Recently Named Clorox CEO Sets Sights on Trade Marketing

Former Coke President Donald Knauss Discusses Strategy and Agency Relationships

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CINCINNATI ( -- In moving from president of Coca-Cola North America to chairman-CEO of Clorox Co., Donald R. Knauss, 55, moves to a marketer that might not have the cachet or the iconic status of Coke, but is a bigger spender in measured media, shelling out $485.5 million to Coca-Cola's $471 million last year, according to TNS Media Intelligence. Coke spends more on marketing overall, when consumer, trade and event promotion is added in.
Donald Knauss
Donald Knauss Credit: AP

In an interview, Mr. Knauss reveals he already has plans to raise the $4.6 billion Clorox's profile in trade marketing. One of the analyst notes this morning mentioned the possibility for disruption as an outsider is brought into a company that traditionally brought CEOs up through the ranks.

Mr. Knauss: Any success I've had is because I've listened to people. Any leader who creates an environment where people can debate and discuss, you're going to get better results. It's about the team. It's not about me. At Coca-Cola, there's a history of having several agencies that change from time to time. At Clorox, there's a long and deep relationship with DDB at this point. I'm wondering if you anticipate any changes based on the way Coke and Clorox have operated.

Mr. Knauss: No, I don't anticipate any changes. I think in fairness to me and the organization and the agencies, having a chance to get on the ground and work with people and talk to the marketing organization and really understand what's going on will be critical. So I think it's just too early for me to speculate on that. If there is terrific advertising and consumer communication being developed, that's what I care about. Is there anything in broad measure in terms of your philosophy that might reshape how Clorox markets?

Mr. Knauss: First of all, my philosophy at agencies is that the people you work with over a long period of time are those who deliver great results. I'm not for the flavor-of-the-month club. I like to have long-standing relationships. And certainly we had that approach at [Procter & Gamble Co., where Mr. Knauss began his career]. And it depends at Coke which categories you're talking about -- we've had a similar approach as well. You have a lot of experience in sales and field marketing. Is that a very different perspective for Clorox, or has there always been a fairly strong involvement from the sales side in senior management?

Mr. Knauss: I think there has been. ...When Coca-Cola calls on a retailer, you typically get access. I have a lot of deep relationships with these retailers and think that I can add value to what they already have at Clorox.

One of the things I've learned in the past few years is that involving retailers at a senior level in the innovation-thought process can really drive innovation. And getting retailers involved and exposing them to what you're thinking about 18, 24, 36 months down the road is incredibly important. I think I can bring some of that retailer interest in helping participate with us and helping us figuring out how to grow categories.

[Retailers] don't care if you swap share with the next guy. What they care about is, are you growing the category and bringing excitement to their stores and taking waste out of their supply chain? And if you're doing those things, they love you. And if you don't, you're probably not going to be on the shelf very long. At Coke, it looks like the broader market trend was toward slowing carbonated-beverage sales and a shift to other beverages that come at a higher price per ounce. Do you see a similar kind of trend for Clorox?

Mr. Knauss: I do. I think if you look at some of the recent examples like [the Clorox] bleach pen, where you capitalize on some of these trends around [lifestyle] and broaden the footprint of these brands, you clearly have a mix play where you can drive enhanced margins. And I think at the end of the day, while volume is very important, revenue is even more important today. We take dollars to the bank.

I think so many people are under such time pressure, that money is not the key obstacle. It's convenience. And when you've got well-respected brands like Clorox, the ability to broaden those brands footprints is significant. As you know, a lot of people at Clorox have come over from P&G. You started your career there. Is that something that will help your transition?

Mr. Knauss: I think it does. It's such a great training ground for so many industries. There's a commonality of values. ... I don't think the cultures are dissimilar at all. Procter & Gamble doesn't hire people who don't have the intellect and the fire in the belly to drive business and change. And you take those people and put them in Clorox, which obviously is smaller in revenue but still has these strong brands, you get people in a very nimble environment. One of the things that appealed to me about Clorox is that you can make things happen quickly. I seem to recall when the joint venture between Coca-Cola and P&G was proposed that you were slated to be the CEO of that operation. Is that correct?

Mr. Knauss: I was slated to be CEO of the North American piece, which was the bulk of it. Any regrets about that deal not going through?

Mr. Knauss: No. I'm not sure the combination of Pringles and Sunny Delight with Minute Maid would have been a great deal. I didn't really see the synergies there. And I think what was going on at the time at Minute Maid was that we were really starting to grow that brand by integrating it into the bottling system. It traditionally had been a warehouse-delivered take-home product. And we really started to explode the growth of it. I don't think the trends on Sunny Delight and Pringles were going the same direction. I think everyone came out in the right place on that in the end. With Clorox you have a much more domestically focused company than Coca-Cola or P&G. Do you see a need to become more global?

Mr. Knauss: Absolutely. When Bob [Matschullat, Clorox interim Chaiman-CEO] and I talked, one of the things we talked about was the opportunity you have when roughly 85% of the business is in the United States, where you have 5% of the population in the world. Coke is a much bigger company. In terms of scale, do you consider Clorox to be at a disadvantage?

Mr. Knauss: I think scale is a double-edged sword. It does at times give you a lower-cost position. But you can accomplish that through partnerships and buying consortiums as well. The other edge of that is loss of speed. So I think Clorox has a nice combination of having enough scale, particularly in the categories where it competes, where it has No. 1 or No. 2 brands ... and having fewer people involved so you can make things happen more quickly. Do you see potential for Clorox to make acquisitions, and if so would you look outside the household-cleaning space toward adjacent businesses, like personal care?

Mr. Knauss: It's too early for me to speculate. I would say one of my top priorities would be to look at the longer-term strategy with the team. ... I want to look [beyond the current fiscal year] to 2010 and beyond and say "What's the strategy here in terms of where do we want to participate by category, channel, geography and market?" I'll be able to give you a much better answer a few months down the road. Where do you see the growth potential for Clorox?

Mr. Knauss: Clearly, when you look at Clorox and the categories they compete in, they've got the No. 1 and No. 2 brands in each one of those categories, which obviously excited me. But even more than that what excited me was the potential for growth of those brands. ... When I look at the macro trends that are going on out there with consumers around health and wellness, sustainability and convenience and also the ethnicity changes in the U.S., with the Hispanic growth, I think those brands match up very well with those trends.
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