Kimberly-Clark, the owner of brands such as Huggies, Andrex and Kleenex, has unveiled plans to reorganise its business into three new units in a move designed to simplify its operations and reduce costs.
The US consumer goods giant said it currently expects to incur approximately $1.5bn in one-time restructuring and reorganisation costs, split roughly into 50% in non-cash charges and 50% of cash expenses, over the next three years as it implements its plans. Much of the expense will come from workforce reductions, although the company did not disclose the number of jobs it would cut.
The restructuring comes at a time when Kimberly-Clark is seeing the benefits from price hikes over the last couple of years wane, with inflation-stricken customers pulling back on purchasing its pricier, branded products. Like its peers P&G and Unilever, the firm is losing shelf space to cheaper supermarket own-label alternatives.
The three new business segments emerging from the restructuring will be North America, International Personal Care (IPC), and International Family Care and Professional (IFP).
It currently has three business segments – Personal Care, Consumer Tissue, and Kimberly-Clark Professional – with each having three geographic sub-divisions.
The company said a planned supply chain modernisation was expected to generate more than $3bn in gross productivity and $500m in working capital savings that would be used to invest in growth.
Kimberly-Clark expects to complete its transition to the new organisational structure by the end of 2024. The actions are expected to generate about $200m of selling, general and administrative savings in the next few years.
Mike Hsu, Chairman and Chief Executive, said: “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.”
The company also reaffirmed its annual organic net sales and adjusted profit targets it had provided earlier in the year. It had missed fourth-quarter sales and profit estimates in January and warned that weak retail inventories could lead to flat volumes in the first quarter.
NAM Implications:
- A stark reminder that paper tissue is a very narrow-margin business.
- Begging the question re how O/L can be sold at prices cheaper than branded tissue.
- But enough of a difference to tempt shoppers.
- The issue will be how long before (if ever) shoppers revert to brands.
