February 26, 2011 Ever-Expanding Enterprise

Volume 14 | Issue 1

Kimberly-Clark’s success is nothing to sneeze at. But if you feel you must, you’ll most likely reach for one of its products (Kleenex). Rodn

Kimberly-Clark is truly a household name. The Dallas, Texas-headquartered company’s brands have become essential parts of daily personal care. More than 1.3 billion people throughout the world use its well-known products that include Kleenex, Huggies, Kotex and Depend, among others.

A global organization, Kimberly-Clark established operations in 38 countries. Customers reside in more than 150 nations. A contributor to the world’s economic health, the company provides jobs to nearly 56,000 employees across the globe.

Enormity – that descriptive applies to its size and to its success. Consider recent figures: In 2009, Kimberly-Clark posted sales of $19.1 billion. It holds number-one and number-two market shares in more than 80 countries. Established more than 138 years ago as a Midwestern enterprise, the company has come a long way. Creativity and productivity fostered its success.

GROWTH VIA INNOVATION
Kimberly-Clark dates back to the 1870s, when it was founded as Kimberly, Clark and Company in Neenah, Wis. By 1886, it had changed its name to Kimberly & Clark Company and became the Midwest’s leading paper producer. What then ensued is a long history of innovation that includes the first toilet paper on a roll, the first facial tissue, Kotex sanitary napkins and the Huggies diaper. The company’s impact has been so pervasive that brand names and products became synonymous. (Almost no one asks for a tissue; rather, they say, “do you have a Kleenex?”)

Innovation is ingrained in its DNA. “That’s our heritage. It’s what helped transform us into a global company,” says Rodney Olsen, vice president of finance for Kimberly-Clark International (KCI).

He proves his point with a surprising fact: “We invented five of the eight categories in which we compete including facial tissues, rolled bath tissues, paper towels, feminine pads and disposable training paints.”

Not bad for a company that began as a midwestern papermaking company. Its pioneering products became part of the daily fabric. But its impact involved more than just innovation.

INTERNATIONAL EXPANSION
In the mid-point of the 20th century, Kimberly-Clark initiated a campaign of international expansion, and that’s what helped it become a world-changing operation. The initiative that began in the 1950s continues into the new century. “We’re focused on the biggest and fastest developing opportunities that will enable further and rapid growth for KCI,” informs Olsen.

This global growth business plan involves Russia, China and Latin America (particularly Brazil). “We expect KCI to continue to grow faster than our overall corporate average for the next several years and we expect it to become a bigger piece of our overall portfolio,” says Olsen.

Russia is a big part of the growth plan, both past and future. “Kimberly-Clark has developed its market presence in Russia since 1996,” reports Olsen. “We have made significant investments in Eastern Europe to establish our brands and build our organization. Our existing global manufacturing capacities were sufficient to support the growing needs of the Russian market during the initial phase of market development.”

According to the company, it has increased its sales 20 times in 10 years in the region. Still, per capita consumption for company categories in Eastern Europe is still relatively low versus North America and Europe, adds Olsen. But income levels are growing, especially among younger people. “So we expect usage to also continue growing, resulting in steady market growth for years to come,” he says.

NEW FACILITY
To ensure growth in the region, Kimberly Clark opened its first Russian manufacturing plant on June 2, 2010. Located in Stupino, near Moscow, the state-of-the-art production facility handles two Huggies diaper lines. But, as with other company plants, the new Russian facility may eventually make consumer tissue products as well as childcare, adult care and feminine care hygiene products.

Kimberly-Clark decided to build the new plant in 2007, after considering the favorable market developments in Eastern Europe and the Commonwealth of Independent States (CIS) countries. Construction began in 2009. This substantial capital investment will allow Kimberly-Clark to support continued growth in Russia and in CIS countries.

“The facility measures more than 400,000 square meters and it provides the new employees with a safe, eco-friendly and energy-efficient environment,” describes Olsen. It’s equipped with highly automated machines that assemble components, with automatic quality control, into finished product. Appropriately, the company designed the facility to add capacity on an as-needed basis.

Currently, the plant has about 200 employees; 90 percent of them are from Stupino. But the employee roster is expected to soon grow to 300 or more. Right now, employees include specialists involved in the operations’ processes. They have passed extensive training in KC facilities in the United States, Europe and Korea.

The impact of this investment should be significant. “By manufacturing in the region, we will increase our speed of delivery as well as better service the rapidly growing consumer base,” says Olsen. “Also, we will improve product supply and save on logistics costs, as we will no longer need to transport our products across thousands of kilometers and across multiple borders.”

OTHER GEOGRAPHIC GROWTH REGIONS
Kimberly-Clark is also focusing on Asia. “As we continue growing, we’re looking to expand our business in China,” says Olsen. “Today, we have three manufacturing locations, where we produce facial tissue products, feminine care products and Huggies diapers. As we grow in this market, we will determine the capacity and the assets we need. We consider China an important part of our growth mission.”

Latin America also represents a fertile area. “In the last 15 to 20 years, we built up strong businesses in the region, which we view as another great opportunity for continued growth,” says Olsen. “In particular, we consider Brazil a very important part of that. However, we’re looking at the entire South American continent. Currently, we have substantial business operations throughout the region, so we feel we are well positioned for increased growth and to bring our innovative products to more Latin American consumers. So far, we’ve been very strong in all of our product categories.”

Kimberly-Clark is also exploring global growth potential in India, Indonesia and Turkey. But right now, these remain possibilities. The company is more focused on the aforementioned regions.

DIVERSITY EQUALS STRENGTH
Kimberly-Clark boasts diversity in terms of both product and geography, which enabled the company to come through recent economic times in relatively good health. “In 2009, we witnessed some pretty turbulent international economic situations, but our diversity helped us pull through,” says Olsen. “The United States and Europe were hit very hard, as were Asia and Latin America. But, as far as our business, the impact was suffered at differing times and at differing levels of degree.”

As such, the company boasted a strong performance in that critical year. This gave it the confidence to continue executing its Global Business Plan, as Kimberly-Clark Chairman and Chief Executive Officer Thomas J. Falk recently related. (That plan – launched in 2003 – was designed to prioritize growth opportunities, apply greater financial discipline to its operations, and increase shareholder returns.) While confident, Falk carefully measured his optimism. The company, he said, planned for a slow and modest recovery in 2010, with organic sales volumes expected to grow two and three percent after the down year of 2009. “We will continue to further strengthen our brands, pursue our targeted growth initiatives and reinvest for long-term success. We have a healthy pipeline of innovation coming to market … and we will support our new and improved products with increased marketing spending.”

Innovation remains a key, as Olsen underscores. “Looking at the large picture, we compete against strong regional and global competitors,” he comments. “As such, it’s incumbent that we maintain our innovation pipeline for our products. That way, we will continue bringing premium products to the market and continue building brand equity.”

So how it’s going? “I am very positive about where we’re heading,” he concludes. “Our international market, and our ability to reach large populations and increase product usage, provides a great growth platform.”

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