Green Initiatives at Kimberly-Clark Add to Upside

Kimberly-Clark’s (NYSE:KMB) market share of global tissue paper production market for at-home use such as paper towels and bathroom tissue has seen a gradual decline over the past few years. This is due to competition from players like P&G (NYSELPG), Georgia Pacific, and Seventh Generation in both North America and international markets. It also competes with companies like Colgate Palmolive (NYSE:CL) and Unilever (NYSE:UL) in the personal care segment.

Kleenex and Scott are the two leading brands of Kimberly-Clark for home use consumer tissue products, generating over a billion dollars in annual sales.  We believe that green initiatives and promotional campaigns featuring its two leading tissue brands will prevent KMB’s share from falling dramatically. While we expect Kimberly-Clark’s share of global consumer tissue paper production to decline to under 11%, Trefis members predict KMB’s share will increase to over 12% by the end of our forecast period, suggesting an upside of near 5% to KMB’s stock.

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

Competition from Multiple Players

Kimberly-Clark faces stiff competition both in North American and international markets from companies like P&G (Charmin, Bounty), Georgia Pacific (Brawny, Sparkle, Angel Soft, Quilted Northern), along with private labels and new emerging players. Rising competition is likely to cause a small dent in Kimberly-Clark’s global consumer tissue paper production market.

Kimberly-Clark has addressed environmental and social concerns through recent initiatives and new campaigns, which could help fend off these competitors. To raise awareness on saving water in the bathroom, KMB introduced an innovative solution called Smart Flush bag. ^[1] When placed in the toilet tank, the material in the bag absorbs water and expands, reducing the amount of water consumed in each flush by up to one liter. A family of four could save 2,000 gallons of water per year by using the Smart Flush bag, as claimed by KMB.

Another green initiative taken up by KMB is Scott Naturals Tube-Free bath tissue. ^[2] The product is said to eliminate the cardboard tube that has been the central fixture of rolled toilet paper. This step has major potential to eliminate millions of pounds of material from the waste stream. Scotts Naturals Tube-Free bath tissue is currently being tested exclusively at select Wal-Mart and Sam’s Club stores in the northeast U.S.

We expect such steps are likely to boost sales of Kimberly-Clark’s tissue products and help improve its market share.

Trefis Community Forecast

Trefis members expect Kimberly-Clark’s share in global consumer tissue paper production market will increase from 11.6% in 2010 to over 12% by the end of the Trefis forecast period, compared to the baseline Trefis estimate of a decrease gradually from 11% implying upside of close to 5% to the Trefis price estimate for Kimberly-Clark’s stock.

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

1. Scott Naturals Brand Offers Easy Solution to Help Save Water in the Bathroom, KMB Press Release, Sept 7, 2010 [↩]
2. Kimberly-Clark Introduces Scott Naturals Tube Free – The First Coreless Bath Tissue for the Home, KMB Press Release, Oct 28, 2010 [↩]