CLOROX'S BRITA BATTLES BACK FROM SALES SLIDE

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the bad news for Brita started in June. That's when the brand not only missed its launch date for a new faucet-mount water-filtration system but also faced aggressive promotion from rival Recovery Engineering's Pur brand.

Clearance sales for smaller brands losing their retail shelf space and comparisons to Brita's own year-ago numbers -- inflated by an aggressive two-for-one deal on pitchers the prior year -- made things look worse.

Brita's June swoon sent sales down 15% for the second calendar quarter and down slightly overall for the year to about $200 million. Even a small decline was a big surprise for a brand Clorox Co. has built at more than a 50% average sales rate since 1988.

News about Brita, combined with trouble integrating Clorox's First Brands acquisition, sent Clorox's stock plummeting by mid-August.

Then came seemingly worse news for Brita: Procter & Gamble Co. was buying Recovery Engineering. Suddenly, Brita faced a huge global rival rather than a thinly funded, entrepreneurial business.

Adding to that, Clorox cashiered Brita's longtime agency, Y&R Advertising, San Francisco, as part of a global consolidation at DDB Worldwide just before releasing the unfavorable results.

Bad as it might sound, analysts have moderated their views both on Brita and Clorox of late.

"Brita clearly is not a brand in decline," said James Dormer, an analyst with Morgan Stanley Dean Witter & Co.

FIXING ITS PROBLEMS

Clorox has fixed problems with the filter replacement indicator light, for example, Mr. Dormer said. And new Brita faucet-mount systems began shipping July 31, with TV and print ads expected to break in the fall, putting Brita for the first time in the faucet-mount segment dominated by Pur.

Charles Couric, VP-general manager of Clorox's Brita division, blamed perceptions of Brita's woes largely on aggressive promotion and public relations by Recovery Engineering as it sought to dress up the company for sale. Brita still holds a huge lead over Pur in household penetration, with an estimated 15% of U.S. households using Brita systems compared to only 3% to 4% for Pur, Mr. Couric said.

Though Pur has narrowed the household penetration gap, Brita still outsold Pur in new systems by a margin of nearly 2.5 to 1 in August, he said. In dollar sales, Brita was up 4% in August over a year ago compared to only 2% for Pur, he said.

NEW SHOP UNRELATED TO PERFORMANCE

Mr. Couric dismissed any notion that Y&R's departure was linked to poor results.

"We've been very pleased with the . . . results and the test scores we've gotten from our advertising," he said.

P&G's entry, he said, could even help Clorox by eliminating unprofitable promotion.

"We at Clorox compete against Procter in a number of categories and, particularly in home cleaning, have done quite well there," Mr. Couric said.

"I still don't believe at the end of the day this is good news for Brita," said Andrew Shore, an analyst with PaineWebber. "I think maybe near-term Procter does keep some lid on pricing and they don't get crazy [with promotion]. But

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