Kimberly-Clark is papering China

Kimberly-Clark's Huggies diapers displayed at a supermarket shelf. The company says that Huggies brand is currently occupying over 70 percent of the high-end diaper sector in China. Bloomberg News

The maker of Huggies diapers, Kleenex napkins and Scott paper towels Kimberly-Clark forecasted that its turnover in China would grow at least 40 percent this year.

Although the figure is somewhat lower than last year's 52 percent, given the world economic slowdown, the multinational's global business was up 10 percent last year. But with competition from archrivals, such as transnational Procter & Gamble (P&G) and domestic Hengan, the target is not an easy mission.

However, Stephen Shao, president of Kimberly-Clark (China) Co Ltd, said 40 percent is a conservative estimation.

Having been working over seven years for the Fortune 500 company with annual sales at $18 billion, Shao, with an MBA from the Massachusetts Institute of Technology, indicated that the economic recession is, in some aspects, a good chance for Kimberly-Clark.

Owing to bullish performance of its business in China, and a year-over-year increase of 67 percent in terms of operating profit in 2008, Kimberly-Clark headquarters has determined to make China a priority.

"A multinational is like a small United Nations and the decision implies we have more power to earn resources and support from headquarters," said Shao.

According to Jiang Manxia, committee member of the China National Household Paper Industry Association, the sector is expected to experience an adjustment in China under global market slide.

Some export-oriented Chinese manufacturers, such as Fujian-based Hengan, have turned more attention to the local consuming market. Meanwhile, small players, due to a shortage of capital, may go into bankruptcy.

"It's time for us to speed up and stand out," said Shao, explaining that his company's business is focused - superior products, innovative solutions and providing high standard services- and with healthy cash flow.

The company decided to pump more money into brand building. "Under the economic gloom, if you spend one yuan on branding, the effect may be the same as you spend 10 yuan during prosperous times," said the president. He claims that if others are short of money to hype themselves, a company such as his will remain in the limelight and obtain the public's eyes and confidence.

According to China National Household Paper Industry Association, China's household paper consumption - involving sanitary napkins, diapers, baby napkins and incontinence products - has been growing fast over the last two decades.

In 2009, the market reached 40 billion yuan, making up 10 percent of the world's consumption as a whole, while the consumption exceeded 45 billion yuan last year and is expected to continue to grow.

But Shao admitted that challenges exist.

People have become thriftier but Kimberly-Clark said it would still stay in the high-end market in China. Chinese consumers, particularly those born in the 1980s and living in urban areas are increasingly willing to spend more and Kimberly-Clark is striving to keep its quality high at cost-effective prices, said Shao.

The goal can be reached via leaner production procedures and making the most of its supply and distribution network, he added.

Since late last year, the household paper expert introduced new brands to China, although one that has been in the US and Europe for years - Depend adult diapers - to the most promising market for it, aiming at taking a lead to occupy incontinence personal care market - a embryonic sector - in China.

Depend is targeting a new market here, aged Chinese suffering from incontinence.

Competitions from likes of P&G and Hengan are a permanent theme for Kimberly-Clark and statistics from the China National Household Paper Industry Association said that in 2008, P&G made up 31.3 percent of China's baby diaper market with its Pampers brand, followed by Hengan's Anerler at 21.7 percent, while the figure for Huggies of Kimberly-Clark was 4.6 percent.

"We are specifically concentrating on the high-end sector," stressed Shao, adding that Huggies currently occupies over 70 percent of the high-end diaper sector in China.

Kimberly-Clark owns a series of paper brands as Kleenex tissues, Huggies, Scott paper towels, Pull-Ups toilet training pants for children, Kotex sanitary napkins and Depend and holds the No. 1 or No 2 share positions in more than 80 countries.

Accessing China in 1994, it has four plants in Beijing, Shanghai, Guangzhou and Nanjing, capital of East China's Jiangsu province, involving 3,000-plus employees. Total investment in China amounts to almost 2 billion yuan.

(China Daily 02/09/2009 page6)