consumer packaged goods

Kimberly-Clark 'Probably Underspent' On Ads Compared To Peers, CEO Says

KImberly-Clark has been slow to increase its marketing spending in recent years, but that’s changing.

The CPG giant, whose brands include Cottonelle, Huggies and Kleenex, recently reported its Q1 2024 earnings.

During prepared remarks at the beginning of the call, Kimberly-Clark Chief Financial Officer Nelson Urdaneta noted that its spending on advertising had increased 50 basis points (0.5%) year-over-year, which he characterized as “largely in line” with such spending for Q4 of last year.

“As our innovation pipeline builds up, and that's starting in Q2, we will further step up investments as the year progresses,” he added, “and we expect it to be at around another 50 basis points for the balance of the year.”

By comparison, competitor P&G reported in its recent earnings call that it had increased marketing spending 14% YOY.



Responding to a question from an analyst about the company’s slow return to such investments in its brands, Urdaneta said, “it's been about investing to get the capabilities to be able to do these things going forward.”

Chairman and CEO Mike Hsu elaborated further on the process.

“We feel great about our investments in advertising,” Hsu said, “We've made significant progress. I think we're up 200 basis points to 300 basis points since I [became CEO at the start of 2019]. However, I'd say we've probably still underspent relative to our peer set.

“I don't know that we have to match them, right? But I would like to continue to increase our investment….There's two factors that caused us to phase our investment,” he added.

Hsu explained that one factor was that the CEO “did not feel like we had all the capability we needed to spend that significantly,” early into his tenure. “At that point, I wasn't confident in what the advertising was going to do,” he said, “So, in the last five years, I think we've really built what I would characterize as a world-class capability on the commercial fronts through the help of [Chief Growth Officer Alison Lewis].”

The comments followed recent changes to the company’s agency partnerships. Last autumn, Kimberly-Clark concluded a media review by appointing Publicisas its U.S. media agency of record, with the holding company putting together a dedicated K-C One unit for the account. At the time, agency research company COMvergence projected that $200 million of an estimated $340 million media budget in the U.S, for the year was devoted to digital.

The other factor Hsu mentioned was less within the company’s control: “two years of a super inflation cycle. We had offset more than a full year of operating profit in that cycle,” he added. “So, we were busy trying to recover margins as well.”

The company anticipates a better climate for 2024.

“We have a lot of activities still coming our way, including a very strong innovation pipeline for which we're going to be putting back money into the business,” Urdaneta added. “We're going to be stepping up investments at least 50 basis points for the balance of the year. And if we see opportunities to invest more in the business, and more in our transformation to accelerate it, we will.”

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