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Clorox Taps Coke Executive as CEO

From Bloomberg News

Clorox Co. on Wednesday named Coca-Cola Co. executive Donald Knauss as chairman and chief executive.

Knauss succeeds CEO Gerald Johnston, 59, who retired May 3 to recover from a heart attack he suffered in March. Board member Robert Matschullat, 58, had been serving as interim chairman and CEO while Clorox conducted its search.

The 55-year-old Knauss takes over at a time when Clorox’s earnings are under pressure from surging raw material costs, especially for energy and resin, which is used to produce the plastic bottles that contain its products.

The maker of household bleach and Glad trash bags has been lifting prices on goods in the U.S. and Latin America to counter higher expenses.

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“It makes a tremendous amount of sense for Clorox,” said Bob Goldsborough of Chicago-based Ariel Capital Management. Knauss “understands branded consumer products very well. He has a very strong background.”

Shares of Oakland-based Clorox rose 23 cents to $60.22 before the announcement. The stock had risen 5.9% this year.

Knauss has been with Coca-Cola for 12 years and has been president of its North American unit, the Atlanta-based company’s largest, since 2004. Knauss said in a statement issued by Coca-Cola that he was leaving to “pursue the opportunity of a lifetime.”

Under Knauss, Coca-Cola introduced soft drinks such as coffee-flavored Coca-Cola Blak, Vault citrus soda and black-cherry-flavored Fresca. Volume rose in each of the last five quarters at the North American unit.

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Knauss, a former U.S. Marine, joined Coca-Cola in 1994 as a senior vice president of marketing for Minute Maid Co. Before that, he held a variety of positions at Frito-Lay Inc., a unit of PepsiCo Inc. He also held marketing positions at PepsiCo’s Tropicana Products Inc. and Procter & Gamble Co.

Johnston, who worked for Clorox for 25 years, was named president and CEO in July 2003 and chairman in January 2005. Shares of Clorox rose 42% during his time as CEO.

Profit has decreased for six consecutive quarters as Clorox has battled higher costs. In August, Clorox reported that fourth-quarter net income fell 9% to $142 million, or 92 cents a share. A review of past stock-option grants found errors, leading to $16 million in expenses for the quarter. Revenue rose 5.2% to $1.32 billion.

Clorox is introducing products such as Clorox Anywhere Hard Surface, a sanitizing spray for countertops and faucet handles, and reducing expenses by as much as $100 million this year.

“The new CEO will cope with rising raw material costs, which are here to stay for a while,” said Jake Dollarhide, CEO of Tulsa, Okla.-based Longbow Asset Management Co. “That comes on top of the challenges Clorox faces from domestic competitors like Procter & Gamble” and rivals in developing markets.


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