Clorox focuses on 'overall value' in face of inflation

The Clorox Company, the consumer packaged goods manufacturer, believes a majority of US consumers are looking for “overall value”, not focusing solely on price, in the face of inflation.

Why it matters

It is often assumed that, during moments of financial stress, consumers will automatically pick the cheapest brand. But the actual value equation frequently rests on other factors beyond cost, such as product quality and reliability.

Clorox takes balanced approach to value

• Clorox is seeking the right “overall value” – balanced across brand, product and price – in reflecting the needs of the majority of shoppers, according to CEO Linda Rendle.
  
• A “smaller portion” of the consumer base is price-sensitive and will be switching between brands depending on deals, trading down to private label and so on, to save money.
• Consumers with lower household earnings, Rendle noted, often “cannot afford for products to fail”, be that bleach which doesn’t remove stains or trash bags that are too thin so must be doubled up to dependably contain household trash.
  
• As such, these shoppers are willing to pay a little more for a trusted, reliable product. “Our brands actually over-index with low-income consumers,” Rendle said at the dbAccess Global Consumer Conference 2022.

Product superiority matters

• At a time of heightened anxiety around health and cleanliness, Clorox saw many consumers enter its categories as the COVID-19 took hold, and it has taken steps to retain their business.
• With this growing audience, heightened investment in innovation and brand building had a vital role last year, Rendle said.
• “Prior to the pandemic, about 55% of our portfolio was deemed superior by consumers and we’re now at 75%,” she added. “And I think as we head into a very difficult period for the consumer, that’s going to bode very well for us as we take the actions that we need to restore margins.”
  
• Innovation will have a central role in this process as it aims to “solve a problem for the consumer”, and thus is worth a buyer spending a relative price premium.

The role of advertising

• Clorox “leaned into advertising last year”, spending an additional $100m, to engage people who were entering its categories.
• The company has traditionally yielded a very strong return from its ad expenditure, and “we’ve done that to an even greater degree over the last 12-months,” Rendle said.
  
• One simple, but effective tactic could be suggesting new ways to use Clorox products for people spending more time at home to save money.

Sourced from SeekingAlpha