How Kimberly Clark Should Cope with New Demand Surge
Executive Summary for Kimberly Clark
The pandemic precipitated a sales spike for household essential brands, most particularly for Kimberly Clark
Consumers poised to permanently change their purchasing behaviors in the post-pandemic era
Structurally prepare for the upcoming sales boom by renovating the manufacturing chain
Household Essentials Sales Boom Amid Coronavirus Pandemic
While Covid dealt a severe blow to numerous businesses, some benefitted from Covid-induced sales spikes. The health crisis precipitated a surge in demand in the consumer tissue and hygiene segments, which include cleaning wipes, tissue, and toilet paper, yielding a 3% rise in organic sales for the industry key player, Kimberly Clark. Thanks to the burgeoning demand for its pandemic-relevant product categories and the company’s strategic focus on growth pillars, Kimberly Clark’s shares gained 3.3% in the year-to-date period against the industry’s decline of 6.6%.
Permanently Altered Consumer Behavior
High consumer demand for household cleaning products is likely to stick around for some time, the survey by Mintel indicates that the pandemic is likely to permanently alter consumer behavior on household cleaning product category.
A bullish market for household essentials is a rare phenomenon. By definition, demand for essentials is inherently steady, increasing only under extraordinary circumstances; either demand soars above usual levels —say, for toilet papers, or the market experience a sudden shortage, both of which signal strange market conditions. But the pandemic unveiled the extraordinary and Kimberly Clark should strategically reinvest its recent earnings to take full advantage of these rare gem events.
Consumers are changing their cleaning routines, taking additional hygiene measures with actual health risks on the line. Although intense precautions are likely to die out after the health crisis subsides, the emotional engagement that consumers now share with household cleaning products is likely to be sticky —meaning, elevated demand levels compared to the pre-crisis level.
As illustrated above, new hygiene habits are likely to boost long-term demand for household cleaning products, establishing a new steady state of demand, which the company should be prepared to meet.
Rethink production lines to brace for a new steady state
Stanley Black & Decker, another company witnessing the Covid-induced sales surge —an increase of 6% in net sales in the third quarter of 2020 compared to the previous year—in light of greater stay-home-time, provides a use case to renovate manufacturing lines to cope with increased demand.
Stanley invested $1.5 million in automation at its factory in 2019, witnessing a 15-20% reduction in labor. The timely investment prior to the Covid hit prepared the company to reap the benefits of the recent demand surge for its hand tools. With a digitally enabled manufacturing plant, the company saw its gross margin rate up from last year's third quarter as greater sales volume, productivity, cost management outweighed the increased operating cost.
As such, digital adoption in the manufacturing chain equip firms to rapidly increase production capacity without compromising on product quality, time to market, and organizational complexity. This is all too relevant to Kimberly Clark. Once economic activity levels rebound, demands for workplace essentials, also among Kimberly Clark's product mix, will also see a renewed increase as industrial demand from hotel and retail sectors pick up. Coupled with heightened consumer demand, Kimberly Clark is poised for another boom—a boom only if Kimberly Clark is prepared to capitalize on. Kimberly Clark should consider adopting digital solutions to poise for a new steady state.
Our digitalization experts at eMoldino provide comprehensive supply chain solutions to manufacturers seeking to minimize uncertainty and maximize efficiency on parts, ultimately changing the dynamics of manufacturing.
Our device collects data regarding location, shot count, cycle time, and temperature, making it easier for companies like Kimberly to track the manufacturing environment and manage potential risks of mold dysfunction or a production shutdown — leading to considerable cost reduction. The data is then transferred to a cloud-based analytics platform, securely managing the data, and enabling smooth communication between OEMs and suppliers. Our software solution team is also on the development of implementing AI and machine learning technology to the platform; all these efforts to participate in the industry 4.0 wave increases client companies' net value.
Industry giants like Samsung Electronics have applied eMoldino's solution in their supply chain of mold and die, and have already seen the tremendous benefits of cost reduction and risk management, especially during these trying times when supply chain complexities were illustrated with full force.
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