CHD
#There's no question you hit the two that are leading the pack.
And one is vitamins, where I said in my opening remarks that we have 5% increase in distribution, which is pretty significant because obviously that carries over into future quarters.
And then BATISTE is just a craze.
So it's getting more and more shelf space.
And there are more and more retailers becoming more interested in it, so it seems like, almost every quarter now, we are gaining more distribution.
And then that has a compounding effect.
That's why we ---+ although it's a small brand, we continue to talk about it, because it is influencing our numbers.
So, you hit on the two big ones there.
Spot market.
I think we will be more favorable than spot as we go into 2017.
So, a couple of things.
I think I went through the detail of why it's not just the incremental promotional spending, but up against higher some comps for vitamins and the category comps for laundry for example and the whole international strong growth, the deceleration.
We are spending quite a bit of money back on marketing, and that's going to take some time to really pull through demand.
On the incremental trade and really couponing spending, those investments are really to drive trial for new products.
That's the crux of it.
So, we want to get that repeat rate up.
I think it's too early to call volume upside from driving trial.
We're just early in the process, <UNK>, and we think that, when we get back up to our competitors' levels of promotion, just on par with what we had a year ago even, we think that will be a nice momentum as we exit 2016.
Just add to that, if you went to first quarter 2015, the laundry category declined round numbers 1.5%.
And then first quarter 2016, it was up 6.5%.
So on a stack basis, I know a lot of people like to talk on a stack basis, you would say laundry was up 5% on a two-year basis.
And Q2 on a two-year basis stacked was 4%.
If you go to three and four last year, Q3 was 2.5% and Q4 was 3.5%.
So that would suggest you're going to see deceleration in laundry if you are a believer in the stack theory.
And if we think it's going to be around 4% to 5%, we are seeing a deceleration in the laundry category on a year-over-year basis.
So who knows, that's just math, but it's something to think about.
I was introduced to it by the analysts.
(multiple speakers)
When it's convenient, I think you like to talk about it.
Yes.
So we've talked about capacity utilization in terms of vitamins a few times, and we said when we made that investment it was a 75% increase in capacity.
In round numbers, when we said that, our business was around $300 million.
And that would take us up to around $525 million, so we have a lot of runway for capacity.
We feel great about that.
We've made some great strides from a manufacturing perspective we touched on earlier, and even on distribution related to vitamins as well.
What was the second part of your question.
We are not going to give you where our sales are today, but we have plenty of room to run.
Your other part of the question was contribution margin.
And I talked about that a little bit last quarter and I said it's going to take us a few years to grow into those fixed overheads.
And it really goes back to the fact that, you are right, we have to get some more revenue and more scale.
But every quarter that goes by, we get better and better at manufacturing vitamins in Pennsylvania and our skill set just improves all the time.
So we are ---+ it's within reach within a few years, so we feel great about that.
Yes, absolutely.
The other piece I've tried to explain once or twice, there's also a disconnect between when consumption is down and we don't promote in certain categories, our organic growth could be flat or up.
And so that's also a disconnect between shipments and organic growth.
That's right.
We touched on that a little bit earlier as well.
We are pretty much agnostic because margins are tougher sometimes in the household business.
It's also slanted more towards the personal care type of portfolio that wants to go online.
So net-net, when you blend those two together, we are pretty much agnostic.
With respect to what our sales are by country, we wouldn't get into that.
And one thing I would like to dispel is the belief that BATISTE is the sole driver of the international business.
ARM & HAMMER is growing quite a bit in Canada and Mexico, and this is kind of anchored in the benefits of baking soda, and that seems to be resonating with people, both in developed and emerging markets.
Femfresh is another one I talked about, which is feminine hygiene.
One interesting phenomenon you might be interested in is there's a lot of product being purchased in Australia and then shipped to China, like shelves being swept.
We are not the only ones that have benefited that from time to time, so that can help ---+ has helped us really from here and there.
Sterimar is the other one I talked about.
So, that is the nasal hygiene product.
It had fabulous growth in Mexico this year and France last year behind the strong marketing and lots of new products that we bring out.
So it's a nice balance between our export business and our country growth.
It's a little early; it's only August.
But you may be familiar with our evergreen model.
So every year, we try to expand our operating margins 50 basis points, and generally half of that will come from SG&A and half of it from gross margin.
And we try to keep marketing pretty level and not save our way to prosperity by cutting our advertising.
All right.
There are no further questions.
I want to thank you all for dialing in today.
We'll talk to you again at the end of October.
