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The Clorox Company

The Clorox Company

1221 Broadway
Oakland, California 94612-1888
U.S.A.
Telephone: (510) 271-7000
Fax: (510) 832-1463
E-mail: info@clorox.com
Web site: http://www.clorox.com

Public Company
Incorporated:
1913 as The Electro-Alkaline Company
Employees: 7,600
Sales: $4.39 billion (2005)
Stock Exchanges: New York
Ticker Symbol: CLX
NAIC: 311421 Fruit and Vegetable Canning; 311941 Mayonnaise, Dressing, and Other Prepared Sauce Manufacturing; 325191 Gum and Wood Chemical Manufacturing; 325611 Soap and Other Detergent Manufacturing; 325612 Polish and Other Sanitation Good Manufacturing; 325613 Surface Active Agent Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing; 326111 Unsupported Plastics Bag Manufacturing; 326199 All Other Plastics Product Manufacturing; 327910 Abrasive Product Manufacturing; 332913 Plumbing Fixture Fitting and Trim Manufacturing; 332999 All Other Miscellaneous Fabricated Metal Product Manufacturing

Although best known for the household bleach that bears the firm's name, The Clorox Company is a diversified international manufacturer and marketer of a variety of consumer products ranging from household cleaners to salad dressings and from plastic bags to cat litter. In addition to Clorox bleach (the number one bleach brand in the world), the company's consumer brands include Formula 409, Pine-Sol, Tilex, and S.O.S. household cleaning products; Liquid-Plumr drain openers; Armor All and STP auto-care products; Glad plastic bags, wraps, and containers; Fresh Step and Scoop Away cat litter; Kingsford charcoal briquettes; Hidden Valley and K C Masterpiece dressings and sauces; and Brita water filtration products. Clorox also makes professional cleaning products for the institutional, janitorial, and foodservice markets. About 19 percent of Clorox's sales are derived outside the United States through marketing channels in more than 120 countries. The company maintains manufacturing facilities in 22 countries and three research and development centers in Pleasanton, California; Willowbrook, Illinois; and Buenos Aires, Argentina.

ONE-PRODUCT, INDEPENDENT COMPANY, 19131957

Clorox was founded on May 3, 1913, as The Electro-Alkaline Company by five Oakland, California-area businessmenEdward Hughes, Charles Husband, William Hussey, Rufus Myers, and Archibald Taft, only one of whom had any knowledge of chemistry. Their objective was to convert brine from ocean water into sodium hypochlorite bleach using an electrolytic process considered to be technologically advanced for its time. Each partner invested $100 in the new venture, and in August 1913 they purchased a plant site. The company's first product, Clorox liquid bleach, was packaged in five-gallon returnable containers and delivered by horse-drawn wagon to local breweries, dairies, and laundries for cleaning and disinfecting their facilities. Labels for the new product identified it as being "made by electricity." The name Clorox was an amalgamation of portions of the names of two of the product's key ingredients: chlorine and sodium hydroxide.

An initial stock issue of 750 shares at $100 each provided $75,000 in start-up capital. The company struggled through its early years and often depended upon personal loans from its directors to pay expenses.

In 1916 a less concentrated liquid bleach product5 1/4 percent sodium hypochlorite instead of 21 percentfor household use was developed and sold in amber glass pint bottles. William C. R. Murray, the company's general manager, came up with the idea of producing and promoting household bleach. Murray's wife, Annie, gave away samples of the formula to customers of the family's Oakland-based grocery store. Its value as a laundry aid, stain remover, deodorant, and disinfectant was also promoted by door-to-door salespeople who demonstrated how a solution of Clorox bleach and water could whiten an ink-stained piece of fabric. Orders were collected on the spot and then given to local grocers who purchased the necessary inventory from the company to fulfill them. Small and local at the time, Clorox was not affected by World War I.

In the 1920s Clorox's manufacturing plant could produce about 2,000 cases, or 48,000 bottles of bleach per day. Assembly line workers filled bottles by hand using hoses attached to overhead tanks. After being filled, the bottles were sealed with rubber stoppers and labeled, also by hand. The company was reincorporated twice in the 1920sas Clorox Chemical Corporation, in 1922, and as Clorox Chemical Co., in 1928and in the latter year the firm went public with a listing on the San Francisco Exchange.

As demand for Clorox household bleach grew, the company expanded its manufacturing and distribution capabilities nationwide. By the early 1930s Clorox had become the best-selling liquid bleach in the country. The company was known by its amber glass bleach bottle, which continued to be used with minor adaptations in size and design until the early 1960s, when Clorox became the first bleach manufacturer to use plastic containers.

In 1929 Murray became president of Clorox Chemical. He served in that capacity until his sudden death in 1941, just prior to the United States' entry into World War II and was succeeded by William J. Roth. In contrast to Murray's relatively uneventful tenure, Roth immediately had to deal with the impact of the country's wartime involvement on the company. Because of the decreased availability of chlorine, the U.S. government permitted bleach manufacturers to reduce the concentration of sodium hypochlorite in their products. Roth, however, opted to decrease production rather than change the quality of Clorox bleach and jeopardize customer satisfaction. He also terminated a number of contracts for chlorine that had been negotiated before the war because those agreements paid suppliers too little for a substance in such short supply. Although these decisions were costly at the time, the company retained the respect of the industry and customer loyalty once the war was over.

SUBSIDIARY OF PROCTER & GAMBLE, 19571968

By the mid-1950s Clorox, still a one-product company, held the largest share of the domestic market for household bleach, thanks in part to the dozen new U.S. plants built between 1938 and 1956. The Procter & Gamble Company, a successful manufacturer of consumer products, viewed Clorox bleach as a compatible addition to its existing line of laundry products, and acquired the company in August 1957.

Procter & Gamble changed the firm's name to The Clorox Company. Within three months of the purchase, however, the Federal Trade Commission challenged the Clorox acquisition on the grounds that it might lessen competition or tend to create a monopoly in household liquid bleaches, a violation of the Clayton Act. Even though Procter & Gamble allowed Clorox to handle its own affairs, in 1967 the U.S. Supreme Court upheld the commission's order that Procter & Gamble divest itself of the Clorox operation. By 1969 Clorox had been spun off as a public company, with a listing on the New York Stock Exchange, and was once again independent.

COMPANY PERSPECTIVES

Clorox begins and ends with the consumer. Our mission is to understand and satisfy consumers in order to build brands that make people's lives easier, healthier and better.

DIVERSIFIED FOLLOWING THE REGAINING OF INDEPENDENCE IN 1969

Clorox's new president, former Procter & Gamble executive Robert B. Shetterly, and his top management team faced a more competitive marketing environment in which enzyme laundry products were rapidly encroaching on Clorox's core business. Realizing that diversification beyond bleach was essential to the company's survival, Clorox management implemented a three-pronged strategic plan aimed at the acquisition and internal development of a line of nonfood grocery products, the acquisition of a food specialty business, and the development of a line of institutional food and cleaning products. They drew up a list of potential targets for acquisition, many of which were purchased within the year, including Jiffee Chemical Corporation, the manufacturer of Liquid-Plumr drain opener; Shelco, which manufactured Jifoam aerosol oven cleaner; and the 409 division of Harrell International, which produced Formula 409 spray cleaners. Also in 1969 the company introduced Clorox 2, its first entry in the dry, nonchlorine segment of the bleach market.

In 1971 Clorox purchased McFadden Industries, makers of Litter Green cat litter. Clorox had first tested McFadden's product in the market with an option to acquire the entire company if the product proved successful. Clorox also acquired Grocery Store Products Company, which manufactured such specialty food products as B&B mushrooms, Kitchen Bouquet gravy thickener, and Cream of Rice cereal. A year later Clorox added a line of salad dressings and party dips to this operation by buying Hidden Valley Ranch Food Products. Sales of the company's chlorine bleach rebounded in the first years of the decade as concerns arose over the health and environmental effects of enzyme and phosphate detergents.

In 1972 Clorox met the third objective of its strategic plan with the acquisitions of Martin-Brower Corporation, a manufacturer and supplier of disposable packaging and paper goods for the foodservice industry, and Nesbitt Food Products, a manufacturer and distributor of soft drink concentrates. Joining the fold the following year was Kingsford Corporation, a leading manufacturer of charcoal briquettes.

The company soon encountered a series of setbacks, however. Just after the Kingsford acquisition, a cool and wet summer depressed sales of charcoal and the recreational products manufactured by other parts of the Kingsford operation. Clorox's introduction of a new product, Mr. Mushroom, coincided unexpectedly with a nationwide botulism scare, which adversely affected Mr. Mushroom and the company's B&B brand. Mushroom production at its newly acquired Country Kitchen Foods subsidiary in England decreased significantly due to a virus in the fertilizer used. Sales of Clorox's cleaning products also fell because of consumers' fears of recession.

KEY DATES:

1913:
Five Oakland, California-area businessmen found The Electro-Alkaline Company, which soon begins producing Clorox liquid bleach.
1916:
Company starts selling a less-concentrated, household version of the product.
1922:
Firm is reincorporated as Clorox Chemical Corporation.
1928:
Company reincorporates as Clorox Chemical Co. and goes public.
1957:
The Procter & Gamble Company (P&G) acquires Clorox, renaming it The Clorox Company.
1969:
Clorox regains its independence after P&G is forced to divest it for antitrust reasons; company completes first acquisition, Liquid-Plumr, and introduces first new product, Clorox 2.
1974:
Through an alliance with Henkel KGaA, the German firm gains a minority shareholding in Clorox.
1990:
The Pine-Sol and Combat brands are acquired.
1996:
Armor All Products Corporation is acquired.
1999:
Clorox acquires First Brands Corporation, maker of Glad plastic bags and wraps.
2002:
Clorox and P&G form joint venture involving the Glad business.
2004:
Clorox's relationship with Henkel is ended.

Although these problems led to a temporary halt in further acquisitions, the company successfully negotiated an agreement in 1974 with Henkel KGaA, a German producer of consumer and industrial food and cleaning products. Clorox gained access to Henkel's research-and-development capabilities and acquired manufacturing and marketing rights to Henkel-developed products in the United States, Canada, and Puerto Rico. Henkel in turn became a minority shareholder in Clorox. In 1975 a civil antitrust suit brought against both Clorox and Procter & Gamble by Purex Corporation, a competitor in the bleach market, came to trial. The suit sought over $520 million in damages, which Purex claimed had resulted from Procter & Gamble's acquisition of Clorox in the late 1950s. Purex admitted defeat in 1982, when the Supreme Court refused to hear the case. Both a federal court and federal appeals court had ruled that Purex had failed to prove that either company had caused it to suffer any loss of business.

Shetterly retired as chief executive officer in 1980 and was succeeded by Calvin Hatch, another former Procter & Gamble executive. Under Shetterly's leadership, the company had diversified beyond bleach into a number of other areas; however, most of these new ventures never became profitable. Conceding that Shetterly's growth plan had failed, Clorox sold its Martin-Brower subsidiary at a loss in 1979 to the U.K.-based Dalgety PLC, and Country Kitchen Foods, its British mushroom canning operation, to H.J. Heinz Company, Ltd., the U.K. subsidiary of the U.S. company. These divestitures gave Clorox plenty of capital to use in its search for niches in the consumer packaged-goods market in which the company could develop its own products and capture a dominant share.

Clorox devoted a significant amount of money and corporate support to research and development. Until the company was able to come up with a breakthrough product of its own, however, it continued to rely upon outside acquisitions to diversify its business and fill its new-product pipeline. Some of the acquisitions made under Hatch's leadership, such as the 1979 purchase of the Emil Villa chain of barbecue restaurants, paralleled Shetterly's mistakes in fueling growth but not profits, while other products gained through earlier acquisitions, such as Cream of Rice cereal, fell short of the company's goals and were eventually sold. Efforts to generate and rapidly build a base of international business were also stymied by solidly entrenched competition.

In 1981 the company acquired Comerco, a Tacoma, Washington-based producer of stains and wood preservatives marketed under the Olympic brand name to hardware and home-improvement stores. Two years later, the company purchased Lucite house paints from E.I. du Pont de Nemours & Company. Clorox attempted to model these acquisitions after its successful Kingsford charcoal operation, using marketing techniques and heavy advertising to produce premium-priced, brand-name products. The subsidiary formed to manage these businesses was never effectively able to integrate the operations of these two product lines nor to attain the company's sales expectations, however. It was sold to PPG Industries, Inc. in 1989 at a loss of $20 million.

Over the years, Clorox had retained leadership of the laundry-bleach market despite numerous attempts by competitors to chip away at its share with other brand-name, private-label, and generic products. In 1982 Clorox faced its toughest challenge when Procter & Gamble decided to launch its own bleach product called Vibrant in a test market. Clorox quickly responded by introducing a new bleach with a similar formula called Wave. Although Vibrant never made it out of the test-market stage due to manufacturing problems, this competitive advance against Clorox set the stage for future attempts by each company to invade the markets for products long dominated by the other.

In 1986 Calvin Hatch retired as chairman, a post he had held since 1982, and was succeeded by President and CEO Charles R. Weaver. Jack W. Collins, the company's executive vice-president and chief operating officer, was promoted to Weaver's former positions. Beginning in 1987, the company diversified into another new business area by purchasing a number of bottled-water companies, including the Deer Park Spring Water Company and Deep Rock Water Company, followed by the Aqua Pure Water Company and Emerald Coast Water Company in 1988.

After several years of uneasy coexistence after the Vibrant incident, the battle between Clorox and Procter & Gamble for dominance of the consumer marketplace erupted. In 1988 the company introduced its Clorox Super Detergent brand of laundry soap powder in four western states and was quickly attacked by Procter & Gamble's new Tide With Bleach brand. Procter & Gamble also began the market test of a new brand of liquid bleach targeted at Clorox customers, a move intended to warn Clorox against entering the laundry detergent market. By mid-1989 Procter & Gamble had withdrawn its bleach product because of disappointing sales. Clorox kept its detergent on the market but continued to face an uphill battle against the entrenched brands. The fact that consumer preferences were slowly moving away from powders toward liquid detergents added to the company's marketing problems. In an attempt to inject new life into its consumer products business, the company acquired the Pine-Sol cleaner and Combat insecticide lines of American Cyanamid Company in 1990 for $465 million, a price generally considered to be too high. That same year, Robert A. Bolingbroke became president, succeeding the retiring Collins.

After spending more than $225 million over three years developing and marketing its detergent, and having thereupon achieved only a 3 percent market share, Clorox in May 1991 abandoned this aggressive but misguided venture. The company took a $125 million pretax charge, largely to exit the detergent business, a charge that cut net earnings to $52.7 million for fiscal 1991, a 65.7 percent drop from the $153.6 million of the previous year. Clorox's entrée into detergent was doubly damaging since Procter & Gamble's counter-punch, Tide With Bleach, also cut into sales of Clorox bleach, with Clorox 2 particularly hard hit, its sales falling 10 percent in fiscal 1991 alone. In addition to exiting the detergent business, Clorox around the same time pulled the plug on other ill-advised products it was test-ing, including a bar soap called Satine and Hidden Valley Ranch microwavable frozen entrees.

COMPANY TURNAROUND

In the aftermath of the company's largely self-inflicted difficulties, Weaver retired in mid-1992. His selection for a successor, Bolingbroke, was rejected by the company board, who instead chose Craig Sullivan to be the new chairman and CEO. Bolingbroke soon resigned; Sullivan, a 21-year Clorox veteran who had been a group vice-president, eventually assumed the position of president as well; and the position of COO was eliminated in order to flatten the management structure.

Under Sullivan's leadership and with the help of a surging economy in the United States, Clorox achieved a remarkable turnaround during the mid-1990s. The largely single-digit year-on-year increases in net sales of the early 1990s gave way to 11.8 and 14.2 percent increases in fiscal 1996 and 1997, respectively, with net sales hitting a record $2.53 billion in 1997. Net earnings were on the rise as well, with another 1997 record of $249.4 million. Cleaning up and bolstering the company's product portfolio and expanding internationally fueled the resurgence.

Soon after becoming chairman, Sullivan ordered a comprehensive financial and strategic review of the company's entire line of products. The study identified three businessesthe Prince Castle restaurant equipment subsidiary, Deer Park bottled water, and the Moore's and Domani frozen food businessesthat accounted for 10 percent of company sales, 24 percent of its workforce, but none of its profits; these businesses also did not mesh well with the rest of Clorox's portfolio. All three were soon divested: Prince Castle was sold in June 1993; the following month, the bottled water business was sold; and in September 1993 Clorox sold Moore's and Domani to Ore-Ida Foods, a division of H.J. Heinz Company. The bottled water and frozen food businesses were sold for a combined $159.3 million.

The company's portfolio was subsequently shored up through a series of acquisitions and a renewed commitment to new product development. Clorox's strong balance sheet, with relatively low long-term debt and plenty of cash, placed it in perfect position to grow through acquisitions. In January 1994 the company acquired the S.O.S. brand of cleaning products from Miles Inc. for $116.5 million. Building on a joint venture it had been involved in since 1988, Clorox in fiscal 1995 purchased Canada-based Brita International Holdings, Inc., a manufacturer and marketer of Brita water filtration systems. In late 1995 the company extended its presence in the bug-killing business by purchasing the Black Flag line of insecticides from London's Reckitt & Colman Plc. Clorox then added Lestoil heavy-duty cleaner to its portfolio in mid-1996 in a deal with Procter & Gamble. In December 1996 the company spent $360.1 million to acquire Armor All Products Corporation and its leading line of automotive cleaning products. Armor All became a wholly owned subsidiary of Clorox.

Meanwhile, notable new product successes included Floral Fresh Clorox, introduced in October 1995, and Lemon Fresh Pine-Sol, which debuted in February 1995 and was formulated after a survey discovered that many consumers did not like the smell of pine. During fiscal 1997 Formula 409 carpet cleaner was introduced, while the flagship Formula 409 all-purpose cleaner was reformulated to kill bacteria. The Clorox 2 color-safe bleach brand was revitalized in 1996 and 1997 through the relaunch of Clorox 2 liquid bleach as a concentrate and with the debut of Floral Fresh dry and liquid formulas.

In the long run, Sullivan's emphasis on international growth was perhaps the most important aspect of his multi-pronged revitalization program. During the early 1990s, Clorox derived only 4 percent of its net sales outside the United States. Sullivan created an international team to tackle overseas markets and set an ambitious goal of deriving a full 20 percent of sales from these markets by 2000. By 1997 Clorox was well on its way to meeting this goal as international sales reached 14 percent. Much of this growth was fueled through acquisitions, particularly in Latin America, where the company was able to quickly gain half of the bleach markets in Argentina and Colombia and 90 percent of the bleach market in Chile. Overall, Clorox spent $1 billion acquiring 26 companies from fiscal 1993 through fiscal 1997; 23 of these were non-U.S. companies, primarily Latin American.

Of course, not everything went smoothly in the mid-1990s. In September 1997 the company recalled and stopped production of QuickSilver, an automotive wheel-cleaning product gained via the Armor All acquisition, after it was blamed for the death of a Canadian child.

ACCOMPLISHMENTS AND CHALLENGES ENTERING THE NEW CENTURY

Clorox's acquisition spree culminated in January 1999 with the purchase of First Brands Corporation for approximately $2 billion in stock and assumed debt, the largest acquisition in the company's history. Based in Danbury, Connecticut, First Brands was best known for its Glad plastic wraps and trash bags. The firm also produced STP automotive additives and Fresh Step, Scoop Away, and Jonny Cat cat litters.

Buying First Brands had an immediate impact on Clorox's top line as revenues jumped from $2.74 billion in fiscal 1998 to just over $4 billion the following year. Yet Clorox acquired First Brands at an inauspicious time. Plastic costs were rising, and the company was in the midst of a heavy advertising and promotional campaign for a new line of GladWare plastic containers. At the same time, Glad's market share was on the decline because of intense competition, particularly with the entrance of cheaper, no-name brands into the category. Over the next few years, Clorox struggled to integrate the First Brands products into its portfolio, and both its revenues and profits stagnated; the price of its stock fell to less than half of its peak in fiscal 1999. Some observers laid part of the blame on the decision to fire a large portion of First Brands' managers shortly after the takeover.

In addition to its difficulties with the First Brands acquisition, Clorox also suffered in the early 2000s from the general economic downturn and from failed product introductions, such as its FreshCare home dry-cleaning kit, which debuted in March 2000 and was pulled off the market in the fall of 2001. An initial success but another ultimate failure was the Clorox ReadyMop mopping system, an all-in-one wet mop with disposable cleaning pads that debuted in early 2002. To improve profitability, Clorox cut costs through layoffs and plant closings. The firm also tightened its focus on core brands, divesting peripheral ones, including Jonny Cat litter and Black Flag insecticide, both off-loaded in 2003.

Sullivan's period at the helm ended when he retired and was replaced as CEO by Gerald E. Johnston in July 2003 and as chairman by Robert W. Matschullat in January 2004. Johnston had spent ten years at Procter & Gamble before joining Clorox in 1981 and working his way up to president and COO by 1999. Under Johnston, Clorox began adopting a higher public profile than it did under the publicity-shy Sullivan, and the new leader also placed great emphasis on investing in research and development and technology to produce innovative new products.

The R&D focus paid dividends almost immediately with the introduction in the fall of 2003 of Glad Press 'n Seal sealable plastic wrap, which became a big hit with consumers. Ironically, this was the first product deriving from a joint venture that Clorox had formed in November 2002 with its one-time parent and longtime rival, Procter & Gamble. The venture, centering on the Glad business, aimed to combine the power of the Glad brand with Procter & Gamble's superior manufacturing prowess, particularly some new plastic technologies it had developed. The Cincinnati company gained an initial 10 percent stake in the Glad business but increased its interest to 20 percent in late 2004 by investing an additional $133 million. Using patented technology from Procter & Gamble, the Press 'n Seal product was touted as sticking better to container surfaces than regular plastic wraps, while also not sticking to itself as readily as the older versions tended to do. A second hit product coming out of the Glad joint venture was Glad ForceFlex trash bags, which debuted in 2004. These bags were embossed with a unique diamond-shaped quilted pattern that allowed the plastic to stretch and thereby be less likely to tear under pressure from sharp or heavy objects.

These two Glad products were part of Johnston's drive to develop "game-changers," products that would enable Clorox to dominate certain categories. Most of these heavily-and creatively-promoted new products, including Clorox disinfecting wipes, Armor All wipes, and the Clorox ToiletWand, were successes. Another innovative new product that found a ready market was the Clorox Bleach Pen, a penlike tool that made it easier for a user to control the application of bleach and that was able to remove stains on a variety of surfaces. The drive to develop new products pushed sales up to $4.39 billion by fiscal 2005, while ongoing cost-containment efforts propelled the profit margin above 12 percent, a vast improvement over the 7.9 percent figure for 2002.

Another significant development during this period occurred in November 2004 when Clorox's relationship with Henkel came to an end. Linked since 1974, the two companies had developed certain technologies together but had never actually jointly produced any commercial products. Henkel elected to divest its 29 percent stake in Clorox in order to help finance its acquisition of Dial Corporation. Clorox gained back the stock by transferring to Henkel $2.1 billion in cash; its insecticides business, including the Combat brand; the Soft Scrub cleaner business; and its 20 percent stake in a joint venture with Henkel focusing on consumer products in Spain and Portugal.

Late in 2005, with soaring energy prices driving up the costs of raw materials, transportation, and utilities, Clorox announced plans to raise prices on 40 percent of its products. Clorox continued to roll out new products and back them and existing products with creative advertising campaigns, but Johnston, the architect of Clorox's turnaround, suffered a heart attack in March 2006, went on leave, and then retired two months later to focus on recovering. Matschullat was named interim chairman and CEO, while the company conducted a search for a successor.

                                   Sandy Schusteff

                         Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

A & M Products Manufacturing Company; The Armor All/STP Products Company; Brita Canada Corporation; Brita Manufacturing Company; The Brita Products Company; Clorox Africa Pty. Ltd. (South Africa); Clorox Argentina S.A.; Clorox Australia Pty. Ltd.; Clorox do Brasil Ltda. (Brazil); Clorox Car Care Limited (U.K.); Clorox de Centro America, S.A. (Costa Rica); Clorox Chile S.A.; Clorox China (Guangzhou) Ltd.; Clorox de Colombia S.A.; Clorox Commercial Company; The Clorox Company of Canada Ltd.; The Clorox Company of Puerto Rico; Clorox Diamond Production Company; Clorox Dominicana, C. por A. (Dominican Republic); Clorox Eastern Europe LLC (Russia); The Clorox Far East Company Limited (Hong Kong); Clorox Germany GmbH; Clorox Hong Kong Limited; The Clorox International Company; Clorox International Philippines, Inc.; Clorox Mexicana S. de R.L. de C.V. (Mexico); Clorox de Mexico, S.A. de C.V.; Clorox Netherlands B.V.; Clorox New Zealand Limited; Clorox de Panama S.A.; Clorox Peru S.A.; The Clorox Outdoor Products Company; The Clorox Pet Products Company; Clorox Professional Products Company; The Clorox Sales Company; Clorox Services Company; Clorox Servicios Corporativos S. de R.L. de C.V. (Mexico); Clorox Switzerland S.a.r.l.; Clorox Uruguay S.A.; Corporacion Clorox de Venezuela, S.A.; Electroquimicas Unidas S.A.I.C. (Chile); Evolution Sociedad S.A. (Uruguay); Fabricante de Productos Plasticos, S.A. de C.V. (Mexico); First Brands do Brasil Ltda. (Brazil); First Brands Corporation; First Brands Mexicana, S.A. de C.V. (Mexico); Forest Technology Corporation; Glad Manufacturing Company; The Glad Products Company; The Household Cleaning Products Company of Egypt Ltd.; The HV Food Products Company; HV Manufacturing Company; Invermark S.A. (Argentina); Kaflex S.A. (Argentina); Kingsford Manufacturing Company; The Kingsford Products Company; National Cleaning Products Company Limited (Saudi Arabia); Petroplus Produtos Automotivos S.A. (Brazil); Petroplus Sul Comercio Exterior S.A. (Brazil); Polysak, Inc.; Quimica Industrial S. A. (Chile); STP do Brasil Ltda. (Brazil); STP Products Manufacturing Company; Traisen S.A. (Uruguay); United Cleaning Products Manufacturing Company Limited (Yemen); Yuhan-Clorox Co., Ltd. (Korea).

PRINCIPAL COMPETITORS

The Procter & Gamble Company; S.C. Johnson & Son, Inc.; Reckitt Benckiser plc; Colgate-Palmolive Company; Unilever; The Dial Corporation; Pactiv Corporation.

FURTHER READING

About the Company on Its Diamond Anniversary, Oakland, Calif.: The Clorox Company, [1988].

Anders, George, and Tara Parker-Pope, "Clorox, Still Growing, to Buy First Brands," Wall Street Journal, October 20, 1998, p. A3.

Bagamery, Anne, "Laundryman," Forbes, July 15, 1985, p. 120.

Baron, Michael, "Clorox CEO Retires, Citing Health," Wall Street Journal, May 4, 2006, p. B7.

Barrett, Amy, "Clorox: Washed Up?," Financial World, February 4, 1992, pp. 17-18.

Barron, Kelly, "Holding the Bag: Clorox Tries to Clean Up a Fumbled Acquisition," Forbes, July 23, 2001, p. 90.

Bole, Kristen, "Southern Lights: South America Brightens Outlook for Clorox," San Francisco Business Times, June 14, 1996, p. 3.

Byrne, Harlan S., "Clorox Co.," Barron's, December 3, 1990, p. 47.

Calandra, Thom, "In the Hot Seat," Forbes, October 12, 1992, p. 126.

Calvey, Mark, "Clorox CEO Seeks 'Bite-Sized' Buys," San Francisco Business Times, September 23, 2003, p. 1.

, "Clorox Pulls Some Pizzazz Out of the Old Bleach Box," San Francisco Business Times, April 16, 2004, p. 4.

, "Troubled Clorox Sharpens Its Ax," San Francisco Business Times, December 7, 2001, p. 1.

Campanella, Frank W., "Still the Leader: Clorox Remains No. 1, but It Thrives on Other Household Products," Barron's, March 25, 1985, pp. 57+.

Carlsen, Clifford, "Clorox Co. Positioned for Large Acquisition," San Francisco Business Times, November 20, 1992, p. 2A.

"Clorox: An R&D Game Plan Is Brightening Its Profit Picture," Business Week, April 23, 1984, p. 113.

"Clorox: Picking Up the Pieces of a Diversification That Failed," Business Week, March 3, 1980, pp. 42+.

David, Gregory E., "New, Improved ," Financial World, February 15, 1994, pp. 36-37.

Greene, Joan, "Operations at Clorox Take on Brighter Hue," Barron's, October 13, 1975, pp. 61+.

Guzman, Doris de, "Clorox Swap Fortifies Henkel's U.S. Consumer Biz," Chemical Market Reporter, October 18, 2004, p. 20.

Hamilton, Joan O'C, "Brighter Days at Clorox," Business Week, June 16, 1997, pp. 62, 65.

Harvilicz, Helena, "Clorox Has a Good Year but Is Still Digesting First Brands," Chemical Market Reporter, August 23, 1999, p. 10.

Hof, Robert D., "A Washout for Clorox?," Business Week, July 9, 1990, p. 32.

Jaffe, Thomas, "No Soap," Forbes, August 13, 1984, p. 122.

Johnson, Bradley, "Clorox's Identity Crisis," Advertising Age, May 6, 1991, pp. 1, 54.

, "What Sullivan Faces As New Clorox CEO," Aduertising Age, June 1, 1992, p. 48.

Lappen, Alyssa A., "Battling for a Bleachhead," Forbes, November 28, 1988, p. 138.

Levine, Jonathan B., "Clorox Makes a Daring Move in the Laundry Room," Business Week, May 2, 1988, p. 36.

Neff, Jack, "Clorox Finds Running with Lions Effective," Advertising Age, March 13, 2006, p.12.

, "Clorox Seeks Successor for Johnston," Advertising Age, May 8, 2006, p. 8.

, "New Products Pump Clorox Growth," Advertising Age, June 16, 1997, p. 22.

Rhine, Jon, "Clorox Aims to Clean Up at P&G's Expense," San Francisco Business Times, March 3, 2000, p. 3.

Rosenberg, Alex, "Clorox Picks President As New CEO," Oakland (Calif.) Tribune, June 20, 2003.

Shao, Maria, "A Bright Idea That Clorox Wishes It Never Had," Business Week, June 24, 1991, pp. 118-19.

Shetterly, Robert B., Renaissance of the Clorox Company, New York: Newcomen Society in North America, 1973, 16 p.

Shisgall, Oscar, Eyes on Tomorrow: The Evolution of Procter & Gamble, Chicago: J.G. Ferguson Publishing, 1981, 295 p.

"Still No. 1: Clorox Seems to Be Successfully Fending Off Stiff Competition," Barron's, August 2, 1982, pp. 38+.

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The Clorox Company

The Clorox Company

1221 Broadway Street
Oakland, California 94612
U.S.A.
(510) 271-7000
Fax: (510) 832-1463
Web site: http://www.clorox.com

Public Company
Incorporated: 1913 as the Electro-Alkaline Company
Employees: 5,500
Sales: $2.53 billion (1997)
Stock Exchanges: New York Pacific
SICs: 2035 Pickled Fruits & Vegetables, Salad Dressings, Vegetable Sauces & Seasonings; 2819 Industrial Inorganic Chemicals, Not Elsewhere Classified; 2841 Soap & Other Detergents, Except Specialty Cleaners; 2842 Specialty Cleaning, Polishing & Sanitation Preparations; 3999 Manufacturing Industries, Not Elsewhere Classified; 5141 Groceries, General Line; 8731 Commercial, Physical & Biological Research

Although best known for the household bleach that bears the firms name, The Clorox Company is a diversified international manufacturer and marketer of a variety of consumer products ranging from household cleaners to salad dressings and from insecticides to cat litter. The companys professional products unit manufactures and markets cleaning and food products for institutional and professional markets and the food-service industry. About 16 percent of Cloroxs sales are derived outside the United States through marketing channels in more than 70 countries. German conglomerate Henkel KGaA holds about a 28 percent stake in Clorox.

One-Product, Independent Company, 1913-57

Clorox was founded in 1913 as the Electro-Alkaline Company by five Oakland, California-area businessmen, only one of whom had any knowledge of chemistry. Their objective was to convert brine from ocean water into sodium hypochlorite bleach using an electrolytic process considered to be technologically advanced for its time. Each partner invested $100 in the new venture, and in August 1913 they purchased a plant site. The companys first product, Clorox liquid bleach, was packaged in five-gallon returnable containers and delivered by horse-drawn wagon to local breweries, dairies, and laundries for cleaning and disinfecting their facilities. Labels for the new product identified it as being made by electricity.

An initial stock issue of 750 shares at $100 each provided $75,000 in start-up capital. The company struggled through its early years and often depended upon personal loans from its directors to pay expenses.

In 1916 a less concentrated liquid bleach product 5¼ percent sodium hypochlorite instead of 21 percentfor household use was developed and sold in amber glass pint bottles. William C. R. Murray, the companys general manager, came up with the idea of producing and promoting household bleach. Murrays wife, Annie, gave away samples of the formula to customers of the familys Oakland-based grocery store. Its value as a laundry aid, stain remover, deodorant, and disinfectant was also promoted by door-to-door salespeople who demonstrated how a solution of Clorox bleach and water could whiten an ink-stained piece of fabric. Orders were collected on the spot and then given to local grocers who purchased the necessary inventory from the company to fulfill them. Small and local at the time, Clorox was not affected by World War I.

In the 1920s Cloroxs manufacturing plant could produce about 2,000 cases, or 48,000 bottles of bleach per day. Assembly line workers filled bottles by hand using hoses attached to overhead tanks. After being filled, the bottles were sealed with rubber stoppers and labeled, also by hand.

As demand for Clorox household bleach grew, the company expanded its manufacturing and distribution capabilities nationwide. By the early 1930s Clorox had become the best-selling liquid bleach in the country. The company was known by its amber glass bleach bottle, which continued to be used with minor adaptations in size and design until the early 1960s, when Clorox became the first bleach manufacturer to use plastic containers.

In 1929 Murray became president of Clorox Chemical Company, a name that had replaced the companys original name in 1922. He served in that capacity until his sudden death in 1941, just prior to the United Statess entry into World War II and was succeeded by William J. Roth. In contrast to Murrays relatively uneventful tenure, Roth immediately had to deal with the impact of the countrys wartime involvement on the company. Due to the decreased availability of chlorine, the U.S. government permitted bleach manufacturers to reduce the concentration of sodium hypochlorite in their products. Roth, however, opted to decrease production rather than change the quality of Clorox bleach and jeopardize customer satisfaction. He also terminated a number of contracts for chlorine that had been negotiated before the war because those agreements paid suppliers too little for a substance now in such short supply. Although these decisions were costly at the time, the company retained the respect of the industry and customer loyalty once the war was over.

Subsidiary of Procter & Gamble, 1957-68

By the mid-1950s Clorox, still a one-product company, held the largest share of the domestic market for household bleach. The Procter & Gamble Company, a successful manufacturer of consumer products, viewed Clorox bleach as a compatible addition to its existing line of laundry products, and acquired the company in 1957.

Procter & Gamble changed the firms name to The Clorox Company. However, within three months of the purchase, the Federal Trade Commission challenged the Clorox acquisition on the grounds that it might lessen competition or tend to create a monopoly in household liquid bleaches, a violation of the Clayton Act. Even though Procter & Gamble allowed Clorox to handle its own affairs, in 1967 the U.S. Supreme Court upheld the commissions order that Procter & Gamble divest itself of the Clorox operation. By 1969 Clorox had been spun off as a public company and was once again independent.

Diversified Following the Regaining of Independence in 1969

Cloroxs new president, former Procter & Gamble executive Robert B. Shetterly, and his top management team faced a more competitive marketing environment in which enzyme laundry products were rapidly encroaching on Cloroxs core business. Realizing that diversification beyond bleach was essential to the companys survival, Clorox management implemented a three-pronged strategic plan aimed at the acquisition and internal development of a line of nonfood grocery products, the acquisition of a food specialty business, and the development of a line of institutional food and cleaning products. They drew up a list of potential targets for acquisition, many of which were purchased within the year, including Jiffee Chemical Corporation, the manufacturer of Liquid-plumr drain opener; Shelco, which manufactured Jifoam aerosol oven cleaner; and the 409 division of Harrell International, which produced Formula 409 spray cleaners. One year later the company introduced Clorox 2, its first entry in the dry, nonchlorine segment of the bleach market.

In 1971 Clorox purchased McFadden Industries, makers of Litter Green cat litter. Clorox had first tested McFaddens product in the market with an option to acquire the entire company if the product proved successful. Clorox also acquired Grocery Store Products Company, which manufactured such specialty food products as B&B mushrooms, Kitchen Bouquet gravy thickener, and Cream of Rice cereal. A year later Clorox added a line of salad dressings and party dips to this operation by buying Hidden Valley Ranch Food Products. Sales of the companys chlorine bleach rebounded in the first years of the decade as concerns arose over the health and environmental effects of enzyme and phosphate detergents.

In 1972 Clorox met the third objective of its strategic plan with the acquisitions of Martin-Brower Corporation, a manufacturer and supplier of disposable packaging and paper goods for the food-service industry, and Nesbitt Food Products, a manufacturer and distributor of soft drink concentrates. Joining the fold the following year was Kingsford Corporation, a leading manufacturer of charcoal briquettes.

The company soon encountered a series of setbacks, however. Just after the Kingsford acquisition, a cool and wet summer depressed sales of charcoal and the recreational products manufactured by other parts of the Kingsford operation. Cloroxs introduction of a new product, Mr. Mushroom, coincided unexpectedly with a nationwide botulism scare, which adversely affected Mr. Mushroom and the companys B&B brand. Mushroom production at its newly acquired Country Kitchen Foods subsidiary in England decreased significantly due to a virus in the fertilizer used. Sales of Cloroxs cleaning products also fell because of consumers fears of recession.

Company Perspectives:

We are a dynamic international organization whose principal business is building brand franchises in categories where we can best use our core strengths. Our products provide excellent value for consumers, and are sold primarily in grocery stores and other retail outlets in many parts of the world.

Our line of domestic retail products includes many of the countrys best known brands of laundry additives, home cleaning and automotive appearance products, cat litters, insecticides, charcoal briquets, salad dressings, sauces, water filtration systems. The great majority of our products either lead or are a strong second in their categories.

Although these problems led to a temporary halt in further acquisitions, the company successfully negotiated an agreement in 1974 with Henkel, a German producer of consumer and industrial food and cleaning products. Clorox gained access to Henkels research-and-development capabilities and acquired manufacturing and marketing rights to Henkel-developed products in the United States, Canada, and Puerto Rico. Henkel in turn became a minority shareholder in Clorox. In 1975 a civil antitrust suit brought against both Clorox and Procter & Gamble by Purex Corporation, a competitor in the bleach market, came to trial. The suit sought over $520 million in damages, which Purex claimed had resulted from Procter & Gambles acquisition of Clorox in the late 1950s. Purex admitted defeat in 1982, when the Supreme Court refused to hear the case. Both a federal court and federal appeals court had ruled that Purex had failed to prove that either company had caused it to suffer any loss of business.

Shetterly retired as chief executive officer in 1980 and was succeeded by Calvin Hatch, another former Procter & Gamble executive. Under Shetterlys leadership, the company had diversified beyond bleach into a number of other areas; however, most of these new ventures never became profitable. Conceding that Shetterlys growth plan had failed, Clorox sold its Martin-Brower subsidiary at a loss in 1979 to the U.K.-based Dalgety PLC, and Country Kitchen Foodsits British mushroom canning operationto H.J. Heinz Company, Ltd., the U.K. subsidiary of the U.S. company. These divestitures gave Clorox plenty of capital to use in its search for niches in the consumer packaged-goods market in which the company could develop its own products and capture a dominant share.

Clorox devoted a significant amount of money and corporate support to research and development. Until the company was able to come up with a breakthrough product of its own, however, it continued to rely upon outside acquisitions to diversify its business and fill its new-product pipeline. Some of the acquisitions made under Hatchs leadership, such as the 1979 purchase of the Emil Villa chain of barbecue restaurants, paralleled Shetterlys mistakes in fueling growth but not profits, while other products gained through earlier acquisitions, such as Cream of Rice cereal, fell short of the companys goals and were eventually sold. Efforts to generate and rapidly build a base of international business were also stymied by solidly entrenched competition.

In 1981 the company acquired Comerco, a Tacoma, Washington-based producer of stains and wood preservatives marketed under the Olympic brand name to hardware and home-improvement stores. Two years later, the company purchased Lucite house paints from E.I. Du Pont de Nemours Company. Clorox attempted to model these acquisitions after its successful Kingsford charcoal operation, using marketing techniques and heavy advertising to produce premium-priced, brand-name products. The subsidiary formed to manage these businesses was never effectively able to integrate the operations of these two product lines nor to attain the companys sales expectations, however. It was sold to PPG Industries in 1989 at a loss of $20 million.

Over the years, Clorox had retained leadership of the laundry-bleach market despite numerous attempts by competitors to chip away at its share with other brand-name, private-label, and generic products. In 1982 Clorox faced its toughest challenge when Procter & Gamble decided to launch its own bleach product called Vibrant in a test market. Clorox quickly responded by introducing a new bleach with a similar formula called Wave. Although Vibrant never made it out of the test-market stage due to manufacturing problems, this competitive advance against Clorox set the stage for future attempts by each company to invade the markets for products long dominated by the other.

In 1986 Calvin Hatch retired as chairman, a post he had held since 1982, and was succeeded by president and CEO Charles R. Weaver. Jack W. Collins, the companys executive vice-president and chief operating officer, was promoted to Weavers former positions. Beginning in 1987, the company diversified into another new business area by purchasing a number of bottled-water companies, including the Deer Park Spring Water Company and Deep Rock Water Company, followed by the Aqua Pure Water Company and Emerald Coast Water Company in 1988.

After several years of uneasy coexistence after the Vibrant incident, the battle between Clorox and Procter & Gamble for dominance of the consumer marketplace erupted. In 1988 the company introduced its Clorox Super Detergent brand of laundry soap powder in four western states and was quickly attacked by Procter & Gambles new Tide With Bleach brand. Procter & Gamble also began the market test of a new brand of liquid bleach targeted at Clorox customers, a move intended to warn Clorox against entering the laundry detergent market. By mid-1989 Procter & Gamble had withdrawn its bleach product due to disappointing sales. Clorox kept its detergent on the market but continued to face an uphill battle against the entrenched brands. The fact that consumer preferences were slowly moving away from powders toward liquid detergents added to the companys marketing problems. In an attempt to inject new life into its consumer products business, the company acquired the Pine Sol cleaner and Combat insecticide lines of American Cyanamid Company in 1990 for $465 million, a price generally considered to be too high. That same year, Robert A. Bolingbroke became president, succeeding the retiring Collins.

After spending more than $225 million over three years developing and marketing its detergent, and having thereupon achieved only a three percent market share, Clorox in May 1991 abandoned this aggressive but misguided venture. The company took a $125 million pretax charge, largely to exit the detergent business, a charge that cut net earnings to $52.7 million for fiscal 1991, a 65.7 percent drop from the $153.6 million of the previous year. Cloroxs entree into detergent was doubly damaging since Procter & Gambles counterpunchTide With Bleachalso cut into sales of Clorox bleach, with Clorox 2 particularly hard hit, its sales falling 10 percent in fiscal 1991 alone. In addition to exiting the detergent business, Clorox around the same time pulled the plug on other ill-advised products it was testing, including a bar soap called Satine and Hidden Valley Ranch microwavable frozen entrees.

Sullivan Turned Company Around in the Mid-1990s

In the aftermath of the companys largely self-inflicted difficulties, Weaver retired in mid-1992. His selection for a successor, Bolingbroke, was rejected by the company board, who instead chose Craig Sullivan to be the new chairman and CEO. Bolingbroke soon resigned; Sullivan, a 21-year Clorox veteran who had been a group vice-president, eventually assumed the position of president as well; and the position of COO was eliminated in order to flatten the management structure.

Under Sullivans leadership and with the help of a surging economy in the United States, Clorox achieved a remarkable turnaround during the mid-1990s. The largely single-digit year-on-year increases in net sales of the early 1990s gave way to 11.8 and 14.2 percent increases in fiscal 1996 and 1997, respectively, with net sales hitting a record $2.53 billion in 1997. Net earnings were on the rise as well, with another 1997 record of $249.4 million. Cleaning up and bolstering the companys product portfolio and expanding internationally fueled the resurgence.

Soon after becoming chairman, Sullivan ordered a comprehensive financial and strategic review of the companys entire line of products. The study identified three businessesthe Prince Castle restaurant equipment subsidiary, Deer Park bottled water, and the Moores and Domani frozen food businesses that accounted for 10 percent of company sales, 24 percent of its workforce, but none of its profits; these businesses also did not mesh well with the rest of Cloroxs portfolio. All three were soon divested: Prince Castle was sold in June 1993; the following month, the bottled water business was sold; and in September 1993 Clorox sold Moores and Domani to Ore-Ida Foods, a division of H.J. Heinz Co. The bottled water and frozen food businesses were sold for a combined $159.3 million.

The companys portfolio was subsequently shored up through a series of acquisitions and a renewed commitment to new product development. Cloroxs strong balance sheetwith relatively low long-term debt and plenty of cashplaced it in perfect position to grow through acquisitions. In January 1994 the company acquired the S.O.S. brand of cleaning products from Miles Inc. for $116.5 million. Building on a joint venture it had been involved in since 1988, Clorox in fiscal 1995 purchased Canada-based Brita International Holdings, Inc., a manufacturer and marketer of Brita water filtration systems. In late 1995 the company extended its presence in the bug-killing business by purchasing the Black Flag line of insecticides from Londons Reckitt & Colman Pic. Clorox then added Lestoil heavy-duty cleaner to its portfolio in mid-1996 in a deal with Procter & Gamble. And in December 1996 the company spent $360.1 million to acquire Armor All Products Corporation and its leading line of automotive cleaning products. Armor All became a wholly owned subsidiary of Clorox.

Meanwhile, notable new product successes included Floral Fresh Clorox, introduced in October 1995, and Lemon Fresh Pine-Sol, which debuted in February 1995 and was formulated after a survey discovered that many consumers did not like the smell of pine. During fiscal 1997 Formula 409 carpet cleaner was introduced, while the flagship Formula 409 all-purpose cleaner was reformulated to kill bacteria. The Clorox 2 color-safe bleach brand was revitalized in 1996 and 1997 through the relaunch of Clorox 2 liquid bleach as a concentrate and with the debut of Floral Fresh dry and liquid formulas.

In the long run, Sullivans emphasis on international growth was perhaps the most important aspect of his multipronged revitalization program. During the early 1990s, Clorox derived only four percent of its net sales outside the United States. Sullivan created an international team to tackle overseas markets and set an ambitious goal of deriving a full 20 percent of sales from these markets by 2000. By 1997 Clorox was well on its way to meeting this goal as international sales reached 14 percent. Much of this growth was fueled through acquisitions, particularly in Latin America, where the company was able to quickly gain half of the bleach markets in Argentina and Colombia and 90 percent of the bleach market in Chile. Overall, Clorox spent $1 billion acquiring 26 companies from fiscal 1993 through fiscal 199723 of these were non-U.S. companies, primarily Latin American.

Of course, not everything has gone smoothly in the mid-1990s. In September 1997 the company recalled and stopped production of Quicksilver, an automotive wheel-cleaning product, after it was blamed for the death of a Canadian child. The company planned to eventually replace the product with a less-toxic alternative. Despite such setbacks, the future looked bright for Clorox. By continuing to make smart extensions of its product lines, aggressively seeking out strategic acquisitions, and taking continued advantage of overseas opportunitieswith Asia the companys next major beachheadCloroxs renaissance was likely to last well into the new millennium.

Principal Subsidiaries

Armor All Products Company; The Brita Products Company; The Clorox Company of Puerto Rico; The Clorox International Company; Clorox Products Manufacturing Company; Clorox Professional Products Company; The Clorox Sales Company; Clorox Services Company; The HV Food Products Company; HV Manufacturing Company; Kingsford Manufacturing Company; The Kingsford Products Company; Clorox Argentina S.A.; Clorox do Brazil Ltda.; Brita (Canada) Inc.; The Clorox Company of Canada, Ltd.; Clorox Chile S.A.; Tecnoclor S.A. (Colombia); Clorox (Guangzhou) Company Limited (China); Clorox Korea, Ltd.; Clorox de Mexico S.A. de C.V.

Further Reading

About the Company on its Diamond Anniversary, Oakland, Calif.: The Clorox Company, [1988].

Bagamery, Anne, Laundryman, Forbes, July 15, 1985, p. 120.

Barrett, Amy, Clorox: Washed Up?, Financial World, February 4, 1992, pp. 17-18.

Bole, Kristen, Southern Lights: South America Brightens Outlook for Clorox, San Francisco Business Times, June 14, 1996, p. 3.

Byrne, Harían S., Clorox Co., Barrons, December 3, 1990, p. 47.

Calandra, Thorn, In the Hot Seat, Forbes, October 12, 1992, p. 126.

Carlsen, Clifford, Clorox Co. Positioned for Large Acquisition, San Francisco Business Times, November 20, 1992, p. 2A.

David, Gregory E., New, Improved . . ., Financial World, February 15, 1994, pp. 36-37.

Hamilton, Joan OC., Brighter Days at Clorox, Business Week, June 16, 1997, pp. 62, 65.

Hof, Robert D., A Washout for Clorox?, Business Week, July 9, 1990, p. 32.

Jaffe, Thomas, No Soap, Forbes, August 13, 1984, p. 122.

Johnson, Bradley, Cloroxs Identity Crisis, Advertising Age, May 6, 1991, pp. 1, 54.

_____, What Sullivan Faces as New Clorox CEO, Advertising Age, June 1, 1992, p. 48.

Lappen, Alyssa A., Battling for a Bleachhead, Forbes, November 28, 1988, p. 138.

Levine, Jonathan B., Clorox Makes a Daring Move in the Laundry Room, Business Week, May 2, 1988, p. 36.

Neff, Jack, New Products Pump Clorox Growth, Advertising Age, June 16, 1997, p. 22.

Shao, Maria, A Bright Idea That Clorox Wishes It Never Had, Business Week, June 24, 1991, pp. 118-19.

Shetterly, Robert B., Renaissance of the Clorox Company, New York: Newcomen Society in North America, 1973, 16 p.

Shisgall, Oscar, Eyes on Tomorrow: The Evolution of Procter & Gamble, Chicago: J.G. Ferguson Publishing Company, 1981, 295 p.

Sandy Schusteff

updated by David E. Salamie

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The Clorox Company

The Clorox Company

1221 Broadway Street
Oakland, California 94612
U.S.A.
(415) 271-7000
Fax: (415) 832-1463

Public Company
Incorporated: 1913 as the Electro-Alkaline Company
Employees: 5,300
Sales: $1.36 billion
Stock Exchanges: New York Pacific

Although best known for the household bleach that bears the firms name, The Clorox Company is a diversified international manufacturer and marketer of a variety of consumer products ranging from household cleaners to salad dressings. It also manufactures and markets equipment and products for the food-service industry and distributes bottled water in several areas of the United States.

Clorox was founded in 1913 as the Electro-Alkaline Company by five Oakland, California-area businessmen, only one of whom had any knowledge of chemistry. Their objective was to convert brine from ocean water into sodium hypochlorite bleach using an electrolytic process considered to be technologically advanced for its time. Each partner invested $100 in the new venture, and in August 1913 they purchased a plant site. The companys first product, Clorox liquid bleach, was packaged in five-gallon returnable containers and delivered by horse-drawn wagon to local breweries, dairies, and laundries for cleaning and disinfecting their facilities. Labels for the new product identified it as being made by electricity.

An initial stock issue of 750 shares at $100 each provided $75,000 in start-up capital. The company struggled through its early years and often depended upon personal loans from its directors to pay expenses.

In 1916 a less concentrated liquid bleach product51/4% sodium hypochlorite instead of 21%for household use was developed and sold in amber glass pint bottles. William C.R. Murray, the companys general manager, came up with the idea of producing and promoting household bleach. Murrays wife, Annie, gave away samples of the formula to customers of the familys Oakland-based grocery store. Its value as a laundry aid, stain remover, deodorant, and disinfectant was also promoted by door-to-door salespeople who demonstrated how a solution of Clorox bleach and water could whiten an ink-stained piece of fabric. Orders were collected on the spot and then given to local grocers who purchased the necessary inventory from the company to fulfill them. Small and local at the time, Clorox was not affected by World War I.

In the 1920s Cloroxs manufacturing plant could produce about 2,000 cases, or 48,000 bottles of bleach per day. Assembly line workers filled bottles by hand using hoses attached to overhead tanks. After being filled, the bottles were sealed with rubber stoppers and labeled, also by hand.

As demand for Clorox household bleach grew, the company expanded its manufacturing and distribution capabilities nationwide. By the early 1930s Clorox had become the bestselling liquid bleach in the country. The company was known by its amber glass bleach bottle, which continued to be used with minor adaptations in size and design until the early 1960s, when Clorox became the first bleach manufacturer to use plastic containers.

In 1929 Murray became president of Clorox Chemical Company, a name that had replaced the companys original name in 1922. He served in that capacity until his sudden death in 1941, just prior to the United Statess entry into World War II and was succeeded by William J. Roth. In contrast to Murrays relatively uneventful tenure, Roth immediately had to deal with the impact of the countrys wartime involvement on the company. Due to the decreased availability of chlorine, the U.S. government permitted bleach manufacturers to reduce the concentration of sodium hypochlorite in their products. Roth, however, opted to decrease production rather than change the quality of Clorox bleach and jeopardize customer satisfaction. He also terminated a number of contracts for chlorine that had been negotiated before the war because those agreements paid suppliers too little for a substance now in such short supply. Although these decisions were costly at the time, the company retained the respect of the industry and customer loyalty once the war was over.

By the mid-1950s Clorox, still a one-product company, held the largest share of the domestic market for household bleach. The Procter & Gamble Company, a successful manufacturer of consumer products, viewed Clorox bleach as a compatible addition to its existing line of laundry products, and acquired the company in 1957.

Procter & Gamble changed the firms name to The Clorox Company. However, within three months of the purchase, the Federal Trade Commission challenged the Clorox acquisition on the grounds that it might lessen competition or tend to create a monopoly in household liquid bleaches, a violation of the Clayton Act. Even though Procter & Gamble allowed Clorox to handle its own affairs, in 1967 the U.S. Supreme Court upheld the commissions order that Procter & Gamble divest itself of the Clorox operation. By 1969 Clorox had been spun off as a public company and was once again independent.

Cloroxs new president, former Procter & Gamble executive Robert B. Shetterly, and his top management team faced a more competitive marketing environment in which enzyme laundry products were rapidly encroaching on Cloroxs core business. Realizing that diversification beyond bleach was essential to the companys survival, Clorox management implemented a three-pronged strategic plan aimed at the acquisition and internal development of a line of nonfood grocery products, the acquisition of a food specialty business, and the development of a line of institutional food and cleaning products. They drew up a list of potential targets for acquisition, many of which were purchased within the year, including Jiffee Chemical Corporation, the manufacturer of Liquid-plumr drain opener; Shelco, which manufactured Jifoam aerosol oven cleaner; and the 409 division of Harrell International, which produced Formula 409 spray cleaners. One year later the company introduced Clorox 2, its first entry in the dry, nonchlorine segment of the bleach market.

In 1971 Clorox purchased McFadden Industries, makers of Litter Green cat litter. Clorox had first tested McFaddens product in the market with an option to acquire the entire company if the product proved successful. Clorox also acquired Grocery Store Products Company, which manufactured such specialty food products as B&B mushrooms, Kitchen Bouquet gravy thickener, and Cream of Rice cereal. A year later Clorox added a line of salad dressings and party dips to this operation by buying Hidden Valley Ranch Food Products. Sales of the companys chlorine bleach rebounded in the first years of the decade as concerns arose over the health and environmental effects of enzyme and phosphate detergents.

In 1972 Clorox met the third objective of its strategic plan with the acquisitions of Martin-Brower Corporation, a manufacturer and supplier of disposable packaging and paper goods for the food-service industry, and Nesbitt Food Products, a manufacturer and distributor of soft drink concentrates. Joining the fold the following year was Kingsford Corporation, a leading manufacturer of charcoal briquettes.

The company soon encountered a series of setbacks, however. Just after the Kingsford acquisition, a cool and wet summer depressed sales of charcoal and the recreational products manufactured by other parts of the Kingsford operation. Cloroxs introduction of a new product, Mr. Mushroom, coincided unexpectedly with a nationwide botulism scare, which adversely affected Mr. Mushroom and the companys B&B brand. Mushroom production at its newly acquired Country Kitchen Foods subsidiary in England decreased significantly due to a virus in the fertilizer used. Sales of Cloroxs cleaning products also fell because of consumers fears of recession.

Although these problems led to a temporary halt in further acquisitions, the company successfully negotiated an agreement in 1974 with Henkel, a German producer of consumer and industrial food and cleaning products. Clorox gained access to Henkels research-and-development capabilities and acquired manufacturing and marketing rights to Henkel-developed products in the United States, Canada, and Puerto Rico. Henkel in turn became a minority shareholder in Clorox. In 1975 a civil antitrust suit brought against both Clorox and Procter & Gamble by Purex Corporation, a competitor in the bleach market, came to trial. The suit sought over $520 million in damages, which Purex claimed had resulted from Procter & Gambles acquisition of Clorox in the late 1950s. Purex admitted defeat in 1982, when the Supreme Court refused to hear the case. Both a federal court and federal appeals court had ruled that Purex had failed to prove that either company had caused it to suffer any loss of business.

Shetterly retired as chief executive officer in 1980 and was succeeded by Calvin Hatch, another former Procter & Gamble executive. Under Shetterlys leadership, the company had diversified beyond bleach into a number of other areas; however, most of these new ventures never became profitable. Conceding that Shetterlys growth plan had failed, Clorox sold its Martin-Brower subsidiary at a loss in 1979 to Dalgety PLCa U.K. companyand Country Kitchen Foodsits British mushroom canning operationto H.J. Heinz Company, Ltd., the U.K. subsidiary of the U.S. company. These divestitures gave Clorox plenty of capital to use in its search for niches in the consumer packaged-goods market in which the company could develop its own products and capture a dominant share.

Clorox devoted a significant amount of money and corporate support to research and development. However, until the company was able to come up with a breakthrough product of its own, it continued to rely upon outside acquisitions to diversify its business and fill its new-product pipeline. Some of the acquisitions made under Hatchs leadership, such as the 1979 purchase of the Emil Villa chain of barbecue restaurants, paralleled Shetterlys mistakes in fueling growth but not profits, while other products gained through earlier acquisitions, such as Cream of Rice cereal, fell short of the companys goals and were eventually sold. Efforts to generate and rapidly build a base of international business were also stymied by solidly entrenched competition.

In 1981 the company acquired Comerco, a Tacoma, Washington-based producer of stains and wood preservatives marketed under the Olympic brand name to hardware and home-improvement stores. Two years later, the company purchased Lucite house paints from E.I. Du Pont de Nemours Company. Clorox attempted to model these acquisitions after its successful Kingsford charcoal operation, using marketing techniques and heavy advertising to produce premium-priced, brand-name products. The subsidiary formed to manage these businesses was never effectively able to integrate the operations of these two product lines nor to attain the companys sales expectations, however. It was sold to PPG Industries in 1989.

Over the years, Clorox had retained leadership of the laundry-bleach market despite numerous attempts by competitors to chip away at its share with other brand-name, privatelabel, and generic products. In 1982 Clorox faced its toughest challenge when Procter & Gamble decided to launch its own bleach product called Vibrant in a test market. Clorox quickly responded by introducing a new bleach with a similar formula called Wave. Although Vibrant never made it out of the test-market stage due to manufacturing problems, this competitive advance against Clorox set the stage for future attempts by each company to invade the markets for products long dominated by the other.

In 1986 Calvin Hatch retired as chairman, a post he had held since 1982, and was succeeded by president and chief executive officer, Charles R. Weaver. Jack W. Collins, the companys executive vice president and chief operating officer, was promoted to Weavers former positions. Beginning in 1987, the company diversified into another new business area by purchasing a number of bottled-water companies, including the Deer Park Spring Water Company and Deep Rock Water Company, followed by the Aqua Pure Water Company and Emerald Coast Water Company in 1988.

After several years of uneasy coexistence after the Vibrant incident, the battle between Clorox and Procter & Gamble for dominance of the consumer marketplace erupted. In 1988 the company introduced its Clorox Super Detergent brand of laundry soap powder in four western states and was quickly attacked by Procter & Gambles new Tide With Bleach brand. Procter & Gamble also began the market test of a new brand of liquid bleach targeted at Clorox customers, a move intended to warn Clorox against entering the laundry-detergent market. By mid-1989 Procter & Gamble had withdrawn its bleach product due to disappointing sales. Clorox kept its detergent on the market but continued to face an uphill battle against the entrenched brands. The fact that consumer preferences were slowly moving away from powders toward liquid detergents added to the companys marketing problems. In an attempt to inject new life into its consumer products business, the company acquired the Pine Sol cleaner and Combat insecticide lines of American Cyanamid Company in 1990.

Clorox products are sold in nearly 60 countries and are manufactured in more than 35 plants around the world. Led by Chairman Weaver and President Robert A. Bolingbroke, who succeeded Jack W. Collins upon his retirement in 1990, the companys future initiative will focus on continuing to develop the institutional segment of its business while strengthening consumer product lines with new brands and companion products to established brands. This approach, which has led to such product successes as Kingsford Charcoal Lighter and Lemon Fresh Clorox Liquid Bleach, is viewed as a key factor in the companys growth. While nurturing new products, the company will be challenged to find innovative ways to rejuvenate its mature brands, such as Clorox chlorine bleach, and broaden their appeal to both domestic and international consumers. In all cases, Clorox will rely heavily on its ability to identify emerging consumer needs and trends and then quickly apply its manufacturing and marketing expertise to preempt entry by larger competitors with greater resources. Clorox liquid bleach remains an ongoing source of marketing strength, and the company is well prepared to protect and solidify its position as a major force in the consumer products industry both at home and abroad.

Principal Subsidiaries

Brita (USA) Inc.; Deep Rock Water Company; Deer Park Spring Water, Inc.; Food Service Products Company; The HVR Company; The Household Products Company; The Kingsford Products Company; Prince Castle, Inc.; Clorox International Trading Limited; The Clorox Company of Canada, Ltd.; The Clorox Company of Puerto Rico; The Clorox International Company; Colgate-Clorox (Far East) Ltd. (50%); The Household Cleaning Products Company of Egypt, Ltd. (49%); Industrias Lesedo S.A. de C.V. (Mexico); National Cleaning Products Limited (Saudi Arabia, 40%); Progar S.A. (Argentina, 51%), Tecnoclor, S.A. (Colombia, 49%).

Further Reading

Shisgall, Oscar, Eyes on Tomorrow: The Evolution of Procter & Gamble, Chicago, J.G. Ferguson Publishing Company, 1981; About the Company on its Diamond Anniversary, Oakland, California, The Clorox Company, [1988].

Sandy Schusteff

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