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Clorox: A Green-Market Breakthrough

The Move: By leveraging its brand and
capitalizing on its retail muscle, the company became a major player in green products.

This year, The Clorox Company launched its first new brand
in 20 years — the Green Works line of natural household cleaners. The
eco-friendly products, derived from coconut and other plant and mineral
sources, were a significant departure for the $5.3 billion juggernaut famous
for mainstays like Pine-Sol and Formula 409. The big question that hung in the balance: whether to openly use the Clorox name on the new brand, or hide it altogether. On a green product, the Clorox badge could have
been a liability: Died-in-the-wool environmentalists, long mistrustful of
Clorox’s flagship bleach, had little interest in the company’s
products, and Clorox’s core customers wanted sanitation on a budget,
not green gimmicks.

In the end, says Emmy Berlind, a Green Works brand manager,
Clorox chose to stick with its own name and logo because they convey the
dependability people associate with the company’s conventional bleach
products. Clorox was betting that its brand’s dependability would
attract the kind of customer who didn’t ordinarily buy eco-friendly
products. “She may not be doing the whole [green] package,”
Berlind says of this consumer. “She might still own an SUV.”
Joel Makower, executive editor of and a consultant to Clorox
on the Green Works launch, says that the brand has successfully drawn newbies. “The
Clorox name gave them assurance,” he says, that the product would
still clean effectively.

To further convince those tentative consumers to put Green
Works in their shopping carts, Clorox priced the line cheaper than competing
green cleaners, harnessing its longtime clout with big-box retailers like Wal-Mart,
Costco, and Target to do so. Green Works products
still cost about 20 to 25 percent more than traditional brands; comparable green products from Seventh Generation and
Method cost twice as much as traditional cleaners. For example, in late November, the price of a 24-ounce bottle of Clorox’s
traditional bleach-based toilet bowl cleaner was $2.14, the Green Works version
was selling for $2.89, and Method’s offering was $4.29. That price
advantage gives Green Works an extra boost among reluctant green consumers,
cementing the company’s access to previously untapped demand. “They
brought greener products to the masses,” Makower says. “Now
that was strategy.”

Meanwhile, to tempt skeptical environmentalists with little
previous interest in the company, Clorox sought out an important ally: For an undisclosed portion of revenue, the Sierra Club allows its
logo to appear on every Green Works bottle,the organization’s first
product endorsement. “The Sierra Club helped alleviate the concerns
of anyone who felt the words ‘Clorox’ and ‘green’
were a disconnect,” Makower says. The move was a PR disaster for
Sierra, whose members criticized the sponsorship fee, but for Clorox it was a
strategic boon. “It protects their backs,” says Andrew Winston, author of the book Green to Gold. “It
focuses their marketing on selling products, not on defending them.”

Green Works was among the drivers that put Clorox in the
black for its first quarter in 2009, which ended Sept. 30. Revenues climbed 12
percent and net income rose 15 percent to $128 million, up from $111 million in
the same quarter last year. Competitors with similarly timed green-product
introductions, such as Church & Dwight Co., which owns the Arm &
Hammer brand and launched its green Essentials line in May, posted more modest
revenue gains — just 4 percent in its third quarter, which ended
Sept. 26.

These results were better than Clorox’s third quarter, when Green
Works first launched and profits were off by 22 percent. But that was partly
due to Clorox’s acquisition of another green endeavor —
Burt’s Bees, a natural personal care line. Overall, despite the slide
in profitability, CEO Donald Knauss noted that Green Works had helped increase
domestic sales by 8 percent that quarter, a time when economic conditions might
suggest that consumers would shy away from premium-priced products.

But they haven’t, and cash register bells are
ringing for Clorox. Excluding Wal-Mart, club store, and convenience store
sales, Green Works sold $5 million worth of glass cleaner in the year ending on
Nov. 2, 2008, according to Information Resources, Inc., a Chicago-based
market research firm. In the same period, Seventh Generation’s glass
cleaner netted $1.1 million and Method’s earned $939,000. Meanwhile, overall
sales of Method and Seventh Generation products have not declined since Clorox
entered the game. Since Clorox wasn’t poaching sales from green
stalwarts, its launch of Green Works seems to have
successfully grown the green marketplace.

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