Kimberly-Clark to close innovation center by May: sources

Kimberly-Clark to close innovation center by May: sources

Yuhan-Kimberly's innovation center / Courtesy of Yuhan-Kimberly

By Park Jae-hyuk

Yuhan-Kimberly is looking to close down its innovation center in Yongin, Gyeonggi Province, by May, in line with the U.S.-based Kimberly-Clark's global restructuring plan, according to multiple sources.

The company is said to have offered a severance package to the center's employees, one of the industry sources noted.

The maker of Huggies diapers also plans to consolidate some of its global innovation centers by concentrating its research projects in key markets such as the United States, another source said.

A Yuhan-Kimberly spokesman said the joint venture was "aware the U.S. company is moving along with its restructuring plan." However, it is unsure whether the center will be shut down.

Yuhan-Kimberly opened its Korean innovation center in 2011 as an extension to another center established in the same city in 2006.

Kimberly-Clark has innovation centers in many areas, including Neenah, Wisconsin, and Bogota, Colombia, according to the company's website.

The centers are focused on research, engineering and design to create prototypes that can be developed into commercial products in the future.

The personal care product maker has a 70 percent stake in Yuhan-Kimberly, and the rest is held by Yuhan, a listed pharmaceutical company, according to Yuhan's recent audit filing.

The local restructuring comes as the U.S. company has been suffering from fierce price competition and a declining birthrate.

It has announced plans to slash about 5,000 jobs worldwide, or 13 percent of its total payroll, to save costs. It will also shut down or liquidate 10 of about 90 factories.

The Kleenex tissue maker said it seeks to save about $2 billion over the next four years through the company's dual-track programs ― Focused on Reducing Costs Everywhere (FORCE) and the 2018 Global Restructuring Program.

The latter program will enable the company to "reduce its structural cost base by streamlining and simplifying its manufacturing supply chain and overhead organization." This would help it save annual costs of up to $550 million by 2021, it said.

The restructuring is to make itself "leaner, stronger and faster" in order to achieve long-term business goals for its shareholders.

"This is the biggest restructuring we have undertaken since the introduction of our global business plan in 2003," Kimberly-Clark CEO Thomas J. Falk said in a press statement last January.

It remains to be seen how much the U.S. giant's wide-scale restructuring will affect its Korean business.

Its North American business faces heavy competition from other online and offline retailers such as Walmart and Amazon.

This has driven down prices of health and hygiene products to a point that eats into its profit, according to news reports.

Yuhan-Kimberly has the lead in most of Kimberly-Clark's products sold here including diapers, tissues and sanitary towels, well ahead of its closest competitor, Procter & Gamble, according to data from Kantar TNS, a market researcher.
Yuhan-Kimberly CEO Choe Kyoo-bok

However, the market landscape here has been developing similarly to what is happening in the U.S.

"There is a price competition amid the onslaught of e-commerce, and the country also faces a demographic cliff," a local industry source said.

Korea is suffering from a shrinking birthrate for years, with more and more young people putting off marriage as the outlook for the job market continues to look gloomy.

In January, the number of newborns babies hit a record low of 358,000, falling below the threshold of 400,000, the state-run statistical office reported.

This is bound to negatively affect sales of baby products such as Kimberly-Clark's flagship Huggies diapers here, industry sources say. P&G's Pampers are in direct competition with Huggies.

The U.S. company has indicated this year would continue to be "challenging" as it explained its cost-cutting measures.

Yuhan reported its book value for its 30 percent stake in the joint venture with Kimberly-Clark at 205.6 billion won, according to the company's financial statements in the third quarter of last year.

Yuhan-Kimberly's 2016 audit filing showed an annual operating profit of 229 billion won.