Cat Fight

THEY GATHERED IN THE CONFERENCE room, expecting an important meeting. After all, it wasn't often that Ed Lowe called together the seven family members who had much of the responsibility for running his company on a daily basis. He began talking, recalling how he had brought them into the company and had even given them shares. Those had been good years for Edward Lowe Industries Inc., which makes litter-box filler for cats. Now, however, in 1984, its position was under attack from Clorox Co., a Fortune 500 company. The family members might have been expecting Lowe to unveil a strategy they could follow in the future. That's exactly what he did, pointing to the folders on the table before each of them. "Inside each folder," Lowe said, "is your retirement package."

Ed Lowe was back.

And so was Clorox. Lowe could be excused for feeling a sense of deja vu. Clorox, the consumer-products giant, had fought to take away Lowe's market a decade before. He was lucky he didn't lose the company then.

It was ironic that Lowe's Inc., as it was originally called, was most vulnerable on marketing. Here was the man who, in 1947, stuffed clay granules into bags and convinced millions of people that Kitty Litter Brand was the only civilized way to care for their cats. But he never took his litter much further than a dominant regional product. When Clorox first attacked in the early 1970s, it rolled out a national product priced about 250% higher than Lowe's. Much to his surprise, it practically displaced him as the leading seller of litter. Lesson: add a few bells and whistles to a product, and people just might shell out more money for it.

Clorox had stumbled, however, and Lowe managed to recapture his dominant position. Now the $1-billion company was back for a second try at conquering the litter market. Lowe knew he was in for another marketing battle.

He didn't know whether he'd survive it, though.

Markets divided among regional brands are often very inviting to such companies as Clorox, which can muscle their way to the top by taking advantage of their national distribution systems. And Clorox needed a boost. In 1979, profits had fallen for only the second time in the company's 66-year history. Sales of bleach, its major product, were growing at under 2% a year, and efforts to diversify into faster-growing fields had foundered. There were also rumblings that Procter & Gamble Co. would enter the bleach market. "Clorox was a company with a sword hanging over his head," says Edward Froelich, a securities analyst at Pershing, a division of Donaldson, Lufkin, & Jenrette.

Clorox looked enviously at the cat-litter business, a $200-million market that was growing at about 15% a year. It seemed like a perfect fit. The company could use its clout with food brokers and supermarket buyers to get shelf space nationwide. And it could take advantage of a strong national sales and distribution network already in place. Certainly Lowe was vulnerable on marketing, talking as he did about building sales by making cats more popular. After all, Lowe liked to say, "You can't make a cat take a crap more often to satisfy your sales volume."

Lowe had prospered over the years by doing things his own idiosyncratic way. In 1947, he launched the industry by scrawling the words Kitty Litter in grease pencil on a brown paper bag and making the rounds of pet stores and wholesalers. Lowe and his company initially met hostility in the supermarket aisles. One A&P buyer snubbed him by saying, "We'll never sell stuff for cats to s in in my store."

When the supermarkets did start selling cat litter in the early 1960s, the only competitors were small regional companies. All of them treated cat litter as a commodity business of undifferentiated products -- 10-pound bags of dirt selling for less than a buck. Lowe's was no different, selling its Kitty Litter Brand in pet stores and the cheaper Tidy Cat in supermarkets.

The company had a commanding 19% of the market by 1970 with its two products. But that only masked Lowe's deteriorating condition: increasing competition from regional and private-label brands was cutting its usual 60% profit margins in half. "There was no real understanding of marketing," says a former employee. "There was nobody scratching the surface and looking at the what ifs." Adds Joe Miller, a son-in-law who served as chief operating officer: "Ed never realized the real potential of his business."

Sadly for Lowe, another company did. In 1971, Clorox plunged into the market with a brand called Litter Green and spent more than $2 million rolling it out nationally. Unlike most litters, it had a distinctive selling point that Clorox seized from market research: Litter Green, made of alfalfa instead of clay, promised to control odors. Consumers didn't seem to mind spending 250% more for an improvement they considered important. Clorox stole away about 20% of the market within a couple of years.

Lowe could easily have been crushed, but Clorox made one fatal mistake. It overlooked the fact that the ultimate consumers of cat litter are -- of course -- cats. And cats didn't like Litter Green. The bleach maker's litter business faded, but its influence was indelible. "What Clorox did taught a lesson to the people in this business," says Paul Bowles, president of Edward Lowe Industries.

The threat from Clorox forced Lowe to think about his company in a different way. "If we didn't do something to establish ourselves in the marketplace, somebody else could jump in there and do that," he says. He now had two major goals: hire experienced managers and roll out a national product with distinctive selling points. Lowe brought on son-in-law Miller, who had been a sales manager at Republic Steel Corp., to build a management team that could create and market the product that Litter Green should have been.

Miller worked fast. He was able to get exclusive use for an odor-fighting chemical from Monsanto Corp. and added it to the higher-end Kitty Litter Brand. He also pushed the product out of pet stores, where sales were languishing, and into supermarkets. Then the company bought a small factory in California and began distributing Kitty Litter Brand all over the country.