Early in the twentieth century, the Kimberly-Clark paper company pioneered “sanitary napkins” with their Kotex brand. Magazine publishers resisted running ads for the innovative but very private product and retailers hesitated to display Kotex. The company overcame these obstacles, and followed this success with Kleenex, one of the most successful brands in business history. By the 1960s, the ninety-year-old-company had fallen on harder times, struggling to find its footing as it competed with marketing giants like Procter & Gamble and Johnson & Johnson. Under new leadership in the 1970s, Kimberly-Clark gave up its longstanding businesses in commodity papers and focused on the very tough but high potential consumer markets. Today the company is highly profitable on $19 billion in annual sales. Here is a quick look at the Kimberly-Clark story.
Wisconsin’s Fox River flows through the cities of Neenah, Menasha, Appleton, and Green Bay. In the 1870s, the river’s valley was a flour milling center. But wheat production was moving northwest, and the big milling companies of Minneapolis like Pillsbury and Washburn-Crosby (later renamed General Mills) were tough competitors. So the mill owners looked for other ways to use the area’s abundant timber forests and water power.
Meanwhile, twenty-eight-year-old Neenah hardware store owner Charles Clark heard about possibilities in papermaking from local paper miller Myron Haynes. With money invested by the wealthy flour milling Kimberly family, Clark, John Kimberly, and two other men founded Kimberly, Clark & Co. to make paper in 1872. Eventually the company name was restyled to Kimberly-Clark.
Even in this digital era, paper surrounds us. Cardboard shipping boxes, toilet paper, books and magazines, grocery bags, paper-based diapers, and even cigarette paper are everywhere. In this environment of abundance, it is easy to take paper for granted.
Yet the conversion of trees and chemicals into the paper we use is an extremely complex, capital-intensive process, requiring giant machinery and tons of water to produce enormous rolls of paper. Originally made from old rags that were gathered by rag merchants in big cities, paper for printing gradually switched from rags to the less expensive and more readily available wood pulp. At first, the wood-based paper was course and of insufficient quality for use in books. Through decades of experimentation and tests of different processes and chemical treatments, the current diverse world of paper evolved.
Neither Kimberly nor Clark had experience making paper, but were smart enough to hire the required talent, including Myron Haynes. For the first forty years after founding, Kimberly-Clark continued to raise capital, build new paper mills, and expand into newsprint for newspapers, glossy coated stock for magazines, quality book paper, and the thin cheap paper for color rotogravure presses which made the color sections in Sunday newspapers. The Kansas City Star became a big customer, followed by The New York Times and the fat catalog of Sears, Roebuck. By 1900, Kimberly-Clark had mills producing 55 tons of newsprint.
Despite the company’s growth and success, it was dwarfed by industry giant International Paper, formed during the trust era of the 1890s. At its 1898 founding by merging seventeen papermakers, “IP” made 60% of the newsprint in America, while newspaper readership and circulation were skyrocketing. The company had twenty-five times the capital of Kimberly-Clark. Other major companies in the paper industry in the twentieth century included Weyerhaeuser, Crown-Zellerbach, St. Regis, Mead, Champion, Scott, and West Virginia.
Charles Clark led the company until his death at age forty-seven in 1891. Kimberly family members continued to play leading roles in the company through the 1960s. Kimberly-Clark invested large sums in research and development, applying new technologies and building larger paper mills with bigger machines. The company began to brand its printing papers, following the lead of Hammermill Paper, the first company to differentiate its papers with trademarked branding.
A challenge for the industry was the presence of newsprint from Canada, where ample forests and less expensive labor meant that Canadian paper sold for $8-10 less a ton than American newsprint. This cost-savings was offset by high tariffs on Canadian paper that the US government put in place to protect the American paper industry. But in 1913, under pressure from the newspaper publishing industry, Congress passed the Underwood Tariff Act, eliminating the tariff. The US paper industry scrambled to find other uses for their paper mills as the price of newsprint dropped below the level required for profitability. Kimberly-Clark got out of the newsprint business in 1916.
In the 19th century, bandages and surgical dressings were made from cotton gauze. Though never discussed in public, women dealt with their periods using similar cotton wads. Cotton largely consists of cellulose, the cell walls of plants. While not quite as good a source of cellulose as cotton, wood pulp also contains plenty of the substance.
Kimberly-Clark and other companies began to experiment with cotton substitutes made from wood pulp, using paper making processes. Kimberly-Clark called their cotton-like product Cellucotton and trademarked the name. Cellucotton proved less expensive than, but as absorbent as cotton.
Nurses and doctors in the military and Red Cross began to use the products for wounds and surgical dressings during World War I. In January 1918, Kimberly-Clark produced nine tons of Cellucotton. With orders from the Army and the Red Cross, the company was producing 138 tons a month by October of that year. The next month, the armistice ending the war was signed, and the Army and the Red Cross cancelled their orders for about 750 tons of Cellucotton.
After the war, demand fell, the military sold their excess stocks cheaply, and the Red Cross also made their inventories available. Most of the producers dropped out of the cotton substitute business, but not Kimberly-Clark. The company continued to improve the manufacturing process, redesigning papermaking machines to produce Cellucotton. In 1919, they hired Walter Luecke from Sears, Roebuck, giving him the assignment of finding new uses for Cellucotton.
Having learned that Red Cross nurses were using the product during menstruation, he and the company’s chemists convinced management to pursue the “feminine products” market. They coined the name “Cottex” for its cotton texture. Realizing that name could be mispronounced, they switched to “Kotex.” (We must assume they were also very aware of the powerful global brand Kodak, which shared the intensity of the hard K sound.)
A marketing legend tells of the great Albert Lasker, an iconic figure in American advertising and representing Kotex, visiting Edward Bok, the editor of the all-powerful Ladies Home Journal magazine in 1921. Bok was hesitant, saying there was no way the magazine would carry ads for such a “private product.” Lasker suggested they ask Bok’s sixty-something, white-haired secretary, what she thought. When she told Bok that it was a wonderful product and should be advertised to women everywhere, Bok agreed to let Kotex advertise in the pages of his magazine. Bok went on to establish a reputation for dealing head-on with controversial women’s issues when other magazines resisted.
The first box of Kotex was sold at a Chicago Woolworth’s dime store. While it took great salesmanship to get retailers to sell and display the product, Kotex was soon a hit. Kotex established a new category, the sanitary napkin, and propelled Kimberly-Clark (through its subsidiary, the International Cellucotton Products Company) into the marketing of products directly to consumers. Kotex held a market share of 50% or more for decades and was for most women synonymous with sanitary napkins.
Kimberly-Clark converted more old paper mills to making Cellucotton and Kotex. Their labs continued to experiment and improve Kotex over time. Thousands of ads and booklets promoted Kotex and its use. Kotex vending machines were invented and placed in women’s restrooms. Yet the bulk of the company’s revenues (but not always so much of the profits) continued to come from making commodity papers for books and other uses.
Another Consumer Product
Another common use of cotton swabs was for makeup removal, by those relatively few women who used cosmetics (primarily actresses and prostitutes). The liberation of women in the early twentieth century was propelled by the right to vote, the affordable personal mobility of the Model T Ford, the promotion of fashion by department stores, and publications like Bok’s. And along came a 1920s boom in the use of cosmetics.
In 1924, Kimberly-Clark started advertising a “cold cream remover,” a small Cellucotton product branded “Kleenex.” Based on consumer research, the company discovered that people used Kleenex more often to blow their noses but needed a larger size. The bigger Kleenex’s were then promoted as “disposable handkerchiefs.” Another new category of paper products was thus created, bearing one of the most famous and durable brand names in the world.
At this stage of the evolution of consumer paper products, Kimberly-Clark dominated “feminine products” and “disposable handkerchiefs.” The far larger Scott Paper Company of Philadelphia led the way in toilet paper and paper towels. In the 1930s, the two companies were the most profitable large paper companies and made profits even in the depths of the Great Depression.
Through the next thirty years, into the late 1960s, Kimberly-Clark tried to be both a major book and other paper producer in commodity markets, as well as the makers of Kotex and Kleenex for the public.
Still the paper industry remained largely a commodity business, subject to price wars and swings from undercapacity to overcapacity when new paper mills were built. Despite leaving the highly competitive newsprint business in 1916, Kimberly-Clark later re-entered the business, partnering in an Alabama mill with Southern newspaper publishers and another massive operation in Canada, a joint venture with The New York Times. These mills required huge capital investments, new machines and technologies, acquisitions of timberlands, and plenty of management attention. While product improvements were made in Kotex and Kleenex, those product lines often received less attention and less research and development money. Their brand dominance came relatively easily for Kimberly-Clark.
As the demand for Kotex and Kleenex continued to grow, other large paper and consumer products companies were attracted to these markets. Scott and other paper companies entered the facial tissue (Kleenex) market. In the late 1930s, Tampax created the tampon and took big market share away from Kotex, which was slow to react. Brassiere-maker Playtex entered the feminine products market. Johnson & Johnson came up with the brands that became StayFree.
Yet the biggest market disruption evolved from the giant Cincinnati marketing and research powerhouse, Procter & Gamble. With the huge post-World-War-II profits generated by their introduction of the first successful detergent, Tide, P&G entered the toothpaste business, taking on perennial market leader Colgate with Crest with fluoride. In 1957, P&G entered the capital-intensive paper business by buying Green Bay, Wisconsin’s small Charmin Paper Company.
P&G applied all its muscle to the Charmin company, developing new brands, inventing better products, and advertising them heavily. (P&G was America’s largest advertiser in these years, developing the soap opera and other techniques to promote its products.)
With the rise of Charmin, Scott found its leadership in toilet paper and paper towels under siege from P&G products including Charmin toilet tissue and Bounty paper towels. Kimberly Clark was in the same position when P&G gradually launched Puffs facial tissues and feminine care products under the Always brand.
By the late 1960s, Kimberly-Clark was no longer the profit star of the paper industry that it had once been. The stock fell in price as profits stopped growing. Management took a hard look at the company’s activities and decided to sell off most of its traditional paper mills, giving up on the commodity paper markets.
In 1971, Harvard-educated lawyer Darwin Smith became the Chairman and Chief Executive Officer of Kimberly-Clark, a company he would lead for the next twenty years. He immediately began selling off the old commodity paper mills and set the company’s course to focus on consumer markets. While some of the old mills were outdated and brought little money, some of the company’s timberlands proved very valuable. The money from the transactions went into research and marketing of Kotex and Kleenex. Large write-downs reduced profits for a few years, but after that profits (and the stock price) began to rise.
A Whole New Category
In the 1960s, the ever-ambitious Procter & Gamble introduced Pampers, the first disposable diaper. By the end of the decade, they had 90% of this growing market. (Pampers ultimately became one of P&G’s biggest products, registering $10 billion a year in sales.) Kimberly-Clark made attempts to take them on with their Kimbies brand but were not successful. Finally, in 1977, Kimberly-Clark introduced a better, higher-priced product, Huggies, which became very successful. P&G competed in the “premium diaper wars” with Luvs.
Over time, Kimberly-Clark sold the last of its legacy commodity paper mills and product lines, focusing exclusively on consumer products. The company gradually expanded into overseas markets. This path was full of rocky starts, misfires, mistakes, and devastating price wars, but Kimberly-Clark got better and better. They battled with P&G to outdo one another by developing better tissues, feminine products, and disposable diapers.
Such strong companies as Playtex, International Paper, and Johnson & Johnson tired of the battles and quit most of these product categories. (J&J’s feminine product lines, Carefree and Stayfree, are now part of Edgewell Personal Care, alongside the old Playtex lines.) Tampax owner Tambrands sold out to Procter & Gamble for $1.85 billion in 1997, giving that company even more clout in these highly competitive categories.
The once powerful (and profitable) Scott Paper Company made acquisition mistakes and lost its dominance, descending into large losses. In 1995, Kimberly-Clark acquired Scott Paper for $9.4 billion. The Scott brands were re-invigorated, often offering lower-priced alternatives to the P&G and Kimberly-Clark products.
The diaper business continues to grow, and today includes the growing market for adult incontinence products, including Depend from Kimberly-Clark and Always from P&G. Kimberly-Clark continues to successfully compete head-to-head (or bottom to bottom?) with Procter & Gamble, a rare feat at which few companies have succeeded.
While COVID boosted home sales of these paper products, it hurt commercial sales to hotels, restaurants, museums, universities, sports and entertainment venues, retail stores, and offices, which are important customers of the industry. In 2022, Kimberly-Clark will celebrate the company’s 150th anniversary. The road to its present solid profitability and $19 billion in revenues has been littered with mistakes and a difficult education, topped by the fiercest competition the business world knows. Yet somehow the leadership of this great company has been able to navigate those waters and survive those storms. Kimberly-Clark products are now used daily by one-fourth of the world’s population in 175 countries.
American Business History Center