Clorox strategy takes inflation and COVID into account

The Clorox Co., the consumer packaged goods firm, is paying careful attention to shopper activity both in response to inflation and as habits grow closer to their pre-COVID form in some categories.

Consumers not switching to private label

• As yet, Clorox has not witnessed any “significant trade down” to private-label goods among inflation-hit consumers, Linda Rendle, its CEO, told investors on an earnings call.
• “We are seeing some trade down within our own portfolio, for example, and we would’ve anticipated and expected this, and we’re working this as part of our sales plan,” she said.
  
• Shoppers, for instance, could “move to some opening price points” for its products. “They still want the branded player, but they don’t have a lot of out of pocket and so they’re buying a smaller size,” Rendle said.
  
• Other buyers are opting for larger pack sizes to get the “very best price per ounce”, and Clorox is working with its retail partners to find the right assortment in response.

The COVID “new normal” is still taking shape

• Working alongside the rising cost of living is the on-going consumer reaction to the fluctuations of the COVID-19 pandemic.
• “We’re seeing changes in more normal behavior coming from consumers, and we’re trying to understand: When are we at a new normal?” Rendle said.
  
• In cleaning and disinfecting, for example, consumer interest is “definitely lower than it was at the height of the pandemic, but higher than it was pre-COVID,” said Rendle.
• The cold and flu season, by contrast, has not been “normal” since the pandemic began, so the company will carefully monitor this area.

Price elasticity lags historical norms

• The company has implemented three price increases, the most recent in July 2022. As such, it is able to monitor price elasticity, or whether consumers are switching away for its products.
• Prior elasticity levels did not “play out over this last year” and have been “slightly better than that historical elasticity that we had experienced,” said Rendle.
• Looking forward over the next 12 months, elasticity could be “better in line with what we saw pre-COVID given the level of pricing and given what's going on with the consumer,” she warned.

Ad support still key

• Clorox will continue to support its brands with a nuanced mix of ads and promotions that will be adjusted in line with “where the consumer is”, its CEO reported.
• “We continue to spend on our brands, we'll spend 10% of sales on advertising and sales promotion next year,” Rendle said. “And we’re proactively working with our retailers on tailored shopper plans to ensure that we’re offering the right value for the moment, depending on where the consumer is.”
  

Sourced from Seeking Alpha