Strategy AnalysisStrategy AnalysisChristopher Mowbray

Jessica SoaresEddie Basiliere

Mike Silva

IndustryIndustry Industry: Institutional and Industrial Cleaning and Sanitizing

Main Categories: Janitorial and housekeeping, food processing and industrial, foodservice, and laundry

$18 Billion Market

History / IndustryHistory / Industry

Public Company – Ticker: ECL 1923: Founded by Merritt J. Osborn

“Economics Laboratory” 1986: Ecolab 1960-2004: 15 Acquisitions

Detergent Manufacturers Pest Elimination Business Vehicle-care Products

2004: Douglas Baker, CEO Market: Foodservices

Global Market Consumers:

- Lodging Establishments- Hospitals- Schools- Full-service & fast food restaurants - & more. .

Location: More than 160 Countries Employ: 26,000 associates

Johnson Diversey Private Company – Family owned 2002 : Johnson Holdings acquired

Diversey Lever Johnson Diversey

S. Curtis Johnson III., CEO Market: Floor Care

Global Market

Consumers:- Coca-Cola- McDonald’s - Wal-Mart- Hilton Hotels

2006: Scrubber-Drier - floor cleaning Productivity 30% Water & Electrical energy reduced by 50%

Location: More than 50 Countries Employ: 11,000

Johnson Diversey Ecolab

Web Site Comparison

= Location of H1N1 information

Porter’s Five ForcesPorter’s Five ForcesThreat of New Competitors

Low barriers to entry leads to many small suppliers competing for business.

New entrants are very much attracted to this industry: Limited Scale Economies Moderate Product Differentiation Low Capital Requirements Minimal Switching Costs

EcoLab has made many attempts to create a larger barrier of entry into their industry.

Acquisitions

Porter’s Five ForcesPorter’s Five Forces

Threat of Substitute Products

New products can take companies in this industry out of business.

New product innovation is key within this industry for both EcoLab and JohnsonDiversey.

Environmental Innovation

◦ JohnsonDiversey has been at the top of Environmental Innovation.◦ Many new competitive innovations are consistently being released.

Porter’s Five ForcesPorter’s Five ForcesIntensity of Competitive Rivalry

JohnsonDiversey and EcoLab setting themselves apart from the rest of the industry.

◦ JohnsonDiversey is able to use the big names of their partners to penetrate new global markets. SC Johnson

Sizing of Divisions◦ JohnsonDiversey has only a fraction of the sales and service force

that EcoLab has.◦ R&D◦ EcoLab bases acquisitions on their ability to reduce competitive

threats.

Porter’s Five ForcesPorter’s Five Forces

Bargaining Power of Suppliers

Suppliers make up a very large part of the business process within this industry.

The timing of shipments and services that EcoLab and JohnsonDiversey provide need to be precise.

Debt in 2007◦ JohnsonDiversey totals $1.1 billion in debt.◦ EcoLab totals $750 million in debt.

Porter’s Five ForcesPorter’s Five ForcesBargaining Power of Buyers

Multinational businesses make up a large part of the buyers within this industry.

McDonalds Chain Hilton Hotel Chain

Industry is turning to global markets as a main source of business.

80% of distribution to buyers is dependant on the distributors and contractors.

◦ High level of quality assurance is needed for distributing products to customers.

(Year End 2008) JohnsonDiversey Ecolab

Net Income (59,521) 448,100

Total Sales 3,280,857 6,137,500

Total Asset 3,215,172 4,756,900

Total Stockholder's Equity (96,245) 1,571,600

COGS 1,990,082 3,141,600

Total Debt 2,854,542 1,138,200

Long Term Debt 1,956,652 799,300

Current Assets 1,150,292 1,691,100

Current Liabilities 897,890 1,441,900

Inventory 255,330 467,200

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JohnsonDiversey Ecolab

Return on Sales Ratio (0.02) 0.07

Return on Assets Ratio (0.02) 0.09

Gross Profit Margin Ratio 0.39 0.49

Debt Ratio 0.89 0.24

Asset Turn Over Ratio 1.02 1.29

Current Ratio 1.28 1.17

Quick Ratio 1.00 0.85

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JohnsonDiversy FinancialsJohnsonDiversy Financials

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JohnsonDiversy DebtJohnsonDiversy Debt

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Ecolab Income StatementEcolab Income Statement

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RecommendationRecommendation EcolabEcolab Option A:

◦ Create Customer Support Groups/Sponsors/Memberships

Cleaning and Sanitizing operations were flat H1N1, other reocurring viruses, Flu shot clinic Helps show care to the communities Gains awareness of who Ecolab actually is to customers Membership with “Climate Group” ( Help gain better image) Work on giving more back to the community

Option B:◦ Stick to what they are doing

Stick to food safety (Strong growth, double digit gains) Have globally growing customers Great internal Factors (Strong, energetic, motivated) Imbed sales force into their own culture

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RecommendationRecommendation EcolabEcolab Option C:

◦ Look into Merger with Unilever Unilever

◦ Global market leader in all food categories that they operate in◦ Global market leader in skin and deodorants◦ Strong position in other home and personal care categories

◦ Very Sustainable company 2/3 raw materials from agriculture Reduce greenhouse emissions Will Ultimately Minimized resources used

Great support financially and strategically

Consequences◦ Great support financially and strategically◦ Might not be free to do whatever you want

Part ownership

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RecommendationRecommendation JohnsonDiverseyJohnsonDiversey

Option A:◦ Keep doing what your doing

Very attractive in community Moral is high, “going green” creates strong beliefs and happy

workplace Goals/Targets They are the sustainable leader

Option B: ◦ Venture into personal care/cleaning market

Merge with Proctor and Gamble◦ Create heavy competition ◦ Help recover debt◦ Gain market share◦ R & D costs will be taken care of easier

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RecommendationRecommendation JohnsonDiverseyJohnsonDiversey

Option C:◦ GO PUBLIC

IPO (initial public offering) Allow investors to buy common stock Large influx of cash Board of directors help guide the company More opportunity in new markets

Consequences:◦ Have to answer to stock holders ◦ Could lose their ultimate vision◦ Heavier Competition

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What’s going on now?What’s going on now?

October ’09: Relationship with Tennant Company to launch Scrub-N-Go ™

2009: Received the 2009 Tekne Green Award from the Minnesota High Tech Association

The award honors businesses that practice environmental awareness and responsibility

October 7th: Unilever announced that it is going to reduce its equity interest in Johnson Diversey from 33% to 4 %

Dubillier & Rice, Inc are going to take 46% equity interest as part of a broader recapitalization transaction

November ‘09: Committed to triple their absolute reduction in greenhouse gas emissions under WWF’s Climate Savers Program by 2013