Kingsford Charcoal Feeling Competitive Pressures, is Overpriced

Clorox (NYSE: CLX) is the large company that is behind the Kingsford charcoal brand. Usually, there’s not much mentioned about Kingsford when Clorox reports earnings. When they released earnings this week though for the quarter ending March 2023, Kingsford was a big topic of discussion.

Clorox singled out the Kingsford brand as a problem area in the past quarter.

However, consumer and competitive reactions are continuing to play out, particularly in our Kingsford business, where we’re taking actions to address increased competitive activity and widened price gaps. We continue to believe elasticities will normalize over time, especially as
consumers face increasing pressures.

Kevin Jacobsen, CFO of Clorox

The problem that Kevin Jacobsen is identifying is that Clorox raised prices on their products back in December. In their other brands, the competitors followed suit. They didn’t see that with charcoal though, and now they are priced higher than competitors.

This is especially problematic given the seasonality of the Kingsford charcoal brand. On the call they noted that 50% of Kingsford sales are during the quarter ending in June.

I think the one watch out we have and you mentioned it is our Kingsford business. While we had very strong performance in the third quarter, Kingsford was a one business that came in below our expectations. And you may have seen in our prepared remarks, we’re seeing an increased level of competitive activity and we’re not seeing competition move to the same degree we moved on pricing. That was one of the businesses we priced in December and we’ve seen price gaps widen and as a result, we saw our shares decline in the third quarter.

Kevin Jacobsen, CFO of Clorox

Clorox noted that they’re making adjustments to their plans both on the pricing side and with merchandising.

While Clorox believes that their issue is with pricing, it does beg the question if it’s starting to just become a different competitive environment in charcoal. Kingsford has enjoyed an 80% market share, according to their internal documents, but it’s easier now to buy premium charcoal than it ever has been.

While Kingsford also offers premium charcoal products, consumers may be seeing the value in other brands over the basic Kingsford briquette that is the majority of their sales. We won’t have to wait much longer to see if it’s a price problem, or if there’s other cracks in their hold of the market.

SourceClorox
RELATED ARTICLES

Most Popular