The price hike, Clorox's first in four years, is a strategic move that follows an ad campaign from DDB Needham Worldwide, San Francisco, touting the brand's quality vs. private labels and also the rollouts of higher-price scented bleaches. That campaign broke in June.
AD SPENDING BOOSTED
Clorox recently boosted by an unspecified amount the media support for the campaign, which supports Clorox's premium price-already 27% higher than store labels before the new hike.
The ads claim private-label bleaches contain metal residues not found in purer Clorox.
Retailers are greeting the price hike favorably, Clorox officials told financial analysts.
"It's been so many years, I don't think they'll have any trouble," said one buyer for a Southeast chain.
Retailers said Clorox is touting the increase as an opportunity to improve profitability of the $422 million category, citing increased manufacturing costs as a reason for the boost.
One retailer executive said her chain will wait to see how the market reacts before deciding whether to increase private-label prices.
"In general, price increases in consumer products are extremely difficult to pass through," said William Steele, analyst with Buckingham Research Group.
P&G REVERSED PRICE HIKE
Procter & Gamble Co., which enjoys a dominant position in laundry detergents similar to Clorox's in bleach, had to cut prices on liquid detergents 6.5% last year after competitors didn't follow an earlier 5% hike.
Still, Mr. Steele said, despite a seemingly commodity category, Clorox has "a phenomenal brand."
Clorox has a 72% share in the category, where the only significant competitor is store brands, according to Information Resources Inc. For the 52 weeks ended Aug. 24, Clorox sales were up 2.9% to $303 million on slightly declining unit volume, reflecting growing sales of its higher-price scented bleaches.
"In this age of getting back to your core brands, Clorox is getting back to the mother lode and making sure they are very soundly positioned," said Ken Harris, consultant with Cannondale Associates. "They believe they can make an increase