Why New Clorox CEO Won't Mimic Alma Mater P&G's Marketing Cuts

Despite Sluggish Value-Focused Market, Dorer Sees Room for Growth

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Incoming Clorox Co. CEO Benno Dorer has some traditions to uphold. One longstanding one is the industry strategy of squeezing supply-chain costs to keep hiking marketing and innovation spending, despite a U.S. market that's been disappointing of late.

As part of a newer industry tradition, the German-born Mr. Dorer joins the ranks of fellow European-born alumni of Procter & Gamble Co., such as Unilever CEO Paul Polman and Estee Lauder Cos. CEO Fabrizio Freda, who've ascended to the industry's top jobs.

Mr. Dorer is set on Nov. 20 to succeed fellow P&G alum Don Knauss, who will remain chairman. Every Clorox Co. CEO since the company was separated from P&G by Federal Trade Commission order in 1969 has been a P&G alum. But that doesn't mean Mr. Dorer is following the entire P&G game plan.

Though P&G executives in recent months have talked about using savings from cheaper digital media to cut marketing costs, Mr. Dorer plans to stick with Clorox's plan to hike marketing spending as a share of sales by a percentage point as a share of sales by 2020.

"I have to leave it to the other companies to comment on why they're doing things," he said in an interview. "You can't cut your way to growth. Ultimately, the defining question for the CPG industry and certainly for Clorox is how to grow profitably. Cost cutting will always be necessary, but you have to invest in brands,"

Clorox is sticking with that plan despite a market Mr. Dorer describes as being in "the year of value."

He believes categories have been soft in part because the jobs people are getting these days often only pay 60% of ones they once had, and because retailers have focused on private-label to take margin amid the stunted growth.

Meanwhile, as developing markets have slowed, global marketers have piled promotional spending into the U.S., where Clorox does 80% of its $6 billion in annual sales, to boost growth, he said. That's also pressuring prices."We don't compete on price, but we compete on value," Mr. Dorer said. To appeal to value consciousness, he said Clorox is focusing on "hard-hitting, direct claims. We're bringing side-by-side demos back."

He sees plenty of room for innovation in Clorox's household businesses, citing his experience coming from P&G into Clorox's Glad joint venture with his old company. "The general thought was how much can you do with trash bags?" he said. It turned out to be a lot, he said, including stretchy ForceFlex bags, Glad Odor Shield and Glad with Febreze to combat odors.

While focused mainly on the U.S. and having just announced its exit from a chronically unprofitable Venezuelan operation, he said Clorox still looks to expand in such markets as Asia and North Africa and even in Europe, where its Burt's Bees business is thriving.

He also sees plenty of profitable new "$60 million plus" opportunities in the U.S. in everything from professional healthcare to "ethnic food enhancers" branching out of Hidden Valley Ranch.

While he sees plenty of cultural similarities between Clorox and P&G, it's not just a P&G clone. "We're smaller, so by definition we should be faster," he said. And Oakland-based Clorox's standing as a rare Bay Area CPG outpost has big advantages, he said, such as being fully immersed in the diversity of the U.S. both for studying consumers and recruiting talent.

"It's a double edged sword in that it's a high cost of living, but I would say the benefits outweigh the down sides" Mr. Dorer said. While other CPGs have been opening Silicon Valley outposts, he said, "I can just drive across the street."

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