Kimberly-Clark holding strong whilst other FMCG players struggle with slowdown

By Michelle Yeomans

- Last updated on GMT

Kimberly-Clark holding strong whilst other FMCG players struggle with slowdown
Fast Moving Consumer Good companies like Kimberly-Clark, P&G, Unilever and Colgate-Palmolive have all benefited from emerging markets but now a predicted slowdown threatens to affect growth, and some are already feeling it more than others.

According to stock analysts Trefis, although emerging markets like Brazil, China, South Africa, India and Russia have been increasing year on year, they are now doing so at a slower pace as currency devaluation has created inflationary pressures which is pushing consumers to reduce their buying activity. 

With this, fast-moving consumer product giants like the said brands are seeing a re-rating of their stocks to account for the slowing growth and high exposure to the emerging markets.

FMCG are products like toiletries that are sold quickly and at relatively low cost. Although the profit margin made on these products is relatively small and are more profitable for retailers than the producers/suppliers.

Kimberly-Clark​ managing to hold tight 

Currently, Trefis analysts say that whilst the likes of Unilever and P&G are reporting to have lost up to 5% of their value on a year-to-date basis, Kimberly-Clark is still managing to outperform.

The personal care brand operates primarily in North America and Europe and is currently pursuing strong expansion in Latin America, which analysts say is the primary factor driving sales growth for the company across segments. 

"Kimberly-Clark decided to make strategic changes to its Western and Central European businesses in October 2012 to improve profitability and to channelize resources towards stronger markets that have better growth opportunities​," Trefis reports. 

Not such good news for some of the other players

Meanwhile; it was not such good news for Unilever, who achieves about 85% of its overall growth from emerging markets, so it is right in the firing line if those markets slow down.

The brand has been shedding some of its food businesses in order to focus on home and personal care products, which take up considerable chunks of its portfolio profits, meaning these are most prone to emerging market volatility.

P&G has also been trying to enhance its presence in these markets, however, it also recently lowered its guidance for sales and earnings growth for FY 2014 due to unfavorable exchange rate movements in many developing economies and policy changes.

"We believe that a prolonged slowdown could hamper P&G’s expansion plans, and consequently its growth trajectory,​" Trefis concludes.

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