Kimberly Clark plots fresh marketing push

27 January 2010

DALLAS: Kimberly Clark, the consumer goods giant, plans to heighten its investment in marketing this year, having benefited from pursuing a similar strategy in 2009.

The company has predicted that its organic sales will rise by at least 2% in 2010, having posted a decline of 1% on this measure in 2009.

Net revenues also fell by 1.5% last year, to $19.1 billion (€13.5bn; £11.8bn), although this was partly due to "unfavourable currency effects of about 5%."

Tom Falk, Kimberly Clark's ceo, described this as a "pretty solid achievement, particularly considering that we faced the worst economic environment any of us have seen in more than 70 years."

At the beginning of last year, the Dallas-based firm outlined a number of key objectives, one of which was to "strengthen our brands", with communications playing a vital role in this process.

It dedicated around 3% of its total sales to advertising in 2009, with a promotional budget that ran at a slightly lower level.

"We supported our brands with a significant increase in strategic marketing, and that was up about $140 million in local currency terms [in 2009]," said Falk.

This included an uptick of $45m in the last quarter alone, with Kleenex being one brand that reported an increase in activity in Q4, when its volume sales rose by 7%.

"In 2010, we'll strengthen our brands and pursue targeted growth initiatives and reinvest back into our business for our future growth," Falk continued.

Marketing spending will rise "faster than sales" this year, with the company's global personal care operations taking more resources, as will Andrex in the UK, and Viva and Cottonelle in the US.

"The categories and countries that are targeted for significant growth are going to be where we invest disproportionately," said Falk.

"You've got high-margin differentiated products, where we would want to spend more behind those, so those would be the focal points," he added.

Kimberly Clark has introduced new products including Huggies Pure & Natural and Scott Naturals paper towels in recent months, and this trend will continue into 2010.

"We've got quite a bit of innovation launching in the early part of the year so you'll probably see stepped up marketing spending," said Falk.

Huggies will be one key area of focus, not least because Procter & Gamble, the world's biggest advertiser, is scheduled to relaunch Pampers, its diaper brand, in March.

Further impetus for this kind of activity is coming from retailers, as chains like Wal-Mart expand their own-label ranges, and delist branded goods that are not delivering the requisite sales.

"Retailers are continuing to push … they want to make room for innovation and so they're going to be pushing manufacturers to make sure that their product line up performing," Falk said.

"So every one of our brand teams is making sure that we've got the right things on the shelf and the right packings for each retail channel and that we're the relevant offering that they want to put on the shelf."

Thus far, the rise of low cost, own-label alternatives has only had a limited effect on Kimberly Clark, and store brands actually got a "little weaker" in the US in the final quarter of 2009, according to Falk.

"There was more branded spending on marketing money and trade promotion, which probably narrowed some of those price gaps," he suggested.

By contrast, the situation is rather different in Europe, where the rise of private label is "a long-term trend" that has been in train for a period far longer than the current recession.

"I'd say we're watching private label more carefully in Europe than we are some of the other branded players," said Falk.

Data sourced from Seeking Alpha; additional content by Warc staff