Kimberly-Clark Provides a Soft Touch
The storied paper-products company is focused on innovation under mild-mannered CEO Thomas J. Falk.
Erin Patrice O'Brien
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E-mailKimberly-Clark Corp. (KMB) is a study in contrasts. While it is recognized around the world as a leading innovator in the consumer-products sector, some of its top brands, including Scott, Kleenex and Kotex, date back to the early 1900s. A global company that operates in 35 countries, Kimberly-Clark has a management philosophy of putting consumers and employees first that never strays too far from its hometown roots in Neenah, Wis. And with 53,000 employees working in four major business groups, the company’s future depends on maintaining and cultivating the entrepreneurial spirit that has driven its growth for the past 137 years.
The challenge of balancing that dichotomy — keeping a firm grasp of Kimberly-Clark’s traditions while constantly looking for new opportunities in a fast-changing global economy — rests on the shoulders of Chairman and CEO Thomas J. Falk. A 26-year Kimberly-Clark veteran and only the eighth CEO in the company’s history, Falk is the architect of the company’s Global Business Plan, although the soft-spoken Midwesterner clarifies, “I’m one of the builders, but a lot of us are holding hammers.”
The company says its four major business lines are: Personal Care; Consumer Tissue; K-C Professional and Other, which produces a broad portfolio of hygiene and safety products for the away-from-home marketplace; and Health Care, which focuses on products that can help protect health-care workers and patients in an acute-care environment. Personal-Care and Consumer Tissue products still accounted for about three-quarters of the company’s nearly $20 billion in 2008 revenue, says Falk. But he adds that the K-C Professional and Health Care segments present opportunities for growth.
BUILDING ON STRENGTHS
Every good architect understands that a design is only as strong as its foundation, and when Falk took the helm in 2002, he knew he had solid footings in place. When the company’s four founders came together in 1872 to create a new type of paper company, they agreed on four basic tenets: to manufacture the best possible products; to serve customers well and deal fairly to gain their confidence and good will; to deal fairly with employees; and to expand capacity as demand for product justified, financing that expansion out of earnings.
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“Complexification”
Although none of these seems particularly groundbreaking today, each was a dramatic departure from business as usual in the 19th century. For example, whereas other paper mills were churning out products as cheaply as possible, Kimberly, Clark & Co., as the company was then known, built the first mill in Wisconsin to make a new, higher-quality newsprint made entirely out of linen and cotton rags. The founders were betting that customers would pay a premium for better quality. Today, with top brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds the No. 1 or No. 2 market share position in more than 80 countries, says Falk.
Using cash flow instead of debt to finance expansion has helped the company weather every economic downturn of the past century, notes the CEO, including the Great Depression and the current recession. Despite the latest downturn, Kimberly-Clark’s strong cash flow allowed the company to repurchase $625 million worth of stock in 2008 to return cash generated in the business to its shareholders, the CEO confirms, and the company implemented a 3.4 percent dividend increase in 2009, the 37th consecutive annual increase. “More important,” Falk says, “when you are a strong company with healthy cash flow, you may get some opportunities during a recession that you wouldn’t get at another time.”
He points to the company’s April 2009 acquisition of Jackson Products Inc., a leading provider of welding safety products, personal protective equipment and work-zone safety products. The purchase, he explains, meshed tightly with the company’s strategy to accelerate growth of high-margin workplace solutions under the K-C Professional business line. “Because of the economic downturn, we were able to buy it at a more attractive price,” Falk says.
