The ongoing economic recovery, stable housing industry, and surging stock prices have helped the broader markets improve. This would further lead to increased spending. The household companies emerge as a clear winner in this scenario.
The main concern for these companies would be the constantly rising costs, which directly impact their margins and profits. Also, being in a cut throat competitive environment, these companies cannot resort to price hikes. In this article, I have discussed three such companies from the household sector which are coping up with these issues very efficiently. They are focusing on cost-cutting initiatives, as well as product innovations to keep up the momentum. Let’s discuss them in detail.
Colgate-Palmolive Company (NYSE:CL)
As announced in October 2012, Colgate is focusing on its restructuring plan (2012 – 2016) as a major tool for cost-savings. This restructuring plan consists of numerous steps, including global job cuts of 6%, accretion into its global supply chain, increasing the usage of shared services, and reducing the number of indirect suppliers.
Colgate-Palmolive Company (NYSE:CL) further plans to implement technological tools into its supply chain, and generate cost-savings by reducing indirect suppliers from 13000 to 5000. With this restructuring plan, the company expects to save around $30 million – $40 million by 2013, and about $300 million by 2016.
Along with this restructuring plan, the company also has its focus on its pet food segment’s recovery with new product innovations. The company saw a decline in this segment’s volume by 2.5% in 2012. The decline was mainly because it was not competitive enough in the natural and organic segments. Therefore, Colgate has come up with a natural product offering — Ideal Balance — to offset the previous losses.
It will include natural food items like fruits, vegetables, and chicken for proper functioning of the immune system, and will offer 100% balanced nutrition. Along with the dry section, the company also introduced 12 new wet section food varieties to broaden its portfolio. This is the company’s latest attempt to recapture the market share with more and more natural offerings. The products will reach their full distribution level by April 2013, and the positive volume growth is expected by the mid of this year.
I am optimistic about Colgate-Palmolive Company (NYSE:CL)’s growth strategy and expect it to be favorable for the investors. The company is targeting at organic sales growth of 6%-7%, which will be driven by innovation and a turnaround in Hill’s business. Moreover, cost saving moves will lead to a margin expansion of 30 bps-70 bps in 2013.
Kimberly Clark Corp. (NYSE:KMB)
Despite Venezuela’s currency devaluation, Kimberly-Clark’s management is positive about the company’s growth, driven by its strategic focus on the emerging markets and cost reduction plans.
Kimberly Clark Corp. (NYSE:KMB)’s focus on the emerging markets is the key driver for its growth. Emerging markets account for around 37% of its total sales. The major focus will be on the markets of China, Russia, and Brazil, which are growing at about 15%. In these markets, the company is targeting on its diaper segment, as it has been witnessing huge demand for this product.