Cat-Litter Rivals Pounce on New Shipping Strategies -- Update

Date : 10/13/2019 @ 7:56PM
Source : Dow Jones News
Stock : Nestle S.a. (PC) (NSRGY)
Quote : 104.72  -0.58 (-0.55%) @ 9:05PM
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Cat-Litter Rivals Pounce on New Shipping Strategies -- Update

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By Sharon Terlep 

Cat-litter companies worked to make their products fresher, less dusty and easier to clean. Now they are chasing a new goal: moving those products more cheaply.

Clorox Co., the No. 2 U.S. litter maker, with brands including Fresh Step and Scoop Away, plans to build an East Coast factory to cut costs of transporting litter as the company struggles to compete with faster-growing rivals. Meanwhile, Nestlé SA -- maker of Tidy Cats, the top-selling U.S. brand -- is spending millions to upgrade a Missouri factory with technology that will lower transportation and inventory-management costs.

The more than $2 billion market for litter is a lucrative piece of the fast-growing pet industry because it is essential to owning an indoor cat, and owners are willing to pay more for advances that cut down on the smell and hassle involved in keeping feline-friendly homes clean. Leading brands promise to contain the smell of multiple cats, slide easily from the box during cleaning, and prevent litter from being tracked through the home, among other claims.

"[Litter sales] tend to grow over time through innovation," said Church & Dwight Co. finance chief Rick Dierker. "People will pay a premium."

But the high cost of producing, shipping and delivering the heavy product has vexed both manufacturers and retailers, particularly as consumers increasingly prefer online shopping and home delivery.

Cat litter is usually made from either clay or moisture-absorbing silica crystals, similar to those found in pouches to preserve food and medications. A typical box or bag of litter weighs 30 to 40 pounds, though crystal-based litter can be lighter and several brands have lightweight options. Clorox's "Fresh Step Lightweight Simply Unscented" is about 30% lighter than its normal-weight counterpart, while Nestlé's "Tidy Cats LightWeight" weighs half as much, according to the companies.

Amazon.com Inc. has an advantage selling litter online over retailers such as PetSmart Inc. and Chewy Inc. because it can bundle a range of products in the same shipment to offset the high cost of delivering heavy bags of dog food or cat litter. Amazon has since discontinued its in-house AmazonBasics litter offering. Amazon didn't immediately respond to a request for comment.

Nestlé has four cat-litter factories, including one in Springfield, Mo., that makes litter from recycled material. The company is spending $115 million to expand another Missouri plant to meet growing demand and an additional $55 million on an automated, digitally controlled system of moving pallets in, out and around the warehouse, which it says will cut handling and transportation costs.

Sales of cat and dog litter, a $2.1 billion industry in the U.S., rose more than 7% in the past 12 months, according to Nielsen data provided by Wells Fargo. Clorox has lagged behind the broader market. Its litter sales increased 3% in the period, while sales of Church & Dwight's Arm & Hammer and Feline Pine brands rose 8%.

Americans own fewer cats but are spending more money overall on their pets. Roughly 25% of households included a cat in 2018, down from 30% in 2012, according to the American Veterinary Medical Association. Households had 1.8 cats on average in 2018, compared with 2.1 in 2012. Owners of all pets spent $16 billion on supplies in 2018, a 6% increase from a year earlier, according to the American Pet Products Association.

In a recent presentation to investors, Clorox product-supply chief Andrew Mowery highlighted the company's "litter network," in which litter is shipped nationwide from a single factory in Spring Hill, Kan. The company plans to invest in the litter business, he said, and to do so without a new factory "would ignore the opportunity to eliminate transportation miles."

Mr. Mowery said Clorox expects the company's new litter factory to be complete in two years. He said Clorox would cut 7 million miles a year off the distance driven to deliver litter, saving 1 million gallons of diesel fuel. He didn't specify the expected cost of the factory, how many people it would employ or where it would be located on the East Coast.

The Oakland, Calif.-based company behind Glad trash bags, Kingsford charcoal and Clorox cleaning products is the only major litter producer with a single U.S. plant. Like Nestlé, Church & Dwight also has multiple litter factories, which are costly to build because of the machinery and equipment required to make litter, analysts say.

A Clorox spokeswoman said the new plant will accommodate growth and new litter varieties.

The litter discussion was part of presentations by Clorox executives to Wall Street analysts in which the company laid out a plan to cut costs and jump-start growth. Clorox's growth has lagged behind rivals' in recent quarters and raised questions on Wall Street over whether the company needs to consider a bigger strategy shift. Clorox shares are up 5.7% in the past year.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

(END) Dow Jones Newswires

October 13, 2019 15:41 ET (19:41 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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