In this episode of Yahoo Finance Presents, correspondent Brian Sozzi speaks with Clorox Chairman & CEO Benno Dorer about the spike in sales the company has seen during the COVID-19 pandemic. Dorer discusses the innovation, investment, and steps Clorox is taking to keep up with consumer supply and demand while also battling price gouging.
It's been quite the month from a consumer standpoint, I imagine quite the month as the CEO of Clorox. When I go into these Target and Walmart stores, I still can't find a lot of the disinfecting wipes I'm looking for. What are you seeing in your manufacturing plants right now?
But clearly, there is an unprecedented demand spike for some of our products, in particular, wipes. We've seen spikes of up to 500% in terms of demand. And no supply chain in our industry is built to satisfy that demand increase in a short period of time.
So what are we doing? We have significantly increased our production. We've done so by simplifying our lineup, which allows our lines to run faster. We're churning out 40% more products last quarter than we did in the previous year quarter. We're activating third-party suppliers who produce for us, who are helping us.
And we're investing in further capacity, so we continue to find new ways to speed up our lines with high capacity. And we think that there's going to be substantial improvement this summer. It's going to be touch and go until then, unfortunately, but help is on the way. And things should ease up in the next few months.
BRIAN SOZZI: Benno, one thing that stood out to me in your earnings call, which you just had, you noted there has been some price gouging out there in the marketplace. And you're working with law enforcement. What are you seeing out there? Is this price gouging still going on, or was it more of it was occurring in March and April when everybody was stocking up?
BENNO DORER: There was an issue early on, but it's gotten a lot better. I see very little now. I check every single day, and I don't find anything right now.
So to be very clear, we do not condone price gouging. We want to make sure that consumers at all times are able to buy our products at the regular prices, especially during this time at the pandemic. It's particularly important.
Our customers also sell at regular prices, so we're talking about independent third-party sellers. And we have worked with major online retailers to get them offline. We've also worked along with our industry association, the Consumer Brands Association, involving the Department of Justice to help get people offline. And that's been working.
We're continuing to monitor the situation. We're continuing to get people offline. Every now and then, it keeps popping up. But I would say it's no longer a broad-scale issue.
BRIAN SOZZI: No, that's certainly good to hear. You know, I was looking back on one of the interviews we did in 2017. And we were talking at length about patents for Clorox products. You know, given this environment, can you still move forward really quickly with innovative new products? Or do you just have to focus on some of the core competencies of Clorox?
BENNO DORER: No, innovation is key. And innovation is the backbone for our IGNITE strategy. Our IGNITE strategy's about a year old. And the lifeblood of everything we do in our products, in our brands, in our work, is innovation.
So what our team is doing, I would say, at this point is about 30% deal with the pandemic. And that keeps everybody busy plenty. But about 70% is really in thinking through what the long-term implications are. And as we get into a recession, innovation continues to be more important than ever.
As we think about the future of disinfecting and finding new ways to serve consumers in the pandemic and beyond, innovation is gonna be vital. So our innovation organization continues to focus on the long term, continues to focus on innovation, because we have to look at 18, 24, 36 months down the road and be prepared to continue to succeed once, hopefully, the pandemic will be all but a memory.
BRIAN SOZZI: What does a new disinfecting product look like for Clorox 36 months down the line? Do they have to be more powerful? What's that-- that need you're seeing in the marketplace that you have to address?
BENNO DORER: It's difficult for me to anticipate what's going to happen 36 months down the road, in particular, in a public setting, because, as you know, innovation is something that we keep very close to the vest. Particularly, our innovation process looks at consumer needs that are unmet, looks at emerging consumer needs, and then translates that into technologies and consumer propositions that are new and differentiated.
And right now, what we're seeing is that a lot of new people are engaging with disinfecting products. That's the phenomenon that we're dealing with right now, that the spike in demand that we're seeing is not people stockpiling at home, but new people engaging with disinfecting products and people engaging with disinfecting products in new and expanded ways. And that's really the ground for new consumer insights. And we translate those consumer insights into new technologies. So expect a lot of innovation to come in the future in the next 36 months in the disinfecting space.
BRIAN SOZZI: Another sentence that jumped off to me on the earnings call was, it sounds as though you are looking to get a little more aggressive internationally. And I bring that up because you have taken a measured approach to Clorox International, but the bottom line is this pandemic is a global health crisis. And the next crisis might be global as well.
BENNO DORER: Clearly. International is about 15% of our sales, but it's growing really strongly, 22% in currency-neutral terms in sales last quarter. And a little over half of our international business is in disinfecting, so as we're seeing more consumers engage with disinfecting products in the US, the very same thing is true in International, which gives us an opportunity to serve more consumers internationally. And we'll invest behind that.
BRIAN SOZZI: How do you think the pandemic will change the future of Clorox? Is it higher sales growth? Is it more margin growth, quicker EPS growth? How are you thinking about it?
BENNO DORER: You know, we look at this as an opportunity to think about how we can serve more consumers. And clearly, we can do that best at this point with disinfecting products. And I think that the role that disinfecting products will play in people's lives is going to be altered forever. It's going to be elevated forever, at least for the foreseeable future. And we have an opportunity to invest in that. And that will hopefully deliver strong growth for the company, because it's, as a business, the disinfecting business about two times as profitable from an even margin perspective as our average business. That also means it gives us an opportunity to expand our margins, yes.
BRIAN SOZZI: Now last one for you, Benno, and we've talked in the past about leadership. What has it been like for you as a leader to run a company that is serving the public in such an important, important way, in such an important time in the world's history?
BENNO DORER: It's difficult at the same time, as it is for all CEOs, I would say, but it's also gratifying because the mission of our company in 1913, yesterday actually-- yesterday was our 107th birthday as a company--
BRIAN SOZZI: Happy birthday.
BENNO DORER: --thank you. Proud history, started by making disinfecting products available to the broad public in service of public health. And never has that mission been clearer than it is today. So everybody at Clorox, including myself, all 8,800 employees are running a little faster, are giving everything they have, hearts and soul and minds, in service of public health and consumers and communities around the world.
So you know, whenever you feel like your world and your work has a meaning, then that just means you're giving a little more. And I think the work that everybody does at Clorox right now has a little bit more meaning than it normally has already. So everybody's giving their best, and I'm proud of everybody.
BRIAN SOZZI: All right, Benno Dorer, our chairman and CEO of Clorox. Full disclosure, I bought a ton of your wipes. I'm constantly looking for your wipes. And on a personal note, I've talked to you many times in the past. Get some sleep, because I know you're doing some very important work at Clorox.
BENNO DORER: Thank you, Brian, and thanks for buying the wipes. Appreciate it.
BRIAN SOZZI: Stay safe.