The Clorox Company (CLX), The Procter & Gamble Company (PG), Kimberly Clark Corp (KMB): Is This Iconic Company’s Moat Disappearing?

The Procter & Gamble Company (NYSE:PG)’s brands include Tide, Charmin, and Iams. Its brand portfolio is much larger than Clorox’s; it has $84 billion in sales compared to Clorox’s $5.6 billion. The Procter & Gamble Company (NYSE:PG) also has a much larger geographic footprint, but is now regretting its aggressive expansion into emerging markets and is backtracking to refocus on developed economies with more brand-conscious consumers.

In addition to rising input costs, The Procter & Gamble Company (NYSE:PG)’s margins are under pressure from its bloated cost structure due to the company’s over-extension, but its retreat from emerging markets will enable the company to trim a lot of fixed costs. As a result, P&G is in the same boat as Clorox — strong brands under temporary profitability pressure.

The story is different for Kimberly Clark Corp (NYSE:KMB), however. Like Clorox and The Procter & Gamble Company (NYSE:PG), Kimberly Clark Corp (NYSE:KMB) owns a portfolio of market-leading brands, including Kleenex, Huggies, and Kotex. However, the company has struggled to maintain its margins more than Clorox and P&G because consumers are more willing to buy off-brand tissues and similar items during periods of economic distress. The protracted high underemployment rate causes additional strain on the company’s profitability.

Kimberly Clark Corp (NYSE:KMB)’s margins are already much lower than Clorox’s. This is the difference between brand loyalty and brand preference — consumers demand Clorox’s brands, but only prefer Kimberly Clark Corp (NYSE:KMB)’s. As a result, consumers will continue to purchase higher-priced products from Clorox and The Procter & Gamble Company (NYSE:PG), but Kimberly Clark Corp (NYSE:KMB)’s margins will come under pressure from private-label products.

Bottom line

Despite recent weakness in revenue and margins, The Clorox Company (NYSE:CLX)’s moat remains intact due to strong consumer loyalty to its brands. Few moats last forever, but Clorox’s will not disappear any time soon.

The article Is This Iconic Company’s Moat Disappearing? originally appeared on Fool.com and is written by Ted Cooper.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends Kimberly-Clark and Procter & Gamble.

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