Kimberly Clark Diapers Market Share Could Add 10% Upside

Kimberly-Clark’s (NYSE:KMB) global market share in disposable baby diapers has been in the range of 20-22% over the past few years. It however witnessed a slight fall in 2009 on account of decline in value sales and exports value. Kimberly-Clark faces stiff competition from P&G (NYSE:KMB) in the baby care market, as well as from cheaper substitutes, which can hamper its market position. Kimberly also competes with Colgate Palmolive (NYSE:CL) and Unilever (NYSE:UL), among others, have resorted to time-tested strategies to maintain the most crucial metric in personal care industry, their market share.

We however expect the company to maintain its market position driven by product innovation and promotional campaigns, and partnerships with superstores to sell its leading Huggies and Pull-up diaper brands. While we estimate Kimberly-Clark’s share to increase to 22% by the end of Trefis forecast period, Trefis members are much higher expectations, predicting that KMB’s disposable baby diaper share will increase to 28%, indicating a potential upside of 10% to KMB’s stock price.

We currently have a Trefis price estimate of $74.48 for Kimberly-Clark’s stock, about 14% above the current market price of $65.21.

Increasing Product Innovation and Promotion

Kimbely-Clark has constantly focused on product enhancement by launching new products under its Huggies and Pull-Ups brands, one of the examples being Huggies Pure and Natural, a super premium diaper that includes natural, organic materials and ingredients to provide gentle protection for new babies, which was launched in April 2009.

Around the same time, the company launched Huggies brand rewards program – Enjoy the Ride Rewards – targeted millennial mom, offering her chances to earn valuable rewards and win instant prizes by referring friends, watching videos, providing opinions, or sharing ideas within the program’s Web site. ^[1]

Partnership with Superstores

Kimberly-Clark maintains good relations with distributors and superstores which have an impact on its sales.  For example, Costco sells Huggies baby diapers in its stores, almost exclusive of other brands. We believe such partnerships will help sustain Huggies’ market share by insulating it from cannibalization by competitor brands such as Pampers.

Trefis Community Forecast

Trefis members expect Kimberley-Clark’s global market share of disposable baby diapers will increase from 24.3% in 2010 to 28% by the end of the Trefis forecast period, compared to a flat Trefis estimate of 21% over our forecast period. The member estimates imply an upside of 10% to the Trefis price estimate for Kimberly-Clark’s stock.

Our complete analysis for Kimberly-Clark’s stock is here.

1. Kimberly-Clark press release, April 13, 2009 [↩]