Firm Takes Goods to Supermarket : Environment: Seventh Generation hopes to improve its fiscal health by expanding its earth-friendly cleaning products to grocery stores.

Made from recycled trash and vegetable oil, Seventh Generation’s line of chlorine-free laundry products and nontoxic cleaners has saved an estimated 35,000 trees and 14 million gallons of water the past three years.

Now the eco-product marketer is fighting to save its fiscal health. After persistent losses and a plunge in its stock price, the tiny company--primarily a seller of products through catalogues and natural food stores--is trying to expand into supermarkets nationwide.

While the Colchester, Vt., company is little known to most Americans and dwarfed by today’s conglomerates, its bid is being watched as a test of the mainstream’s appetite for earth-friendly products--which experts say has waned from the euphoria following the 20th anniversary of Earth Day in 1990.

If the gamble works, a dozen Seventh Generation products, from all-natural dishwashing detergent in quirky blue boxes to toilet paper made from 100% recycled trash, will pepper supermarket shelves nationwide within a few years.

“The media likes the little guy trying to make it big against the giants. It’s a good story. But again, Seventh Generation isn’t the only company with an alternative household cleaner or toilet paper or dishwasher detergent,” said Joel Makower, editor of the Green Business Letter, a Washington-based environmental publication.

The challenges facing Seventh Generation are daunting.

Seventh Generation’s stock, traded on the Nasdaq stock market, is just above a low of $1.62 1/2 per share hit last month, when the company reported a $490,556 third-quarter loss on $1.95 million in revenue. Two-thirds of $7 million in proceeds from the company’s initial public offering late last year are gone, drained by unanticipated expenses.

The company said in a third-quarter filing with the Securities and Exchange Commission that it has enough cash to last through the end of March, when it will need to find new sources of funding or make significant reductions in its operations.

But Jeffrey Hollender, the company’s ponytailed president, says he isn’t too worried. Just turned 40, Hollender envisions turning a nation’s preoccupation with cancer-causing dioxins and leaky landfills into a defiant challenge to the likes of Procter & Gamble.

“This is a critical juncture for the company and certainly the risks are not ones we take lightly,” Hollender said in a recent interview in New York.

But by the end of 1995, “we’re looking to get into thousands of stores, not hundreds of stores. I think that’s a conservative objective,” he said.

So far, Seventh Generation’s products are sold in regional supermarkets in Atlanta, Boston, Seattle and Buffalo, N.Y., but the company says it is taking longer than expected to reach agreement with major national chains.

To set itself apart, Seventh Generation is relying on an atypical strategy for eco-companies: slashing prices so it can directly compete with national brands.

A bottle of all-natural toilet bowl cleaner that used to go for $5.50 is now $2.98. Dishwashing liquid based on vegetable oil instead of petroleum went from $3.40 to $2.48.

Seventh Generation reformulated its products to use less expensive ingredients that it says are still environmentally sound and work just as well as those based on synthetics.

But the company’s automatic dishwasher detergent contains a petroleum-based cleaning agent instead of vegetable oil, an admission that natural ingredients don’t always perform best. The product still has no harmful phosphates or chlorine.

“You’re always making some compromises to achieve performance,” said Martin Wolf, a scientist and chemist who helped formulate the products.

The packaging, replete with assertions about how the products help the environment, is clearly different from other consumer brands. Included is an explanation of the Seventh Generation name, which it says is derived from “the great law of the Iroquois confederacy.”

“In our every deliberation, we must consider the impact of our decisions on the next seven generations,” goes the explanation.

Another hurdle is the cost of membership in the big leagues. Giant consumer products companies normally pay steep fees called slotting allowances to retailers for the privilege of displaying their brands on crowded shelves.

Seventh Generation wants supermarket chains to carry its products for free. It hopes to stimulate interest by offering coupons to existing catalogue customers and staging in-store demonstrations.

Another factor is Hollander’s optimism, worthy of an environmental activist, against conventional wisdom that shallow-pocketed companies can’t make it in the national arena.

“I don’t believe we will go out of business if we don’t succeed in the mass market,” Hollender said. “The question we are asking is, ‘Will Seventh Generation make it happen, or will someone else make it happen?’ ”