Kimberly-Clark Pricing Spineometer: 4 of 5 Vertebrae

Kimberly-Clark, a personal care and surgical products paper company, had a slightly positive Q3 2023. Revenue rose 1.6% to $5.1 billion and earnings before interest and taxes rose 18% to $774 million over the same period last year.

A review of Kimberly-Clark’s October 24^th earnings call and financial report provided insight regarding the importance of pricing on performance.

Price management is definitively important to Kimberly-Clark’s executive leadership.  Both Mike Hsu, CEO of Kimberly-Clark, and Nelson Urdaneta, CFO of Kimberly-Clark, attributed performance partly to their investments in pricing capability.

Nelson Urdaneta stated, “we’ve been building a lot of muscle around revenue growth management, and this includes price-back architecture and the ability to have also the right packs and sizes and formats for the different customers that we deal with across the globe.”

Mike Hsu added, “Further gains in price and mix were enabled by strong revenue growth management capability, while volume improved sequentially for a third consecutive quarter.”

Worryingly for investors however, the prospect of deflation did arise.  Mike Hsu said, “I’m not seeing, at least in the near term in, a huge inflation. We have rolled back some pricing because it notably in professional in Europe, we had energy costs that really shot up and then came back down.”

Given Kimberly-Clark’s operations, we would expect between 40 and 200 people to be dedicated to pricing or revenue growth management.  Given the maturity of this market, we would expect Kimberly-Clark to come in at the lower end of this spectrum.

1. Most would be focused on transactional pricing with retailers and promotion management. Some would be focused on market insights and new product development pricing.
2. Given the global nature of Kimberly-Clark, we would expect them to be distributed in different geographies.
3. Macroeconomic factors of inflation, deflation, and exchange rates would be a part of the purview of revenue growth management at Kimberly-Clark, as all of these things impact pricing. (Pricing paper products in high-inflation countries like Turkey, Argentina, and Haiti must be a nightmare.)

Research into the investment by Kimberly-Clark in pricing yielded very encouraging results.

The team size was well within expectations.  Titles ranged from manager and director to the vice president role.  Responsibilities varied between data and commercial operations. No one was specifically identified as managing pricing for new product development.  Revenue growth managers were globally distributed.

Given the importance and capability of pricing at Kimberly-Clark as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of November 2023.

Kimberly-Clark Pricing Spineometer: 4 out of 5 Vertebrae.

KMB (Kimberly-Clark Corporation) was relatively unchanged at 122 the day prior to their earnings call and 120 one week later. FY 2022 revenue of $20.2 billion with a 13% operating margin and P/E ratio near 23.

For FY ‘22, a 1% improvement in price would yield 7.5% improvement in operating profits holding all else constant at Kimberly-Clark.