Most CPG brands have been sluggishly developing direct-to-consumer (DTC) capabilities for the last several years. The dichotomy of hypergrowth and immaterial market share has left e-commerce leaders looking for more data to support their particular DTC strategic thesis. Procrastination has ultimately proved costly, as the coronavirus pandemic wreaked havoc on traditional CPG supply chains, which are stacked with intermediaries. With COVID-19 raging on in America, brands must account for seismic shifts in consumer behavior and embrace the DTC mindset.

Of the few large CPG portfolios that leaned strongly into DTC pre-pandemic, most did it in the form of investments. The Clorox Company utilized this growth strategy to bolster its DTC capabilities when it acquired dietary supplement leader Nutranext in 2018 for $700 million.

Nutranext Acquisition

If you’re still stuck in the “CPG Land” of yesteryear, you might be confused as to why The Clorox Company’s portfolio would include anything outside of cleaning products. But according to CEO Benno Dorer, Clorox has always thought of itself as a health and wellness company. This commitment expanded in 2016 with the acquisition of dietary supplement brand Renew Life. While that predated transaction closely aligns categorically with Nutranext, it wasn’t the margin accretive potential from cost synergies that attracted The Clorox Company. Instead, Nutranext’s portfolio of consumer brands had strong digital sales, including through the brands’ DTC websites. Additionally, Clorox was getting a savvy team of proven digital brand builders and marketing professionals that had experience executing on a consolidated digital platform to reduce customer acquisition costs.

To put it plain and simple, Nutranext might have been strategically aligned with The Clorox Company’s “health and wellness” identity, but its intent in 2018 was to make a $700 million acquihire bet on the future of retail.

The Clorox Company’s DTC Strategies

While less than one-tenth of The Clorox Company’s sales currently come from the digital channel, the CPG giant is utilizing four strategies that should prove extremely valuable towards DTC market leadership within the industry over the next half-decade.

Done Is Better Than Perfect

Originating within tech startups, the concept of releasing a “minimal viable product” and incorporating learnings into future releases may sound counterintuitive to some CPG professionals. If a product’s initial retail launch whiffs on vital areas, such as taste, functionality, design aesthetics or unit economics, establishment thinking within the industry points to it being dead on arrival. With a lengthy merchandising journey at large physical retailers, brands pour over every detail in an ambitious attempt to dodge all potential landmines. This approach might place emphasis on the correct variables for a successful brick-and-mortar launch strategy, but those factors aren’t as critical when introducing a product on a DTC website.

By essentially owning the retailer, D2C CPG brands can execute merchandising resets with just a few clicks. Why waste additional time and resources releasing a product that might not end up resonating with consumers anyway, right? The Clorox Company has embodied the mantra of “done is better than perfect” by operating as fast as possible, staying agile to consumer feedback, and letting data guide their iterative decision-making on DTC product offerings.

Prioritize Digital Marketing

With the coronavirus pandemic affecting normal shopping routines, CPG brands have had to adapt to new consumer journeys. That means championing a marketing strategy that supports a longer path-to-purchase than the bottom-of-funnel trade marketing tactics heavily used at legacy CPG brands. The Clorox Company actually began shifting its marketing spend in 2019, with 55% of the budget being allocated to digital. Additionally, the company stated on its May earnings call that it would be increasing that amount by $50 million in the second half of 2020 to capitalize on increased trialing from effective consumer educational content distributed digitally during the health crisis.

Apply DTC Lens to Product Development

Arguably the biggest challenge with CPG brands launching their own DTC websites has been the unattractive unit economics. (Does this sentence remind you of the 1993 classic movie “Groundhog Day”? It’s strangely reminiscent of last decade’s grocery e-commerce conundrum with marketplaces and omnichannel retailers, right?)

While individual CPG brands don’t have the same strategic supply chain levers to pull as Amazon, Walmart or Target, they can apply earlier learnings, such as bundling or multipacks, to improve their unit economics. Additionally, The Clorox Company saw firsthand how you can create premium DTC offerings with new value-added line extensions and product development through its Nutranext brands.

Leave the Nest…Just Don’t Disown Your Parents

“That isn’t the way we do things here” could be one of the biggest reasons many CPG portfolios are still stuck in legacy business models and are now struggling to reinvent against an onslaught of digitally-native vertical brands. The decision-making hierarchy within these bureaucratic organizations couldn’t be more opposite to those within CPG startups. For a legacy CPG portfolio to achieve its DTC aspirations, it must rethink the relationship between “parent and child.”

At The Clorox Company, they allow the digital professionals at Nutranext to spread their wings and make quicker decisions around product, pricing and marketing without always needing their parents’ approval. That being said, if DTC products and brands were left on an island without any of the parents’ resources, they wouldn’t be profitable fast enough to justify further investment. Because of that, The Clorox Company provides resources to make long-term infrastructure investments, secure the best marketing technology partners, and utilize capabilities within R&D and innovation department.

Case Study: Objective Wellness

In October 2019, The Clorox Company had its first brand launch “in a long time” with Objective Wellness. This launch was particularly significant because the products would only be sold on the brand’s DTC website. Objective Wellness provides a case study in how The Clorox Company was able to successfully apply the four DTC strategies discussed above.

• Done Is Better Than Perfect: Objective Wellness only took four months from ideation to commercialization. While many of the brand elements are very well composed, there are visual aspects that clearly convey the “launch and learn” mentality.
• Prioritizing Digital Marketing: Objective Wellness operates within a CPG subcategory that requires a certain level of education. This education can be easily provided through digital content on social media platforms and brand websites.
• Apply DTC Lens to Product Development: Objective Wellness products are optimized for profitable unit economics. Additionally, The Clorox Company utilized flexible packaging with some products to help with cost-effectiveness and efficiency of parcel shipping.
• Leave the Nest…Just Don’t Disown Your Parents: Objective Wellness will be able to operate autonomously from The Clorox Company’s “billion dollar or bust” decisions. That being said, Nutranext will utilize many different resources, from marketing to product development, to jumpstart the growth of the DTC supplement brand.

Conclusion

Though Objective Wellness might not become the next mega brand, it will prove to be a perfect testing ground for The Clorox Company. As the DTC mindset deepens and broadens across the whole company, Clorox will be able to incorporate its learnings into every sales channel. Even with it being the early days for DTC at The Clorox Company, its long-term goal of fundamentally shifting how the massive organization does business should put it on the right side of history.