OAKLAND, CA — The Clorox Company saw its shares fall 4 percent this morning after announcing a $14 million drop in net income, but one bright spot noted by the company was an increase in sales of Burt's Bees products.
Burt's Bees, the natural personal care brand Clorox purchased in 2007 for $925 million, was called out by the company in a third-quarter earnings release for having some of the biggest gains out of Clorox's broad range of products.
But growth in Burt's Bees and other brands was offset by losses from Glad and stagnant Brita water filter sales. Clorox is responding by increasing Glad trash bag prices 9.5 percent.
Along with Clorox's Green Works lines of cleaners, Burt's Bees and Brita fit into what Clorox is calling the sustainability mega-trend, which it identified in 2006 and has shaped its actions around those brands.
In late 2008, Green Works, Burt's Bees and Brita were partly responsible for big profit and sales jumps. At the time, Clorox's purchase of Burt's Bees was only a year old and the Green Works line had expanded its product range after launching at the start of year.
At the close of its first year, Green Works was a $100 million business; its sales are now $60 million a year. "We have seen some softness in the natural cleaning category over the last two years," Clorox spokesperson Dan Staublin said, noting that the biggest hinderances have been the recession and increased competition.
"We believe the fundamentals of the category and this sustainability mega-trend are real, and the key, really, is to strike the right value proposition," Staublin said. To address that issue, Clorox has dropped its Green Works prices. The line carries a price premium of just 5-10 percent over other cleaners, down from 25 percent previously.
Competition is a tougher issue to address. Green lines from other major producers have also been hurt by the recession, the New York Times reported, but niche green companies like Method and Seventh Generation have thrived at the same time.
"It’s difficult for (companies like Clorox) to appeal to the greener leaning of us, and those of us in the middle want a good deal," wrote Suzanne Shelton, CEO of the Shelton Group ad agency, in an analysis of why consumers are turning away from the likes of Green Works and more towards the Methods of the world.
Clorox's third-quarter net income fell from $165 million last year to $151 million this year, as overall revenue rose 1.3 percent after falling for the last two quarters. Clorox is also now expecting a 1 percent decrease in year-over-year sales for fiscal year 2011.
Clorox bleach - CC license by conradvolle/Flickr
There are two sides to be
There are two sides to be considered in this equation, and I am curious about the backend operations benefits associated with the green product line production. If on the front end the consumers might not be adopting the products at the moment because the other products cost less, are the consequences of the total operational picture being calculated properly? For example, if working with some of the chemicals and the total lifecyle aspect associated, would the impacts of an NOV, spill, or other cost to the business truly be reflected in relation to those products?
While green is definitely being branded and marketed to consumers, are the back end operations living up to expectations? And are companies really aware of the potential ROI for more efficient operations? I realize that many old school executives will argue that the regulations dont need to be justified in because they should exist and they are trying to fight those and eliminate the accountability elements associated with manufacturing and trying to justify our lack of jobs in the space as a direct correlation. However, the real challenge is a combination of that element yes, but also the larger global picture associated with all elements. We are playing on a level playing field that is fair, while others are able to remove scientifically proven variables from their cost of business because no one is holding them to it. Who should?
We learn in early economic theory that land is one of the most precious resources that exist, however, land is Earth and the value of land is directly tied to many factors that 'we cant control', but in reality can help reduce the impacts of with better manufacturing processes and oversight. We only started this industrial age 100-200 years ago, do you think we really have it perfected?
Also, perhaps consumers are more aware than you give them credit for and the branding associated isn't just tied to front end marketing, but the larger picture. Burt's Bees is an interesting case study and example.
Proactively manage the back end EHS operations to reduce the total cost associated with manufacturing X or staying up to speed with ever changing requirements, you'd be suprosed
The underpinnings for the
The underpinnings for the green movement are well established globally although it has taken two decades to emerge in more obvious ways in North America where conspicuous consumption and convenience dominate. This week's federal election in Canada saw the first Green candidate elected to Parliament after 20 years of effort.
Clever marketers led by Walmart understand that going green/promoting sustainability is an attractive and more readily acceptable form of cost savings.
Embracing market segmentation will help marketers and observers make sense of this trend. There is a market segment of 20%-25% that are predisposed to trying to behave in a sustainable manner and paying a fair price for what they consume - it's not for everyone. Segmentation cuts across demographics - those with the most disposable $ or of a certain education or income are not necessarily most predisposed to spending it on "green".
Sustainability to some extent means that the convenience of consumer packaged goods is being rejected in favour of buying locally, whether it be locally grown foods or locally produced goods and services.
No need to have angst about it; it works for some, not for all. In time, economic need will determine how broadly it is embraced.
cheers, Aubrey
People only care about being
People only care about being green if they have money to waste. Now that those days are over, the interest in paying more for a green product will wane. Method and Seventh Generation are quaint ideas, but their sales are so inconsequentially small that it doesn't matter to large consumer companies such as Clorox.
Sustainability is a fad fueled by propaganda from governments and interest groups. There isn't any factual data to support that these products will be better for our environment, there is just "faith". It is not a trend that will be adopted by the mass market who knows that green products generally don't work as well and cost more than their current products.