Kimberly-Clark Corporation

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Kimberly-Clark Corporation

P.O. Box 619100
DFW Airport Station
Dallas, Texas 75261
U.S.A.
(214) 830-1200
Fax: (214) 830-1289

Public Company
Incorporated: 1880 as Kimberly & Clark Company
Employees: 39,664
Sales: $5.73 billion
Stock Exchange: New York

While probably best known as the maker of industry-leading Huggies diapers and Kleenex tissues, Kimberly-Clark Corporation’s products and services range from cigarette papers to air transportation. Originally a small newsprint maker, Kimberly-Clark (K-C) is now a highly diversified, international company divided into three primary operations. The first and most profitable division includes consumer products, such as tissues and feminine-, child-, and incontinence-care products; the second division includes newsprint and printing papers as well as tobacco papers and technical and correspondence paper products. Aircraft services and air transport ion is the third division—its best recognized asset is Midwest Express Airlines.

Kimberly, Clark & Company was founded in Neenah, Wisconsin, in 1872 as a partnership of four men—John A. Kimberly, Charles B. Clark, Frank C. Shattuck, and Kimberly’s cousin, Havilah Babcock. The company began the first paper mill in Wisconsin. Its initial product was newsprint made from linen and cotton rags. Within six years the company expanded by acquiring a majority interest in the nearby Atlas paper mill, which converted ground pulpwood into manila wrapping paper. The business was incorporated in 1880 as Kimberly & Clark Company, with John Kimberly as president. In 1889 the company constructed a large pulp- and paper-making complex on the Fox River. The community that grew up around the factory was named Kimberly, in honor of John Kimberly.

Among the company’s early innovations was the paper used for rotogravure, a procedure for printing photographs with a rotary press. In 1914 researchers working with bagasse, a pulp by-product of processed sugar cane, produced creped cellulose wadding, or tissue. During World I this product, called cellucotton, was used to treat wounds in place of scarce surgical cottons. At that time field nurses also discovered that cellucotton worked well as a disposable feminine napkin. The company later recognized the commercial potential of this application, and in 1920 introduced its Kotex feminine napkin.

In 1924 the company introduced another disposable tissue product, Kleenex, to replace the face towels then used for removing cold cream. A survey showed, however, that consumers preferred to use Kleenex as a disposable handkerchief, prompting the company to alter its marketing strategy entirely. Nationwide advertisments promoting Kleenex for its current use began in 1930, and sales doubled within a year. Uncomfortable marketing such personal-care items as feminine napkins, Kimberly & Clark had created a separate sales company—International Cellucotton Products—which it contracted to manufacture Kotex and Kleenex.

During the 1920s the company built a Canadian pulp mill and power plant called Spruce Falls Power and Paper Company in Kapuskasing, Ontario. In 1925 the company formed what would become Canadian Cellucotton Products Limited, for marketing cellucotton products internationally. The following year Kimberly & Clark, in partnership with The New York Times, added a newsprint mill to the Spruce Falls complex and expanded its pulping capacity.

The company was reorganized and reincorporated in 1928 as Kimberly-Clark Corporation. That same year, as shares of Kimberly-Clark were being traded on the New York and Chicago stock exchanges for the first time, John Kimberly died. He was 90 years old and still president at the time of his death.

During the 1930s Kimberly-Clark concentrated on marketing its new products. During World War II the company devoted many of its resources to the war effort. The company also contracted Margaret Buell, creator of the cartoon strip “Little Lulu,” to promote Kleenex. Buell and Little Lulu continued to promote Kleenex for Kimberly-Clark into the 1960s.

After the war, Kimberly-Clark initiated a growth program to handle revived consumer product demand. Facilities were built or acquired in Balfour, North Carolina, and Memphis, Tennessee, in 1946; and in Fullerton, California, and New Milford, Connecticut, in the late 1950s. Pulp production at Terrace Bay, Ontario, was launched in 1948, and in 1949 the company, along with a group of investors and newspaper publishers, began the large Coosa River Newsprint Company in Coosa Pines, Alabama. Kimberly-Clark acquired the Michigan-based Munising Paper Company in 1952, Neenah Paper Company in 1956, Peter J. Schweitzer, Inc.—which had mills in France and the United States—in 1957, and the American Envelope Company in 1959. International Cellucotton Products Company formally merged with its parent company in 1955, as did Coosa River Newsprint Company in 1962.

Throughout the 1960s the tampon, first manufactured by Tampax, gained favor among women, and the tampon ate into Kotex’s market share. Kimberly-Clark turned its attention to new products. In 1968 the company introduced Kimbies, a disposable diaper with tape closures. Initial sales were strong despite competition from Procter & Gamble’s Pampers. While K-C tended to its diverse operations, however, it failed to keep up with early disposable diaper improvements and market innovations. As a result of continued poor sales and leakage problems, Kimbies were withdrawn from the market in the mid-1970s. Competition in the infant-care product industry caused Kimberly-Clark to re-evaluate the balance between its consumer products and lumber and paper products divisions.

Darwin E. Smith, who was elected president of Kimberly-Clark in 1971, took on Procter & Gamble’s challenge. Smith decided that in order to compete properly in consumer product markets Kimberly-Clark had to prune its coated-paper business. Within one year of taking control of the company, Smith initiated changes that included the sale or closure of six paper mills and the sale of more than 300,000 acres of prime northern California land. With cash reserves of more than $250 million, primarily from the land sale, Smith then inaugurated an aggressive research campaign. He assembled a talented research-and-development team by hiring specialists away from competitors. The company’s advertising budget was increased substantially, and plans were made for the construction of additional production facilities.

Marketing was central to Smith’s strategy for growth, as Kimberly-Clark emphasized its commitment to consumer products. Research-and-development efforts enlarged the company’s technological base from traditional cellulose fiber-forming technologies to lightweight non-wovens utilizing synthetic fabrics.

A new premium-priced diaper in an hourglass shape with refastenable tapes was introduced in 1978 under the name Huggies. By 1984, Huggies had captured 50% of the higher-quality disposable diaper market. The sudden popularity of the product caught Kimberly-Clark by surprise, and it was forced to expand production to meet consumer demand.

Facial tissue and feminine-care products were also part of Kimberly-Clark’s growing consumer product operations. In 1984, it was estimated that the company’s Kleenex brand held 50% of the tissue market. A chemically treated virucidal tissue called Avert was test marketed that same year, but the higher price and limited utility of the product prevented it from gaining widespread popularity. Aimed at health-care institutions and at companies as a product to reduce absenteeism, Avert never really got off the ground, and in 1987 Kimberly-Clark decided not to mass market the product.

The 1980 toxic shock syndrome scare caused a slump in tampon sales. Kimberly-Clark began an aggressive advertising campaign on television for Depend incontinence products in the early 1980s. At the time, incontinence products were as unmentionable as feminine-care products had been some 60 years earlier. The promotion resulted in Depend gaining a profitable share of the incontinence-products market, and it quickly became the best-selling retail incontinence brand in the United States. In an effort to broaden its position in therapeutic and health-care products, Kimberly-Clark acquired Spenco Medical Corporation in Waco, Texas, that same year.

While sales from primary growth operations—personal-care products—were increasing, approximately 25% of Kimberly-Clark’s sales continued to come from the pulp, newsprint, and paper businesses. The company further diversified its operations in 1984 by converting its regularly scheduled executive air-shuttle service into a regional commercial airline.

The company’s foray into aviation was initiated by the purchase of a six-seat plane in 1948 to shuttle executive’s between company headquarters in Wisconsin and Kimberly-Clark factories around the country. With six planes in 1969, Smith, then an executive vice president for finance, suggested that company air travel be converted from a “cost center into a profit center” by offering corporate aircraft maintenance services. K-C Aviation, as the subsidiary was called, later remodeled three DC-9s and in June 1984 intitiated flight service between Appleton and Milwaukee, Wisconsin; Boston; and Dallas, Texas. The fledgling airline operated under the name Midwest Express. Despite a 1985 crash in Milwaukee, Midwest Express remains a modest but successful venture for Kimberly-Clark.

In 1985, stating that the state had a bad climate for business, Smith relocated Kimberly-Clark’s headquarters from Wisconsin to Texas. Just before this move Kimberly-Clark was sued by Procter & Gamble, who claimed that Kimberly-Clark had unlawfully infringed on its patented disposable diaper waistband material. Huggies had increased its market share to 31%, upsetting Procter & Gamble’s Pampers. After nearly two years of litigation, a federal grand jury ruled against Procter & Gamble.

During the 1980s Kimberly-Clark met the challenges of its competitors in the consumer products industry by relinquishing some of its paper interests. The “diaper wars” have proven profitable for Kimberly-Clark; the company has been forced to market aggressively and to concentrate on its own strengths—consumer markets in which its well-recognized trademarks reign. Since restructuring and focusing on marketing and investment in technological growth and innovation, Kimberly-Clark has enjoyed steady growth.

Principal Subsidiaries

Avent, Inc.; Avent, S.A. de C.V. (Mexico); K-C Advertising, Inc.; K-C Aviation Inc.; K-C do Brasil Ltda. (Brazil); Kimberly-Clark Benelux Operations B.V. (Netherlands); Kimberly-Clark Canada Inc.; Kimberly-Clark Computer Services, Inc.; Kimberly-Clark de Centro America, S.A. (El Salvador, 39.6%); Kimberly-Clark France S.A.R.L.; Kimberly-Clark GmbH (Germany); Kimberly-Clark Integrated Services Corporation; Kimberly-Clark International, S.A. (Panama); Kimberly-Clark International Services Corporation; Kimberly-Clark Limited (U.K.); Kimberly-Clark Philippines Inc. (87%); Kimberly-Clark Puerto Rico, Inc.; Kimberly-Clark Sales Corporation (Netherlands); Kimberly-Clark Technical Products, Inc.; Kimberly-Clark Thailand Limited (60%); Kimfibers Ltd.; LTR Industries S.A. (France, 72%); Ridgeway Insurance Company Limited (Bermuda); Spenco Medical Corporation; Spruce Falls Power and Paper Company, Limited (Canada, 50.5%); SYZYGY, Inc.; YuHan-Kimberly, Limited (South Korea, 60%).