Clorox’s coronavirus challenge: 500% demand spikes and nonstop manufacturing
The coronavirus has been an unimaginable business boom and daunting manufacturing challenge for Clorox.
The cleaning supplies maker, founded in Oakland in 1913, saw record shipments of disinfecting wipes, sprays and bathroom cleaners in the first three months of 2020. Net cleaning product sales spiked 32% to $671 million in that period compared with 2019.
As U.S. shutdown orders began in March, demand surged 500% for some products, which have been consistently sold out at stores.
The company’s 19 U.S. plants, including one in Fairfield, are running nonstop.
“People today are manufacturing more products than we’ve ever had, and our production speed is faster than it ever was,” said Benno Dorer, CEO of the 8,800-person company, who said there have been no workplace accidents during that time.
The company continues prioritizing employee safety during unprecedented demand.
Before shelter-in-place orders in March, workers at the company’s Oakland headquarters on Broadway and other offices switched to working from home, though the company is an essential business that can stay open. Office workers will stay home until at least July 4. People continue to work inside its Fairfield plant and a research lab in Pleasanton. Clorox has implemented temperature scanning, cleaning, staggered meals and breaks, social distancing, and masks, practices that are spread throughout corporate America.
Fewer than 20 Clorox employees have been infected by the coronavirus, and no cases were serious enough to require hospitalization, he said.
Clorox boosted production by 40% and made 40 million more disinfecting units in the first three months of 2020 than 2019. Clorox added 250 employees and contractor jobs during the pandemic. The company is adding one outside manufacturing partner per month to help with production.
But it still isn’t enough. Clorox expects products to be in low supply until the summer.
“They’re at max capacity. The sales are off the charts,” said Kaumil Gajrawala, a senior analyst at Credit Suisse. Clorox’s rival Reckitt Benckiser, maker of Lysol, and Procter & Gamble are also seeing sales spike.
Gajrawala expects that Clorox production won’t meet demand for six months. He expects sales to be elevated for the next three to five years, and potentially longer.
Part of the shortage is because the company is prioritizing deliveries to its hospital and health care customers, who are on the front lines battling the virus.
“That can lead to, at times, difficult discussions with our retail customers. But is it the right thing to do, to take care of caregivers in hospitals and positively impact their lives first? It absolutely is,” Dorer said.
Dorer, who has worked at Clorox since 2005, grew up in Germany and has lived in four countries. He said that worldliness helped prepare him for coronavirus.
“I’m very comfortable throwing myself in new situations. So if you think about it, when you enter a new country, often you don’t speak the language. You don’t know anybody. You don’t know anything about the local culture,” he said. “I quite thrive in situations for which there is no data or precedent and where there’s ambiguity and uncertainty.”
Dorer credits Clorox management’s diversity of backgrounds and thinking as a way to help navigate the coronavirus challenge.
Household consumers account for more than 90% of sales, but as America reopens, Clorox is deepening relationships with other companies, expanding its business lines.
United Airlines said last week it is working with Clorox to provide cleaning of airport facilities and offering Clorox products for fliers. Uber is also working with Clorox to provide cleaning supplies in cars in North American cities that are reopening. Clorox declined to disclose revenue from the partnerships.
Gajrawala of Credit Suisse said Clorox could expand further by partnering with theaters, bars and restaurants with cleaning help. He also said the company could expand its business internationally, such as in Europe. Currently more than 80% of sales are in the U.S.
The virus has helped Clorox rebound from declining sales last year that it attributed in part to weaker performance in Glad trash bags and Kingsford charcoal. But with more people staying at home, those products, along with Brita water filters and Hidden Valley ranch salad dressing, are also seeing increased sales.
Clorox faced an abrupt public relations challenge in April, when President Trump wondered at a news conference, without basis, whether using disinfectant “by injection inside or almost a cleaning” could “knock (coronavirus) out in a minute.” Clorox, along with Lysol, immediately told consumers never to consume their products.
Dorer said the company has been ramping up its outreach and consumer education, including working with Facebook to take down misinformation and increasing its ad spending by $50 million in the second half of the year.
“We have changed the way we advertise. We have changed the way we go about engaging with consumers online,” he said. “And we really spend a lot of time and effort and money on the proper use of our disinfecting products.”
In addition, the company has committed $14 million to coronavirus relief, including $400,000 in Oakland.
Dorer said the coronavirus has created a new world, but he hopes there will be a new emphasis on health and well-being.
“The business will never be the same after this,” he said.
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