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Church & Dwight eyes battery-powered toothbrush market(Business Daily Update Via Thomson Dialog NewsEdge) Author: d Sometimes the best business plan is to acquire someone else's developed brand. At least that's what consumer goods maker Church & Dwight Co Inc is hoping. Wanting to expand from traditional manual brushes to modestly priced battery brushes, Church & Dwight entered the segment last October by acquiring Procter & Gamble's Crest SpinBrush for US$75 million. "We were very pleased with the acquisition, as it enhanced our oral care portfolio with a leading brand in the battery-powered toothbrush segment," wrote James R Craigie, the company's president and chief executive officer (CEO), in its annual report 2005. But this is only part of the company's reason for the acquisition. Later this year, Church & Dwight announced it will enter China for the first time with the newly acquired Crest SpinBrush. "The acquisition is an extremely important purchase for Church & Dwight's entry into the China market, and we are working to develop a pipeline of new products under the SpinBrush brand," says Adrian J L Huns, president of International Church & Dwight Co Inc. "We will introduce other products under the ARM & HAMMER brand gradually based on researching which would be successful here." Founded in 1846, New Jersey-based Church & Dwight is the world's leading producer of sodium bicarbonate, popularly known as baking soda, which is a natural product that cleans, deodorizes, leavens and buffers. The company's ARM & HAMMER brand is one of the most well known trademarks in the United States for a broad range of consumer and specialty products developed from the base of bicarbonate and related technologies. "We are a well-known name in the US, the same as Pepsi and Nike, but we're a little late being here now," Huns says. Five or six years ago, the company began to look at China, and had planned to take a normal practice to get into the market studying the market, setting up relations with retailers and manufacturers, and introducing products tailored for China before the SpinBrush acquisition came last year. "Then we changed our mind," Huns says. "The company knows little about China, the consumption trends, the consumers, the labour market, and the sales channels, but Crest SpinBrush does and can greatly facilitate Church & Dwight's local business. It's a good deal," says Chen Fuguo, CEO of China Business under Interbrand, a London-based brand consulting company. As part of the acquisition deal, Church & Dwight and P&G signed a licensing agreement which says the former can use the brand name Crest for fours years worldwide including China. The company has given a Chinese name for Spinbrush, xuanjie (meaning bright and white). "Crest is a good name in China. It's good to use it, why not? We will think about a new name for SpinBrush four years later," Huns says. In 1999, Dr John Osher created and launched SpinBrush. He achieved impressive success one year later, and SpinBrush became the leading battery-powered toothbrush in sales at Wal-Mart. In 2001, P&G acquired SpinBrush, changing its name to Crest SpinBrush and gave it an additional feature: dual heads. P&G introduced Crest SpinBrush to China after it was a hit in the US in 2001, and it also became a popular battery-powered toothbrush brand in China. This July, Church & Dwight began to operate the Crest SpinBrush China business. Supermarkets and hypermarkets in Beijing, Shanghai and Guangzhou are its target stores. "During the transitional period, P&G has helped us familiarize with retailers like Wal-Mart and Carrefour," says Zhao Tong, marketing director responsible for SpinBrush with Church & Dwight Beijing Trading Co Ltd. Church & Dwight also set up a Guangzhou office of 20 employees responsible for research and development, quality control, and distribution. Compared to the fast pace of battery-powered toothbrush consumption worldwide, China has seen slower growth. But Church & Dwight believes the China market has great potential, and thinks the company will grow with the market. In 2004, global toothbrush retail sales was US$6 billion, and the sales of power-operated toothbrushes was US$1.4 billion. From 2001 to 2005, the sales of battery-operated and rechargeable toothbrushes around the world had increased by 16 and 10 percent, while that of manual toothbrushes reduced by 5 percent during the same period. But in China, "the market size is currently small, and China is not in favour of battery-powered toothbrush companies thanks to low disposable incomes and consumer habits," says Dong Junfeng, a senior analyst from Galaxy Securities. "I don't think Church & Dwight has done the right thing entering China with Crest SpinBrush." Richard A. Lister, general manager with Church & Dwight Beijing Trading Co Ltd, does not agree with Dong. "Chinese people will be more concerned about oral health and the market is expected to grow fast," Lister says. "We expect sales in China can increase a lot," he adds, while refusing to elaborate on specific figures. According to a report released by the China Stomatology Association in June, as much as 97.6 percent of Chinese people have suffered from oral hygiene-related disease, and one third of urban residents ignore oral hygiene. "Battery-powered toothbrushes provide better bristle coverage on teeth surfaces, resulting in better plaque removalthe more they know about it, the more Chinese people will like to use battery-operated toothbrushes," says Wang Weijian, vice-president of Stomatology Department at Peking University. Currently, SpinBrush, Oral-B and Colgate are major battery-powered brands. Considering Chinese people are price-sensitive, SpinBrush is aimed at the low-end market, the same as Colgate, while Oral-B is positioned at a higher market. "The price ranges from 29 to 39 yuan (US$3.67-4.94), it is affordable in China, but we can earn a thin profit," Zhao says. This August, the National Bureau of Statistics announced that the average resident's income in July in Beijing, Shanghai and Guangzhou was 1,822 yuan (US$230.63), 1,810 yuan (US$229.11), and 1,350 yuan (US$170.89) respectively. Besides good products and lower prices, Lister says Church & Dwight's uniqueness lies in its commitment to consumer education to promote the local consumption market. In 2006, the company kicked off education campaigns in eight elementary schools in Beijing, Shanghai, Guangzhou and Chengdu, teaching children the correct brushing methods in maintaining good oral care and personal hygiene and distributing some SpinBrushes as well. In 2007, it will also send one university student to New Jersey School of Medicine and Dentistry for a dental hygienist training programme. "We will continuously send more students abroad," says Lister. While developing the SpinBrush brand, Church & Dwight is also planning to introduce other products under the ARM & HAMMER brand into China. a product whose market share in the US is more than 70 percent will come to China. "The products will mainly sell at hypermarkets, convenience stores, and drug stores in China's major cities like Beijing, Shanghai, Guangzhou and Chengdu," says Hou Yizang, marketing manager responsible for Trojan with Church & Dwight Beijing Trading Co Ltd. In 2005, China ranked fourth in sales of condoms which are 2 billion units, following the UK, the US and Japan, and the figure is expected to gain an annual growth rate of 15 percent. British brand Durex got the highest share of 10 percent last year here. "We will surely have more products to come," Lister says. Copyright 2006 Business Daily Update Source: Financial Times Information Limited - Asia Intelligence Wire. |