Mr. Falk described the jeans diaper innovation as a bright spot in a bleak year for the diaper market, particularly in North America, where consumers were trading down to lower priced diapers like private label products and Procter & Gamble's Luvs value brand. For the full year, K-C reported its diaper business down one full point, a situation the company hopes to reverse in 2011, as conditions in the market reverse themselves in the second half and innovations draw consumers back to the Huggies brand.
"In the second quarter, the jeans diapers boosted our share but we gave it back," Mr. Falk said. "We expect the category softness to reverse itself in the second half of the year. Kimberly-Clark has a lot of innovation planned to make sure it grabs a piece of the market's recovery."
Typically, K-C rolls out one or two product improvements in its diaper business during a 12-month period and Mr. Falk indicated consumers could expect to see the next round product improvements during the first half of 2010.
Softness in the diaper market was to some extent made up for by gains in other areas for K-C, which announced this week full year sales were up 3%. Among the year's bright spots were innovative new products including the jeans diapers, the U by Kotex feminine hygiene line and new products in the Poise and Depend adult incontinence line.
In other news, K-C has initiated a number of efforts to maximize shareholder value. These include an increased dividend payout, a buyback of $1.5 billion in stock and a two-year plan to restructure its pulp and tissue business. The restructuring is expected to be completed by the end of 2012 and will involve the streamlining, sale or closure of five to six manufacturing facilities around the world. In conjunction with these actions, the company will be exiting certain non-strategic products, primarily non-branded offerings, and transferring some production to lower-cost facilities in order to improve overall profitability and returns. By 2013, the restructuring should reduce annual net sales by $250-300 million and increase operating profit by at least $75 million. Most of the restructuring will impact the consumer tissue business segment.