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Ecolab, Inc. (NYSE: ECL) recorded 2007 total revenues of nearly $5.5 billion. The company manufactures and sells commercial cleaning and disinfecting products to companies in the consumer service and health care industries.^[1] The company also provides pest control and commercial cooking and refrigeration equipment repair products and services to its customers.^[2] Ecolab maintains customer relationships by selling cleaning equipment that makes its customers more efficient but must be used with Ecolab's chemical products.^[1] The company also trains its sales people to visit their customers often and act as cleaning consultants, identifying areas where customers can improve cleanliness to avoid negative publicity from situations such as food contamination.^[1] According to Morning Star, these two strategies have helped Ecolab gain roughly 10% of the $49 billion global market for industrial and institutional cleaning and sanitizing products.^[3] Ecolab's market share makes it the largest of the industrial and institutional cleaning and sanitizing products companies.^[3]

During 2006, an outbreak of E. Coli forced Taco Bell to withdraw green onions from all of its 5,800 stores and close all 15 of its Philadelphia stores temporarily.^[4] An increase in spending on cleaning and sanitizing products by other restaurants and fast food chains in response to the public's reaction to the situation was partially responsible for a 9% increase in Ecolab's U.S. Cleaning & Sanitizing revenue in 2007. Similarly, between Q4 2006 and Q4 2007 spending on hotels and other accommodations increased 12.5%.^[5] This resulted in an 11% increase in Ecolab's U.S. Cleaning & Sanitizing revenue between Q4 2006 and Q4 2007.^[6] Also in 2007, favorable exchange rates gave Ecolab's foreign revenues a $147 million boost.^[7] Ecolab's products compete with similar products manufactured by Clorox Company (CLX), Church & Dwight Company (CHD) and Zep, Inc (ZEP).

Contents 1 Business Segments 1.1 U.S. Cleaning & Sanitizing (44%) 1.2 U.S. Other Services (8%) 1.3 International (48%) 2 Business Financials 3 Key Trends and Forces 3.1 Media attention towards food contamination cases increases the demand for Ecolab's cleaning and sanitation products 3.2 Favorable exchange rates resulted in a $147 million boost to Ecolab's 2007 international revenues 3.3 Demand for hotel rooms influences the demand for the products Ecolab makes to clean them 4 Key Competitors 5 References

[edit] Business Segments

[edit] U.S. Cleaning & Sanitizing (44%)

U.S. Cleaning & Sanitizing generated 44% of Ecolab's 2007 revenues before the effect of exchange rates. The segment produces and markets cleaning chemicals and equipment to hotels, traditional restaurants, fast food restaurants, food producers, beverage producers, industrial laundries and similar customers.^[1] U.S. Cleaning & Sanitizing also provides sterilization and cleaning chemicals to doctors and other health care providers.^[1] The segment provides water treatment chemicals that compliment its cleaning chemicals as well as commercial and consumer car care products such as Rain-X.^[1] The segment sells cleaning equipment that makes cleaning more efficient but can only be used with U.S. Cleaning & Sanitizings chemical products, insuring a stable customer base.^[1] U.S. Cleaning & Sanitizing sells its products through a team of sales people trained to act as sanitation and cleaning consultants, helping customers avoid food and product contamination.^[1] U.S. Cleaning & Sanitizings products compete with similar product sold by Clorox Company (CLX), Church & Dwight Company (CHD) and Zep, Inc (ZEP).

[edit] U.S. Other Services (8%)

U.S. Other Services generated 8% of Ecolab's 2007 revenues before the effect of exchange rates. The segment provides pest elimination products and services to hotels, restaurants, healthcare providers, grocery stores, and similar customers.^[2] U.S. Other Services also provides commercial cooking and refridgeration equipment repair.^[2]

[edit] International (48%)

International earned 48% of Ecolab's 2007 revenues before the effect of exchange rates. Ecolab's International business is modeled after its domestic business.^[8] However, Ecolab's International segment focuses more heavily on providing cleaning and sanitizing products to hotels, restaurants and food and beverage producers.^[8] Like Ecolab's domestic businesses, Ecolab's International sells specialized cleaning equipment designed to work only with Ecolab chemicals and trains its salespeople to act as consultants, advising customers on the best and newest products to help them operate more efficiently.^[8] Ecolab's International products compete with similar product sold by Clorox Company (CLX), Church & Dwight Company (CHD) and Zep, Inc (ZEP).

[edit] Business Financials

Ecolab Total Revenues, Operating Income and Net Income^[7][9] ($ in millions)

Segment	2007	2006	2005
U.S. Cleaning & Sanitizing	2,351	2,152	1,952
U.S. Other Services	450	411	375
International	2,522	2,372	2,245
Foreign Currency Translation	147	(39)	(37)
Total Revenues	5,470	4,896	4,535
Operating Income	667	612	542
Net Income	427	369	319

[edit] Key Trends and Forces

[edit] Media attention towards food contamination cases increases the demand for Ecolab's cleaning and sanitation products

Between November and December 2006, 71 people in New Jersey, New York, Pennsylvania and Delaware became sick with E. Coli after eating at Taco Bell restaurants.^[10] As a result of the E. Coli outbreak, Taco Bell was forced to withdraw green onions from all of its 5,800 stores and close all 15 of its Philadelphia stores temporarily.^[4] As other restaurants and fast food chains attempted to prevent similar events from happening at their restaurants, they increased the amount of time and money they spent on cleaning and sanitization. The increased public focus on food sanitization at the end of 2006 resulted in increased demand for Ecolab's U.S. Cleaning & Sanitizing products in 2007. Partially a result of the increased demand, Ecolab's U.S. Cleaning & Sanitizing revenue increased 9% in 2007.^[7]

[edit] Favorable exchange rates resulted in a $147 million boost to Ecolab's 2007 international revenues

Between June 18, 2007 and June 18, 2008, the U.S. dollar depreciated in relation to the euro, the Canadian dollar, and the Chinese yuan.^[11][12][13] The weak U.S. dollar resulted in a $147 million boost to Ecolab's 2007 international revenues.^[7] In general, when foreign currencies depreciate relative to the U.S. dollar, the value of Ecolab's international sales decreases. On the other hand, exchange rates resulting in a weak U.S. dollar boost the value of Ecolab's international sales.

[edit] Demand for hotel rooms influences the demand for the products Ecolab makes to clean them

During the 4th quarter of 2007, consumer spending on hotel rooms and other accommodations increased 12.5%.^[5] As a result of the increase in hotel spending, hotels had more rooms rented and therefor had to spend more on cleaning products to maintain them. As a result of the increased spending on cleaning products, Ecolab's U.S. Cleaning and Sanitizing revenue increased nearly 11% from $532.7 million in Q4 2006 to $589.4 million in Q4 2007.^[6] In general, when spending on hotels and other accommodations increases, so does spending on products used to clean them which, in turn, increases Ecolab's U.S. Cleaning and Sanitizing revenues. On the other hand when spending on hotels decreases so does Ecolab's U.S. Cleaning and Sanitizing revenue.

[edit] Key Competitors

• Clorox Company (CLX) manufactures and markets consumer products such as bleach, cleaners, cat litters, charcoal, sauces, plastic storage bags, plastic garbage bags, and other products. The company's cleaning products compete with those produced by Ecolab's U.S. Cleaning & Sanitizing and International segments.^[14]
• Church & Dwight Company (CHD) manufactures and markets consumer products such as cleaners, toothpaste, deodorant, condoms and other products. The company also manufactures specialty chemicals, animal nutrition products and commercial cleaning products. The company's commercial cleaning products compete with those manufactured by Ecolab's U.S. Cleaning & Sanitizing and International segments.^[15]
• Zep, Inc (ZEP) manufactures and sells commercial cleaning products such as cleaners, disinfectants and degreasers. The company also offers pest control products and services. The company's pest control products and services compete with those offered by Ecolab's U.S. Other Services segment while its commercial cleaning products compete with those manufactured by Ecolab's U.S. Cleaning & Sanitizing and International segments.^[16]

Ecolab and Key Competitors 2007 ($ in millions)

Company	Total Revenues	Net Income	Net Profit Margin
Ecolab	5469.6	427.2	7.8%
Clorox Company (CLX)	5273	461	8.7%
Church & Dwight Company (CHD)	2220.94	169.03	7.6%
Zep, Inc (ZEP)	565.89	14.08	2.5%

[edit] References

1. ↑ ^{1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7} ECL 2007 10-K Item 1: United States Cleaning & Sanitizing Segment, pgs 3-5
2. ↑ ^{2.0 2.1 2.2} ECL 2007 10-K Item 1: United States Other Services Segment, pg 5
3. ↑ ^{3.0 3.1} Morning Star Analyst Report: Ecolab, Inc. ECL
4. ↑ ^{4.0 4.1} MSNBC: Taco Bell acts after E. coli outbreak
5. ↑ ^{5.0 5.1} Bureau of Economic Analysis: Tourism Spending Grew 2.0 percent in Fourth Quarter 2007
6. ↑ ^{6.0 6.1} ECL 2007 10-K Exhibit 13: Quarterly Financial Data, pg 47
7. ↑ ^{7.0 7.1 7.2 7.3 7.4 7.5} ECL 2007 10-K Exhibit 13: Operating Segments, pg 46
8. ↑ ^{8.0 8.1 8.2} ECL 2007 10-K Item 1: International Segment, pgs 5-6
9. ↑ ECL 2007 10-K Exhibit 13: Summary Operating and Financial Data, pg 50
10. ↑ U.S. News and World Report: Timeline: Deaths and Illnesses Caused by Food Contamination
11. ↑ ^{11.0 11.1} EUR to USD Exchange Rates
12. ↑ USD-CAD Exchange Rates
13. ↑ Historic Exchange Rates: USD-CNY Look up on 6/18/07 and 6/18/08
14. ↑ Google Finance: CLX
15. ↑ Google Finance: CHD
16. ↑ Google Finance: ZEP

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