Kimberly-Clarke - Senior Vice President and CFO Mark Buthman
"There was some evidence of consumer tradedown in the back half of last year, but that seems to have stabilized with private label flattening in the first quarter," he said, noting that some category decline has been seen in professional, consumer tissue and training pants. Currently, K-C's organic growth is in the 1-2% range overall.
At the core of K-C's growth strategy is strengthening its brands and targeting growth in areas where it sees a clear advantage. Recently, these efforts have resulted in the launch of some innovative new products like gender specific adult incontinence items in its Depend brand, Huggies Pure & Natural diapers and Scott Naturals with an increased recycled content.
Huggies Pure and Natural diapers, made from natural, organic materials and ingredients, come with a 15% price premium, a cost that Mr. Buthman called on-the-mark for a certain segment of the market. "The roll out of these diapers is part of a larger move toward more sustainable products," he said. The same is true for the Scott Natural line—a family of bath tissue, towels, napkins and flushable wipes products that deliver quality, performance and environmental benefits.
Emerging markets are also on K-C's radar with a 14% increase reported in these regions during the first quarter of 2009. "Eighty percent of the world's population lives outside of North America and Western Europe but only 30% of K-C's sales are here," Mr. Buthman said. Strong prospects for the company lie in the BRICIT region (Brazil, Russia, India, China, Indonesia and Turkey), he added.
"We choose to focus on areas where we can be the market leader or at least a strong number two," Mr. Buthman said, noting that K-C has purposely stayed out of some geographies, such as Germany and Japan where it has felt achieving a certain level of penetration would not be possible.
Referring to the current economic climate as a difficult environment, Mr. Buthman said relief is beginning to be felt across the board.
"Kimberly-Clark and our competition are in a reasonably similar place. By and large the price increases that were driven in 2008 are being realized in 2009."
More specifically, in diapers the emphasis has been on getting to more absolute price points. "Getting the jumbo pack to a price point less than $20 per pack and getting a pack on the shelf for under $10 has been a very important dynamic going on in the diaper category," he explained. Other important marketing efforts have been incremental increases in coupon values, sampling in hospitals and an emphasis on diaper sizes.
Moving forward, K-C's latest innovations will be supported by continued strong marketing efforts; however, the way K-C has approached marketing has evolved over the past five years. Whereas five years ago, 60% of its advertising budgets went to network television commercials, now only 40% is geared toward television and this segment encompasses more targeted stations. "We are trying to make the most efficient use of every marketing dollar," Mr. Buthman explained. In developed regions, this can mean using a variety of tools from advertising to sampling to in-store promotion to internet education. "Creating new habits in emerging markets could require overinvestment."