You know, younger people prefer taking gummy rather than a pill or capsule. So we do expect that that still is going to be an opportunity for us. And in other markets around the world, gummies just don't exist, and it's mostly pills and capsules, so it's even more of a need for us.
Time for one from the audience, if somebody wants to jump in. Okay, I'm going to ask a question on marketing then.
Okay.
So marketing spend is going up a lot this year. You've talked, you know, spoken about that, and then even more than originally planned at the start of the year. But one thing that struck us as interesting is you've been spoken about looking at your marketing spend relative to units, the volume, not just to growth in dollars of sales. And that's different than what we've heard from some other companies. So I was just curious if you could talk to why you think marketing spend relative to units is the right way to manage the spend?
Well, I'll let Barry take it, right? Being the Chief Marketing Officer.
Sure. You know, historically, we usually talk about it as a percentage of net sales, right? And we've used that 11% as a target. We've reinvested this year. I think it's not an arms race to spend more in $ necessarily, right? It doesn't have to be. When you're getting more and more effectively to targeting and more efficient, it becomes less about how much $ you're spending and about the other two KPIs and measures you try to send. So whether it's volume or whether it's, it's looking specifically at other KPIs that we measure, we think we're doing pretty well in the 11% range. So it's not an arms race, is what I would say.
Yeah, and then the bellwether is really how you're doing on share.
Yeah.
I mean, how is the business performing? The business is performing really well across many different categories, many different brands. If categories are growing and our share is growing, then we feel like the marketing numbers are...
Okay. We'll wrap it there. We'll go to breakout, but-
Yeah.
Thank you all.
Thanks for your attention.
Thanks for being here, and Lauren, thanks for coming up.