When you’re the person running Kimberly-Clark Corp., you have to understand the world of diapers.
The Irving-based maker of Huggies, Kleenex, Cottonelle and other household brands sells into more than 175 countries, many with fast-growing economies where mothers are spending more on their babies. Thomas Falk, the company’s chief executive, estimates that a billion people will move into the middle class over the next eight years in just four key markets — China, India, Russia and Brazil.
“In some lower-income markets, a mom may only use one diaper per day, maybe just overnight,” he said in a recent interview. “But she aspires to use more. And as her income improves, she’ll get up to the five or six a day that she would use in North America.”
Meanwhile, an aging population in the United States presents a different opportunity. Kimberly-Clark has stepped up marketing for Depend and Poise, products to protect against incontinence and bladder leakage problems. The market for these so-called adult diapers may someday equal baby diapers in size.
Like other multinationals, Kimberly-Clark’s results have been depressed in recent quarters by currency impacts from the strong U.S. dollar. Last year, net sales declined by 5.7 percent to $18.6 billion even as organic sales globally showed 5 percent growth. Operating profit declined by 36 percent. First-quarter results were similarly affected, though the company recorded a profit of $560 million, up 15 percent.
Falk, 58, has been at the helm of Kimberly-Clark since 2003, guiding its expansion around the globe. The company relocated its headquarters to North Texas from Wisconsin in the 1980s, and has about 200 employees at its corporate office.
The Star-Telegram recently caught up with Falk to discuss the global business. Here are excerpts from the interview.
On continuing to innovate with products like diapers and paper towels:
People say, “Gosh, that diaper works so great, you can’t possibly make it better.” But our job is to have the next two or three years of great ideas in the pipeline So we’re constantly working on new materials that fit better, absorb better, that move better with the child. … As long as we’ve been making diapers, we still have diapers that leak occasionally. So we’re constantly trying to get the diaper that’s never going to leak. We’ll probably never going to get there, but it doesn’t mean we’re going to stop trying.
On the growing market for adult diapers:
Today in the U.S., the diaper category is about $4 billion, and the adult incontinence market is about $1 billion. On the other hand, Japan is maybe what the future looks like for some markets, which has had a low birth rate for a while and an aging population. Today in Japan, the adult incontinence category is bigger than the disposable diaper category. You go into a grocery store and see a 40-foot incontinence section and a 30-foot diaper section.
In the last quarter, we had double-digit growth in the U.S. and double-digit growth in developing and emerging markets. It’s still an underpenetrated category in the U.S., and it’s growing as more people turn 65 every day and we’re all living a little longer.
On doing business in China:
We’ve probably been in China in some fashion for more than 20 years, and I’d say for at least the first half of that time, we probably didn’t know what we were doing. We made every mistake you could make going into a market and not understanding the consumer. … Early on we were thinking that the Chinese consumers didn’t have very much money, so we made a very low-cost product for them. Actually, in hindsight, if you don’t have much money, then the products that you buy have to work really, really well. If you’re a low-income mom and you’re only going to use one diaper per day, that diaper has to last all night. .
On a potential trade war under Donald Trump:
For us, it’s less of an issue because we make much of what we sell in each market. So we make all of the products for U.S. consumers here in the U.S., we make products for our Chinese consumers in China. You can’t ship bathroom tissue or diapers very far because they’re bulky and they fill up a truck pretty quickly. … On the other hand, I do think that freer trade and open markets is generally good for business.
On being headquartered in DFW:
I was in the initial move in August of 1985. I was a junior financial guy. I think we only moved 50 people here from Wisconsin and hired about 50 people locally. It’s been a terrific city for us. It’s a good city to travel out of, you’re two and a half hours from anyplace in North America. And there’s great international connections to be able to get wherever we need to go around the world.