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Age : 60
Public asset : 3,306 USD
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Biography : Mr. David K. Koch is Chief Operating Officer at Boomerang Systems, Inc.

Koch Tries Its Hand at Carpet Cleaners

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09/19/2016 | 03:15am CET

Koch Industries Inc., a conglomerate owned and run by conservative billionaire brothers Charles and David Koch, is making a push into the household-cleaner business, taking aim at industry stalwarts such as Procter & Gamble Co. and Clorox Co.

One of the largest private companies in the world, Koch is launching a carpet-cleaner line that will be sold under the Stainmaster brand. The product is the result of a pairing between two Koch companies: Invista, which makes Stainmaster carpet and upholstery, and Georgia-Pacific, maker of Dixie paper products, Angel Soft toilet paper and Brawny paper towels.

It is Koch's first foray into the $25 billion U.S. household-cleaning market, and executives say they have several more products in development.

For two years, Koch has been trying to get its disparate portfolio of companies, whose products also include Lycra fabric, fiber-optic wire and refined natural-gas products, to work more closely together.

"Innovation is not just one 'aha' idea from a great inventor," said John Pittenger, Koch Industries senior vice president of strategy and innovation. "As a rule, a great invention was probably hatched in six or seven different places at a time. So this is about combining existing knowledge from different places."

Georgia-Pacific, based in Atlanta, developed the product and will handle advertising and distribution through its established relationships with major retailers. Invista, based in Wichita, Kan., contributed the Stainmaster name and expertise in carpet fibers.

The cleaner will go up against British consumer-products company Reckitt Benckiser Group PLC, the maker of Resolve, which has a roughly 24% share of the $360 million U.S. carpet-cleaning market, according to Euromonitor.

The Stainmaster cleaner went on sale in recent weeks at Wal-Mart Stores Inc., a number of grocers and about 30 Lowe's Cos. locations. A national rollout is planned for later this month.

Reckitt Benckiser took issue with Koch's main selling point for the Stainmaster cleaner: that the product avoids leaving a sticky residue, common to other carpet cleaners. Resolve's ingredients leave no sticky residue, Reckitt Benckiser said.

Koch's decision to get into household-cleaning products "is a huge threat" to the established players, said Gary Stibel, founder of New England Consulting Group in Westport, Conn. "In too many of these categories the leading brands haven't been innovating."

The idea to develop a carpet cleaner emerged when Koch executives decided to act upon a wealth of consumer data that came along with the company's 2004 acquisition of Invista from DuPont Co. According to the research on Stainmaster, one of the brands included in the deal, many consumers considered it a top carpet-cleaning brand even though, in reality, there was no Stainmaster carpet-cleaning product.

Mr. Pittenger said the company is looking at other Koch pairings in lawn-and-garden products and in apparel. Georgia-Pacific recently created a home-cleaning division and plans to launch more offerings.

Pushing further into the core consumer-products business could set up Koch companies to compete with some of their biggest customers. For instance, Invista provides material for diapers made by P&G and its rival Kimberly-Clark Corp., both large and lucrative businesses. "That's a place we've chosen not to go," Mr. Pittenger said.

Getting companies in unrelated industries and far-flung locales to work together doesn't come naturally, Koch executives said.

In recent years, the conglomerate has pushed its different businesses to work together. At board meetings, executives from each company share the projects they are working on. Each year, hundreds of employees meet at a so-called innovation summit to exchange ideas.

Koch Industries also is setting up a companywide network that allows employees in the various businesses to easily share information about intellectual property and research projects.

"The issue is getting people to really sit back from all the things they are focused on and saying, 'Who here might be able to help?' " said Georgia-Pacific Chief Executive Jim Hannan. "We're hopefully getting better at leveraging all that tacit knowledge that exists across all the companies."

Write to Sharon Terlep at [email protected]

Corrections & Amplifications

This article was corrected September 19, 2016 at 2:10 p.m. ET to reflect that the cleaner will go up against British consumer-products company Reckitt Benckiser Group PLC, the maker of Resolve, which has a roughly 24% share of the $360 million U.S. carpet-cleaning market, according to Euromonitor. The original version misstated Reckitt's products in the seventh paragraph.

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