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.

To promote Tidy Cat, which was taking a licking from generics and private-label brands, Lowe's added a masking fragrance, blue flecks, and about 30? to the price tag. In 1981, Tidy Cat 3 was rolled out nationally, with ads featuring cats dancing to a snappy jingle.

They weren't dancing for long, though. Figuring there was more than one way to skin a cat owner, Clorox made its second move into the market. It began testing a new cat litter called Fresh Step. This time it came up with an ingenious gimmick to draw attention to its fragrance chips. Clorox's promotions promised that every time a cat pawed the special chips, a mint herbal fragrance would be released. Never had cat urine smelled so good. "It was good market positioning," says Thomas Kuczmarski, a Chicago consultant who works with Lowe. "None of the competing brands had that kind of theme."

As Clorox moved into test markets, Lowe's responded by flooding them with such prmotions as consumer coupons and retailer discounts. "We tried to dissuade them from coming out of test market," says Thomas Ramey, who was director of marketing. Lowe's tried different combinations: in St. Louis, for example, a two-for-the-price-of-one coupon was supposed to take consumers out of the purchasing cycle. But litter buyers are fickle, and very willing to try a new brand. "We learned that there was no real way to stop the product trial," says David Tooker, who was senior vice-president of marketing and sales. "So we didn't panic during the trial phase."

Clorox wasn't rushing into anything, either. The company tinkered with different prices and sizes and added more test markets in 1982. The members of Lowe's team carefully monitored Clorox's actions, but they were confused about the company's intentions. Would Clorox actually roll out the new product? At what price? Or might it surprise them by competing with a different product, like a revamped Litter Green? "It wasn't a matter of us sitting and waiting until they rolled out," says Kuczmarski. "But you aren't going to spend millions of dollars to compete against a product that's not out there yet."

In April 1984, Clorox finally launched Fresh Step nationwide, boasting to the trade that it was going to spend $12 million to promote it. Some retailers received 20% discounts, plus catchy promotions, and more coupons than the industry had ever seen. Consumers were tuning in to a television campaign of unprecedented scope. This was the second major challenge to Lowe, and it boosted the price tag for defending his market. "Any money I spend comes out of my pocket; it doesn't come out of the shareholders," complained Lowe. "[Clorox] had this slush fund of $12 million or so that they could pump into this with no loss to themselves, really. They weren't taking it out of the family jewel box." His jewel box, to be precise. Lowe had just kicked his seven family managers out of the company so he could resume managing it himself.

Lowe restructured management, this time with himself in the catbird seat. His plan called for each division to set up a committee to do long-term planning. Each group included outsiders. The Marketing Strategic Action Committee, comprised of two marketing consultants and six Lowe's managers, spent a day every month looking at how the company should defend itself.

Their first concern was that retailers, dazzled by Clorox's marketing campaign, would give it some of Lowe's precious shelf space. So Lowe's executives crisscrossed the country, demonstrating to food brokers how Lowe's intended to fight back. "We communicated very frankly and seriously to the brokers what the situation was," says Russell Fox, a retired Kellogg Co. marketer who is on the committee. "If we lose our distribution, we've got one hell of a problem." The Lowe's team handed out NFL-style whistles to its 65 brokers, with tags that said, "Where's the 3 pounds?" -- a reminder to them of the difference between a standard 10-pound bag of Kitty Litter Brand and a 7-pound bag of Fresh Step.

Lowe's wanted to find out as much as it could about the enemy's plans. Led by Tooker, the marketing department set up an "aggressive intelligence network" using suppliers, customers, and information about other product rollouts. It studied Clorox's costs, expenses, and promotions. "We developed a real war-room philosophy," says Tooker, who began calling Clorox "those Communists from Oakland."

Tooker started a role-playing game, too. One person would take the part of the Fresh Step brand manager; the others would pretend to be Clorox board members. They grilled the manager. How did she explain the weak test-market results when the product was eight pounds? Why, after only 90 days, did she decide that the seven-pound product was the right one? "It gave us a lot of what ifs and yeah, buts," says Tooker. "It enabled us to look at what we thought they were looking at in Oakland." Clorox's internal employee newsletter, picked up in the lobby of a mutual customer, became required reading. One issue, for instance, gave kudos to the research-and-development department for solving a production problem with Fresh Step. The special odor-fighter, which was supposed to be triggered by the cat, was instead firing off during shipping.

Once corrected, that problem didn't stop Clorox from astealing Lowe's share of branded products in the market, which was sliding from its high of 33%. The marketing committee strongly urged Lowe to acquire a few regional companies. It would make the company stronger, they argued, by giving Lowe's more shelf space and production capacity. But Lowe wouldn't hear of it; he didn't want to buy what he felt were inferior products that were probably losing market share faster than his own.

Lowe also refused to cut prices or to match Clorox's steep discounts to dealers. "You could say, 'Let's cut the price. Let's go right on down to the bare bottom," he says. But if the battle were defined by price cutting, Lowe felt there was no way he could win; Clorox certainly had the resources to outlast him. Fresh Step was priced at $1.99, 20? cheaper than Kitty Litter Brand and 30? more than Tidy Cat 3. He considered spending $5 million on consumer coupons, but wasn't convinced that would lead anywhere in the long run, either. "You can hurt your competition," says Kuczmarski. "But after it's over, what long-term impetus is there for the consumer to buy?"

The only lasting consumer lure, as any good marketer knows, is a product that performs. And like Litter Green before it, Fresh Step's success highlighted the weaknesses of Lowe's products. But several committee members, especially Kuczmarski, felt strongly that Lowe's ought to move slowly on making improvements. The major risk, Kuczmarski argued, was that after making product changes, consumers would perceive the product as unchanged -- or even worse. Lowe's couldn't afford to rush; it had to find out exactly what consumers wanted by doing an in-depth survey.

When Lowe heard about the survey idea, though, he "bit our heads off," says an exemployee. He pointed out that he had been to more cat shows than anyone in the room. He was a specialist. He had lived with cat litter for nearly 40 years. And now he was going to let some market researcher tell him how to make his product? "This'll cost me $50,000, and what is it going to give us?" Lowe wanted to know. But after he had assuaged his pride, he was willing to negotiate. After all, Clorox was on to something better. "I know when something is good and when something is bad, and I knew that our product needed improvement," he admits.

Committee members argued that Lowe had to think even beyond the current Clorox threat. Ten percent annual growth in the litter market was sure to lure more big companies like a tabby to catnip. And the entry fee wouldn't strain the resources of a Quaker Oats Co. or a Procter & Gamble. Now was the time to spend the money and raise the ante for potential competitors. The committee even dragged in the head of a local market-research firm to explain what the study could achieve. "He was not opposed to spending money, but it was a very painful exercise to convince him," says a former employee.

Lowe agreed to the strategy, which came to be called "the one-two punch." Ramey, a student of marketing warfare, was the lord of the ring. He reasoned that Tidy Cat 3 was most immediately threatened. It had the most shelf space to lose. Lowe agreed to dip into his "war chest" and match Clorox by spending $8 million promoting both brands. The strategy: as Clorox approached the end of its promotion budget, Lowe's would unveil an improved Kitty Litter Brand, reformulated based on results of the consumer survey.

It was no surprise when the survey showed that consumers wanted odor control. Lowe knew he could create a better odor-control additive that would match Clorox's Fresh Step; he even found a way to make it visual by adding green and blue flecks. But the survey also found a strong sentiment in favor of a product with far less dust than existing litters. Lowe mulled it over: was this the value-added advantage that would catapult him past Clorox?

But dust control was difficult. And expensive. Lowe didn't want to make a costly product change if he could help it. So he built a contraption that utilized vacuum vents to shake the dust out of the litter before packaging. It didn't work; more dust was generated during shipping. Finally, Lowe made a commitment. He raised his R&D spending from $1 million to $4 million, putting the heat on employees at his "Cat Care Center," where cats answer nature's call in the name of commerce.

Lowe grew impatient as the months passed. The committee kept trying dust-free products and sending them back. Meanwhile, Clorox was gaining. Lowe had hoped to hold Clorox to a 14% dollar share of the market. If it was much more successful, it might spend another $8 million pouring concrete for a plant. And then the trouble would really begin. "Once you have the assets invested, you'll fight even harder," Tooker says.

By spring 1985, Clorox had captured 14% of the market. Lowe decided he couldn't wait any longer. With the dust-control additive still in development, the company introduced an improved, redesigned Kitty Litter Brand with "dual-odor control." Aah, but how to demonstrate the unique wonders of this new product? Lowe supplied his brokers with litter boxes and a vial of -- you guessed it -- cat urine. Never mind that it was an imitation; it smelled just as pungent. The brokers emptied the vial into the litter and invited retailers -- who at the moment must have been questioning the price of success -- to sniff it.

In January 1986, Lowe's threw its second punch: 99% dust-free versions of both Kitty Litter Brand and Tidy Cat 3. The two reformulated products seemed to hold Clorox at bay: its market share hasn't strayed in over a year. And Lowe's has shipped 22% more units of Kitty Litter Brand over last year, mostly at the expense of the regional brands. It has raised its total market share, including private labels, back to about 40%, just where it was when Clorox let the cat litter out of the bag.

To launch his dust-free products, Lowe made his debut in his company's ads last June, pouring out his litter alongside Fresh Step. Clorox filed a complaint, and Lowe sent Stanley Beals, vice-president of advertising, along with an attorney, to demonstrate that the product claims were true.

At one television network last July, Beals dumped a 10-pound bag of Kitty Litter Brand and a 7-pound sack of Fresh Step into the interoffice memo trays to demonstrate Lowe's claim. "The big guys come in here and they try to get us off the air by using the clout they have with all the advertising they do," says Lowe. "We had to run into New York and spend a lot of money to prove to the media that the complaint wasn't true. We have to defend ourselves."

That may be harder in coming years. Several of Lowe's key managers left last year, including Ramey and Tooker. Meanwhile, Clorox is showing persistence beyond its limited success: it has test-marketed another product, Litter Green 2, for yet a third assault on Lowe. "Ed has the myth that he is divine," says a longtime associate. Divine or not, he may need, like his favorite pets, nine lives to survive in the business.