Summary
In the face of consumer changes and current economic conditions, Clorox must make several key decisions regarding resource allocation and strategic focus across its product divisions. Specifically, there has been a strong focus since 2006 on product sustainability and green initiatives.
As such, Clorox needs to determine if this is the right strategy to pursue for the long-term and if it needs to be green organization-wide, not just toward a few products. In recent years, many changes have been made to start shifting public perception of Clorox toward being an eco-friendly supporter. Due to this strategy and consumer trends, Clorox should stay the path of being an eco-friendly, green organization. Current consumer preferences support the notion that green sustainability is a megatrend, not a passing fad.
To achieve the Centennial Strategy goal of double-digit profit growth in 2013 and to implement green initiatives and best practices across all Clorox product divisions, small changes in strategy and an increase of approximately $18 million in marketing and advertising needs to happen in the short run. The tweak in strategy will open new growth opportunities in other consumer segments, which will allow Clorox to capitalize on consumer trends and increase revenue. Advertising will support and educate these new segments and is based on the original advertising campaigns that were launched for these divisions in previous years.
Research and development will continue in the medium and long run to ensure Clorox innovates products and takes advantage of growth trends outside of the domestic U. S. market. Implementing the “Clorox Clarity” program will centralize resources to the eco office, allowing more efficient distribution and communication with Clorox’s corporate office. More importantly, the eco office will implement a framework to foster knowledge sharing, information distribution and skills transfer from the three current green divisions – Burt’s Bees, Brita and Green Works – across the entire organization.
This program will be key in making Clorox a truly eco-friends, sustainable organization for the foreseeable future. The proposed recommendations provide a detailed framework and timelines to ensure that Clorox takes advantage of a corporate advantage through sustainability while still achieving the original profit goals targeted in the Centennial Strategy.
Introduction
After many consecutive years of revenue growth across multiple divisions and product lines, Clorox is now faced with stagnant forecast projections and is in endanger of not achieving its goal of double-digit profit growth for its Centennial Strategy by 2013.
How should Clorox allocate its resources among its brands and products in order to achieve its Centennial Strategy targets while continuing to increase its sustainability efforts? Critical Issues Clorox is currently facing several issues. First, it needs to determine whether the “sustainability” trend is viable in the long term and if it offers ample opportunity for growth. Specifically, the company has to assess the potential of the “green” or “sustainable” market and the return on investment that can be achieved by penetrating this market.
The second issue facing Clorox is the disproportionate revenue generated by its product portfolio. While there is a significant push for a sustainability strategy, the three product lines in this category make up only 10% of the company’s revenue. The remaining 90% of revenue comes from Clorox’s large portfolio of cleaning and household products, many of which are in declining markets. To put this into perspective, in 2010 $4. 98 billion out of $5. 53 billion in sales occurred in declining markets, while growing markets accounted for only $0. 55 billion in sales (Barley, 2011).
If Clorox does not restructure its portfolio mix and increase revenue contribution from the growing markets, it faces the risk of losing sales and its position in those markets. Using its current resources, Clorox needs to determine how to allocate those resources among its current brand portfolio. Equally important is determining whether to invest in new product lines or brands. Clorox also has to decide whether to expand into international markets or focus strictly on expanding its market share across its brands in the primary U. S. market.
Asian, South American, and European markets offer potential for growth but the cost of expanding into these markets and the limited availability of financial resources pose concerns with respect to international expansion. Focus on growth versus profitability is another important strategic decision that needs to be addressed. Clorox projects flat sales for 2011, which is not a positive indicator for investors’ 2 interests and the company performance as a whole. Brands like Green Works have not turned profitable yet and are decreasing the bottom line. It is important that Clorox determine a balance between growth and profitability.
Since Clorox made the shift toward a socially responsible brand image it needs to sustain the momentum it created with its initial marketing efforts and continue to increase awareness among the public about its environmental, social and financial contributions. Lastly, Clorox must determine how the knowledge and expertise it gained through its “green” products will be shared throughout the entire organization. This needs to happen in order to use its corporate advantage in sustainability and involves determining which human resource strategies can be used to foster this advantage across its divisions.
External Analysis The future of the U. S. market for household cleaning products is changing and companies are trying to adapt to a growing change in consumer preferences and demands. The consumer is becoming increasingly interested in a greener and more sustainable lifestyles and products. In 2009, “green” cleaners generated $557 million in sales across the country and, by estimates, will generate approximately $2 billion in sales by 2014 (Market Wire, 2010). Another study reports that in 2010 42% of American adults have used a “green” household cleaning product during the year.
This translates into approximately 48 million households and $12 per household spent on green cleaning products (MyCompanyPR, 2011). The marketing challenge currently facing companies in the household cleaning industry is how to effectively communicate to consumers the benefits of “green” – efficacy, safety, ease of use and convenience – simultaneously. Yet, as market demand for such products continues to grow and consumers become more interested in green and sustainable lifestyles, the opportunity for companies to increase sales by targeting these segments will only increase.
Several factors affect the competitive landscape and the business decisions facing Clorox. From a macro-environmental perspective, trends in social norms and preferences must be considered. As discovered in the 2007 Cambridge Group Demand Landscape study, there has been a shift in consumer preference toward eco-friendly, sustainable products (Barley, 2011). Furthermore, consumers are much more likely to care about non-toxic ingredients, safer products, and the effectiveness of “sustainable” products.
Related to this social shift is a combination of political, technological, and environmental shifts that could impact the way Clorox operates. Carbon taxes, government regulation of product development and an increased awareness of carbon footprints may affect how Clorox produces, positions, and markets its products. Legal implications of claiming products as “green”, “natural”, or “sustainable” could come into play, as there are currently no requirements in place to refer to products as such
Finally, the economic landscape is a major concern for Clorox. The current recession will likely impact the company’s bottom line, as can be seen by a projection of flat sales for fiscal year 2011. In the absence of a stable or growing economy, Clorox needs to explore the potential of implementing alternative strategies to increase growth and profitability.
Internal Analysis
A complete SWOT analysis of Clorox reveals that the Clorox brand poses a strategic advantage and weakness for its “green” product line. While the Clorox brand name brings instant awareness and credibility of its cleaning products within Green Works, the brand hinders products like Burt’s Bees that strive for a non-harmful, natural image – something that the Clorox bleach product does not portray. This is a key consideration from a branding and positioning standpoint. Leveraging the Clorox brand name has an immediate and serious impact. Where it acts as a support to one product line, it acts as a deterrent to another. Another key concern for Clorox is how its resources should be divided among its product lines.
While the company’s three lines of “green” products (Brita, Burt’s Bees and Green Works) are a major component of its sales and marketing strategy, these products only represent 10% of total revenues. In order to support and continue its sustainability strategy, revenues for its green lines need to represent a much larger portion of its overall portfolio. Clorox faces risks of high commodity costs, and the industry it operates in is extremely competitive. Additionally, Clorox’s highly leveraged position gives it more risk than industry peers.
Due to its international presence there is also currency risk. Clorox has opportunities that it can leverage to increase its “green” product revenue. The company’s relationship with Wal-Mart, its brand affiliation with Sierra, the availability of new channels to reach consumers (ex. social media) and the growing market for green products can all positively impact the growth of this segment.
Additionally, the “Clorox” logo should be removed from all packaging of Green Works products as there is a negative association of the Clorox brand with harmful bleaching chemicals. In place of the Clorox logo, the Sierra Club logo should be leveraged as it will enhance the environmentally friendly nature of the product. Lastly, research shows that TV programming concerning environmental issues accounts for 58% of first time eco-friendly household product purchases. As a result, Clorox should invest in television advertising that runs during these programs to increase awareness of Green Works products.
Once the product has been established in the marketplace, additional access to consumers through Facebook and other social media distribution networks can be used to reach consumers. Marketing to consumers through Target and Wal-Mart will also help increase product adoption. Burt’s Bees Clorox should focus on growth and profitability by expanding its target market through a lower price point while still maintaining its premium status. This strategy will target “Beauty Enthusiasts” and “Demanding Conventionalists” who represent access to 39% more female consumers and an additional 54% of NPC market sales.
Current barriers to accessing this group are pricing and lack of product knowledge. By lowering its price to an optimal level and repositioning the existing product lines to appeal to this secondary market, Burt’s Bees products open the possibility to almost double sales. The repositioning strategy should include providing more samples to new target consumers, packaging that will highlight the products ingredients, and fragrances sought by the target market. This will result in an increased market share and sales volume that can offset any potential loss from existing primary customer segments leaving.
For the medium term, Burt Bees should focus on increasing penetration in its existing global markets, and in the long term, explore expanding into new and growing emerging markets such as China and India via a line of organic products. Brita Given Brita’s high profit margins, Clorox needs to increase the sales within the product line and focus on growth. Brita’s products currently compete in only 12% of the $2 billion water filtration market, which represents a fractional $240 million. Penetration into other sub-segments of the water filtration market offers significant opportunity for growth.
Given the size of the faucet based filtration market for households, Brita must leverage its established brand image and focus on expanding within this segment. In the short term (1 year), Brita should invest in marketing the faucet based filtration system by targeting individual households and emphasizing the superior taste of Brita processed water and its affordability. In the medium term (3 years), Brita needs to invest in R&D of other products and expand its product line to an on-the-go water filtration system.
In the long term (5 years), Brita needs to take advantage of the growing demand by schools other public institutions that are going bottle-free and the growing demographic looking for alternatives to bottled water. Clorox Clarity Set up an ambidextrous structure with eco-office leading the research and innovation in green eco-friendly products in addition to overseeing the Clorox Clarity program. Clorox Clarity is an initiative to create a corporate wide knowledge centre for transfer of green and sustainability know-how from leading eco-friendly brands inside the Clorox family to the primary product group.
Gradually assimilate the non-green products under the green banner. Each of the three sustainable brands will designate Subject Matter Experts (SMEs) to transfer the green best practices to the knowledge centre and consult the managers from the primary product team on developing viable plans for improvement of sustainability indicators in the respective product line. In addition to an intranet being set up to facilitate file sharing and information transfer, bi- 8 weekly meetings will be conducted by the SMEs and non-green product managers and marketing managers to share this information and expertise.
Conclusion
In light of the economic downturn and stagnant revenue growth projections for 2011, it would be easy to justify abandoning the Centennial growth strategy and sustainability initiatives. However, consumer preferences and growth trends have not changed. This supports a commitment to Clorox’s strategy for growth and profitability and proves green sustainability is a trend, not a fad.
A tweak to strategy and a small increase in short-term advertising will allow the three green product divisions to gain more market share, much like the results seen when advertising of these products first launched. The launch of the Clorox Clarity program to share knowledge and foster innovation of sustainability across the entire organization combined with continued research and development in the medium term and market expansion in the long-term will ensure Clorox attains double-digit profit growth by 2013 and secures a market leadership position in green sustainability for the future.
Bibliography
- Clorox. (n. d. ). Eco Governance. Retrieved 3, 2012 from Clorox Company website: http://www. thecloroxcompany. com/corporate-responsibility/planet/eco-goals/
- Collis & Montgomery. (1988). Creating Corporate Advantage. Harvard Business Review. Green Household Cleaners to Double U. S. Market Share 2014 Says News Report. Retrieved March 3, 2012, from My Company PR: http://www. mycompanypr. com/green-householdcleaners-to-double-u-s-market-share-2014-says-new-report/pr/516/
- The Clorox Company. 2010 Annual Report to Shareholders and Employees. Retrieved March 3, 2012 from Clorox Company website: http://www. thecloroxcompany. com/downloads/annual-reports/ar10_complete. pdf
