Top Companies Report

12. Clorox

July 11, 2011

Oakland, CA

510.271.7000

www.thecloroxcompany.com

Sales: $2.6 billion


Sales:

$2.6 billion (estimated) for household cleaning and personal care products. Corporate sales: $5.5 billion. Net income: $603 million for the year ended June 30, 2010.


Key Personnel:

Don Knauss, chairman, president and chief executive officer; Daniel J. Heinrich, executive vice president, chief financial officer; Lawrence S. Peiros, executive vice president, chief operating officer; Frank A. Tataseo, executive vice president, strategy and growth, partnerships, away from home; Wayne L. Delker Ph.D., senior vice president, chief innovation officer; Benno Dorer, senior vice president, general manager, cleaning division; James Foster, senior vice president, chief product supply officer; Jacqueline P. Kane, senior vice president, human resources and corporate affairs; Grant J. LaMontagne, senior vice president, chief customer officer; George C. Roeth, senior vice president, general manager, specialty division; Laura Stein, senior vice president and general counsel; Michael Costello, vice president, general manager, international.


Major Products:

Cleaning—Clorox disinfecting wipes, Pine-Sol dilutable cleaners, Clorox Clean-Up cleaner and Clorox bathroom cleaners; Personal Care—Burt’s Bees natural personal care products.


New Products:

Cleaning—Outdoor Fresh and Garden Fresh Pine-Sol, Clorox 2 Foaming Soil & Stain Remover, Clorox2 packs, Bleach Outdoor, Lemon-to-Go wipes, Tilex Tile & Grout; Burt’s Bees—Nourishing Lip Balm with Mango Butter and Rejuvenating Lip Balm with Açai Berry, Spearmint Gel Natural Toothpaste.


Comments:

Clorox holds several strong positions in the household and personal care market, but the company faces pressure from rising commodity costs and private label competition. For the nine months ended March 31, 2011, corporate sales slipped 1% to $3.7 billion, while net earnings dropped 10% to $388 million. During the period, cleaning sales dropped about 1%.


Big brands drive Clorox, as 88% of the company’s portfolio is made up of brands that are either No. 1 or No. 2 in their category. According to SymphonyIRI data for the 52 weeks ended March 27, 2011, Clorox Wipes held a 51% share of its category, Clorox Toilet Bowl cleaner, 37%; Pine-Sol, 30%; Tilex/Clorox 19%; Burt’s Bees, 20% and Clorox Bleach, 64%. All of them are No. 1 in their categories.


Still, not all is well for Clorox or other consumer product companies as commodity prices soar, forcing companies to raise prices across their portfolios. Commodity costs are expected to double to $170 million in fiscal 2012.


“We’re taking pricing [raising prices] broader and faster than we’ve ever taken before,” Clorox chief operating officer Larry Peiros said in an interview last month. “At the end of the day, we know we will lose some volume due to pricing.”


The company recently raised prices 10% on Glad garbage bags, and is talking to retailers about further increases. The higher prices are expected to boost sales by four percentage points in Clorox’s new fiscal year, which started July 1, but volume is seen falling three percentage points as a result. Clorox still sees flat volume overall next year, recouping losses by selling more new products and by advertising. However, Bernstein & Co. has noted that Clorox is the consumer product manufacturer most at risk from consumers trading down to cheaper goods, especially in categories like cleaning products, trash bags and bleach. In general, analysts are worried about consumer pushback. Clorox will try to respond by offering more value to consumers, like Febreze-scented Glad trash bags and new scents of Pine Sol cleaner.


Last year, corporate sales rose 2%, volume was up 3%, but net earnings rose 12%. While cleaning segment sales were flat, the gain in volume was attributed in part to increased shipments of Clorox Disinfecting Wipes and other disinfecting products to meet demand associated with the H1N1 flu pandemic.


Also contributing to the volume growth were increased shipments of Pine-Sol cleaner and Clorox toilet bowl cleaners due to increased distribution and promotional activities and increased shipments of Armor All auto care products due to price declines. These increases were partially offset by lower shipments of STP auto care products due to reduced promotional activities and the Green Works line of natural cleaners due to category softness.

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