Friday, November 2, 2007

Clorox Buys Burt's Bees

Bleach manufacturer Clorox is the latest big player to muscle into the naturals market with the acquisition of Burt's Bees for $925m.

Large companies are beginning to pick off small natural and organic personal care firms to capitalise on the growth of the niche market and ultimately boost its top-line growth.

On its current double-digit growth path
Burts Bees is set to achieve sales of $170m in 2007, which is around five times less than the price Clorox paid for the company.

Justifying the high price is the sales potential of Burt's Bees. Clorox expects the
acquisition to provide an additional two points of sales growth in the fiscal years 2008 and 2009.

Clorox CEO Donald Knauss said: "This acquisition allows us to enter a growing market that's consistent with consumer megatrends."

"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"

Organic Monitor director Amarjit Sahota told that Colorox will also benefit from the green image of Burt's Bees.

As for Burt's Bees, Sahota questioned whether the move would be in the long-term interests of the firm, despite the deal meaning that Burt's Bees products will be sold through mainstream retail channels.

He said: "We expect Burt's Bees to become damaged by the acquisition because of its impact on customer and retailer perceptions of the brand."

In a recent interview with Sahato expressed concern that multinationals with strong established retail channels are marginalising smaller brands and selling diluted natural and organic products.

He called for tighter regulation of the naturals market to prevent companies from selling 'natural' cosmetics that contain relatively few natural ingredients.

Burt's Bees, which was previously owned by private equity firm AEA Investors, has been a strong campaigner for greater regulation of natural and organic cosmetics in recent times.

Sahato fears that may not continue after the latest buy-out because of the demands of the mass-market and the fact that Burt's Bees new parent company has no history of selling natural or organic products.

The takeover of Burt's Bees follows two major acquisitions of natural personal care players last year, namely L'Oreal's acquisition of Body Shop and Colgate-Palmolive buy-out of Tom's of Maine.