Clorox to raise its prices 'broader and faster' than ever due to rising commodity costs, also plans to use over US$1B in cash for acquisitions, targeting personal care and disinfecting products, emerging markets, say company executives
June 3, 2011
– Clorox Co. will be increasing prices “broader and faster” than the consumer products maker ever has because of pressure from rising commodity costs and declining demand, said Clorox CFO Larry Peiros, reported MarketWatch.com on June 2.
The Oakland, California-based company also plans to spend its more than US$1 billion in cash to buy more companies and products, said Clorox CEO Donald Knauss at a conference in San Francisco, the San Francisco Business Times reported on June 1, referring to a May 31 article in The San Francisco Chronicle.
Clorox’s expansion strategy will target disinfecting and personal care products, as well as exposure in emerging markets, said Knauss, who was the keynote speaker at a Financial Planning Association conference on May 31.
The company expects to lose about three percentage points of volume but gain four percentage points in sales from its pricing moves in its upcoming fiscal year starting July 1, said Peiros, MarketWatch.com reported.
After increasing its prices on Glad garbage bags by 10% recently, Clorox is talking to retailers about additional hikes and the retailers have not been resistant, so far.
Recently, an unnamed retailer told Clorox that it was getting thousands of price hike proposals from other manufacturers, after Clorox presented a “fairly lengthy list” of its price increases for the year ahead, said Peiros, reported MarketWatch.com.
During the year, commodity cost increases are projected to double to $170 million, but could be lower depending on how oil tracks, said Peiros.
Clorox expects to make up for losses by boosting sales for new products and through advertising, and still maintain its research and development and marketing spending, reported MarketWatch.com.
In the consumer-products sector, Clorox is the company most at risk from consumers shifting to lower-cost items, particularly in bleach, trash bags and cleaning products, according to Bernstein & Co.
The company will try to counter this with products that offer better value for consumers, such as its Glad trash bags and Pine Sol cleaners with new scents, MarketWatch.com reported.
The primary sources of this article are MarketWatch.com, New York, New York, on June 2, 2011, and the San Francisco Business Times, San Francisco, California, on June 1, 2011.