Name of the Company: Kimberly-Clark
Business Sector: FMCG, Personal Care
Operating Geography: North America, United States, Global
About the Company: Kimberly-Clark is a multinational personal care products company based in Irving, Texas, US with popular brands like Kleenex, Scott, Huggies and Kotex. Established in 1872, the Fortune 500 firm has more than 43,000 employees on its rolls as of 2015.
Revenue: US $ 18.6 billion – FY ending Dec 2015
SWOT & PESTLE Analysis
|1. Strong ROIC and dividend payout |
2. Fortune 500 Company with popular brands
3. Sustainable business operations
|1. Rising input commodity costs impacting margins
2. Lack of diversity compared to key competitors
|1. Immense potential in Developing and Emerging (D&E) markets|
2. Strategic alliances and acquisitions
|1. Competition from global and regional players
2. Emergence of private label brands
3. Adverse foreign currency movements
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1) Strong ROIC and Dividend Payout: Kimberly-Clark’s, Return on Invested Capital (ROIC) was 22.7% in 2015, the best since it announced Global Business Plan in 2003. It is a top dividend paper in the Consumer Packaged Goods sector and delivered a dividend yield of ~3% in FY 2016. Kimberly-Clark has increased dividend payout for 44 consecutive years.
2) Fortune 500 Company with Popular Brands: Kimberly-Clark ranked #151 on the Fortune Global list in 2015. Its popular brands like Kleenex, Scott, Huggies, Pull-Ups and Kotex are leading brands in their segment in more than 80 countries and it claims to have a fourth of the global population purchasing its products on a daily basis.
3) Sustainable Business Operations: Kimberly-Clark strives to bring in sustainability in every aspect. It makes products with recycleable materials like wood fibre, recycles its packing and makes sure they are not harming the environment. It has reduced its greenhouse gas emissions by 10% over the last decade and aims to reduce it by another 10% by 2020.
1) Rising Input Commodity Costs Impacting Margins: The price of wood pulp which is the main input for manufacturing of tissues has adversely impacted Kimberly-Clark’s margins, consumer tissue division generating a third of the organizations revenues. According to IBISWorld, the price of wood pulp is likely to increase by a CAGR of ~5% till 2019. Kimberly-Clark needs to increase usage of alternative sources of low cost raw materials for tissues and decrease reliance on natural forest products, else it would be forced to increase prices to sustain margins.
2) Lack of Diversity Compared to Key Competitors: Kimberly-Clark is mainly into personal care segment which includes feminine hygiene, baby care and consumer tissue products. However, its major competitors such as Procter and Gamble (P&G), Unilever and Johnson & Johnson have a diversified set of product offerings across personal care and other fast moving consumer goods segment. They have the advantage of divere market footprint and global supply chains across segments which they can extensively leverage upon to strengthen their market and launch new products.
1) Immense Potential in Developing and Emerging (D&E) Markets: The developing and emerging markets such as China, Eastern Europe and Latin America are attractive in terms of market dynamics and offer significant potential in medium and long-term perspective. Personal care, Adult care and Feminine care are potential growth areas for Kimberly-Clark in these markets.
2) Strategic Alliances and Acquisitons: Strategic alliances and acquisitons can help Kimberly-Clark to enter new markets and expand its global footprint. In a recent alliance with Walt Disney in 2015, it will open up Baby Care Centers within Walt Disney resorts and theme parts.
1) Competition from Global and Regional Players: Kimberly-Clark faces tough cpmpetition from new entrants and private labels particularly in developing and emerging markets. Mamy Poko from Japan’s Unicharm group is giving tough competition to Huggies in Asian markets in the diapers segment. Sealer from Taiwan’s Everbeauty Corp has also gained significant market share in the local market as it offers reasonable quality product at affordable prices. Procter and Gamble (P&G) competes with Kimberly-Clark across all the product segments in major markets except ‘away-from-home tissue products’ while Unicharm has gained foothold in Asian and African markets in the bay care products segment. SCA Hygiene, the Swedish MNC also has a strong foothold in the European markets. It has launced its diaper brand, Libero in India, its first venture in Asia, in 2013 and has started local manufacturing facilities in the country for diapers, incontinence products and tissues.
Furthermore, consumer products giant Unilever and P&G are pursuing aggressive growth and expansion strategies in personal and baby care segments. They have larger geographical footprint and huge marketing budgets which outmatch Kim. Their increased focus can eat into Kimberly-Clark’s market share.
2) Emergence of Private Label Brands: Private labels are emerging in the personal care space which are eating into the market share of mainstream companies like Kimberly-Clark. US based Bemax launched its private label of disposable diapers in 2015 and palns to distribute in Europe and other emerging markets. Amazon launched its private label ‘Mama Bear’ for baby diapers and ‘Elements’ for baby wipes. Companies like Amazon have the advantage of their online infrastructure and superior supply chain and can leverage the same with minimal risks.
3) Adverse Foreign Currency Movements: Volatile foreign currency movements and athe appreciation of US $ against other benchmark currencies can significantly impact Kimberly-Clark’s margins. Euro,GBP and other major Asian currencies are expected to remain weak over 2017 which is a cause of concern for the company.Kimberly-Clark SWOT analysis has been conducted by and reviewed by senior analysts from Barakaat Consulting.
1. Kimberly-Clark Annual Report 2015: http://www.cms.kimberly-clark.com/umbracoimages/UmbracoFileMedia/2015_AnnualReport_umbracoFile.pdf
2. Kimberly-Clark Overview: http://www.kimberly-clark.com/ourcompany/overview.aspx
3. Kimberly-Clark Third Quarter 2016 Presentation: http://investor.kimberly-clark.com/common/download/download.cfm?companyid=KMB&fileid=912996&filekey=F8866CD6-0C1E-491D-88AB-4FFA4D30B5B8&filename=KMB_Q3_2016_Results.pdf
4. Amazon is launching new private labels, including in food and diapers: WSJ: http://www.cnbc.com/2016/05/16/amazon-is-launching-new-private-labels-including-in-food-and-diapers-wsj.html
5. Bemax to Launch Private Label of Disposable Baby Diapers: http://www.prnewswire.com/news-releases/bemax-to-launch-private-label-of-disposable-baby-diapers-300139335.html
6. Kimberly-Clark Announces Strategic Alliance With Walt Disney Parks: http://www.prnewswire.com/news-releases/kimberly-clark-announces-strategic-alliance-with-walt-disney-parks-and-resorts-300190086.html
7. Wood pulp and Paper Prices Continue to Rise: http://www.pulpapernews.com/2016/02/wood-pulp-and-paper-prices-continue-to-rise
8. These Scenarios Could Push Our Valuation of Kimberly-Clark Below the $100 Mark http://www.forbes.com/sites/greatspeculations/2015/06/15/these-scenarios-could-push-our-valuation-of-kimberly-clark-below-the-100-mark/2/#73772d10125f
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