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Assessing the Robust Gains in Clorox’s Lifestyle Segment due to Burt’s Bees

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Lifestyle segment’s revenue in fiscal 2Q16

The Clorox Company’s (CLX), or Clorox’s, Lifestyle segment’s volume and sales both grew by 2.0% in fiscal 2Q16. This was primarily due to double-digit gains in Natural Personal Care and solid gains in food, which were partially offset by a decline in Water Filtration sales. The company’s Lifestyle segment sells and markets food products, water-filtration systems and filters, and natural personal care products in the US.

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Reasons for increase

Clorox’s Lifestyle segment’s revenue came in at $0.3 billion in fiscal 2Q16. The solid gains in food business were driven by Ranch with Sweet Chili and Ranch with Roasted Garlic, as well as by Hidden Valley dressings and dip mixes, particularly Greek Yogurt.

Additionally, sales grew due to double-digit growth from Burt’s Bees, specifically from the launch of new lipsticks, blemish balm cream (also known as BB cream), and new Mint Cocoa and Caramel Apple lip balms. Clorox’s facial towelettes also saw growth driven by Clorox’s holiday program, but these gains were offset by sales declines and lower shipments in Water Filtration.

Operating income and creating demand

Clorox’s Lifestyle segment’s operating income decreased by 1.4% in fiscal 2Q16. The decrease in operating income was primarily due to significant incremental demand-building investments to drive trials and innovation. The company is producing innovative products in order to create demand in the highly competitive food and beverage industry. Meanwhile, Unilever’s (UL) Best Foods salad dressing and Knorr sauces compete with CLX’s products in the US and internationally, whereas other peer companies like Procter & Gamble (PG), Kimberly-Clark (KMB), and Colgate-Palmolive (CL) do no operate in salad dressings and sauces.

Notably, Clorox has been focusing on Brita, its water filtration product, by centering on a partnership between Brita and Stephen Curry, the National Basketball Association’s Most Valuable Player, by creating demand through digital and social media.

CLX has exposure in the iShares Morningstar Mid-Cap ETF (JKG) with 1.3% of the total weight of the portfolio as of February 8, 2016.

Continue to the next part for a look at Clorox’s International Segment in 2Q16.

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