Chair and Chief Executive Officer
Dear Stakeholder: For 105 years, we’ve been passionate brand builders. From our earliest days as a “bleach start-up,” creating an iconic new brand that has made a difference in many millions of consumers’ lives for more than a century, to today as a builder of modern consumer experiences for a large, diverse portfolio, Clorox has always been motivated by a desire to understand and meet the needs of our consumers through our brands in unique and novel ways.
Why? Because strong, purpose-driven brands drive consumer value. They inspire consumer trust. They stand out and are differentiated from the competition. They deliver long-term shareholder value. At Clorox, we believe in the power of brands. Our brands.
What’s more, with the name of our biggest and oldest brand the same as the name that sits atop our headquarters building in Oakland, California, the benefits delivered by our brands — of value, innovation and leadership — carry over to our company as well, with equivalent expectations. Our brands reinforce what we believe in as a company: a commitment to Good Growth — growth that’s profitable, sustainable and responsible.
We expanded our health-and-wellness portfolio with the acquisition of Nutranext, a manufacturer and marketer of leading dietary supplement brands in the retail and e-commerce channels.
In fiscal year 2018, increasing the value proposition of our brands to consumers remained a centerpiece of our strategy. We are bringing to life our company’s mission to “make everyday lives better, every day” through each of our brands by articulating a purpose that expresses their value and meaning in consumers’ lives. For example, the Brita business has identified its purpose to make water better for people and the planet.
Today, the majority of our brands are seen by consumers as providing better value. When asked whether our brands are superior or equal to the competition, 80 percent of consumers say “yes”— higher than the number that answered affirmatively four years ago.
Our Clorox Company brands can be found in nine of 10 U.S. households, almost a million more than a year ago. And more than 80 percent of our brands command the No. 1 or No. 2 market share position in their categories in the U.S. and internationally. Just this year, our iconic Burt’s Bees® beeswax lip balm vaulted to No. 1 in the overall lip balm category for the first time in its history.1
Building on this strength, we acquired dietary supplements maker Nutranext, which encompasses a family of category-leading brands that includes Rainbow Light®, Natural Vitality® and Neocell®. This next generation of brands expands our portfolio even further into the health-and-wellness space, where we see potential for growth as more and more consumers seek a healthier lifestyle.
This fiscal year also brought a continued emphasis on innovation across our portfolio and throughout our business.
In product innovation, we launched Fresh Step Clean Paws® cat litter, Burt’s Bees cosmetics — the largest introduction in that brand’s history — and a reinvention of the brand that started it all, Clorox bleach, by adding the power of Cloromax, which reduces the adhesion of soil to surfaces and makes whites brighter and last longer. In each case, we’ve stretched the potential of these brands through unique product attributes that meet a consumer need. We also built upon last year’s successful introduction of the Clorox Scentiva experiential scent cleaners platform by expanding into new product categories and fragrances.
Innovation at Clorox to strengthen the value proposition of our brands goes well beyond product and also has been integrated into our processes to improve overall operational excellence. Most notably this year, a new 258,000-square-foot manufacturing facility opened just outside Atlanta, Georgia. Featuring one-of-a-kind, state-of-the-art equipment, this facility is intended to enhance our supply chain and support growth in our Home Care business.
We also are innovating how we engage with consumers through the use of technology in all aspects of marketing, tapping the latest digital trends to offer more personalized messaging that delivers on increasingly fragmented consumer needs.
This year, our brands deployed artificial intelligence to reinforce their value. Our Kingsford® brand, for example, partnered to provide content for the Google Assistant that answers questions about grilling. Similarly, a chatbot powered by AI was developed for the RenewLife® website to help guide consumers through the buying process.
Another reflection of our emphasis on technology is our industry-leading digital media spend, which in fiscal year 2018 was about 50 percent of our overall media spending for the first time, compared to 45 percent last year.
We’ve also continued to push the bounds on e-commerce, which grew more than 45 percent in the past year and now represents 6 percent of company sales, with projections to reach 8 percent in fiscal year 2019.
Simply put, building and maintaining leading brands requires people who are motivated to lead and give their best every single day.
The leadership of our brands shapes the culture at Clorox. We believe this leadership shows in the engagement of our employees. In fiscal year 2018, we matched last year’s all-time-high 88 percent employee engagement rate, which remains 7 points ahead of competitors in the Fast-Moving Consumer Goods Sector and even 2 points higher than Global High-Performance Companies, which we consider our benchmark. Representation of women and minorities in our workforce continues to move up, among both overall employees and managers. And, we remain leaders within the Fortune 500 in our representation of women and minorities on our board of directors.
Building on that strong foundation, we continue to invest even more in our employees — all 8,700 strong — to heighten their sense of ownership and empower them to take bold action, using an agile approach to drive growth. As part of that work, we accelerated our inclusion and diversity efforts through new initiatives that included training to help employees recognize and limit the influence of unconscious bias. Our goal is to achieve a more diverse and inclusive workplace so the collective genius and soul of our company can truly shine.
I’m proud that our work has resulted in recognitions by third-party organizations. We were named to two noteworthy indices, the Bloomberg Gender Equality Index and the Thomson Reuters Diversity and Inclusion Index, on which we were ranked No. 28. We again received a perfect score on the Human Rights Campaign’s Corporate Equality Index — a recognition we’ve earned since 2006. In addition, Diversity MBA’s list of Top Places for Women and Diverse Managers to Work placed us at No. 5, while Hispanic Network Magazine cited us on its Best of the Best List of Top Employers in 2017-18.
As a brand leader, there’s also an expectation of corporate responsibility that we take seriously.
As of the close of calendar year 2017, we’ve now made environmental sustainability improvements to 49 percent of our product portfolio since our 2011 calendar year baseline, just shy of our 50 percent goal by 2020. We’ve also exceeded our goal of 20 percent reductions in greenhouse gas emissions, water use and solid-waste-to-landfill and remain on track to meet a similar goal for energy reduction by 2020.
In a year when the planet faced seemingly unprecedented natural disasters from hurricanes to wildfires, we provided support to communities around the world, many of which are places where our own people live and work. I’m especially proud that in fiscal year 2018 we gave a total of $20 million in combined product donations, foundation cash grants and cash through cause marketing campaigns.
In recognition of our corporate responsibility work, we were gratified to be ranked No. 9 on Barron’s 100 Most Sustainable Companies list and No. 20 on CR Magazine’s 100 Best Corporate Citizens list.
While we’ve made great progress, we’re not satisfied. We’ve already begun planning the next phase of our corporate responsibility strategy and will be looking to raise the bar even higher as we set our new objectives for 2025. This work is a critical part of our goal of Good Growth, helping to drive long-term shareholder value.
By constantly evolving and investing to meet consumers’ needs, our brands were able to deliver ongoing value to shareholders. In fiscal year 2018, we returned $676 million1 in cash to our shareholders, including a 14 percent dividend increase declared three months earlier than originally scheduled due to the benefits of tax reform. This marked the 42nd consecutive year we’ve increased our dividend. We also initiated a share buyback program of up to $2 billion, demonstrating our commitment to return cash to Clorox stockholders.
Our obsession with building and investing in modern and relevant human-centric brands began with Clorox bleach more than a century ago and continues as we enter fiscal year 2019. What do we believe is behind a great brand? It’s value. It’s innovation. And it’s leadership. All instilled with trust and supported by our highly engaged Clorox team of 8,700 people. In our brands is everything we need, today and into the future, to reward our consumers and, ultimately, all our stakeholders.
Benno Dorer, Chair and Chief Executive Officer
1Total amount reflects $450 million of cash dividends paid and $271 million of payments for stock repurchases, less $45 million related to issuance of common stock for employee stock plans and other.