Kimberly-Clark looks to innovation and the long term

Kimberly-Clark, which owns hygiene brands including Kotex, Kleenex and Scott, is increasing its advertising spend back to 2020 levels as it backs new product innovation to make inroads in highly competitive consumer packaged goods categories. 

Why it matters

In difficult economic times, many brands cut back on advertising and adopt a more aggressive discounting strategy. But Kimberly-Clark is bullish, investing in its brands now for long-term growth pay-offs down the line. 

Leveling up ad spend

On a Q4 earnings call, chairman and CEO Mike Hsu explained that the business was “taking advertising back up a little bit more” after some pandemic-period reductions. “We’re excited about the programs that we have and we want to invest behind them,” he said. “And at this point, we’re pretty good at evaluating the returns of our investment and making sure that they pay out.” 

Turning away from discounting

After several months of a highly promotional pricing environment, Hsu is less inclined to continue down that particular path, preferring to invest in advertising and brand building, which he believes are better for the long-term health of the company’s brands. 

“I’m not a fan of driving the business through promotion,” he stated. “We can do it effectively, because we know our ROIs on trade promotion as well as we know our advertising ROIs.” And while the returns on both are satisfactory, “I like the advertising ones better,” he added. “That’s my go-to, and I think it’s better for the long-term health of the brand.”

Looking for long-term category growth 

Kimberly-Clark’s retail customers aren’t keen on passing price increases to consumers – an unpalatable but often necessary decision in inflationary times – and are more focused on long-term category growth and how the company’s brands plan to deliver it. 

“Part of what they’re looking for from us is to make sure that we’re bringing commercial programming to grow the category for the long term,” Hsu said. 

“They’re excited about our innovation and they’re excited about the commercial ideas that we’re bringing this year. They want us to bring it, and so that’s probably the bigger reason why we’ve ticked up the investment in our advertising.”

Sourced from Seeking Alpha

[Image: Kimberly-Clark]