A VERY DIFFERENT LETTER FOR A VERY DIFFERENT YEAR
I’d like to focus my letter this year on our values and how this confluence of challenging conditions has provided the impetus for Clorox to live out our values when it counted most. And we were rewarded by consumers and stakeholders, leading to a strong financial performance — including solid fundamentals, growth and increased shareholder value — which you will see throughout this report. We’re proud that what we’ve achieved this year has been Good Growth — growth that’s done the right way.
In a year of turmoil, the Clorox family has remained strong because of our values — particularly integrity, fair dealing and ethical practices that are the underpinnings of our focus on doing the right thing. These are values that have guided our predecessors for 107 years and are even more relevant to the challenges brought on by COVID-19. Our character is both internally embedded and externally recognized, as the Axios Harris Poll 100 ranked us No. 1 in corporate reputation, and Forbes rated Clorox one of America’s Best Employers for Diversity. In this unique moment in time, The Clorox Company has become essential to the health and well-being of our society. And in this year, fueled by our IGNITE strategy, which enabled us to serve more communities and consumers, we continued our commitment to delivering value to all our stakeholders.
Supporting People Through the Pandemic
Clorox is a health and wellness company at heart, and during COVID-19 our mission has never been clearer. Since our founding in 1913, we’ve been an ally to communities and the government in times of need, including health crises and natural disasters, starting with World War II, when bleach was used to disinfect wounds, neutralize enemy gases and purify water. And whether it was the Ebola outbreak in West Africa, the swine flu or Hurricane Katrina, The Clorox Company has been there to lend a hand with both product and monetary donations, in collaboration with the American Red Cross and many other organizations in the U.S. and internationally. We’ve learned how important it is to act quickly to help. With COVID-19, we activated our teams across the company in January to increase supply to protect public health and people.
We identified three priorities:
1) Protecting the health, safety and
well-being of our employees.
We care deeply about the safety and well-being of our global workforce and their families. Our team that makes and ships essential household products did an outstanding job in the face of extraordinary circumstances. Their health and well-being is top of mind, and we are grateful for
2) Maximizing supply to get our
products where they’re needed.
As a company, we remain focused on doing everything feasible to maximize the supply of disinfecting products to serve consumers, healthcare workers and our communities in the face of demand that at times increased 500%. This is unprecedented for us or any consumer goods company.
3) Supporting caregivers and people
most impacted by COVID-19.
The Clorox Company Foundation and our brands committed more than $14 million globally in product and monetary donations to relief efforts in the fight against COVID-19. In addition, starting in April we prioritized our hospital-grade disinfectants, increasing production significantly to help healthcare facilities fight the spread of infection.
Guided by Our Strategy
Our IGNITE strategy was a beacon in helping us navigate through this uncharted period in fiscal year 2020. At the time it was created, we didn’t know how prescient the strategy would be. And integrating environmental, social and governance goals into IGNITE provided a grounding to help us pivot quickly, in a number of ways.
Our ability to Reimagine Work during the pandemic, to keep our plants running 24/7 and not lose productivity, coupled with the agility and adoption of new technology with which we shifted to a remote workforce globally, enabled us to thrive under very trying circumstances.
HOW WE’RE ADAPTING THE SUPPLY CHAIN TO ADDRESS DEMAND
In addition, IGNITE gave us the framework to make the right decisions to lead the company through this unique moment. Those decisions supported our strategic focus Fuel Growth, allowing us to cultivate a lot more communities with our essential products in new ways during the pandemic and lighting the path to serve society as people move about beyond their homes. Partnerships with United Airlines, AMC Theatres, Uber Technologies and Cleveland Clinic are testament to that. And we will not be hesitant to invest in more of these opportunities to bring our essential products to new places, expanding our disinfection efficacy, our influence and our footprint. Innovating for Good Growth was the guiding principle of IGNITE, and it was the catalyst to a resurgence for the company even prior to the pandemic. It will propel our actions going forward.
Continued Commitment to ESG
Our focus on environmental, social and governance priorities furthered our vision of earning people’s enduring loyalty and creating long-term value creation for all stakeholders. The time when a mysterious pathogen suddenly gripped the entire planet was precisely the time we most needed our team’s loyalty, work ethic, innovative thinking, teamwork and long-term focus — the foundation of ESG. And during this time, we don’t want to take our eye off the ball of sustainability.
Our commitment to the environment — the “E” in ESG — shows up in all parts of our business every day. And the pandemic has made it more evident how important sustainability is. We set an ambitious target of 50% combined reduction in virgin plastic and fiber packaging and remain committed to this today.
Our IGNITE strategy starts with putting people — or the “Social” in ESG — at the center of everything we do. Not only has the pandemic made this even more significant, the racial reckoning that we experienced this spring triggered by the unjust death of Black men and women has been deeply dispiriting, and sadly they are not anomalies. Clorox stands against racism, inequality and injustice. And we stand with the Black community to confront the systemic racial injustices that have plagued our nation for generations yet feel even more palpable right now. We know we need to do more. It is a time for action and also a time for healing and rebuilding. We have started that process, with significant action toward racial justice and equality in our communities in the U.S. and within our company.
Inclusion and diversity is at the heart of this effort. If we want employees who come together in a crisis, who contribute innovative approaches based on their diverse backgrounds, who instinctively prioritize allocating supplies to front-line workers, who volunteer for long hours in scary times, and who provide perspective that balances our biases in the face of inequality, we need to genuinely value these attributes. I&D has never been more important nor its value more evident.
How we are structured and operate — or the “Governance” in ESG — has always mattered, but the pandemic demonstrated another way it’s important. We’ve never experienced a pandemic like this that spread globally almost overnight. Through it all, Clorox has been able to maintain its R&D operations; large teams of talented people; strong supply chains and distribution networks; and adaptable manufacturing and testing facilities.
In addition, we’re committed to enhancing our leadership in ESG through an unwavering commitment to strong corporate governance and ESG performance overseen by our board of directors. Executive compensation awards reflect achievement of our ESG goals for members of the Clorox Executive Committee, including for me.
Finally, we’re in alignment with key ESG reporting frameworks, including the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures. As a signatory to the United Nations Global Compact, we also reaffirm our commitment to its Ten Principles by driving a strategy that imagines a brighter future for our people and the world around us.
Delivering Essential Value
Thanks to the heroic work of our people, our performance in fiscal year 2020 was very strong, delivering sales growth of 8%. And organic sales were up 10%, our highest organic sales growth on record. We also delivered total company gross margin expansion, and a 16% increase in diluted EPS. Importantly we expanded our household penetration and increased the share of our brands in the U.S. and internationally. And I’m proud that the percentage of our U.S. portfolio seen by consumers as delivering superior value has risen to an all-time high, positioning our brands well in this recession, because value is king, especially during difficult times. Consumers trust our brands and are choosing our brands, and we will continue to build long-term loyalty by investing in our relationship with them. And we’re already making progress against an ambitious set of ESG goals.
With a name that’s synonymous with the words “clean” and “trust,” Clorox is uniquely positioned to expand the base of consumers, communities and people we serve beyond the pandemic. Our 2020 fiscal year was a year when lives and livelihoods depended on the care with which we did our jobs. It’s what makes us essential, and I take that responsibility to heart.
Finally, as I step down from my role as CEO of Clorox, I want to say that it has been my great privilege to carry forward the legacy of generations of strong Clorox leaders in my pursuit of Good Growth — growth that’s profitable, sustainable and responsible. The idea of Good Growth was based on the belief that companies can deliver great results the right way; that serving employees, communities and the planet is as important as serving shareholders; and that how we generate profit matters. I feel good about the progress we’ve made in delivering on that promise and look forward to continuing to serve the company as executive chair of the board.
I’m leaving Clorox in a good position and in great hands, with Linda Rendle taking over the reins as CEO. I’ve worked with Linda for 13 years, and from the beginning I knew she was a special talent. She’s an exceptional leader with an excellent track record. I think our industry needs leaders with courage — not only to do the right thing but to envision the future and make bold decisions. And that’s exactly who Linda is. She’s the right leader at the right time for this company.
I’m proud of her and every member of our team of 8,800 strong. Today more than ever.
Benno O. Dorer
Chair and Chief Executive Officer