Two years after its acquisition, Glad has yet to bring any happiness to Clorox Co.
When Clorox Co. bought Glad as the cornerstone of its purchase of First Brands in 1998, the company had every reason to believe the plastic bag and wrap business would be the next in a series of successful brand turnarounds. But the brand has remained on a downhill slide that has sometimes taken Clorox along with it.
Now, Clorox, whose strategy has long been to cut trade and consumer price promotion as it revives acquired brands through media advertising and new products, plans to hike promotional spending on Glad.
It's one more example of how, more than seven years after Procter & Gamble Co. tried to steer the industry away from price promotion, package-goods marketers still have trouble staying away from deals.
"Trade spending is like a narcotic habit," says Burt Flickinger, managing partner with Reach Marketing. "It will keep you going. But it won't make the brand, the category or the company healthy."
Under First Brands, Glad received little media advertising and was supported mainly by trade promotion and couponing. The brand had no agency of record when Clorox acquired it, along with such brands as STP automotive products and Fresh Step cat litter in 1998.
Clorox execs derided the marketing skills of Glad's caretakers at First Brands and exuded confidence they could turn Glad around quickly, as they had in the past with such brands as Pine Sol cleaners, said one industry executive. Within six months of closing the deal, Clorox named DDB Worldwide, San Francisco, to cre--ate a new campaign, which harkened to the old "Don't Get Mad, Get Glad" tagline initially launch-ed in the 1970s by Leo Burnett Co., Chicago. Clorox also bolstered the existing Glad-ware re-usable/disposable container line with new sizes, then added a "Stand-and-Pour" freezer bag and an "Odor Shield" garbage bag to the Glad lineup this year.
But what really made an impact was Clorox's move to cut trade promotion dollars for Glad and other brands in 1999, then cut promotion on Glad again earlier this year to compensate for rising plastic resin prices. Competitors didn't follow suit. Retailers reacted by withdrawing merchandising support, and Glad sales plummeted. At around $48, Clorox's stock price stands more than 20% below the high of $62 it reached in early 1999, before the First Brands' problems became apparent.
Glad's sales were down 10.3% to $306 million in trash bags, down 10.6% to $80 million in food-storage bags and down 23.2% to $15.4 million in lawn and leaf bags for the 52 weeks ended Oct. 8, according to Information Resources Inc. The categories themselves were each down, too. But other branded competitors-Pactiv Corp.'s Hefty; S.C. John-son & Sons' Zip-Loc and Slide-Loc; and Reynolds Metals Co.'s Reynolds brands-all fared better than Glad, and private-label picked up sales in each category.
So, starting this month, Clorox plans to shore up Glad's sagging market share with increased trade promotion and couponing, though Clorox said it won't cut ad spending on Glad or other brands to compensate. Clorox said the funding will come from manufacturing efficiencies.
"It's still our long-term strategy to build Glad through [ad] spending and innovative new product programs," said Karen Rose, group VP-chief financial officer, in a recent conference call with analysts. But she said Clorox will restore trade promotion and couponing on "less differentiated" products that make up the bulk of the Glad's sales while it waits for new product programs to build long-term growth.
A similar strategy worked for Fresh Step. Clorox last year restored previously cut promotional programs for the brand. That stabilized Fresh Step, and the introduction of a new product, Fresh Step Crystals, restored sales and share growth this year, Ms. Rose said.
But Andrew Shore, an analyst with Deutsche Bank Alex. Brown, said he fears Glad won't turn around so easily. "Glad is a commodity business, and everything they've done so far to stabilize it and get it right has taken much longer than they thought," he said. "It's a nanosecond before a competitor like [S.C. Johnson] comes out and replicates something they've done," as happened with stand-up freezer bags this year.
And Glad is the only major food-storage brand without a zipper-style slider bag-the fastest-growing segment in the food-storage category-though the company has told analysts it plans to launch a zipper product next year.
"The game has changed, and they're the only ones not participating," said Ken Harris, partner with Cannondale Associates. New product efforts to date haven't differentiated Glad enough to prevent inroads from private-label, he said, but he believes Clorox can ultimately turn Glad around as Kimberly-Clark Corp. did with Scott paper brands after a lengthy struggle.
Clorox is far from the only company that has had to resort to promotion to prop up market shares lately. After trying in vain to stem Dial Corp.'s reliance on trade promotio, former Chairman-CEO Malcolm Jozoff was ousted earlier this year in favor of Herb Baum, who made a similar promise. Mr. Baum said in October that Dial has reduced the quarter-end "trade loading" promotions previously used to reach sales and earnings numbers, albeit at a cost of lower sales and earnings last quarter.
Without unique products and strong advertising, package-goods brands have little choice but to pay up to maintain shelf space, especially as consolidation makes retailers more powerful, said Paul Kelly, consultant with Silvermine Consulting.
Even P&G, which went to war against trade and consumer promotion in the early 1990s through its "value pricing" strategy, has retreated on occasion. P&G matched rival Kimberly-Clark in heavy diaper-couponing last year and boosted trade allowances and couponing to defend laundry detergent brands against Dial's Purex Ad-vanced launch earlier this year. Some retailers believe P&G will step in with increased trade spending again on detergents early next year, too, though P&G has said it only plans to increase trade promotion in Europe.
But even some smaller players succeed in holding the line on promotion, Mr. Kelly said, mentioning Reynolds in food storage and J.M Smucker Co. in jams and jellies. The key is having category leadership, strong new product programs and the discipline to hold the line on retailer demands, he said.
"But if you don't have a leadership position and differentiating products," he added, "you really don't have much choice."
Copyright November 2000, Crain Communications Inc.