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Burt’s Bees international performance weaker than expected

By Katie Bird , 06-Jan-2011
Last updated on 06-Jan-2011 at 18:00 GMT

The international expansion for natural personal care brand Burt’s Bees’ has been slower than expected, leading owner Clorox to write down the business by a quarter of its acquisition price.

The company purchased the business for $913m back in 2007, and has announced that in its fiscal second quarter it will record a noncash goodwill impairment charge of $250m to $255m

While Burt’s Bees has recorded double-digit sales growth for the fiscal year to date, Clorox has said the expansion of the brand into new international markets has not progressed as quickly as it had anticipated.

“The Burt's Bees business remains a very solid contributor to Clorox's results, with sales growth and profit margins above the company average,” said CFO Dan Heinrich.

“However, the impacts of the continuing global economic recession and projected slower sales growth ramp-up in new international markets have caused us to moderate the growth rate assumptions we are now using in valuing the business,” he added.

Challenging newer markets

A company spokesperson told CosmeticsDesign.com USA that the challenge has been increasing sales growth in countries the brand has entered more recently, particularly in light of consumers looking for lower price, value items during the recession.

“A primary driver of this slower-than-anticipated growth has been building trial with value-oriented consumers,” the spokesperson said.

In addition, managing the regulatory requirements and gaining products approval has taken longer in some countries than was envisaged, the spokesperson explained.

Despite the write down, the Clorox CFO said the company remained committed to growing the business and anticipated sales would build over time as the recession recedes.

“Burt's Bees remains the fastest growing business unit in the company, with double-digit fiscal-year-to-date sales growth, and our revised estimates continue to project low double-digit sales growth for this business over the next several years,” he said.

In addition, company CEO Don Knauss highlighted the good fit the brand has with the general consumer trends of sustainability, and health and wellness, and its strong retailer support.

“We are fully committed to investing in this business to drive growth and build share,” he said.

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