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UPDATE 2-Clorox shifts focus from convenience to value
June 11, 2009 / 7:28 PM / 8 years ago

UPDATE 2-Clorox shifts focus from convenience to value

* Focus on affordability responds to recession

* Handful of new products planned for fiscal 2010

* Lowering debt-to-EBITDA ratio

* Shares rise 0.3 percent (Adds details of recent stock activity)

By Jessica Wohl

NEW YORK, June 11 (Reuters) - Clorox Co (CLX.N) is following the lead of recession-hit shoppers, moving away from a focus on convenience to promote the affordability of its bleach, water filters and other products.

When Clorox unveiled its “Centennial Strategy” in May 2007, it outlined four focus areas. It updated that plan on Thursday, once again emphasizing tactics to go after the trends of health and wellness, sustainability and a market that has become more multicultural. Now, instead of the fourth area being a focus on convenience, Clorox is taking note of shoppers’ spending habits.

“Consumers are increasingly focused on value, and we expect this trend to continue even after the economy recovers,” said Chairman and Chief Executive Don Knauss.

Knauss said he expects to start seeing some economic growth by the fourth quarter of this year or, more likely, by the first quarter of 2010.

“You can’t dump $1 trillion plus into the economy and not see something happen,” he said in an interview.

Before the recession hit, Clorox was introducing items such as a wand product for which consumers buy replacement pads to clean their bathrooms.

As cash-strapped consumers increasingly seek out less expensive items, the company is emphasizing value in its marketing. One campaign shows mothers how to dilute Clorox bleach to clean toys. Another shows that a Brita water filter eliminates the need for 300 bottles of water and that a glass of water from the filter costs about a penny.

While some consumers Clorox has spoken with “will forsake convenience for affordability,” taking steps such as making their own baby food rather than buying pre-made food, there is also a small “pretty robust” group of consumers willing to pay for products that command higher prices, Knauss said.

Clorox said it would launch two Green Works natural laundry products next month priced above conventional detergents and stain removers.

“It is a super premium niche, no doubt about it,” Knauss said.

He said the 95 percent natural detergent is a value for those looking for “green” cleaning products. Conventional detergents are about 60 to 65 percent natural, Knauss said, joking that much of that natural base is water.

Another new product set to debut in fiscal 2010 is a Kingsford charcoal briquette that is easier to light and heats up faster. The company will also launch a Glad ForceFlex bag that stays in place better in trash cans. Those two new items will keep the same prices as products already on the market as Clorox tries to keep value-oriented consumers from trading down to other products.

“We kept convenience in the background of that affordability trend,” Knauss said.

While there is renewed emphasis on value, the company said it would maintain the dozens of price increases it has taken in recent years. Of the more than 50 price hikes Clorox put in place to help offset higher costs, it has only taken down the price of Glad trash bags. The bags are still priced higher than they were before the first price hike was taken.

Clorox also maintained its financial forecasts for 2010 and its goals through 2013 [ID:nN11467201]. It now aims to lower its debt-to-EBITDA ratio to a range of 2 to 2.5, from a prior target of 2.5 to 3 and from March’s 2.85 level. It could start buying back shares in the second half of fiscal 2010.

The changes in Clorox’s financial policies are “welcome news” for bondholders, said GimmeCredit analyst Craig Hutson.

Clorox also said it could need acquisitions to grow internationally. [ID:nN11392798]

Shares of Clorox rose 16 cents to $53.65. The shares have risen 3.4 percent so far this year, while those of larger rival Procter & Gamble Co (PG.N) have fallen more than 15 percent. (Reporting by Jessica Wohl; Editing by Gunna Dickson, Steve Orlofsky, Gary Hill)

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