US’ Kimberly-Clark launches strategic transformation to fuel growth

April 03, 2024 - United States Of America

American multinational personal care products company Kimberly-Clark Corporation, under the leadership of chairman and CEO Mike Hsu, has announced a new phase in its transformation, introducing a novel operating model and key commercial initiatives aimed at accelerating the growth of its brands and businesses beyond the pace of their respective categories. The company's strategic revamp hinges on three synergistic pillars designed to dramatically improve performance.

Firstly, the company is set to invigorate its focus on pioneering innovation by investing in science and technology to meet unfulfilled and changing consumer needs. This effort centres on expanding 12 powerhouse brands that dominate market positions, contributing to more than 80% of the company's net sales across five crucial daily-need areas: baby and child care, feminine care, adult care, family care, and professional. These areas together constitute a total addressable market of approximately $240 billion, Kimberly-Clark said in a press release.

Secondly, the company aims to enhance its margin structure by deploying initiatives and leveraging technology and data analytics to forge a fast, adaptable, and integrated supply chain. This modernisation effort is expected to deliver over $3 billion in gross productivity and $500 million in working capital savings.

Thirdly, Kimberly-Clark plans to reorganise its operations into three business segments: North America, international personal care (IPC), and international family care and professional (IFP), to cultivate agility, speed, and focused execution. This reorganisation is part of the company's strategy to drive growth by leveraging its competitive advantages. The North America segment, generating approximately $11 billion annually, will utilise its significant scale to enhance value creation and innovation. IPC, with sales around $6 billion, aims to drive growth and profitability in core categories across five core markets and 50 enterprise markets by optimising routes-to-market and simplifying product portfolios. IFP, generating about $3.5 billion in sales, will aim to improve its business mix and profitability by growing six iconic brands in family care and professional markets, leveraging shared technology platforms.

These strategic moves are complemented by efforts to streamline functions across research and development, marketing, finance, information technology, and human resources, anticipated to generate approximately $200 million in administrative savings in the coming years, to be reinvested back into the business.

In line with these transformative steps, Kimberly-Clark has established ambitious long-term growth and return targets, including organic net sales growth surpassing market growth, adjusted operating profit growth in the mid-to-high single digits on a constant currency basis, adjusted EPS growth in the mid-to-high single digits, and an annual free cash flow generation of at least $2 billion.

"We are building on the consumer centricity and commercial advantages we've established by moving to a more agile and focused operating structure that we are confident will help accelerate our proprietary pipeline of innovation in right-to-win spaces and improve our growth trajectory, profitability, and returns on investment," said Mike Hsu.