Kimberly-Clark Corporation History

Company Perspectives:

We are a company that consistently emphasizes quality, service and fair dealing. We are a team of people who take pride in exceeding the expectations of our customers, colleagues and shareholders. As we approach a new century, our goal is to become one of the handful of companies recognized as "best in the world" in terms of people, products and returns to shareholders. Our plan is to keep doing what we do best--effectively putting together Kimberly-Clark's four great strengths: superior products created through innovations in our core technologies: fibers, nonwovens and absorbency; enduring trademarks recognized and trusted around the world; growing consumer and away-from-home product franchises; and a worldwide team of talented, highly motived employees.

Company History:

With its 1995 merger with Scott Paper Co., Kimberly-Clark Corporation solidified its position as the number two player in the paper products industry and aimed its sights on number one, Procter & Gamble. The combined Kimberly-Clark and Scott operations created a giant, with manufacturing operations in 33 countries; the company includes more than 150 countries in its sales efforts. In addition to its powerful consumer paper products business, which includes market leaders in tissues and feminine-, child-, and incontinence-care products, Kimberly-Clark also continues to operate pulp and newsprint operations (the company's original areas of operation) and an aircraft services and air transportation unit, headed by Midwest Express Airlines.

Early History

Kimberly, Clark & Company was founded in Neenah, Wisconsin, in 1872 as a partnership of four men: John A. Kimberly, Charles B. Clark, Frank C. Shattuck, and Kimberly's cousin, Havilah Babcock. The company began the first paper mill in Wisconsin. Its initial product was newsprint made from linen and cotton rags. Within six years the company expanded by acquiring a majority interest in the nearby Atlas paper mill, which converted ground pulpwood into manila wrapping paper. The business was incorporated in 1880 as Kimberly & Clark Company, with John Kimberly as president. In 1889 the company constructed a large pulp- and paper-making complex on the Fox River. The community that grew up around the factory was named Kimberly, in honor of John Kimberly.

Among the company's early innovations was the paper used for rotogravure, a procedure for printing photographs with a rotary press. In 1914 researchers working with bagasse, a pulp by-product of processed sugar cane, produced creped cellulose wadding, or tissue. During World War I this product, called cellucotton, was used to treat wounds in place of scarce surgical cottons. At that time field nurses also discovered that cellucotton worked well as a disposable feminine napkin. The company later recognized the commercial potential of this application and, in 1920, introduced its Kotex feminine napkin.

In 1924 the company introduced another disposable tissue product, Kleenex, to replace the face towels then used for removing cold cream. A survey showed, however, that consumers preferred to use Kleenex as a disposable handkerchief, prompting the company to alter its marketing strategy entirely. Nationwide advertisements promoting Kleenex for its current use began in 1930, and sales doubled within a year. Uncomfortable marketing such personal-care items as feminine napkins, Kimberly & Clark had created a separate sales company, International Cellucotton Products, which it contracted to manufacture Kotex and Kleenex.

Expansion from 1920s to 1960s

During the 1920s the company built a Canadian pulp mill and power plant called Spruce Falls Power and Paper Company in Kapuskasing, Ontario. In 1925 the company formed what would become Canadian Cellucotton Products Limited, for marketing cellucotton products internationally. The following year Kimberly & Clark, in partnership with the New York Times Company, added a newsprint mill to the Spruce Falls complex and expanded its pulping capacity.

The company was reorganized and reincorporated in 1928 as Kimberly-Clark Corporation. That same year, as shares of Kimberly-Clark were being traded on the New York and Chicago stock exchanges for the first time, John Kimberly died. He was 90 years old and still president at the time of his death.

In the 1930s Kimberly-Clark concentrated on marketing its new products. During World War II the company devoted many of its resources to the war effort. The company also contracted Margaret Buell, creator of the cartoon strip "Little Lulu," to promote Kleenex. Buell and Little Lulu continued to promote Kleenex for Kimberly-Clark into the 1960s.

After the war, Kimberly-Clark initiated a growth program to handle revived consumer product demand. Facilities were built or acquired in Balfour, North Carolina, and Memphis, Tennessee, in 1946, and in Fullerton, California, and New Milford, Connecticut, in the late 1950s. Pulp production at Terrace Bay, Ontario, was launched in 1948, and in 1949 the company, along with a group of investors and newspaper publishers, began the large Coosa River Newsprint Company in Coosa Pines, Alabama. Kimberly-Clark acquired the Michigan-based Munising Paper Company in 1952, Neenah Paper Company in 1956, Peter J. Schweitzer, Inc.--which had mills in France and the United States--in 1957, and the American Envelope Company in 1959. International Cellucotton Products Company formally merged with its parent company in 1955, as did Coosa River Newsprint Company in 1962.

Throughout the 1960s the tampon, first manufactured by Tampax, gained favor among women and ate into Kotex's market share. Kimberly-Clark turned its attention to new products. In 1968 the company introduced Kimbies, a disposable diaper with tape closures. Initial sales were strong despite competition from Procter & Gamble's Pampers. While Kimberly-Clark tended to its diverse operations, however, it failed to keep up with early disposable diaper improvements and market innovations. As a result of continued poor sales and leakage problems, Kimbies were withdrawn from the market in the mid-1970s. Competition in the infant-care product industry caused Kimberly-Clark to reevaluate the balance between its consumer products and lumber and paper products divisions.

Restructuring in the 1970s

Darwin E. Smith, who was elected president of Kimberly-Clark in 1971, took on Procter & Gamble's challenge. Smith decided that to compete properly in consumer product markets Kimberly-Clark had to prune its coated-paper business. Within one year of taking control of the company, Smith initiated changes that included the sale or closure of six paper mills and the sale of more than 300,000 acres of prime northern California land. With cash reserves of more than $250 million, primarily from the land sale, Smith then inaugurated an aggressive research campaign. He assembled a talented research and development team by hiring specialists away from competitors. The company's advertising budget was increased substantially, and plans were made for the construction of additional production facilities.

Marketing was central to Smith's strategy for growth, as Kimberly-Clark emphasized its commitment to consumer products. Research and development efforts enlarged the company's technological base from traditional cellulose fiber-forming technologies to lightweight nonwovens utilizing synthetic fabrics.

A new premium-priced diaper in an hourglass shape with refastenable tapes was introduced in 1978 under the name Huggies. By 1984, Huggies had captured 50 percent of the higher quality disposable diaper market. The sudden popularity of the product caught Kimberly-Clark by surprise, and it was forced to expand production to meet consumer demand.

Diversification in the 1980s

Facial tissue and feminine-care products were also part of Kimberly-Clark's growing consumer product operations. In 1984, it was estimated that the company's Kleenex brand held 50 percent of the tissue market. A chemically treated virucidal tissue called Avert was test-marketed that same year, but the higher price and limited utility of the product prevented it from gaining widespread popularity. Aimed at health care institutions and at companies as a product to reduce absenteeism, Avert never really got off the ground, and in 1987 Kimberly-Clark decided not to mass market the product.

The 1980 toxic shock syndrome scare caused a slump in tampon sales. Kimberly-Clark began an aggressive advertising campaign on television for Depend incontinence products in the early 1980s. At the time, incontinence products were as unmentionable as feminine-care products had been some 60 years earlier. The promotion resulted in Depend gaining a profitable share of the incontinence products market, and it quickly became the best-selling retail incontinence brand in the United States. In an effort to broaden its position in therapeutic and health care products, Kimberly-Clark acquired Spenco Medical Corporation in Waco, Texas, that same year.

Although sales from primary growth operations--personal-care products--were increasing, approximately 25 percent of Kimberly-Clark's sales continued to come from the pulp, newsprint, and paper businesses. The company further diversified its operations in 1984 by converting its regularly scheduled executive air-shuttle service into a regional commercial airline.

The company's foray into aviation was initiated by the purchase of a six-seat plane in 1948 to shuttle executives between company headquarters in Wisconsin and Kimberly-Clark factories around the country. With six planes in 1969, Smith, then an executive vice-president for finance, suggested that company air travel be converted from a "cost center into a profit center" by offering corporate aircraft maintenance services. K-C Aviation, as the subsidiary was called, later remodeled three DC-9s and in June 1984 initiated flight service between Appleton and Milwaukee, Wisconsin; Boston; and Dallas, Texas. The fledgling airline, operated under the name Midwest Express, got off to a rocky start with a 1985 crash in Milwaukee, planes flying 80 percent empty, and large operating losses. By 1989, however, the operation was in the black, with planes at 66 percent capacity; a $120 million expansion increased the number of destinations to 15 cities and the airline boasted a fleet of 11 DC-9s.

In 1985, stating that the state had a bad climate for business, Smith relocated Kimberly-Clark's headquarters from Wisconsin to Texas. Just before this move Kimberly-Clark was sued by Procter & Gamble, who claimed that Kimberly-Clark had unlawfully infringed on its patented disposable diaper waistband material. Huggies had increased its market share to 31 percent, upsetting Procter & Gamble's Pampers. After nearly two years of litigation, a federal grand jury ruled against Procter & Gamble. Kimberly-Clark enjoyed further successes in its ongoing diaper rivalry with Procter & Gamble later in the decade when it introduced the extremely popular Huggies Pull-Ups disposable training pants in 1989. This product extension helped Kimberly-Clark trim Procter & Gamble's market share lead, as well as propel Huggies into the number one position in the disposable diaper market.

1990s and Beyond

Starting in the late 1980s, Kimberly-Clark began another diversification program--this time geographically, targeting Europe--although the company's largest international growth would come in the early and mid-1990s. To keep the company growing at a healthy pace, Smith began to increase Kimberly-Clark's presence in Europe in 1988. From that year to 1992, the company invested nearly $1 billion in European plants. Although revenues from its European operations increased steadily, the huge investments (totaling $700 million in 1993 alone) and restructuring charges that went along with them began to affect the company's profits. Net income of $435.2 million in 1991 fell to $150.1 million in 1992 before recovering slightly to $231 million in 1993.

Meanwhile, the company further reduced its commodity papers operation in 1991 when it sold Spruce Falls Power and Paper. The following year, Smith, the architect of Kimberly-Clark's restructuring and diversification efforts since 1972, retired as chairman and was succeeded by Wayne R. Sanders. The new chairman had worked his way up the ranks and had spearheaded the risky endeavor of developing Huggies Pull-Ups. The year 1992 also saw the introduction of Huggies Ultra Trim diapers.

Under Sanders's leadership, it appeared as if the company would divest itself completely of its commodity papers roots. Kimberly-Clark announced in late 1994 that it would explore the sale of its North American pulp and newsprint operations. The following year, however, the company decided not to sell because pulp and newsprint prices rose so high it no longer made economic sense to do so. Kimberly-Clark did divest its cigarette papers business in mid-1995 by spinning it off into a company called Schweitzer-Maudit International Inc. after shareholders initiated a proxy fight in 1994, concerned about the potential costs of liability lawsuits against tobacco, which were then beginning to gain strength.

In 1995 Sanders engineered the deal that would usher in a new era for the company: the merger of Kimberly-Clark with the Scott Paper Co. The deal was the logical culmination of Kimberly-Clark's international expansion, since Scott was globally strong and held the number one position in tissue in Europe. The $9.4 billion deal led to a 1995 charge of $1.4 billion for Kimberly-Clark to consolidate the merger, which led to the layoff of 6,000 workers and the sale of several plants. To pass antitrust muster, Kimberly-Clark had to sell the Scotties facial tissue operation, two of four tissue plants in the United States, and its Baby Fresh, Wash-a-Bye Baby, and Kid Fresh brands (which it sold to Procter & Gamble).

The late 1990s would be a period of transition for Kimberly-Clark as it worked to integrate the Scott Paper operations into its own. The company hoped that its newfound international clout, however, would make it a more formidable rival of the industry leader, Procter & Gamble, for years to come.

Principal Subsidiaries: Avent, Inc.; Carlton Paper Corporation Limited (South Africa; 50%); Chengdu Comfort & Beauty Sanitary Articles Co., Ltd. (China; 98.1%); CPM Inc.; Handan Comfort & Beauty (Group) Co., Ltd. (China; 90%); Housing Horizons, LLC; Kimberly-Clark Inova a.s. (Czech Republic); K-C Aviation Inc.; Kimberly-Clark Argentina S.A. (51%); Kimberly-Clark Benelux Operations B.V. (Netherlands); Kimberly-Clark Canada Inc.; Kimberly-Clark de Centro America, S.A. (El Salvador, 75%); Kimberly-Clark Costa Rica, S.A. (75%); Kimberly-Clark Far East Pte. Limited (Singapore); Kimberly-Clark GmbH (Germany); Kimberly-Clark International, S.A. (Panama); Kimberly-Clark Limited (U.K.); Kimberly-Clark Malaysia Sendirian Berhad (51%); Kimberly-Clark Peru, S.A. (68%); Kimberly-Clark Philippines Inc. (87%); Kimberly-Clark Puerto Rico, Inc.; Kimberly-Clark Sopalin, S.A. (France); Kimberly-Clark Thailand Limited; Kunming Comfort & Beauty Hygienic Products Co., Ltd. (China; 97.9%); Nanjing Comfort & Beauty Sanitary Products Co., Ltd. (China; 97.9%); Scott Continental N.V. (Belgium); Scott GmbH (Germany); Scott Iberica, S.A. (Spain; 99.7%); Scott India; Scott Japan Limited; Scott Limited (U.K.); Scott Paper Indonesia; Scott Paper B.V. (Netherlands); Scott Paper Limited (Canada; 50.1%); Scott Paper Company; Scott Paper Company de Costa Rica, S.A. (51%); Scott Paper Company - Honduras, S.A. de C.V.; Scott Paper GmbH (Germany); Scott Paper (Guangzhou) Limited (China; 75%); Scott Paper (Hong Kong) Limited; Scott Paper (Malaysia) Sdn. Bhd.; Scott Paper Portugal Lda.; Scott Paper (Shanghai) Co., Ltd. (China; 56%); Scott Paper (Singapore) Pte. Ltd.; Scott S.N.C. (France); Scott S.p.A. (Italy); Taiwan Scott Paper Corporation (66.7%); Thai-Scott Paper Company Limited (Thailand; 99.6%); Venekim, C.A. (Venezuela; 60%); YuHan-Kimberly, Limited (South Korea, 60%).

Principal Operating Units: Health Care and Nonwovens Sector; Household Products Sector; International Consumer & Service Sector; Logistics Sector; North American Pulp & Paper Sector; Personal Care Sector; Service & Industrial Sector; U.S. Pulp and Newsprint.

Further Reading:

• Byrne, John A., and Weber, Joseph, "The Shredder: Did CEO Dunlap Save Scott Paper--Or Just Pretty It Up?," Business Week, January 15, 1996, pp. 56-61.
• Forest, Stephanie Anderson, and Maremont, Mark, "Kimberly-Clark's European Paper Chase," Business Week, March 16, 1992, pp. 94, 96.
• Freeman, Laurie, "Kimberly Holds Its Own Against Giants," Advertising Age, November 19, 1984.
• Glowacki, Jeremy J., "Kimberly-Clark Corp.: Accelerates Global Expansion with Scott Merger," Pulp & Paper, December 1995, pp. 34-35.
• Hackney, Holt, "Kimberly-Clark: No Escaping a Messy Diaper (Business)," Financial World, April 27, 1993, p. 16.
• Ingham, John N., ed., "Kimberly, John Alfred," in Biographical Dictionary of American Business Leaders, Vol. II, Westport, Conn.: Greenwood, 1983.
• Murray, Matt, "Kimberly-Clark To Take Charge of $1.4 Billion," Wall Street Journal, December 14, 1995, pp. A3, A8.
• Narisetti, Raju, "For Sanders, Getting Scott Is Only the Start," Wall Street Journal, December 5, 1995, pp. B1, B12.
• ------, "Kimberly-Clark Will Cut Staff 15% in Europe," Wall Street Journal, January 29, 1996, p. B2.
• Star, Marlene Givant, "Proxy Fight at Kimberly-Clark: Investors Request Tobacco Spin-Off," Pensions & Investments, March 6, 1995, pp. 2, 41.

Source: International Directory of Company Histories, Vol. 16. St. James Press, 1997.