Clorox cleaners take big share of green market
Ilana DeBare, Chronicle Staff Writer
Sunday, October 12, 2008
Matt Kohler is a former brand manager for the Green Works... Aram Garabedian, a Clorox scientist on the team that deve... Clorox senior scientist Steve Kong helped develop the com...
(10-11) 16:02 PDT -- Last winter, the Clorox Co. gambled that its famous name would translate well from the world of bleach into the world of environmentally friendly cleaning products.
So far, that bet is looking like a winner.
Just eight months after its introduction, Clorox's Green Works line is on track to generate first-year sales of well over $40 million. It's already outselling all other brands in the green cleaning products niche.
And perhaps most significantly, Green Works seems to be luring customers away from traditional cleaning products rather than from green rivals - expanding the overall market for green cleaners.
The Oakland company has faced some bumps in the road, including controversy over the Sierra Club's backing for Green Works and a dispute over some of Clorox's advertising claims about the product line.
But overall, observers say, Green Works' rollout has been a model for how a big consumer products corporation can successfully enter the green market.
"They did their homework, saw an opportunity with the sea change in green, and got a good product name," said Nik Modi, a stock analyst with UBS who follows Clorox.
"They've actually grown the natural cleaner category. People who weren't buying (green cleaning products) are buying them now."
Clorox had historically built its $5.3 billion business on household products that were effective and affordable but not particularly green - things like bleach, Glad plastic wrap, and cleaning products sold under the brands of Formula 409, Liquid-Plumr, Pine-Sol and Tilex, as well as Clorox.
But since the arrival of CEO Donald Knauss in 2006, the company has moved into the market for natural products in a big way. In November, Clorox spent $913 million to acquire Burt's Bees, which makes beeswax-based body care products. It has also been promoting its line of Brita water filters as a greener alternative to bottled water.
And with Green Works, Clorox became the first major consumer products company to offer a line of green cleaning products - turf that had previously been limited to small firms such as Seventh Generation and San Francisco's Method Products.
Clorox made several key decisions in entering the market. First, it put considerable effort into formulating products made from 99 percent natural, non-petrochemical ingredients, rather than just slapping a green-looking label on a conventional product.
It also decided to keep the Clorox name on the new line to defuse consumer fears that green products would be less effective at cleaning.
"The lesson is not to be shy about using your brand name," said Ali Debadj, an analyst with Sanford C. Bernstein & Co. "It can bear fruit in the natural category."
Clorox benefited from the support of some large retailers like Wal-Mart, which gave Green Works some of its most visible shelf space. "They got the retailers on board and put a lot of advertising out there," said Debadj.
As a result of all this, Green Works' sales quickly shot past Clorox's longer-standing green competitors.
For instance, Green Works sold $3.4 million worth of glass cleaner in just eight months, compared with $1.1 million sold by Seventh Generation and $947,000 by Method over a full 12 months, according to Information Resources Inc., a Chicago market research firm. (Those figures don't include sales at Wal-Mart.)
Green market growing
But Method and Seventh Generation didn't see their sales drop. In fact, their share of the overall cleaning market continued to grow - a sign that Green Works was attracting people who hadn't previously bought green cleaners.
"You're never terribly excited when Goliath is entering your space, and you're David," said Eric Ryan, co-founder of Method. "But the great thing is they're bringing more attention and significant working capital to educating Americans that you can be green and effective. That's only going to grow the category."
One area where Clorox did hit some rough road was in its partnership with the Sierra Club.
The club's national leadership had agreed to let Clorox use its logo on Green Works labels in exchange for an undisclosed share of the profit.
But the move caused an uproar among members around the country who were unhappy with Clorox's overall environmental record and the Sierra Club's refusal to disclose financial details of the deal.
The controversy may ultimately have hurt the Sierra Club more than it hurt Clorox. Most of Green Works' target customers - average consumers with a mild or "light green" environmental interest - were totally unaware of the debate within the club.
"There is a cautionary tale here about building alliances," said Jeffrey Hollender, CEO of Seventh Generation. "While light green consumers may have a limited set of criteria to be met, as you move into the deeper green community, people look at the company and not just the products."
Another stumbling block for Clorox came with a complaint filed by a rival cleaning products company, S.C. Johnson.
It asked the national advertising division of the Council of Better Business Bureaus to rule on whether Clorox could legitimately claim that Green Works works "as well as conventional cleaners."
The group said in July that it was fine for Clorox to claim that Green Works got rid of most dirt as well as other cleaning products. But it told Clorox to modify its ads to avoid implying that Green Works kills germs and handles grease as well as other cleaners.
Clorox officials downplayed the impact of the ruling.
"Our formula is really strong, we are still really proud of our formula, and we are still able to communicate our message," said brand manager Emmy Berlind.
Meanwhile, it remains to be seen whether Green Works will be able maintain its strong out-of-the-gate sales.
"It takes nine to 12 months to get a good feel for 'repeat' - will customers keep buying it time and time again?" said Modi.
But company officials, who have raised their sales projections six times since January, are confident. They have already added liquid dish soap to the line, and may add more products.
"We're the leader in natural home care eight months after our launch," said Berlind. "We're very, very happy."
Green and conventional cleaning product sales
E-mail Ilana DeBare at email@example.com.