HOUSTON — An executive with consumer products maker Clorox Co. said his firm is concerned about possible polyethylene shortages in 2003 and 2004 if low profitability leads PE makers to reduce reinvestment.
This potential shortage could affect PE prices and have a major effect on Clorox, since PE makes up a large portion of the $600 million to $700 million in raw materials that the Oakland, Calif.-based firm buys each year, corporate procurement manager John Taylor said.
Clorox is a major user of linear low density PE through its Glad trash bags business. The company's trademark bleach products also are packaged in high density PE bottles. Other Clorox products include Hidden Valley Ranch salad dressing and Kingsford charcoal.
"If we miss our resin forecast by 4-5 cents a pound, it means we miss our earnings-per-share estimate by a significant amount," Taylor said at the CMAI World Petrochemical Conference in Houston.
Difficulties in resin price forecasting also can lead to cutting advertising and promotions or delaying new product introductions. Clorox is working to establish more stable pricing through contracts, futures, financial swaps and better forecasting methods, Taylor said.
Clorox and other consumer products companies also are finding it difficult to raise prices on their products as their customers get larger. One of Clorox's largest customers posted sales of almost $200 billion last year, meaning that if that firm accounted for 10 percent of Clorox's total sales — roughly $400 million — Clorox still would represent only 0.2 percent of the customer's annual sales.
"Through consolidation and growth, our customers have increased levels of pricing leverage," Taylor said.
Clorox's Glad unit was 10th in Plastics News' 2000 ranking of North American film and sheet makers, with sales estimated at $690 million. The company also runs blow molding operations to produce some of its own bottles.