WD-40 Targets Global Growth With Premium Products, Specialist Expansion and Digital Push

WD-40 NASDAQ: WDFC outlined its long-term growth strategy, supply-chain approach and capital-allocation priorities during a Water Tower Research fireside chat, with management emphasizing international expansion, premium product formats, digital capabilities and specialist maintenance products.

President and CEO Steve Brass said the company’s long-term growth algorithm targets mid- to high-single-digit maintenance product sales growth, gross margin above 55%, and EBITDA growth that exceeds sales growth. The strategy is organized around four “must-win battles,” including expanding WD-40 Multi-Use Product geographically, premiumizing its product mix, growing the WD-40 Specialist line and expanding digital capabilities.

International Markets Drive Expansion Opportunity

Brass said the United States provides a stable base for global expansion, representing about 35% of global sales. The company’s U.S. maintenance-products business has posted a compound annual growth rate of roughly 6% to 7% over the past five years, he said, while U.S. sales increased by approximately $55 million over that period. International markets account for about 65% of the business, and the WD-40 brand is available in 176 countries and territories, according to Brass. The company is focused on its top 20 global growth opportunities.

Latin America has approximately tripled over the past five to six years, Brass said. Meanwhile, the company’s direct European markets—including the U.K., France, Germany, Spain and Italy—generate about 30% of total business and have delivered single-digit to high-single-digit growth, with occasional double-digit gains. China is WD-40’s largest growth opportunity and its third-largest market globally after the U.S. and France, Brass said. The company operates a direct China business with about 60 employees and is generating double-digit growth there. India is the company’s second-largest opportunity, with sales growth above 20% through its partnership with local company Pidilite. India is already WD-40’s second-largest market by unit volume, Brass said.

Premium Formats and Specialist Products

CFO Sara Hyzer said premiumization centers on improving the end-user experience through formats such as the WD-40 Smart Straw and EZ-REACH products. Smart Straw addresses the issue of users losing the straw included with the classic can, while EZ-REACH includes a flexible straw intended to help users access difficult-to-reach areas. Sales of the two premium formats combined rose 19% year to date and represented about 50% of WD-40 Multi-Use Product sales, Hyzer said. By unit volume, premium formats accounted for about 40% of global Multi-Use Product sales, leaving what management views as a significant runway for further adoption. Premium formats account for roughly 80% of sales in developed markets such as the U.S., compared with low-single-digit penetration in some emerging markets. Hyzer said WD-40 is nearing the availability of manufacturing capacity in China that would allow it to introduce Smart Straw products in China and Asian distributor markets. Smart Straw sells at about a 30% uplift to the classic can. EZ-REACH sells at about a 45% uplift to the classic can. The company targets 10% annual growth for the premium formats. Brass said the WD-40 Specialist line, which includes products such as high-performance penetrants, high-temperature lubricants, silicone sprays and cleaners and degreasers, is the company’s fastest-growing range. The sub-brand has grown at a compound annual ra...