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Ecolab: Fewer Products, More Profit: Ecolab Expects to Shrink Its Global Product Line By Half Over the Next Three Years.
Sunday, May 17, 2009 2:51 PM


(Source: Star Tribune, Minneapolis)trackingBy Liz Fedor, Star Tribune, Minneapolis

May 17--Ecolab, which has created cleaning solutions for customers in 160 countries, is trying to clean up its product line.

The St. Paul-based company, with $6.1 billion in annual sales last year, has 26,000 products on the global market. "This complexity costs money," Ecolab CEO Doug Baker told shareholders at the annual meeting this month.

Baker said in an interview that he wants to cut the number of products "by at least 50 percent" over the next three years.

By cutting costs associated with superfluous products, Ecolab will free up working capital, and the company hopes it ultimately will boost profitability.

Exhibit A in its bid to trim down: The company developed 44 pot-and-pan cleaning solutions for North American customers. Over time, Ecolab added colors -- such as pink, blue and green -- and scents -- including cherry blossom and lavender.

"They require a different recipe to manufacture," Baker said, adding that there aren't 44 distinct customer pan-cleaning needs.

"Common sense says this is crazy," Baker said, "You can still meet the market needs quite handily with 10."

The company insisted that despite far fewer products, revenue should not be hurt. Ecolab Vice President Mike Monahan said that, at best, culling the product line will boost sales. At worst, he said, the product lineup changes will have "no significant impact" on sales.

"When we are done, we will have a better product lineup that does at least the same job or better for customers," Monahan said. He added that Ecolab will work with its customers and sales force to ensure there's a smooth transition to the revised product line.

George John, chairman of the Marketing Department at the University of Minnesota's Carlson School of Management, said Ecolab is experiencing product "creep." But he added that's not surprising for a corporation its size that sells products directly to other companies.

"The way you compete in that business is to customize products for those clients," such as hotels and restaurant chains, John said.

Indeed, on a recent tour of Ecolab's research facility in Eagan, Baker explained how the company developed a special product for McDonald's restaurants to clean up grease. The latest version of the cleaner is packaged in a compact jug to avoid taking up much space.

'170 piles'

Ecolab was founded in 1923 by an auto dealer who created a product to clean carpets. It now has 58 plants and 173 product warehouses around the world. "If a product is offered for sale and you've got 170 warehouses, you end up with the product in 170 piles," Baker said.




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