Corrections or additions?

This article by Barbara Fox was prepared for the May 8, 2002

edition of U.S. 1 Newspaper. All rights reserved.

Church & Dwight’s Long & Winding Road

Dotcoms come and go, biotechs wax and wane, but laundry

product companies just keep scrubbing along. So it has been with

Church

& Dwight, holder of the fabled Arm & Hammer brand and logo on the

yellow box of baking soda. Founded in 1846, C&D has been doing pretty

much the same business from its facilities on North Harrison Street

and Thanet Circle since 1985. But last year it bought two big

companies

and doubled in size.

The first purchase, USA Detergents in North Brunswick, merely added

to Church & Dwight’s soap repertoire, but the second purchase —

the consumer product side of Carter Wallace — could change Church

& Dwight’s public image. Suddenly the company accustomed to relying

on words like "pure, safe, and natural" finds itself mouthing

slogans that refer to glamour, pleasure, and steamy sex. With Carter

Wallace came an intimate line of products, Trojan condoms.

One change has already occurred: The company accustomed to toiling

away in relative obscurity — with most of its revenues coming

from such arcane areas as sodium bicarbonate for dairy cow feed —

is enjoying the spotlight that comes with an increase in revenues.

Though C&D is exponentially smaller than the top laundry product

company

in the United States (Procter & Gamble), it now holds the third-ranked

position. Sales of the new brands account for a one-third increase

in revenues.

Church & Dwight negotiated with Medpointe, the company that was buying

the other half of Carter Wallace, to divide up the loot. Medpointe

got the ethical drugs division for $408 million (see story on page

55) and Church & Dwight paid about $739 million for the personal

products,

including the international division and Lambert Kay pet products

(vitamins, supplements, collars and leashes, grooming aids, and

shampoos).

In addition to all the condom brands, some of the other brands are

Nair depilatories, Arrid deodorants, First Response pregnancy testing

kits, and Pearl Drops toothpolish. Carter Wallace adds a technical

base, particularly in aerosols, to C&D’s substantial R&D efforts in

Princeton. "It also adds to an already highly motivated,

efficient,

and productive organization," says Steven Cugine (pronounced

koo-chee-nee),

vice president of human resources.

Family members are no longer in charge. Dwight C. Minton, a fifth

generation member of the founding family, holds the post of chairman

emeritus. President and CEO Robert A. Davies III, 66, started his

career with Procter & Gamble and has also worked at Colgate-Palmolive

and American Home Products. A graduate of Colgate with an MBA from

Columbia University, he was at Church & Dwight from 1969 to 1984.

As earnings were plunging in 1994, Davies was brought back and

promoted

to president and CEO with Zvi Eiref as his CFO.

"Since Bob Davies returned to the company, the team he put

together

has really massively transformed the company and backended it into

a solid high performance organization," says Cugine. "Sales

have gone from $400 million to just north of $1.5 billion, which is

pretty extraordinary, and profits have grown as well."

Of the 620 jobs on Half Acre Road in Cranbury that were acquired by

Church & Dwight, 320 are in manufacturing and about 300 in the

corporate

office. Of the corporate staff, about 150 people (in marketing, sales,

and R&D) will join Church & Dwight at its expanded offices in

Princeton,

and the others are retiring or being laid off. The union workers on

the manufacturing line have been invited to apply for jobs at the

Lakewood plant. "We said we would love to have you, just

apply"

says Cugine. All in all, Church & Dwight will end up with a total

of 1,430 workers in New Jersey.

On the consumer side, the Half Acre Road plant was the

manufacturing site for such products as Nair, Arrid, Sea & Ski sunburn

cream, Rise shave cream, pet shampoos and vitamins for the Lambert

Kay division, and ethical drugs, such as the pioneer tranquilizer,

Miltown.

Some of the Carter Wallace products were bought by Church & Dwight

outright, the rest were purchased by Armkel LLC, a 50/50 joint venture

partnership between Church & Dwight and venture capitalists at Kelso

& Company. C&D by itself came up with $128.5 million and Armkel

chipped

in the rest of it, $610.5 million.

Armkel is a public company that tapped the bond market for funds,

and it owns technology, licensing, and manufacturing facilities for

certain brands. The Armkel/C&D arrangement works like this: for the

brands that Armkel’s factories produce, Armkel buys the management

services from C&D, and C&D buys the inventory from Armkel. Armkel

owns the 750,000-foot facility on Half Acre Road, and C&D is in charge

of selling that on Armkel’s behalf.

By June, both C&D and Medpointe are scheduled to clear their workers

out of Half Acre Road. Cushman & Wakefield is marketing the property,

which has 450,000 square feet of manufacturing space, a 160,000-foot

warehouse, and laboratory/office buildings of 127,000 and 35,000 feet.

C&D contracted with Berkowsky & Associates, on Route 1 North, to

design

and build a 55,000 square foot expansion for its headquarters at 469

North Harrison Street. It now totals 125,000 feet, and C&D also leases

91,000 feet in two buildings on 100 and 101 Thanet Circle.

Carter Wallace’s international division has been housed, along with

the credit department, at 2 Research Way, and both entities now

operate

as Armkel, with former CW executive Adrian Huns remaining in charge

of the international division. They are also expected to move to the

C&D headquarters.

At this point C&D has a nearly $500 million U.S. personal care

business

plus a $250 million international business. Synergies of consolidation

are expected to save $10 million for Armkel and an equal amount for

C&D. Now C&D faces the task of assimilating all the Carter Wallace

products and people. Here’s what C&D (and Armkel) bought:

Personal Care Products

Church & Dwight already had a line of deodorants,

antiperspirants,

and toothcare products.

Carter Wallace brands bought by Church & Dwight: Arrid

and Lady’s Choice antiperspirants.

Carter Wallace brands bought by Armkel: Trojan condoms,

Naturalamb condoms, Class-Act condoms, Nair depilatories (lotions,

creams, and waxes), First Response and Answer home pregnancy and

ovulation

test kits, Pearl Drops toothpolish and toothpaste, Rigident denture

adhesive. And not to forget — Carter’s Little Liver Pills, the

laxative.

Laundry Products

Church & Dwight brands: Arm & Hammer liquid detergent,

Arm & Hammer Fabricare powder detergent and baking soda deodorizer,

Arm & Hammer Fresh "N Soft fabric softener sheets, Arm & Hammer

Super Washing Soda

Brands from USA Detergents, purchased as part of a joint

venture, Armus: Xtra liquid and powder detergents and Nice ‘N Fluffy

liquid fabric softener.

Deodorizing & Household Cleaning Products

Church & Dwight brands: Arm & Hammer pure baking soda

in the familiar yellow, red, and black box, also Arm & Hammer carpet

and room deodorizer, vacuum free foam carpet deodorizer, cat litter

deodorizer, Super Scoop, Super Clay, and Crystal Blend cat litters,

Super Puppy Pads and Home Alone floor protection pads. Brillo soap

pads, Scrub Free bathroom cleaners.

Carter Wallace brand: Lambert Kay Pet Care Products.

Specialty Products

Specialty chemicals: Performance grade sodium bicarbonate,

leavening mix for tortillas, potassium carbonate, potassium

bicarbonate,

a fungicide, an anti-slip floor treatment, a pollution control

product.

Animal nutrition products: Feed grade sodium bicarbonate

and potassium bicarbonate, rumen fermentation enhancers, and Megalec

— rumen bypass fat.

Specialty cleaners: Armex (blast media), Armakleen, and

Aquaworks (aqueous cleaners).

That’s an impressive list for a company that started out making

plain bicarbonate of soda. Centering the products and image around

bicarbonate of soda has proved useful. Analyst Bill Mann

(www.fool.com)

points out that Church & Dwight has had "an iron-clad brand"

for more than 150 years. "It took a basic product with a solid

brand and turned it into something that your kitty, your refrigerator,

your teeth, and your neighbors can’t live without."

"The stable companies have come back into favor," says Phillip

Hofmann, senior vice president of J.M. Lafferty, an independent

research

provider in Chicago (E-mail: pjhof@jmlafferty.com). "Soap is a

slow growth business. You will sell only as many bars of soap as you

have people to wash."

C&D has been saying it wants to grow since Minton moved the company

to Princeton in 1985. But 10 years ago people were coming and going

with dismaying speed, and 120 jobs were cut from 1994 to 1996. One

view is that a lot of money was spent on sales that were never

generated,

and the creation of new functional areas expanded the company

dramatically.

While the company tried to launch new baking soda-related products,

there were a lot of personnel changes and team changes.

"Bob and Zvi were brought back to turn the company around from

its financial performance in the early 1990s," says Cugine. Cugine

claims that — with the exception of the last year’s departure

of former president and COO Jon Finley (Davies took over as president)

— the personnel situation has been pretty stable. "It has

been a significant and slow build," says Cugine. "We are a

major employer in New Jersey, and I don’t think you could have said

that in 1994." He also claims that having a streamlined

organization

helps C&D rack up $500,000 in sales per United States employee, an

unusually high ratio for the industry.

Cugine, the son of a sheet metal worker in northeast Philadelphia,

majored in industrial relations and human resources at Temple, Class

of 1984, and started his HR career working for Jim Carnes at the

Sarnoff

Center. For 10 years he worked for various divisions of FMC and came

to Church & Dwight in 1999. He lives in Yardley with his wife and

their three school-age children.

"In many respects there a lot of similarities between these

companies,"

says Cugine. "They are two old companies with a lot of

history."

CW was popular with the corset set because of Carter’s Little Liver

Pills, the major product from 1880 to 1929. In 1935 came Arrid, the

first dry, stainless deodorant, followed by Nair in 1940. Throughout

its history, Carter Wallace spent heavily on print, radio, and then

television advertising, with 85 percent of advertising dollars doing

to television. Nationally, it was the 16th company to be an early

TV sponsor, with "Name That Tune" and the Johnny Carson show

among the favorites.

C&D’s reputation came, of course, from sodium bicarbonate manufactured

in the kitchen of a physician (Austin Church) and his brother-in-law

(John Dwight) in Rochester, New York in 1846. The first corporate

headquarters was over a grocery store in New York. As far back as

1860, the firm was using direct mail advertising. The famous "arm

of Vulcan" trademark came from Austin Church’s son who had been

manufacturing mustard at Vulcan Spice Mills.

From 1880 to 1966 the firm distributed promotional trading cards,

and by 1922 it had instituted a health education program, supported

by direct mail. In contrast to Carter Wallace, C&D did not begin to

use radio until 1969, and soon after that it went into TV advertising.

Cugine admits that the two companies have their cultural differences.

"The good news is that Carter Wallace and USA Detergents are

local,

so it increases our ability to execute and integrate these

acquisitions."

"C&D has been in this community for a long time, and we have a

significant investment in New Jersey. We try to be good to the

environment

and good to the community in which we work. We are basically

conservative

but lean and aggressive in the markets in which we compete," says

Cugine.

For the first time, Church & Dwight will be competing in the youth

market, where Carter Wallace had notably excelled. No where is this

disparity more plain than on the Internet. Church & Dwight has a very

typical, buttoned-up corporate site. In contrast, way early in the

Internet game, Carter Wallace followed the advice of Market Source

(the Cranbury-based company that focused on the adolescent market)

to invest in a collective branding site geared to a young audience.

MarketSource grabbed the URL "www.loveandsex.com" for its

client and put up a chapter for each brand (Nair, Trojans, Pearl

Drops)

all relating to dating, says Peter Morrison, vice president of what

is now Market Source Integrated Solutions on Commerce Drive.

"In its heyday, loveandsex.com was doing a couple million users

a year, moved a lot of free samples, and got linked to a lot of other

sites," says Morrison, a 1985 graduate of the School of Visual

Arts in New York City.

The Trojan chapter has a quiz: How long does the average woman take

to achieve orgasm: 25 minutes, 15 minutes, or 10 minutes. (Hint:

always

pick the middle answer). Trojan visitors spend from 10 to 30 minutes

on the games, the equivalent of a five-minute television commercial.

This is definitely the youth market: The Pearl Drops chapter offers

kissing tips: Brush your tongue before going out. Never use the tongue

on the first date. Relax and enjoy every bit of each other’s lips.

Trojan’s offer of a free condom starts out "All we need from you

is your parents’ address and your exact condom size . . . only

kidding.

You don’t have to worry about receiving any embarrassing packages

which say `Do not bend: your requested condom is enclosed.’"

At the time of the sale, Carter Wallace was getting more sexy, not

less. "They were getting more daring," says Morrison. "The

posters on the Trojan site were downright risque."

Carter Wallace had been marketing sex effectively for a good long

time. Will Church & Dwight do as well?

— Barbara Fox

Church & Dwight Co. Inc. (CHD), 469 North Harrison

Street, CN 5297, Princeton 08543-5297. Robert A. Davies III, CEO.

609-683-5900; fax, 609-497-7177. Www.armhammer.com

ArmKel International Division, 2 Research Way,

Princeton 08540-6628. Adrian Huns, division president. 609-520-3100;

fax, 609-520-3114.


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