Kleenex, a brand that has been drying eyes and blowing noses for almost nine decades, is about to develop a stronger position in personal wipes, with a new line of cosmetic cleansers and facial cloths set for launch in the UK during September 2011. Euromonitor International assesses the strategic implications.
Kleenex tissues weakened by higher commodity costs
Globally, retail sales of Kimberly-Clark's Kleenex tissues summed US$2.1 billion in 2010, according to data from Euromonitor International. This figure is around 4.5 times more than retail sales of Procter & Gamble's Puffs, the world's second biggest tissue brand. Despite its success, Kleenex, like scores of other leading brands of fast moving consumer goods, is battling against rising commodity costs, particularly for wood pulp.
Passing on extra production costs to the consumer would be a risky strategy. Firstly, there is a strong (and increasingly popular) low-priced private label category, which accounted for 20% of global tissue sales in 2010 – and 47% of sales in Western Europe. Kleenex needs to narrow the price gap with private label, not risk extending it. Secondly, the West's middle-class consumers are feeling more cash strapped as food inflation climbs faster than wage inflation. The net result is margins for Kleenex are getting squeezed, and this is piling more pressure on its innovations department to come up with new ideas to bulk out the bottom line.
Tissue segmentation is yet to yield any significant consumption dividend
To date, most Kleenex innovation has been channelled into a revamped segmentation strategy within the tissue business. The objective has been to broaden the footprint of Kleenex tissues by developing niche lines, primarily with a specific consumer and/or convenience profile.
In autumn 2010, for example, Kleenex Pockets – a line of ultra thin tissues presented in a pocket-size pack – were introduced into the UK market, geared specifically towards on-the-go usage by men. Kleenex supported the brand with a sizeable marketing spend, including a print advertising campaign featuring former Olympic sprint athlete Linford Christie, using the strap line “I've got a tiny packet”. The brand perhaps needed a more sophisticated advertising campaign to attract the UK's upwardly mobile 17-34-years-olds. But, the idea behind the brand was a smart one as the UK market for pocket handkerchiefs was largely untapped.
In the recent past, Kleenex has also launched on-the-go products designed specifically for women. And other segmentation gambits have included tissues for hay fever, and medicated tissues to ease the symptoms of colds and flu. In one of the brand's more memorable packaging innovations, tissues in boxes shaped as oranges, limes and watermelons were launched in the US in a bid to encourage consumption during the summer period, which is traditionally a lacklustre season for tissues.
Such innovations, clever as some of them have been, have not stopped Kleenex from losing market share however. In North America, for example, the brand's participation in tissue sales dropped from 49% in 2007 to 44% in 2010, according to Euromonitor International. And in Western Europe, Kleenex's value share dropped from 22% to 21% over the corresponding period. The global financial crisis was, in short, a negative turning point for the brand.
It therefore makes sense that Kleenex should look to spread its risk, while also capitalising on its brand heritage, by developing a stronger position in wipes. It is a category with a fundamentally different consumer profile to tissues, yet at the same time close enough not to damage Kleenex's strong associations with nose blowing and tear drying. This is important because when a well-known brand crosses over into unfamiliar territory, it can sometimes muddle its heritage. Kleenex has become, after all, virtually a generic term for tissues in Western markets, rather like Coke has become a generic term for cola carbonates.
Kleenex has much to gain from new investment in wipes
Personal wipes is a hugely attractive market for new product development, with global retail sales worth US$6.6 billion in 2010, according to Euromonitor International. It is not wholly new territory for Kleenex either. The brand already has a small footprint in intimate wipes (with a global value share of 6% in 2010). And, Kleenex was used historically as a facial cleansing solution for women (way back in the 1920s), so one could argue that Kleenex Facial Cleansing Wipes and Eye Makeup Removal Wipes are something of a return to Kimberly-Clark's roots.
Other products in the new line up of wipes due for launch in the UK include Kleenex Shine Absorbing Sheets and Kleenex Facial Cloths. All the wipes will be made with natural fibres, and, as such, will be able to flex favourable environmental credentials. This point of differentiation from competitors' brands could prove important, because there is evidence that UK consumption culture is turning greener. The products will first be launched in the UK's Superdrug chain (from September), and will come on stream in other mainstream retailers from January 2012.
The UK is the biggest market in the world for facial cleansing wipes, with retail sales summing US$186 million in 2010, according to Euromonitor International. As such, the UK is the right market to showcase a more concerted wipes investment, and will act as a benchmark for a potentially wider international roll out of Kleenex wipes. Globally, the market for cosmetic wipes is fragmented, with the top 20 brands accounting for not much over 50% of retail sales, according to Euromonitor International.
In the UK, Kleenex will be competing against brands such as Simple, Nivea Visage, Johnson's, Olay and Boots No 7. But, there is room for a front-of-mind name like Kleenex to make an impact on consumers. Indeed, these new personal wipes could be the start of a significant value-enhancing business trajectory for Kleenex.
Cosmetic wipes today, baby wipes tomorrow?
Looking forward, Kleenex ought to take a closer look at the baby wipes category, which generated a global retail value of US$4 billion in 2010. Baby wipes is a billion dollar category in the US alone. Pampers and Huggies lead the field, by virtue of their dominance of nappies/diapers. However, there is no reason why Kleenex could not challenge these brands in core Western markets. It would, of course, need substantial new investment. But, once again, the brand equity of Kleenex in tissues has potential to play out favourably.
Kleenex will need to keep the innovations bar high when it comes to its flagship tissues category, but personal wipes could be where the brand rediscovers itself in terms of sales growth. Crucially, segmentation within personal wipes could develop as an increasingly attractive strategy for Kleenex, offsetting some of the disappointing segmentation results in tissues. Competitors will need to keep a watchful eye.