Sustainability & CSR: Schedule, Assignments, etc.
(details and clarifications)
Mark J. Kay, Ph.D.
NOTE: The course is designed to help citizens build resilient and sustainable
societies within the context of climate change, sustainable development, and the UN
Millennium Development Goals. Does that help to clarify things? Actually, maybe
not, but we will be learning about these things….
I teach the class differently each time, and the schedule varies and may change, but
here it goes:
First class: introduction, triple bottom line thinking, bad jokes
Also for discussion that day the bad apple article: Do All Companies Have to be
Evil?—this is listed in the readings as “Bad Apples”
Please review the follow up readings from lecture posted on Canvas,
particularly Living Beyond Our Means, NatCapHBR99, GDP14, &
populationSciAm2005.
If you missed the class (or just fell asleep) also read Millenium Ecosystem
Assessment, and Living Beyond Our Means.
Second class: The Dannon case
Particularly important: read and ponder the article listed as CSRbeneCost11,
and CMR04BhatSen and be ready to discuss the meaning of CSR. Also, eat
some yogurt!
Follow up readings: Gladwell’s the talent myth, State of the American
Workplace Report 2013.
Third Class: Clorox case. Pay attention to the items in the appendix of the case and
the Unruh10 article. Also read and ponder the article listed as CauseMktg05. And
clean your house or apt.!
Fourth class: We will discuss in detail the Starbucks report from 2000, but also
read the three other articles with Starbucks in name, and the coffee articles, but
updates to be discussed. Also, drink some coffee!
Fifth class: FFE Quiz, Review, summary, discussion, EnvJust12.
Final FUN FAST EASY quiz:
1. What international organization established the Bruntland Commission, and what
is their oft-quoted definition of sustainability?
2. What was the Millennium Ecosystem Assessment and, in a few sentences, what
3.
4.
5.
6.
did they find?
The year 2005 is the midpoint of a decade that spans three unique, important
transitions in the history of humankind. List two.
An industrial ecologist stated, “The term ‘eco-friendly’ should not ever be used.
Anything manufactured is only relatively so.” Explain this with the LCA concept.
What is the $ value of the planet’s ecosystem services? ($ number only please, no
discussion needed).
Another fun question…
Final Written Individual Assignment
The final assignment is to:
1.) Assess the costs and, more importantly, the benefits of doing a sustainability
and/or CSR program at a firm, utilizing the readings and case discussions. (66%
of final paper grade)
2.) Assess a company’s CSR, sustainability, or citizenship report. Explain the extent
to which the company recognizes and takes responsibility for the social and
environmental impacts of its business. Please note that every student chooses a
different report. (33% of final paper grade)
IMPORTANT: Use the readings on Canvas! These have been carefully selected. Sources
used from outside the course readings must be carefully cited. No plagiarism. Outside
sources must be clearly indicated and all sources documented (not simply by a web
address). If you cite a course article, you can just cite the author name and date.
Recommended Report Format
A) Executive Summary of one page.
B) Discuss the internal (or company and employee benefits) of CSR and
sustainability initiatives (these can be put in a table format, but be specific). The
Dannon case provides as a good example to illustrate the internal value of CSR
programs, and this can explain why it was not their priority to advertise their CSR
activities. Explain how a CSR strategy needs to “fit” a firm’s management culture.
C) Discuss the emerging opportunities in the evolving “green market.” Cite
strategies and opportunities. As part of this, summarize the Clorox case and discuss
how they successfully developed green brands. Cite the benefits of these efforts on
marketing, branding, and reputation enhancement.
D) Briefly summarize the company CSR report that you read. Then critique the
report of the company that you examined. Explain how the firm defined their
specific “responsibility” in the report and any shortcomings.
Is the company doing enough? Is it effective and fully transparent in
addressing all social responsibility concerns? What would you suggest that
the company needs to do?
Do not forget the benefits for both people and planet –sustainability is not just about
money (or solely an instrumental benefits to the firm’s shareholders alone).
Missing Classes, Extra Credit, Writing Suggestions, and the Last Week of Class
You can submit the final assignment any time. Advice: If you want an “A” in the
class, be thorough; provide more than the “basics” in your discussion.
Demonstrate your mastery of the material by (a) summarizing the cases in your
answer, and also, (B) explaining their significance, particularly in relation to the
posted articles and class discussions. If you missed the class on GRI, it is up to you
to find out about the sustainability reporting at the GRI website. The site has ample
explanations and useful information. Be critical of the reports that you read.
MISSING CLASSES?
If you miss classes, or cannot make it the last class, submit the quiz answers with the
final exam, but also explain the significance of the quiz questions. If you missed
more than one class, there are additional articles (Xtras found on Canvas) to
summarize and submit with the final paper. If you did not miss any classes you can
also do this assignment for extra credit with the final paper.
For the exclusive use of A. Awad, 2017.
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REV: SEPTEMBER 28, 2011
CHRISTOPHER MARQUIS
POOJA SHAH
AMANDA TOLLESON
BOBBI THOMASON
The Dannon Company: Marketing and Corporate
Social Responsibility (A)
At the beginning . . . I set the challenge of putting industry to work for people, reconciling business and
society at large. I am profoundly convinced that it is possible to be at once efficient and truly human. In
leading a business, we must use our hearts as well as our minds, remembering that while the earth’s sources of
energy are limited, those of truly motivated people are not.1
— Antoine Riboud, CEO of Danone (1972)
At the end of 2009, The Dannon Company (Dannon) was at a strategic crossroads. Sixty-seven
years after first entering the U.S. market, Dannon was poised to become the leader in America’s
domestic yogurt sector. As Michael Neuwirth, senior director of public relations, considered
strategies that would take the company to the next level, he wondered how Dannon’s long-standing,
deeply ingrained corporate social responsibility (CSR) efforts could play a role.
Dannon was a U.S. subsidiary of Danone, one of the largest health-focused food companies in the
world. Danone’s global business focused on fresh dairy (e.g., Activia yogurt), bottled water (e.g.,
Evian), medical nutrition, and baby nutrition. Dannon manufactured and marketed fresh dairy
products in the U.S. and was the No. 2 player in the domestic yogurt market in 2008. Interestingly,
Danone viewed the U.S. as an emerging market for yogurt, and therefore Dannon’s marketing efforts
had focused on growing U.S. yogurt consumption and expanding the category, while also growing
its brands.
Dannon, following in the footsteps of Danone, had maintained a strong commitment to CSR. CSR
was not a stand-alone focus area, but integrated into the company’s overall mission of “bringing
health through food to as many people as possible.” To date, the company’s CSR commitment and
programs had been very internally focused. For example, through its foundation, The Dannon
Institute, the company was active in research and education on healthy eating, but few consumers
were aware of such activities.
Yoplait, a portfolio brand of the U.S. food conglomerate General Mills and Dannon’s top
competitor, was well known for its annual “Save Lids to Save Lives” breast cancer awareness
campaign. With the strong connection between Dannon’s production of health and wellness foods
________________________________________________________________________________________________________________
Professor Christopher Marquis, Pooja Shah (MBA 2010), Amanda Tolleson (MBA 2010), and Research Associate Bobbi Thomason prepared this
case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data,
or illustrations of effective or ineffective management.
Copyright © 2010, 2011 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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For the exclusive use of A. Awad, 2017.
410-121
The Dannon Company: Marketing and Corporate Social Responsibility (A)
and its commitment to health and nutrition-based CSR activities, Neuwirth saw an opportunity to
communicate these synergies to consumers and potentially enhance the company’s success. He
wondered, “Should Dannon start to proactively communicate to consumers about its CSR initiatives,
and if so, what benefits and risks would Dannon face?”
Before posing this question to the executive committee, Neuwirth decided to feel out the
perspectives of various stakeholders within the organization, including members of the marketing,
human resources, and corporate affairs departments. Some of the specific questions he planned to
ask these stakeholders were:
Should we communicate Dannon’s CSR activities?
What would be the best means to do so?
Should it be a corporate-level or brand-level campaign?
What would Danone think about this decision?
What would be the implications on Dannon’s current CSR initiatives?
What, if anything, would it require in terms of additional CSR programs?
Danone
Danone traced its heritage to Barcelona, Spain, in 1919, when Isaac Carasso wanted to create
yogurt with inherent health benefits. He introduced “Danone,”a an innovative yogurt product made
with pure lactic ferments he had obtained from Institut Pasteur in Paris, which helped treat intestinal
disorders and was initially prescribed by physicians. Ten years later his son, Daniel, founded
Danone in Paris, which leveraged its unique emphasis on health to differentiate itself from other
yogurt manufacturers. Upon his father’s death in 1939, Daniel Carasso became CEO and in
subsequent years Danone embarked on a rapid expansion plan in Europe through mergers with
Gervais, a leading French fresh cheese business, in 1967, and with Boussois-Souchon-Neuvesel (BSN),
a leading glass containers and beverages company, in 1973. In the 1980s and 1990s, the conglomerate,
renamed BSN, became one of the world’s largest food manufacturers with a presence in 30 countries.
In 1994, CEO Antoine Riboud began to lead BSN through a strategic reorientation, refocusing on
the company’s products with health and well-being benefits. As a first step, the company was
renamed Danone, after the name of the company’s best-known international brand. Riboud and later
his son, Franck (who became CEO in 1996), reorganized the company around four focus areas (dairy,
bottled water, baby nutrition, and medical nutrition) and as a result divested several profitable,
though noncore, businesses and acquired others.
In 1997, Danone made its debut on the New York Stock Exchange (NYSE). “We are not listing on
Wall Street simply for the U.S. market,” explained Chairman Riboud, but “just as much to consolidate
our position as leader,” particularly in dairy products and water.2 Danone was already quoted on the
Paris, Brussels, and Swiss Bourses and on the London Stock Exchange, but said it was now turning to
the NYSE in order to raise its international profile.3 In 2008, Danone posted net revenue of $21.2
billion and employed 80,143 people worldwide. Its dairy and medical nutrition businesses ranked
No. 1 worldwide, with bottled water and baby nutrition holding No. 2 positions.
a Danone, meaning “Little Daniel,” was named after Carasso’s son, Daniel.
2
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A Focus on Social Responsibility4
To bring health through food to as many people as possible.
— Danone Mission Statement
Danone historically took a holistic approach to social responsibility and, as the mission statement
indicated, social values were deeply embedded in the culture of the company and the business.
Antoine Riboud communicated his vision of Danone’s dual commitment to economic performance
and social responsibility in 1972 when he stated, “Corporate responsibility does not end at the factory
gate or at office doors. The jobs a business creates are central to the lives of employees, and the
energy and raw materials we consume change the shape of our planet.”
According to senior leadership, social responsibility was as fundamental to Danone’s purpose as
its economic performance. This was referred to as the “double project” (in French, le double projet),
and stipulated an equal respect for the social impacts and financial results of business decisions.
Employees, such as Tony Cicio, the vice president of human resources at Dannon, took pride in the
authenticity of Danone’s CSR activities, explaining that it’s “not done for the ‘wrong reasons,’ it’s
really done from the heart.” He described Danone’s approach as “humble” and “internal,” further
explaining that it “is not about ticking a box or proving something to the public; it’s engrained. The
reason the business developed in the first place. [It’s] not about looking good externally; it’s a part of
our culture.”
Danone’s social responsibility focused on three areas: “Nutrition and Health,” “People,” and
“Nature” (see Exhibit 1):
Nutrition and Health: At the center of the company’s CSR activities were the Danone
Institutes, the first of which was established in 1991 in three countries in Europe and in 1997 in
the U.S. as a nonprofit organization with the mission “to develop and disseminate scientific
knowledge on diet and nutrition to benefit public health” through a collaboration with
academics and scientists focused on nutrition research and health professionals. The institutes
focused their efforts around children’s nutrition education in ways that were pertinent to each
region. For example, program areas in the United States included promoting children’s
nutrition, especially preschool nutrition education, and fostering the success of tomorrow’s
leaders in the field of nutrition. As of 2010, there were 18 institutes worldwide (established by
local Danone companies) sponsoring over 800 research projects and 60 continuing education
programs for the general public, at a value of €16 million in financial support.5 For example, in
the United States, amidst the struggling economy of 2009, the Dannon Institute produced a
webinar on “Maintaining School Wellness during Tight Budget Times,” while in Indonesia,
the institute convened a meeting of experts on “Child Growth and Micronutrient
Deficiencies.” The network was continuing to grow, with the most recent establishment in
2008 of the Southern Cone Danone Institute, representing the countries of Argentina, Chile,
and Uruguay.
People: Danone established both internal and external programs. Internally, the company
focused on the development of employees through activities such as the “Danone Way,” a
management tool designed to enable managers to assess performance along multiple
dimensions (e.g., quality, ethics, management, environment), and the integration of social
goals in the remuneration of the company’s 1,500 directors and key managers. For example, at
Dannon US, 30% of employees’ variable compensation was tied to the company’s social and
environmental performance. Externally, Danone supported its consumers, its suppliers, and
the local communities in which it operated. For consumers, the company not only created
3
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The Dannon Company: Marketing and Corporate Social Responsibility (A)
nutritional education initiatives, but also updated the nutritional formulas of over 600
products to be healthier. Suppliers were expected to maintain the social principles of Danone,
in addition to ensuring product safety and promoting the economic development of local
producers. The company was also actively involved in local communities, committing an
additional €5–€6 million to sponsor local events and provide product donations and
emergency aid relief. Additionally, in 2005, Danone’s Volvic brand collaborated with
UNICEF to launch the “1 litre for 10 litres” initiative, which financed the digging of wells to
increase clean water access in Africa.
Nature: Danone took a firm stance on sustainability, with a target of achieving carbon
neutrality on five of its brands by 2011. Accordingly, in 2001 it instituted the “Sensible Plants”
program to reduce water consumption by 30%, energy consumption by 20%, and packaging
weight by 10%, and increase waste recycling to 80%; by 2008, all targets, with the exception of
water consumption (93% of target), had been achieved and surpassed. Further, between 2005
and 2008, the company spent €90 million on environmental investments, including tools to
measure carbon and water footprints. Danone also expected its suppliers to promote
environmentally friendly farming practices and planned on developing tools that integrate
sustainable development indicators into supplier evaluation and monitoring.
As a testament to its commitment to social responsibility, Danone was selected for the Dow Jones
Sustainability Index from 1998 to 2008, and for the INNOVEST classification of the world’s top 100
companies with high involvement in sustainable development from 2003 to 2008.
Danone Enters the U.S.
Danone originally entered the U.S. market in 1941, when Daniel Carasso immigrated to the United
States in search of a safe haven during World War II. In 1942 Carasso founded Dannon Milk
Products, Inc., in New York, changing the name from Danone to Dannon to make it sound more
“American.” At its inception, the company faced a major challenge, because the U.S. yogurt market
was practically non-existent—most Americans had never even tried yogurt, let alone purchased it.
As a result, Carasso was forced to think innovatively in order to garner interest among the skeptical
American consumer base. In 1947, Carasso achieved a major breakthrough with the introduction of
the “Fruit on the Bottom” yogurt product; its perfect balance of tartness and sweetness suited the
American palate and made it an instant success. In 1955, Dannon proved innovative once again,
introducing a low-fat yogurt that appealed to health enthusiasts.
Although the decades after World War II brought various structural and ownership changes,
including a period when the brand was owned by Beatrice Foods, in the 1980s Dannon once again
became an “official” part of Danone. By then, the company had grown to 17 product categories
(SKUs) and was poised for additional growth. The remainder of the 1980s and the 1990s were
characterized as periods of innovation for Dannon. In 1988, the company capitalized on the new
FDA approval of aspartame and launched “Dannon Light,” the company’s most successful product
launch until that point. Moreover, it developed many novel products targeted at the children’s sector
and the desserts sector, including premium frozen yogurt. After Danone’s strategic reorientation
around health began in 1994, innovation at Dannon changed as product development became
anchored on health benefits.
In addition to the Dannon business, Danone’s U.S. subsidiaries included Danone Waters of
America (Evian bottled water) and Stonyfield (organic yogurt).
4
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Dannon’s Relationship with Danone
Dannon was a wholly owned subsidiary of Danone. At Danone, local decision making was
encouraged and trusted. Local executives were completely responsible for the profit and losses of the
country-based business units (CBUs). While the scientific formulas for many products were created at
the global headquarters, specific taste profiles were typically adapted to a local environment. Dannon
had a fiduciary responsibility to its parent and was accountable for a set of deliverables and data for
reporting purposes. For example, Dannon was obligated to meet annual targets for profitability,
operating free cash flow, manufacturing safety, and environmental sustainability.
Danone also worked to train its leaders and communicate the broader company values.
Programs, such as Danone Way, a leadership training program, ensured cultural cohesion and
outlined the practices through which Danone operated. The company values were referred to with
the acronym HOPE: humanism, openness, proximity, and enthusiasm. “Humanism” embodied being
people oriented and was linked to the mission of health through food. “Openness” addressed the
goal of an open global culture. For example, CEOs and senior management regularly transferred
among Danone subsidiaries in different countries, which created exciting opportunities and growth
platforms for individuals and the firm as a whole. “Proximity,” with its Latin root for being close,
emphasized the need for local subsidiaries to meet their financial commitments to the parent
company. As Cicio said, “Our responsibility to our parent company is to live the values and deliver
financial return.” Finally, “enthusiasm” was the result of the preceding three values that enabled
exciting opportunities for individuals and the company.
Gustavo Valle, the CEO of Dannon in 2009, exemplified the value of “openness.” He was
originally from Argentina, and before starting his position at Dannon US, he was the CEO of Danone
Brazil. However, he was not unique; of the 300 employees at the Dannon US headquarters, 50 were
born outside the United States. Marketing Vice President Marc Jove, for instance, was born in
Barcelona and before taking his current position, he was the marketing vice president at Danone
Argentina.
The U.S. Yogurt Industry
Sixty-seven years after Dannon introduced yogurt to the U.S., Danone still viewed the U.S. as an
emerging market for yogurt. In 2007, U.S. yogurt consumption per capita was only 11.8 lbs, versus
62.4 lbs in Switzerland and 42 lbs in France (see Exhibit 2). From 2003 to 2007, yogurt consumption
grew 31% in the U.S., versus only 6% in Switzerland and a downturn of 3% in France.6 These two
statistics, combined with the much larger U.S. population, marked the United States as a highpotential growth market for Danone in the next 5 to 10 years. Growth had slowed in the past 2 years,
and therefore Dannon continued to focus on growing the yogurt category and proving its relevance
to Americans.7
Yogurt was not as core to the American diet as to the European diet. As of 2008, the total U.S.
yogurt category was $3.7+ billion, growing at about 1.5% per year.b The main product categories
were Staples/Quarts (38%), Light (27%), Proactive Health (13%), Kids (12%), Indulgent (6%), and
Drinks (3%). Proactive health, the newest product segment first introduced in a test market by
Dannon’s DanActive in 2004, was defined as products with health benefits beyond basic nutrition,
such as probiotics for improved intestinal transit and immune function.8 Recent growth in yogurt
b The source of most of this sales data is IRI, a database that does not reflect some of the category’s largest retailers, most
notably Walmart, where Dannon has a strong position and is growing faster than IRI-covered retailers.
5
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The Dannon Company: Marketing and Corporate Social Responsibility (A)
consumption was driven by the Proactive Health, Light, and Quarts segments (see Exhibit 3). Core
yogurt consumers were 45+-year-old women. They were typically from a high- or medium-income
household, although low-income household consumption was increasing. Demographics with high
potential for growth included 45+-year-old men, 0- to 11-year-old kids, and 25- to 54-year-old
women. While 85% of American households had yogurt and consumed it, they significantly trailed
European households in amount consumed. The average American consumption was around 13 lbs
per capita on the coasts, decreasing to 9 lbs per capita in the middle of America. A core goal at
Dannon was to increase not only the number of Americans who consumed yogurt, but also how
frequently they consumed it.
In 2008, Yoplait was the market leader with a 35.4% market share and Dannon was close on
Yoplait’s tail with 28.9% market share. The third largest market share, about 11%, belonged to
private label brands. The other main segment of competitors consisted of small, niche companies
catering to a specific consumer, such as Fage (Greek) (see Exhibit 4). Another niche player focused
on organic yogurt, Stonyfield, was 85% owned by Danone. Yoplait was the market leader in the Light
and Staples segments, and these two segments represented 67% of their sales. Dannon was the
market leader in Proactive, and it represented 40% of sales (see Exhibit 5).
Organizational Structure
Dannon valued collaborative decision making, and therefore major strategy and resource
allocation decisions were presented to the executive committee, which represented all the major parts
of Dannon’s business (see Exhibit 6). Decisions were always strongly influenced by Danone’s global
strategy and mission.
The White Plains, New York, corporate headquarters was home to the executive committee, as
well as most corporate-wide departments such as marketing, finance, human resources (HR), and
CSR. Nationwide, Dannon had 1,150 employees, most of whom worked at one of Dannon’s three
plants located in Ohio, Texas, and Utah (see Exhibit 7). The Ohio plant was the largest yogurt
manufacturing plant in the U.S. and among the largest in the world.
Products
Dannon sold and produced 6 million cups of yogurt per day in almost 100 flavors, styles, and
sizes.9 Dannon’s product portfolio covered most of the major categories: Staples/Quarts (Dannon
brand: Fruit on the Bottom, Fruit Blends), Light (Light & Fit), Proactive Health (Activia & DanActive),
and Kids (Danimals & Dan-o-nino) (see Exhibit 8).
Proactive Health had become a major area of growth and competitive differentiation for Dannon
since it launched Activia, the leading proactive health brand, in 2006. Activia was a yogurt that
contained Bifidus regularis, a probiotic culture clinically proven to help regulate the digestive system.
Activia’s ads featuring Jamie Lee Curtis were well known and were actually spoofed in a Saturday
Night Live skit in 2008. Within 1 year of launch, Activia reached $100 million in net sales—less than
1% of new products ever achieve this milestone in their first year.10
Marketing Strategy
As one of the top two yogurt producers in the U.S., Dannon was poised to benefit from growth in
U.S. yogurt consumption, and therefore focused its marketing strategy on increasing category
relevance and per capita consumption. Starting in 2006, Dannon focused on providing products that
delivered a high health benefit, and then communicating that benefit to make yogurt more relevant.
6
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Dannon allocated its marketing budget among the different brands, and did not advertise the
corporate Dannon brand. Dannon brands typically spent their marketing budgets on TV ads, in-store
shopper marketing tactics (e.g., coupons and aisle banners), and branded websites. In 2010, the main
priority for Dannon was to help consumers understand what yogurt could do for them and how it
impacted everyday life. Once the yogurt category was further developed, the company expected to
reevaluate its marketing priorities.
The Dannon Company CSR11
The responsibility of The Dannon Company, Inc., goes far beyond our business of producing wholesome
yogurt products. It is our privilege to be an active partner in providing families with the tools and information
they need to live healthier lives.12
— Gustavo Valle, President and CEO
Dannon’s CSR activities fell under the Regulatory and Corporate Affairs Department, which also
covered legislative, regulatory, and public relations activities. Gayle Binney, manager of Dannon
Corporate Responsibility and The Dannon Institute, was the only full-time employee dedicated to
CSR activities. Neuwirth, as her manager, was also highly involved with CSR in addition to his PR
responsibilities. As with all Danone subsidiaries, Dannon was encouraged to develop projects that
capitalized on Danone’s three key CSR themes: nutrition and health, nature, and people.
Nutrition and Health
Created in 1997, the U.S. Dannon Institute was an independent, nonprofit foundation dedicated to
promoting excellence in the field of nutrition, and communicating the link between nutrition and
good health. The Institute pursued two main program areas in the U.S.: promoting children’s
nutrition, especially preschool nutrition education, and leadership development of promising and
established nutrition researchers.
The institute was unique in a variety of ways. First of all, both academic experts and Dannon
executives sat on the institute’s board of directors. Unlike many company-organized foundations, the
Dannon CEO was not the president of the institute. As of March 2010, Virginia A. Stallings (M.D.;
Director, Nutrition Center at The Children’s Hospital of Philadelphia) was the president of the
Dannon Institute. Dannon’s intention was to give leading academics authority, and thus maintain the
integrity of the institute. In January 2008, Dannon U.S. received Virgo Publishing’s Focus on the
Future Humanitarian Award for the institute’s contributions to nutrition education over 10 years.
The institute was dedicated to spreading awareness and encouraging leadership in the realm of
health and nutrition. For example, the institute held a Nutrition Leadership Institute® that was
designed to equip outstanding nutrition doctoral graduates with a broad perspective and leadership
skills. Many of the program’s alumni took on important roles at academic institutions, government
offices, and industry. The institute also created a nutrition education curriculum, Celebrate Healthy
Eating, which was specifically designed for preschool children in day care settings. It provided
educators with lesson plans about the food groups and classroom activities. The original four
program modules were distributed as a supplement to Scholastic’s Early Childhood Today magazine,
with a distribution of 40,000 teachers, directors, and early-childhood coordinators and administrators.
Additionally, in 2006, the federal government mandated the establishment of school wellness policies
for public schools. The institute worked with District Administration magazine to publish Healthy
Steps Forward, a special edition publication and webinar, that provided school administrators with
information about how to move district school wellness policies from implementation to assessment.
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Dannon also made efforts to make healthy eating accessible to children in every socioeconomic
group. In 2008, Dannon developed a quality, low-cost blended yogurt called NutriDay™ (later
renamed Dannon $1.00). At a cost of $1.00 per four-pack, NutriDay™ provided schools with an
affordable, nutrient-rich food item for students. Additionally, starting in 2002, Dannon donated
excess product to Feeding America, the nation’s leading domestic hunger-relief charity. In 2008
alone, Dannon donated more than 2 million pounds of fresh dairy products. Dannon Next
Generation Nutrition Grants were established in 2006 with the mandate to help teach children and
their families about healthy lifestyles to combat childhood obesity. Each year, Dannon contributed
$30,000 to one nonprofit organization in each of the four communities with a Dannon plant or office,
totaling $120,000 per year. The organizations receiving grant funding tracked and monitored how
the children enrolled in their programs changed their eating and physical activity behaviors. For
example, the 2006 New York grant recipient, Hudson River HealthCare, reported that among the
children participating in their program, there was a 154% increase in those who ate the USDArecommended number of fruit and vegetable servings per day, and an 81% increase in those who
participated in at least 30 minutes of physical activity per day.
Dannon worked to keep its advertising in line with these ideals. In 2008, unlike many of its
competitors, Dannon joined the Children’s Food and Beverage Advertising Initiative, pledging that
100% of its advertising to children under age 12 would be for products that met key nutritional
guidelines reviewed and approved by the Council of Better Business Bureaus.
People13
Consistent with the Danone philosophy of engaging with the social environment, Dannon
supported local community organizations through donations and volunteer time. Some initiatives
were consistent across the company, such as “Children’s Day” in December, when historically all of
Dannon’s locations provided volunteers at local charities to help children in need during the holiday
season. Various locations also had unique initiatives. For example, employees at Dannon’s Fort
Worth facility visited Cook Children’s Medical Center to decorate the doors to patient rooms and
leave gifts in hospital beds; Dannon’s Utah Finance Department actively supported the American
Heart Association’s annual Heart Walk and Run, where 100% of employees participated, raising
$5,135 and donating Dannon smoothies to the event.
Dannon also worked to enrich the health and well-being of its employees through the
development of a comprehensive work–life wellness program. This included free exercise programs
on site during lunch and after work, tuition assistance, financial assistance for adoption-related
expenses, and a scholarship program for the children of employees.
Nature14
Following the lead of Danone, some of Dannon’s CSR initiatives focused on the environment.
Dannon’s cross-functional Green Obsession Team brought employees together to identify and
promote ways of reducing Dannon’s environmental footprint. From 2004 to 2009, Dannon reduced
the quantity of its primary packaging (on a per-ounce basis) by 15%, and plants and offices had
regular recycling programs.
In 2008, Dannon hired a senior director of environmental sustainability, who led the Green
Obsession Team and helped to ensure that green initiatives were incorporated into all of Dannon’s
products and business strategies. In 2008, more than 85% of Dannon’s products were carried by
trucking companies participating in the U.S. Environmental Protection Agency’s Smartway Transport
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partnership, a program aimed at reducing carbon dioxide emissions through improvements in truck
design.
The same year, Dannon conducted a Carbon Footprint Analysis to better understand the
breakdown of carbon generated during the life cycle of its products. Based on the results, Dannon
prioritized nine key areas for improvement: packaging, manufacturing plant energy & water use,
employee education & engagement, waste & losses in the entire life cycle, supply chain & logistics,
external communication, office and workplace, raw materials, and retailer/consumer engagement.
Discussions with Key Dannon Leaders
Over the course of a few weeks, Neuwirth approached many of his colleagues to propose the idea
of communicating Dannon’s CSR efforts to its consumers and to understand their perspectives. He
appreciated that there were many different opinions on the subject and by no means was his mind
made up. He reflected back on the key points conveyed by each of his colleagues.
Alessandro Arosio, Senior Director of Marketing
Neuwirth’s conversation with Alessandro Arosio was informative; as a marketer with consumer
packaged goods companies for nearly 12 years, Arosio noted the tension between dedicating
resources to advance the brand and dedicating resources to promote the social mission. “We have an
internal debate on whether we should spend more money on the corporate level promoting social
programs or whether we should put those resources towards fueling the stand-alone brands first.
The reason why we haven’t committed is because we haven’t identified how we’re going to measure
the impact of the corporate program.”
If Dannon did choose to increase its marketing efforts to promote this social mission, a consumer
communication strategy explaining Dannon’s CSR programs would be a natural “next step,” because
it would demonstrate consistency in its marketing message and could translate to increased
consumer confidence in Dannon. Through a combination of corporate-level and brand-level
advertising campaigns, Dannon could potentially differentiate itself as a leading player that
promoted the health of its consumers through its product line, as well as the progress of the
community in which it operated.
On the flip side, Arosio felt there were several challenges with this strategy. First, given that
Dannon was a company focused on measurability and impact, this initiative would be difficult to
calculate a return on investment (ROI) for since it provided mostly intangible benefits. There would
be limited short-term sales impact, if any, and as a result its success would be difficult to measure.
Moreover, Dannon’s key business objective was to generate consumption of its products, and the
promotion of healthy habits through this initiative might not immediately impact consumption. A
CSR communications strategy could increase consumer confidence in Dannon, but patience would be
required to assess its impact on business growth. Finally, Dannon’s competitors could take
advantage of a potential halo effect if consumers were confused about which company had been
promoting these CSR programs.
There were also some specific considerations around the dynamics of the situation described by
Arosio that resonated with Neuwirth. Arosio explained:
I would love to [communicate our CSR programs to consumers], but it would require a
change in our fundamental commitments with [Danone] in Paris, including the budgets we
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agree to deliver. This drives our prioritization of investments, to ensure that we are able to
deliver on our commitment. If we were to revisit these commitments, perhaps we could
reinvest in communication of CSR programs. Alternatively, if Dannon received a financial
benefit or tax incentive from the government to help promote public health and ultimately
lower healthcare costs through prevention and education about health, it would make it
possible for Dannon to pursue more of this strategy.
Jon Pollock, Brand Manager
During his conversation with Jon Pollock, brand manager for Activia (who joined Dannon after
receiving his MBA from Harvard Business School in 2007), Neuwirth gained some additional
insights. Most illuminating was Pollock’s opinion on how Dannon should embark on the
communication strategy if the company decided to pursue it. In Pollock’s words:
We already advertise tremendous amounts on our individual sub-brands, with a focus
around health benefits, and Activia, for example, is becoming one of the most heavily
advertised brands in the CPG arena. To that end, a bigger opportunity could be to
communicate about what Dannon overall stands for and how it brings health, nutrition, and
social well-being to the communities it is involved in, which aligns its business with its social
mission.
In addition, Pollock believed there was an opportunity to use the global Danone brand. “Since the
equity of the Dannon brand is relatively modest compared to Danone at a global level, there is a huge
opportunity to leverage the Danone brand’s halo to define how Dannon as a company brands itself in
the U.S.” Bolstering the Dannon brand could especially help the two proactive health brands, Activia
and DanActive, if Dannon came to stand for nutrition expertise as a result of communicating its
nutrition-focused CSR efforts, especially the Dannon/Danone Institutes. This could then provide
further credibility to the health benefits promised by Activia and DanActive
Pollock also expressed some concerns. First, like Arosio, he was concerned about the
measurability of the ROI and the opportunity cost of making the investment. He wondered, “Would
Dannon be sacrificing short-term profitability for no guarantee of long-term value?” Pollock also
struggled with the idea of opening Dannon up to additional scrutiny by publicizing its CSR efforts.
Critics could potentially emerge and start analyzing all of Dannon’s activities and claim that the
company could be doing even more. As such, Dannon could be forced into a defensive position and
be perceived as disingenuous by its consumers.
Marc Jove, Senior Vice President of Marketing
Marc Jove had been at Danone for 13 years, after working in marketing at Wrigley. Jove started
with Danone in Barcelona. In one assignment, before joining Dannon in the U.S., he was the global
director of marketing for the Activia brand.
Jove’s reaction was immediate and definitive. No, he would not recommend speaking with
consumers about Dannon’s CSR activities. The crux of his argument focused on this question: “Why
would someone buy a product because they like the company, even if the product is not relevant to
them?” As the head of the Marketing Department, Jove knew well that the main marketing challenge
for Dannon was not getting consumers to want Dannon—rather, it was getting consumers to want
yogurt. Jove said:
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The U.S., strangely enough, is still an emerging market for yogurt. The yogurt category is
not yet as relevant to Americans as it is in other geographies of the world, and they don’t yet
understand what yogurt is providing. Maybe, when consumers have decided to pursue the
yogurt category, talking about our CSR would help them to decide among brands. But first,
we need to educate Americans on the properties of yogurt and the health benefits.
He believed that good marketing required making trade-offs and deciding on the best messages,
because you couldn’t communicate too many messages at once. In Jove’s opinion, marketing dollars
should first be spent building the category, and then increasing the consumption of Dannon’s specific
products. Speaking to consumers about CSR before either of those landmarks was met would just
muddle the marketing message. As Jove said, “I cannot put the chariot in front of the horse. First is
product. Then we can enrich it with community and social activities.”
Jove had developed a corporate-level CSR-focused campaign when he was VP of marketing for
Danone Argentina, just before he transferred to the U.S. in 2008. However, he saw that as a
completely different situation since the yogurt market in Argentina was very mature, with 30 lbs per
capita consumption, and Danone was well positioned there as the leading brand. In that situation,
marketing around a more emotional bond with the company made more sense to him, versus the
need to focus on rational benefits in the U.S. market.
Once the yogurt industry convinced U.S. consumers of its relevance and had moved them to a
much higher consumption rate, then Jove would consider a CSR marketing message. However, he
would still avoid one-way, mass market communication channels. Instead, he would want to use
two-way, targeted communication channels such as PR programs and interactive media initiatives.
“We would need to open our ears to all the stakeholders and create relationships. The key would be
to be completely honest and to have a credible CSR program to back up the marketing message.”
While he did not want to use CSR as a tool to sell products, Jove did value the CSR commitment
of Danone, and that was part of what had kept him with the company for 13 years. “This is the type
of company where I can feel really good—I’m not only selling products with health attributes, but
doing so in a responsible way. There is a perfect match between my way of being and the company’s
way of being.”
Claudia Sargent, Director of Media
When Neuwirth approached Claudia Sargent about this idea, she immediately grinned and said,
“I’ve gone down this road before.” Sargent spent most of her career on the advertising- and mediaagency side focusing on strategic media planning. A few years ago, she joined Dannon to manage all
of its media planning and investment, and one of her first suggestions was to run a corporate image
campaign that would feature the CSR activities. She noticed that Dannon’s marketing focused on
selling individual brands and not Dannon as a company. “I wanted to develop more of a corporate
campaign—it would be an umbrella campaign that could feature all the different brands. And it
would have a health halo effect down to the individual brands. It’s not something you would run all
year-round—you would want to find specific times of year when you would either layer it over
brand campaigns, or it could be a bridge between different brand campaigns.”
She still liked the idea of a corporate campaign focusing on Dannon’s health and nutrition CSR
initiatives, especially the Dannon Institute. It could create credibility for the Dannon brand and its
key message around the health benefits of yogurt. “This type of campaign would allow Dannon to
develop a more personal engagement with consumers by showing them that we care about the things
that they care about, such as health education for children and developing healthier products. If we
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advertise that, and have a tasty product as well, then it just makes an easier sell. . . . However, I don’t
think we have a competitive advantage in this, because Yoplait has been doing ‘Save Lids to Save
Lives’ for years, and General Mills is a powerhouse in CSR marketing, at least in the U.S.” Sargent
felt that the differentiator would need to be Dannon’s focus on health and nutrition, and its tie to the
products Dannon sells.
Having been at Dannon a few years, Sargent saw it as a “nice to have,” rather than a “must have.”
She said:
When it comes down to budget allocation between this or a specific brand campaign, I’m
not sure this could make the cut. The main issue is reallocating funds away from a specific
brand campaign with a very functional message that we need to generate revenue for our
business. We need to focus on brand growth related to the benefits of our core brands. Our
benefits are very brand specific, and so need to be communicated on a brand-campaign basis.
As a last thought, she mentioned the potential for a negative backlash if consumers felt Dannon
was just jumping on the CSR bandwagon. Although this would be undeserved with Dannon’s long
history of CSR commitment, it could certainly happen with the current skepticism around “greenwashing” and ”pink-washing,” practices in which companies disingenuously emphasized social and
environment benefits.
Tony Cicio, Vice President of Human Resources
After spending his career in finance, Tony Cicio moved into the position of vice president of
human resources at Dannon in 2008, seeking to challenge himself in a new role. As vice president of
HR, Cicio added a unique perspective about the intangible “people” aspects of the strategy.
However, having spent his entire career in finance, and most recently as CFO of Dannon US, Cicio
could also speak to the feasibility of the strategy. For many of the reasons mentioned by the other
stakeholders, including the authentic alignment of Dannon’s mission statement with its social
initiatives, Cicio was open to exploring the strategy, and with his financial lens, he was curious about
how it connected to the company’s profits.
Cicio saw this question as not simply a strategic choice, but a “moral dilemma.” He reminded
Neuwirth that although the two pillars of Dannon’s purpose, economic and social, were separate,
they were equally as strong and important. Cicio did not want to compromise either pillar. In his
words, “Business interests are the business interests. And the social interests are the social interests.”
Yet Cicio also felt that Dannon could benefit from an emotional connection that fueled consumer
loyalty over time because “consumers are becoming wearier of corporate greed and thus are more
savvy in their purchasing decisions.” Cicio continued to say, however, that Dannon would have to
balance this benefit with a risk of misconstrued consumer perception that “Dannon is just another
corporation trying to increase its commercial presence.” Accordingly, he believed that the strategy
should be launched on a small-scale, grassroots basis initially, with local community engagement.
Cicio preferred to do it “for the right reasons.” Overadvertising could create a backlash and result in
the company losing credibility.
Cicio saw an important role for CSR in the recruitment and retention of employees. In fact, when
personally recruiting employees, he started by telling them the mission statement: to bring health
through food to as many people as possible. Cicio believed in the importance of employees
connecting with the emotional purpose to “better the lives of people through the products that they
offer” and thus fully understand how working at Dannon connects with their individual passions. He
noted, “with the newer generation of employees coming in, there is a need to have a social mission.
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While some companies are now jumping on the bandwagon, this is not new to Dannon. A meaningful
part of why they want to be part of the company, and why they stay, is that they have the
opportunity to make a difference in the community.” He had observed that more people were
choosing companies with CSR programs, because it fit with what they wanted out of life.
As the conversation with Neuwirth began to wind down, Cicio noted that while he took pride in
the CSR initiatives, he was well aware that Dannon was not a nonprofit, and did need to make profit.
But he also struggled with the costs of CSR activities and the measurability of impact. He asked
Neuwirth how sustainable the company’s CSR effort was without profit. Since CSR at Dannon was
not alienated from economic aspects, and since he believed that indirectly there was an economic
value, he admitted that he was open to ways in which CSR could provide an additional return on
investment.
Gayle Binney, Manager of Corporate Responsibility and The Dannon Institute
Gayle Binney was the only employee at Dannon dedicated full time to CSR. She had joined the
company in 2004, following a career in nonprofit management and at academic research institutions,
such as New York Hospital-Cornell Medical Center and New York University Medical Center. She
had witnessed the benefits of communicating the company’s CSR initiatives to employees, noting
that it provided “employees with a tangible way to be a part of the solution.” At the same time,
however, she recognized the challenge of attempting broader reach, given that Dannon’s smaller
scale in the U.S. might limit its ability to impact society at large and therefore might force it to focus
its tactics and resources.
According to Binney:
While Dannon hasn’t made communicating its corporate social responsibility initiatives a
priority, if you look at the communication dollars spent, it also hasn’t hidden it from the world;
the company does communicate through the Dannon Cares section on its website and the 16page Corporate Social Responsibility Overview that provides consumers with a perspective of
the areas that Dannon has prioritized, and communicates Dannon’s commitment to nutrition
and health.
Additionally, financial analysts were aware of these efforts. Finally, Dannon focused on the
communities in which it operated. For example, through the Dannon Next Generation Nutrition
Grants, Dannon initiated and supported nutrition education for children in the four communities
where it had its headquarters or factories.
Binney was comfortable with the fact that Dannon had not been overt and promotional about its
CSR with the general public, because these programs were first and foremost an internal initiative
and not designed for public relations. She acknowledged that the company could have sought more
credit externally and that advertising CSR could definitely support the business. However, Binney
stressed the complexity of that marketing message. In Binney’s opinion, any advertising would
require articulating the connection between Dannon and Danone, then explaining what Danone has
done and what Dannon has done. Although Binney felt it was an admirable story that would impress
people, it would have to be told through a very well-thought-out campaign.
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The Decision
The last executive committee meeting of the year would be taking place tomorrow, and Neuwirth
knew that this was his last opportunity to propose this CSR-consumer marketing strategy for
inclusion in the 2010 strategic plan. After several conversations, he was more confused than ever as
each individual raised legitimate arguments for both sides.
Should he take a stand and propose this to the executive committee? If so, who would
spearhead this strategy?
What type of communication strategy and media channels should he suggest?
Should he recommend a corporate-level or brand-level campaign?
Would Dannon have to make changes to its current CSR initiatives? If so, what potential
implication would it have for future initiatives?
Would speaking about Dannon’s CSR efforts to consumers result in greater attention toward
health and nutrition generally? In greater financial rewards for Dannon? Would this strategy
lead to greater internal investment in CSR activities?
Ultimately, the matter boiled down to a single question in Neuwirth’s mind: “If we could grow
our business, while helping Americans choose better foods that led to better health, why wouldn’t we
want that?” Neuwirth took another spoonful of his delicious Activia vanilla yogurt as he
contemplated this decision.
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Exhibit 1
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The Three Focus Areas of Danone’s CSR
Source: Company document.
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Exhibit 2
The Dannon Company: Marketing and Corporate Social Responsibility (A)
Global per Capita Consumption of Yogurt
Source: Company document.
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The Dannon Company: Marketing and Corporate Social Responsibility (A)
Exhibit 3
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Retail per Capita Yogurt Consumption in the United States
Source: Company document.
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Exhibit 4
The Dannon Company: Marketing and Corporate Social Responsibility (A)
Market Shares of Leading Yogurt Labels
Dollar Share
Dollar Share of Category: Total U.S.
Source: Company document.
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Yoplait Owns Core, Kids and Light
Dannon Owns ProActive Health
Exhibit 5
Dannon‘s Sales by Category as Compared to Competitors
Category
$3.7 billion
$1.1 billion
DRINKS 3%
INDULGENT
6%
$1.3 billion
INDULGENT
DRINKS 2%
1%
KIDS 11%
KIDS 12%
INDULGENT
10%
CORE 19%
PROACTIVE
HEALTH
13%
DRINKS 1%
KIDS 19%
PROACTIVE
HEALTH 4%
CORE 31%
CORE 38%
LIGHT 27%
LIGHT 27%
Source: IRI data YTD Ending July 26, 2009 for Pie Chart; Dollar Sales 52 WE July 26, 2009
PROACTIVE
HEALTH
40%
LIGHT 36%
6
Source: Company document.
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Exhibit 6
The Dannon Company: Marketing and Corporate Social Responsibility (A)
Dannon‘s Executive Committee
Source: Company document.
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The Dannon Company: Marketing and Corporate Social Responsibility (A)
Exhibit 7
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Dannon Headquarters and Plants in the United States
Source: Company document.
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Exhibit 8
The Dannon Company: Marketing and Corporate Social Responsibility (A)
Dannon Product Portfolio
Portfolio of Products
Source: Company document.
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Endnotes
1
Dannon’s “Corporate Social Responsibility: The Dual Project.”
2 “France’s Danone Lists on New York Stock Exchange,” Les Echos, November 21, 1997, via Factiva, accessed
February 2010.
3
“Danone to Make Its Debut on NYSE,” Agri-Industry Europe, November 21, 1997, via Factiva, accessed
February 2010.
4
Group Danone, “Groupe Danone 2008 Sustainability Report,” http://www.econsense.de/sites/
all/files/danone_rtdd_2008_en.pdf.
5
http://www.danoneinstitute.org.
6
“History of Danone—Dannon 2009.”
7
“US Snapshot Updated Q3 2009 MN Clean,” IRI database analysis provided by The Dannon Company.
8
Dannon Company, “You Asked about Probiotics,” brochure, http://www.dannon.com/pdf/Probiotic.pdf.
9
http://www.dannon.com, accessed December 2009.
10
“History of Danone–Dannon 2009.”
11
Dannon Company, “Dannon Cares: 2008 Corporate Social Responsibility and Sustainable Development
Overview,” http://www.dannon.com/pdf/2008CSR_complete%20locked.pdf.
12
http://www.dannon.com, accessed December 2009.
13
Dannon Company, “Dannon Cares,” 2008.
14
Dannon Company, “Dannon Cares,” 2008/
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9 -5 1 2 -0 0 9
REV: APRIL 3, 2012
ELIE OFEK
LAUREN BARLEY
The Clorox Company: Leveraging Green for Growth
We make everyday life better, every day.
— The Clorox Company Mission Statement from its 2007 Centennial Strategy 1
In late January 2011, Beth Springer headed into the executive committee strategy meeting at The
Clorox Company (Clorox) in Oakland, California. Clorox manufactured and marketed premium,
branded consumer products primarily in the U.S. through grocery stores and mass merchandisers.
Springer, executive vice president international and natural personal care, and the other executive
committee members would discuss Clorox’s annual and long-range plans. (See Exhibit 1 for
executive committee members.) She knew tensions could run high as they debated whether to
recommit to the existing strategy and tactics, offshoots of Clorox’s 2007 Centennial Strategy.
Shortly after the arrival of Clorox chairman and CEO Don Knauss in 2006, the company crafted a
strategic plan honoring the company’s 100th anniversary in 2013. The Centennial Strategy, as it was
called, provided a roadmap for long-term, accelerated growth and defined the metrics to evaluate
success. A key aspect was the company’s increased emphasis on major, global consumer trends
(“megatrends”). Over the next few years, Clorox focused on two of the megatrends—health and
wellness, and environmental sustainability—which led to products and go-to-market strategies that
addressed consumers’ growing interest in what Clorox broadly termed “sustainability.” This, in
turn, drove the successful repositioning of Brita (a water filtration system), the acquisition of Burt’s
Bees (a natural personal care line), and the launch of Green Works (a natural cleaning product line).
In August 2010, Clorox reported fiscal year 2010 sales of $5.5 billion and progress against its
Centennial Strategy annual targets that mostly met or exceeded expectations despite the challenging
business environment. (See Exhibits 2 and 3 for five-year financial summary and progress on the
Centennial Strategy annual targets, respectively.) However, the financial outlook for 2011 was less
favorable, and Clorox projected flat sales for its fiscal year ending June 30, 2011. Sales of Clorox’s
brands—most with leading market shares—were soft amidst the prolonged economic downturn.
As Springer settled into her chair, she wondered if Clorox should continue its strategy of investing
heavily in sustainability. Although Brita, Burt’s Bees, and Green Works comprised only about 10% of
Clorox revenues, they accounted for much of the company’s sales growth over the past several years.
But the growth rates of Burt’s Bees and Green Works, in particular, had slowed considerably in the
past year. Possible explanations included the weak economy and that the trends fueling their growth
________________________________________________________________________________________________________________
Professor Elie Ofek and Research Associate Lauren Barley prepared this case. HBS cases are developed solely as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2011, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
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512-009
The Clorox Company: Leveraging Green for Growth
were simply fads that had run their course. It was also possible that the brands’ marketing mix was
suboptimal and needed to be refined.
Springer knew the company had to allocate resources over its entire brand portfolio, not just the
three “sustainable” brands. Over the past year, Clorox had increased its consumer and trade
spending to shore up sales of its primary brands, such as Clorox Bleach, Pine-Sol, and Formula 409,
which were in mature categories. Most market shares in these categories were up, but it was unclear
how long Clorox should continue its defensive spending and at what level. Growth rates in the
sustainable brands had also picked up somewhat recently, and Springer wondered if Clorox should
invest heavily in these brands going forward. If so, where would this funding come from? Springer
was eager to participate in the upcoming discussion as the executive committee debated how best to
position Clorox to achieve its centennial targets as the 100 th anniversary grew ever nearer.
Company Background
Clorox was founded in 1913 as the Electro-Alkaline Co. It was reincorporated in 1922 as the
Clorox Chemical Corp. and was acquired by Procter & Gamble Co. (P&G) in 1957. By 1969, P&G
divested Clorox, and in the intervening years until 2011, Clorox grew to be a mid-size company in the
household and personal care industry through acquisitions and strong capabilities in research and
development (R&D), and marketing. Its portfolio of leading brands included its namesake Clorox
Bleach; household cleaning products such as Pine-Sol, Formula 409, Soft Scrub, Tilex, and Green
Works; Glad wraps, bags, and containers; Brita water filtrations systems; Kingsford charcoal; Hidden
Valley and KC Masterpiece dressings and sauces; and Burt’s Bees natural personal care products.
(See Exhibit 4 for brand portfolio.) Clorox’s competitors included industry behemoths P&G and
Unilever with $78.9 billion and $58.7 billion in FY10 revenues, respectively.
Don Knauss and the Centennial Strategy
Knauss joined Clorox in September 2006 after a 12-year career with Coca-Cola, Co., most recently
as its president of Coca-Cola North America. By May 2007, the company defined the Centennial
Strategy, which focused on achieving double-digit annual growth in economic profit through its
milestone anniversary in 2013.2 Under the strategy, Clorox would continue building the number one
or number two share brands in mid-sized categories. It would also push for accelerated sales growth
using various means, including: 1) extending existing brands to adjacent categories; 2) entering new
sales channels with its existing brands; and 3) increasing penetration in countries where Clorox
already did business.3 Driving “demand creation” and building “consumer loyalty” would fuel this
“organic” growth. Clorox articulated a “3Ds” framework to achieve this: desire (pre-purchase
communications to educate consumers how and why the Clorox brands met their needs); decide (instore and at-the-shelf strategies to ensure consumers chose Clorox brands where most purchase
decisions were made); and delight (continual innovation to secure customers’ loyalty and repeat
purchases).4 In addition, Clorox would be more deliberate in identifying and acting upon existing,
latent, and emerging consumer trends that could be important growth drivers for its business.
Clorox identified four global consumer trends that could be incorporated into its product lines
and go-to-market strategies: health and wellness, sustainability, convenience (changed to
“affordability” in 2009), and a multicultural marketplace. Springer summarized:
These global trends were not new. They were in the media; consultants like McKinsey were
incorporating them into their presentations. As we renewed our corporate strategy to grow
faster, we decided to be more externally focused and use these trends to anticipate changes
2
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that were relevant to our consumers. Before, we tended to be more narrowly focused on filling
gaps within our existing portfolio, and we thought our existing portfolio was sufficient.
Riding the Tailwinds of Sustainability
In late 2007, Springer’s group at the time—the strategy and growth office—fielded research with
The Cambridge Group to understand the size and nature of the “sustainability” opportunity for
Clorox. Springer explained, “We did the Cambridge research to get at emerging and latent demand
around sustainability. Would more and more consumers change their habits and buy different
products around sustainability? Our conclusion was yes.”
According to the Cambridge research, consumers seeking sustainable product solutions were no
longer a small niche; 15% of the population exhibited very strong demand for these products and
another 33% had strong demand. Clorox’s syndicated research confirmed the Cambridge findings.
One study found 15% to 30% of the population was comprised of consumers Clorox called “deep
greens”—those who were interested in sustainability and acted on their interest. Another study, an
online consumer survey of claimed purchased behavior, found that over one-third of consumers
claimed to regularly buy green products in December 2007 versus only 12% in August 2006.
The Cambridge research segmented consumers into six groups and ranked the most compelling
benefits for each segment. Clorox chose the “emerging eco guardians” segment as its primary target
for the company’s sustainability efforts with the “eco committed” and “personal purists” as its
secondary targets. (See Exhibits 5a and 5b.) Historical research was used to help predict potential
events that could propel or disrupt consumer demand for sustainable products. (See Exhibit 6.)
The research conducted also gave Clorox insight into what drove consumers’ interest and
involvement in sustainability. Springer elaborated:
Another important piece of learning was that sustainability was not always about saving
the world for our consumer—usually a female head of household. Health and wellness, and
environmental issues were often about her and her world—rather than the world. It was about
making her world better, and in doing so, she was doing a good thing for the world. These were
driven by desires and concerns for the well-being of herself and her family.
Out of this insight, we defined the market as the full spectrum encompassing “my
environment” and “the environment,” depending on the consumer’s level of involvement and
control. They also weren’t mutually exclusive; there were consumers who cared about both in
varying degrees. In general, we were targeting consumers who expressed concerns about the
products that were “in me, on me, and around me.” (See Exhibit 7.)
The research also looked at what drove first and repeat purchases of sustainable products for the
home and family. Among other things it found that consumers who bought environmentally friendly
products often relied on the channel to filter claims, with specialty retailers, such as Trader Joe’s and
Whole Foods Market, considered reliable authorities. Over the next couple of years, Clorox made a
series of moves to grow by capitalizing on sustainability.
The Repositioning of Brita-“In Me”
In 1988, Clorox acquired the rights to market Brita in the U.S. from a small German company,
Brita GmBH. Brita was a pour-through water filtration system with a two-compartment pitcher and
a replaceable filter. Brita did not have the Clorox name or logo on its packaging and was marketed as
3
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The Clorox Company: Leveraging Green for Growth
a standalone brand. Under Clorox management, Brita’s positioning and advertising focused on the
taste benefit of tap water filtered by Brita. By 2002, Brita grew to a 70% share of the high margin
category of pitcher filtration systems. But, over the next five years, the category declined and Brita
sales sagged.5 Shortly after Knauss’ arrival at Clorox, he gave slow growth businesses such as Brita a
year or two to improve sales.
As the company sought to revitalize Brita, there was a realization that water filtered by Brita could
replace the water in millions of plastic bottles Americans threw away each year. Al Gore’s 2006 film
“An Inconvenient Truth” had increased consumers’ sensitivity about bottled water’s environmental
impact, and backlash against bottled water grew. 6 It took some convincing before the Brita brand
group agreed to position Brita as the sustainable alternative to bottled water. Springer recalled:
Initially, sustainability was seen a bit as left-wing political correctness. The Cambridge
Group research helped convince some of the skeptics that “sustainable” brands represented
significant profitable growth upside. We also were fortunate to have a CEO who came from
Coca Cola and had lived through difficult issues on sustainability around health, water use,
and bottle waste. He came to Clorox knowing about the megatrend and that at a minimum
you needed a defensive stance if not an offensive one.
In August 2007, Brita partnered with Nalgene, a manufacturer of reusable beverage containers, to
launch the FilterForGood public relations (PR) campaign. The campaign prompted consumers to use
Nalgene’s reusable bottles and Brita-filtered water by invoking three primary messages: 1) the energy
used to make disposable water bottles in the U.S. could power 190,000 homes a year; 2) the water
from one Brita filter could replace as many as 300 16.9-ounce plastic bottles, giving users great taste
without the waste; and 3) drinking Brita-filtered water cost a user only $0.19 a day for annual savings
of $1,748 (based on 240 gallons per year at an average price of $1 per bottle). 7 The campaign was so
successful that Brita incorporated the messaging into its advertising. 8 (See ad in Exhibit 8.)
Initially, Brita’s growth rate increased substantially, but slowed a bit through the recession. By
FY10, Brita had $250 million in revenues (up from $170 million in 2007), and was still highly
profitable and one of Clorox’s fastest growing brands.
The Burt’s Bees Acquisition-“On Me”
In November 2007 Clorox acquired Burt’s Bees, a leading premium brand in the growing U.S. $6.4
billion high margin natural personal care (NPC) segment, for slightly under $1 billion. 9 At the time of
the acquisition, the NPC segment was small compared to the overall U.S. personal care market ($62
billion), but was one of the fastest growing subcategories with a projected annual growth rate of
almost 8% through 2010. The NPC subcategory was fragmented with the top 10 brands accounting
for 54% of the total U.S. NPC market size. (See Exhibit 9 for the shares of leading brands.) Health
and natural food stores were responsible for 40% of NPC market sales, followed by specialty stores
(27%), direct sales (9%), drug stores (6%), and mass merchandisers (6%).
Burt’s Bees was founded in the 1980s by Burt Shavitz, a beekeeper from Maine, and Roxanne
Quimby, a graphic designer he met in 1984. The company grew rapidly mostly by word of mouth
after the 1991 launch of its signature lip balm, made from bees wax and almond oil. Later, the pair
had a falling out, and Quimby acquired Shavitz’s share of Burt’s Bees in 1999. Over the next few
years, Quimby expanded distribution, launched an eCommerce website, and introduced new lines
including a toothpaste and a shampoo as well as the Baby Bee product line. Quimby put the
company up for sale in 2003, when it sold to AEA Investors, a New York private equity firm. AEA
paid Quimby $141.6 million for an 80% stake and hired John Replogle from Unilever as CEO in 2005.
4
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Based on the founders’ ideals, The Burt’s Bees team built the business around an idea called “The
Greater Good” that argued if companies were socially responsible, profit would follow. 10 (See
Exhibit 10.) The team grew distribution beyond health food stores and grocers to major retailers such
as CVS and Walgreens drugstores, and Target.11 By 2007, Burt’s Bees was in 15,000 retail outlets.
Burt’s Bees products were often set up in a dedicated area with unique merchandising that the
company referred to as “hives.” In the more health and natural oriented food chains, such as Whole
Foods, Burt’s Bees was able to train retailer employees on selling its products. By 2007, Burt’s Bees
revenues had grown to $164 million (90% in the U.S.), up from $23 million in 2000. 12
When Clorox acquired Burt’s Bees, Knauss commented, “The Burt’s Bees brand is well-anchored
in sustainability and health and wellness, and we believe it will benefit from natural and green
tailwinds.”13 Furthermore, Knauss said the acquisition signaled that Clorox was entering into a
strategic phase that would allow the company to expand into a natural product business platform. 14
The acquisition seemed a perfect fit with the Centennial Strategy. Springer explained:
We wanted a business that could be big in the U.S. market, but also had some international
potential. Based on our centennial criteria and looking through the vector of sustainability, we
screened many categories for internal growth and acquisition. We decided to look hard at
health and personal care because they had been important growth drivers for most of the big
household companies over the past decade. Burt’s Bees came on the market, and it had much
of what we were looking for in a small company that needed big company capabilities.
Some loyal Burt’s Bees customers were less enthusiastic about the acquisition and accused the
company of “selling out.” Springer summarized, “We reassured them that Clorox would not change
Burt’s products for the worse and that we intended to learn from Burt’s how to make the entire
corporation greener. We’ve delivered on both.”
Under Clorox ownership, Burt’s Bees remained somewhat independent and was marketed as a
stand alone brand with no reference to the Clorox name or logo on its packaging. In February 2008,
Burt’s Bees launched a “Natural Vs” campaign to educate consumers and address confusion about
what comprised a “natural” product in the health and personal care categories. (See Exhibit 11 for an
ad.) Burt’s Bees also added a “natural bar” on each of its product’s labels to show the percentage of
natural ingredients.15 Jim Geikie, vice president global marketing, Burt’s Bees, explained: “A
significant portion of the population is focused on their health and that of their families. With the use
of nicotine and birth control patches, there is a raised consciousness that what is applied to the skin
could be absorbed into the body. In fact, 60% of what is applied gets absorbed.”He added:
We have a five-segment consumer market. The far left is what we call the “committed
naturalists,” and they make up 1% to 2% of the female population. They are highly educated,
read the back labels, and research products. The next group over we call the “health and
beauty sleuths.” They are less environmentally focused, and more wellness focused. They are
on the lookout for harmful chemicals, which they avoid, and tend to be about 6% to 8% of the
population. We focus our marketing efforts on these two segments today. As we expanded
our distribution into more mainstream retailers like CVS and Target, we knew we had to
expand our target beyond the committed naturalists.
In September 2008, Burt’s Bees released its first corporate social responsibility (CSR) report. The
company articulated ambitious, quantitative goals to measure progress on its “Greater Good”
business model.16 The goals for 2020 included: being a zero-waste, zero-carbon company; operating
on renewable energy in LEED certified buildings; and 100% employee engagement in sustainability
activities.17 Incentives were put in place to encourage top down and bottom up participation. 18
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The Clorox Company: Leveraging Green for Growth
Under Clorox, Burt’s Bees followed the Centennial Strategy playbook closely. The brand was
extended to adjacent categories, including the launch of Burt’s Bees natural acne solutions. Burt’s
Bees also gained distribution at Wal-Mart. In 2009, it began expanding overseas under the Burt’s
Bees name, entering new markets in Asia (Japan, Korea, Thailand), then Europe (France, Italy,
Germany, and Scandinavia), and lastly Latin America in late 2010 (Chile, Colombia, Panama and
Puerto Rico).19 Burt’s Bees also had a loyal Facebook following. Geikie stated, “We were rated the
number two Facebook page by one rating agency. Facebook is a great way to engage our users with
new product concepts or to distribute samples prior to launch.” In June 2010, Burt’s Bees was named
the leading green brand by the ImagePower Green Brands Survey. 20
But by 2010 Burt’s Bees growth rate had slowed considerably, and it accounted for 4% of Clorox
FY10 revenues. Springer stated:
Burt’s Bees was up 25% the year before the recession, but then growth slowed to single
digits the year the recession hit. Price was a factor. Burt’s Bees is a premium personal care
brand. We also sell a good portion of the business in gift and trial packs that are priced
between $9 and $20, which were way off in the recession. We sell a lot through the U.S. drug
retailers whose business was also down.
Geikie added, “In the recession, we weren’t losing customers, but we weren’t gaining new
consumers as much as we had been over the past couple of years.”
The Green Works Launch-“Around Me”
Quickly after the Burt’s Bees acquisition, Clorox added a second brand to its natural product
business platform by launching Green Works in January 2008. It was the first brand that Clorox had
developed internally in over 20 years. Springer recalled:
Research over the years showed that some consumers wanted clean and healthy homes, but
had some aversion to traditional cleaning ingredients or “chemicals” as they tended to call
them. We determined that a lot of the competing “natural” or “sustainable” cleaners suffered
from a number of challenges, including the perception that they didn’t work; they weren’t very
natural; they were very expensive; and they weren’t widely available. We had tremendous
knowledge of surface chemistry at Clorox that could help us make a natural product that
worked effectively and was not too expensive. We also had broad customer relationships and
distribution. We had the ability to bring green cleaning into the mainstream.
A Clorox study found that 43.8% of consumers said they wanted to use more natural household
cleaning products, but the products needed to get the job done. 21 Clorox research also found that
53% of consumers planned to buy more eco-friendly products over the next year, and 47% were
willing to pay up to a 25% premium for them. 22 Seventh Generation and Method were the leading
brands in the natural cleaning category with 2007 retail sales of $100 and $46 million, respectively.
At the time of the launch, natural products represented less than one percent of total cleaning
category sales and were typically priced almost twice that of traditional cleaning products. 23 There
was no government standard that products had to meet to call themselves “natural,” and some
companies used green-looking labels on traditional cleaners to make them look natural. Research
showed that many consumers were confused by environmental labeling, and some claims were
unclear and potentially misleading. Nick Vlahos, vice president and general manager, Burt’s Bees
and former leader of Clorox’s Laundry, Brita, and Green Works businesses, elaborated:
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The insight was that consumers were disenchanted with those $5.99 natural cleaners
because they didn’t work. Although there was a lot of debate, we decided to put the Clorox
name and logo on the Green Works packaging because “Clorox” means power and efficacy to
the consumer. That comes from our bleach heritage. Some thought that adding the “Clorox”
name would make Green Works seem less “natural” because some consumers equate “Clorox”
with chemicals. We thought the trade-off was worth it, because the Green Works target is not
the green purist. We are targeting the consumer who buys Formula 409 but is a bit chemically
concerned and might try Green Works for a reasonable premium. She is not willing to sacrifice
on efficacy, price, availability, or brand, but is willing to make small steps to live greener.
At launch, the Green Works line included an all-purpose cleaner, a glass and surface cleaner, a
toilet bowl cleaner, a dilutable cleaner, and a bathroom cleaner. All Green Works products were at
least 95% natural, and made with cleaning ingredients derived from coconut and lemon oil. The
products were biodegradable, packaged in recyclable bottles, and their formulas were not tested on
animals. Clorox asked retailers to shelve Green Works next to the traditional home cleaning products
so that shoppers were more likely to make the switch to Green Works. Retailers would benefit if
consumers traded up because they would earn a larger penny profit on the sale. Clorox hoped that
Green Works would grow into a $200 million brand at retail over time.
Clorox supported the launch with $30 million in traditional advertising, mainly TV and print (see
Exhibit 12 for an example), and got retailers, particularly Target and Wal-Mart, on board early with
$20 million in trade spending. Chris Hyder, director of marketing, said, “It was a nice launch—a big
effort. The company got a lot of great coverage on Wall Street, and the retailers were really excited.
Retail sales in its first year topped $100 million. There was the feeling that it was the next big thing.”
Clorox also partnered with the Sierra Club, an influential U.S. environmental organization, which
agreed to promote Green Works by allowing the Sierra Club name and logo to be on the packaging in
exchange for an undisclosed cut of the sales. Knauss said at the time, “Our partnership with the
Sierra Club is significant for Green Works but also for The Clorox Company as we continue the focus
on our sustainability efforts. Industry plays an important role in environmental conservation.” 24
The arrangement was the first of its kind in the Sierra Club’s 116-year history, but it was not
without controversy. Several state Sierra Club chapters expressed disapproval with its parent
organization.25 Some also questioned Clorox’s commitment. One activist stated, “We’d like to see
them [Clorox] incorporate these practices into all their products. Why sell one set of products that
have hazardous ingredients and others that don’t?” 26
At the one-year anniversary of the Green Works launch, Clorox announced the natural cleaning
category had grown more than 100%. Green Works was the number one natural cleaning brand in
the U.S. with a 42% share, ahead of the more established players.27 In 2009, Clorox also began listing
the ingredients in its conventional cleaning, laundry and disinfecting products sold in the U.S. and
Canada.28 Knauss stated at the time, “More than ever, consumers want to know what’s in the
products they use in and around their homes.” 29
By early 2010, Green Works added more products to its line: a liquid laundry detergent, a laundry
stain-remover, natural biodegradable cleaning wipes, a glass cleaner, and a dishwashing liquid.
Despite its broad product line, by 2010 Green Works accounted for less than 2% of Clorox revenues.
Its growth rate had slowed considerably; and it had yet to reach profitability. Springer explained:
“We got a lot of trial through heavy discounting and by a heavy push at Wal-Mart. Some of these
triers were never destined to be repeaters. There are a lot of people who want the power of
traditional cleaners. There are also a lot of people where it’s all about price. That group has gotten
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The Clorox Company: Leveraging Green for Growth
bigger over the last two years with the recession. I think Green Works got a little ahead of itself and
tried to convert everyone to green.”
Hyder added his perspective:
Many of the green brands have struggled in the last couple of years as economic conditions
deteriorated. They usually cost more to produce and are higher priced. In the case of Green
Works, some consumers have traded down to less expensive solutions: traditional cleaners or
vinegar and water. Others are less willing to try a new green cleaner that costs more.
In hindsight, we probably invested too much and were a bit too far ahead of the trend.
While we drove Green Works to $100 million in retail sales, we lost a lot of money in the
process. The good news is that we are the number one natural brand in almost every segment
except where another brand had an enormous head start like Seventh Generation in laundry
detergent. We believe we will benefit from any future category growth. I think competitors
will now have a hard time figuring out how to enter the category without buying an existing
brand. Green Works is also a wonderful recruiting tool for Clorox, and most everybody who
comes here wants to work on Green Works, until they realize how small the business is.
As Green Works’ sales declined, Clorox reduced Green Work’s marketing budget, going to a more
targeted marketing approach for the brand. It refined the Green Works message from an appeal to a
more explicitly green target to consumers (mostly mothers with children) who were concerned about
having harsh chemical fumes in the home. Distribution was also re-examined. Springer stated:
Mass merchandisers are still Green Works largest customers, but certain customers and
certain areas are more developed. Target tends to skew to shoppers with higher education and
income levels who can afford products they think are good for their sensitive skin and
allergies. There are some rural Wal-Mart stores that have a full Green Works line, but where
the average low income shopper can’t afford to trade up to an all natural product. It’s okay to
let some of the Green Works products fall off the shelf there and to work to replace them with
some of our core products that will sell.
In addition, the brand group cut the number of Green Works SKUs (stock-keeping units),
eliminating some size and scent variants. Hyder explained, “The original intent was to have a Green
Works offering in every segment related to cleaning. It was seen as a door into some massive
segments in which we didn’t compete like liquid dishwashers and laundry detergents.”
In early 2010, the brand group lowered the everyday price point on many Green Works products
to improve their velocity and maintain distribution support. Vlahos explained, “We wanted to get
within a 10% premium to the mainstream cleaning products. Initially we played a high-low price
strategy at the shelf. A Green Works product would be $2.99, but on deal, it would be $1.99. We
pulled some of the trade dollars out and lowered the cost of the product to get the price point right,
which gave retailers a bit more margin on a daily basis.” Springer added, “Green Works is now
almost a $50 million brand at retail, but it’s back to growth.” Competitive brands Seventh Generation
and Method reported double-digit sales growth for most products in 2010 after flat sales in 2009.30
Clorox continued to receive positive coverage for the line. In 2010, Green Works received the
Natural Product Association certification, which required products be primarily made of plant-based
ingredients, use no harsh chemical processing, and not be linked to any health risks or tested on
animals.31 Also in 2010, the Foreign Policy Association for Corporate Responsibility recognized
Clorox for its CSR, particularly in making natural cleaning products accessible with Green Works.
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The Truth About Bleach
As Springer’s strategy and growth office helped Clorox identify ways to leverage “sustainability”
for growth, it was pushing the company to address some of the misperceptions about its flagship
brand: Clorox sodium hypochlorite bleach. Springer recalled:
We were having a pretty big debate internally about whether it was wise to address the
naysayers on bleach. Historically we had been silent: we believed that any discussion about
sodium hypochlorite bleach might lead to an association with free chlorine, which our end
product doesn’t have, but the discussion just goes downhill from there. Unfortunately, the
online world allows misinformation to be spread in ways it never has before so we advised the
business unit that marketed bleach to stop being silent. We did some simple research that
showed them that the vast majority of mentions on the web about bleach or Clorox were
negative. This led to a series of work called “The Truth About Bleach” that corrected the
misinformation out there, and also went public about all that is good about bleach.
Corporate Responsibility Strategy
As Clorox put more resources behind the sustainable brands, it also began formulating a broader
corporate responsibility (CR) strategy. Springer explained, “We wanted to let the consumer know
she was buying from a company that does the right thing in terms of donating products and money,
reducing its footprint, and caring about society.” In early 2008, Clorox established the Eco office. Bill
Morrissey, vice president environmental sustainability, explained its role:
All of a sudden we had Brita, Burt’s Bees, and Green Works. We looked like the sustainable
company. We had put the spotlight on ourselves, but I don’t think as a company we really
were a sustainability leader. We were responsible; one of our core values is doing the right
thing. But, two of our competitors, Unilever and SC Johnson, had been publishing CSR reports
for a decade. Clorox needed to be more integrated so we didn’t have the three sustainable
businesses over here and the rest of the company that made up 90% of our revenues over there.
Morrissey spent the first year in his new role meeting with different internal functional groups
and business units to explain what his office was and was not. He summarized, “We were
responsible for our companywide eco strategy, coordinating efforts across businesses, and agitating
for change. But the real work would have to be done by the functional groups and the business units,
and we would have to compete with other business priorities to get the work done.”
In addition to embedding environmental sustainability into the company’s strategy, Clorox added
eco criteria into its executive performance scorecard and into the goals and business plans of the
individual business units. Springer explained: “Each business unit had to contribute to reducing our
solid waste, use of water, and greenhouse gas emissions, as well as to making product improvements
such as reducing the amount of material in the product or packaging but delivering the same
consumer benefit. Or replacing an ingredient that today was considered safe but might be some...
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