Prospects for Kimberly- Clark
Group in Disposable Paper Products
Core Business
Wide-ranging operations
·
Disposable paper products
constitute Kimberly-Clark’s core business, with its Personal Care operating
segment, including nappies/diapers/pants, sanitary protection and incontinence
products, and its Consumer Tissue segment, covering toilet paper, tissues,
kitchen towels and paper tableware, jointly accounting for 76% of company
revenue in 2007. Kimberly-Clark registered sales of more than US$1 billion in
five disposable paper products sectors in 2007: nappies/diapers/pants, toilet
paper, tissues, sanitary protection and kitchen towels.
Strong presence in nappies/diapers/pants
·
Nappies/diapers/pants
represents Kimberly Clark’s most valuable sector, accounting for 34% of the
company’s disposable paper products value sales in 2007. The company held a
27.6% share of global value sales of nappies/diapers/pants in 2007, to rank
second, 8.3 percentage points behind Procter & Gamble. The two companies
stand a considerable distance clear of their nearest rivals, with Japanese
company, Uni-Charm, ranking third at the global level with a share of just over
5%.
·
Kimberly-Clark’s largest
nappies/diapers/pants markets are North and Latin America, which each accounted
for around a third of the company’s sector sales. The company is the leading
player in value terms, ahead of Procter & Gamble, in both markets. Kimberly-Clark
increased its sector share by 0.1 percentage points during the year.
·
In 2007, the company registered
growing sector sales in every regional market except Australasia, where it is
the dominant player with a value share of 71%. Australasia saw financial pressures
including rising mortgage interest rates increase the appeal of economy brands
in an already mature market at the end of the review period. The company
registered its strongest growth in Eastern Europe, where it benefited from a
rising birth rate in the large Russian market.
·
Kimberly-Clark’s growth in
nappies/diapers/pants was driven by improvements in the shape and fit of its
premium-tier Huggies brand and innovative marketing with alternative media,
including on-demand video programming and customised in-store promotions,
complementing traditional advertising. New product development also boosted
company sales in 2007. The company launched GoodNites Sleep Boxers and Sleep
Shorts in North America, for example, with similar boxer-style underwear, which
aims to reduce the night time anxiety for children who wet the bed, introduced
in Europe under the DryNites brand.
Marked contrasts in outlook
·
Euromonitor International
forecasts that global sales of nappies/diapers/pants will grow at a compound
annual growth rate (CAGR) of 5% over the 2007-2012 period. However, prospects
contrast markedly between developed and emerging markets, with North America
and Western Europe projected to witness stagnation as a result of maturity,
intense pricing competition, and, in Western Europe, in particular, low birth
rates constraining growth.
·
Meanwhile, emerging markets
will see an increasing demand for convenience – as urbanisation creates job
opportunities for women and accelerates lifestyles - and increased product availability
through developing retail systems drive strong growth. Eastern Europe and Asia
Pacific are projected to lead global growth with a predicted CAGR of 13% and
10%, respectively, over the 2007-2012 period. Kimberly-Clark’s strongest
potential lies in Eastern Europe, where the company holds a strong second place
in the fast-growing Russian market. In Asia Pacific, the company lags behind
the leading players in the dynamic Chinese market, which is projected to post a
CAGR of 24% over the forecast period, though it is dominant in India which is
set to grow at a CAGR of 8%.
Global leader in toilet paper
·
Kimberly-Clark’s second largest
sector, toilet paper, accounted for 31% of its disposable paper products value
sales in 2007. The company leads toilet paper, with a 22% share of world value
sales in 2007, more than double that of its nearest rival, Georgia-Pacific.
Kimberly-Clark’s toilet paper value sales increased by 5% during the year,
driven by strong growth in its largest market, North America, which is
responsible for around 34% of its sector sales. The company’s North American
sales were spurred by increasing sales of the Scott brand and the relaunch of
the Cottonelle brand with improved softness and strength.
·
Currently, Kimberly-Clark’s
toilet paper operations in emerging markets are benefiting from the extension
of brand-building strategies that have a proven track record in particular
markets. Thus, the Labrador icon which initially supported the Andrex brand in
the UK and has been employed in the marketing of toilet paper in North America
and Western Europe has been extended to Latin America, Eastern Europe and the
Middle East and Africa.
·
Such developments are
bolstering Kimberly-Clark’s capacity to exploit ongoing growth in emerging
regions, with Latin America and Eastern Europe both forecast to post a CAGR of
nearly 5% over the 2007-2012 period as increased hygiene-consciousness, rising
purchasing power and expanded distribution spur sales.
·
This will prove increasingly
important, as intense pricing competition, bolstered by strong private label
segments and the rise of discounter-orientated retail formats, dampens growth
in developed markets. As a result, North America is expected to witness a CAGR
of 2% over the 2007-2012 period, while Western European sales are projected to
stagnate. Growth in North America will be driven by higher quality new products
and rising prices as manufacturers, including Kimberly-Clark, pass on rising
raw material and energy costs to consumers.
·
Euromonitor International
forecasts that Asia Pacific will be the fastest growing toilet paper market in
the world over the 2007-2012 period, with a CAGR of 8%. Kimberly-Clark is the
leading player in the regional sector. However, it ranked only fifth in the
dynamic Chinese market, which is predicted to register a CAGR of nearly 12%
over the 2007-2012 period. Moreover, the competitive obstacles to the company’s
development in China were increased in 2007 when its major multinational rival,
SCA, purchased a stake in Vinda, ranked second in the sector. SCA’s involvement
should help Vinda in its efforts to expand production and extend its sales
network across the country.
North American bias in tissues
·
Tissues accounted for around
11% of Kimberly-Clark’s disposable paper products value sales in 2007. The
company’s tissues operations are significantly biased towards North America,
which was responsible for nearly half of its sales in the sector in 2007.
Kimberly-Clark is the leading player in tissues in North America, with a value
share of 53% in 2007.
·
Kimberly-Clark’s North American
tissues sales stagnated during the year, as the sector suffered from
competition from alternative products such as kitchen towels and toilet paper.
In order to counter such competition, the company is looking to develop new
products with distinctive benefits. Thus, in September 2008, the company
launched Kleenex Facial Tissue with Lotion, an enhanced product which delivers
improved softness and strength to the Kleenex brand through new proprietary
tissue technology. It is also looking to develop an “emotional affinity”
between consumers and its core Kleenex brand, through the “Let It Out”
marketing campaign and moves such as the launch of My Kleenex Tissue, which
allows consumers to make their own personal statement with a custom-printed
Kleenex oval product, in 2007.
·
Such action will be important
to Kimberly-Clark’s efforts to exploit a projected CAGR of 1% in North America
over the forecast period, as it seeks to fend off increasing competition from
second-placed Procter & Gamble, which eroded its lead in 2007 through the
development of its Puffs brand, and an increasingly sophisticated private label
segment.
·
Latin America and Asia Pacific
are forecast to be the fastest growing regional tissues markets over the
2007-2012 period, with predicted CAGRs of nearly 4%. Kimberly-Clark is the
leading player in both markets as a result of a broad ranging geographic
coverage within each region. In Latin America, Mexico offers significant growth
opportunities, as the company holds a dominant lead in the market which has a
projected CAGR of 4%, though it is also increasing its share in the Brazilian
market, with a predicted CAGR of 5%, thanks to its extensive distribution
network.
·
In Asia Pacific, Kimberly-Clark
entered the Indian retail tissues sector through its joint venture with
Unilever in 2007 with the launch of Kleenex. Euromonitor International expects
sales of tissues in India will grow at a CAGR of nearly 10% over the 2007-2012
period, driven by rising disposable incomes and an increasing amount of time
spent outside the home.
Rising sales in kitchen towels
·
Kitchen towels accounted for
around 5% of Kimberly-Clark’s disposable paper products value sales in 2007.
The company registered growth of 4% in the sector in 2007, despite sales in its
largest market, North America, growing by only 0.8% during the year. Growth in
North America was constrained by maturity and the fact that increasingly
budget-conscious consumers used products sparingly or replaced them with reusable
cloths.
·
Kimberly-Clark ranks third in
North American kitchen towels, behind the strong leader, Procter & Gamble,
and Georgia-Pacific. Procter & Gamble’s aggressive development of the
Bounty brand extended its sector lead in 2007, though Kimberly-Clark withstood
its rival’s expansion significantly better than Georgia-Pacific, which saw its
share fall by 1.3 percentage points.
·
Kimberly-Clark’s product
improvements and innovative marketing, including a magazine insert that
combined a marketing message with a product sample, helped its Viva brand to
overtake Georgia-Pacific’s Brawny to become the second-ranked kitchen towels
brand in the region, behind Procter & Gamble’s Bounty, in 2007. Innovative
marketing will play an important role in the competition between the top three
players and, indeed, the private label segment, in North America, over the
forecast period, as manufacturers struggle for share in a mature market
undermined by low consumer confidence.
·
Euromonitor International
forecasts a global CAGR of 2% for kitchen towels over the 2007-2012 period.
Eastern Europe is projected to be the fastest growing regional market over the
forecast period, with a CAGR of nearly 9%, as rising disposable incomes,
accelerated lifestyles and increasing hygiene-consciousness drive up relatively
low levels of per capita consumption. This bodes well for Kimberly-Clark, which
overtook Metsä Tissue Corp to become the leading player in the region in 2007,
as it expanded its distribution in markets such as Romania.
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