Clorox Income Falls as Recession Slows Green Brands
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