Gonzalo Uribe — Foto: Ana Paula Paiva/Valor

Kimberly-Clark, the U.S.-based maker of personal care and household cleaning products, is expanding operations in Brazil in order to turn the country into the company’s innovation hub and main exporter for the Latin American market. “All Brazilian plants will produce items to be exported by the end of this year,” Gonzalo Uribe, the chief executive for Latin America, told Valor.

Since 2020, the owner of brands Intimus, Neve and Huggies is investing in capacity expansion, equipment, installation of new technologies and construction of an increasingly local raw material supply network. It also foresees sustainability targets, such as using 25% recycled plastics in packaging and reducing non-renewable fibers by 50%. The investment totals $120 million, one third of which will be injected this year.

“Brazil is our most important market in Latin America. It is one pillar of the company’s organic growth,” said Mr. Uribe. Earlier this month, the Colombian executive made his first visit to Brazil since taking office, bringing the entire management team from the region to follow the plans to strengthen the operation.

Brazil is one of Kimberly-Clark’s 10 largest operations worldwide, with 4,000 employees. In the first quarter, Mr. Uribe said, the sales of the Brazilian operation grew by double digits. Globally, the sales of the U.S-based multinational grew 7% year over year, to $5.09 billion, but operating income fell 10%, the same contraction as net income, which stood at $535 million.

“Margins are typically lower in the first quarter, but they are starting to show some recovery,” Mr. Uribe said. The cost of goods sold was 13% higher in the quarter, but, according to him, analyses and data point to an improvement this year.

During his visit to the country, he closely followed the changes in the Suzano plant, São Paulo. With the investments, the unit started producing 200 million diapers per month and automated the production of wet wipes. “Our entire production line is digitalized, with data every second on how the production is going, how much material we are consuming, how our products are in terms of quality,” Mr. Uribe said. Besides the local market, the unit already supplies Chile, Peru, Bolivia and Argentina.

But the allocation of funds includes the company’s other two plants, in Mogi das Cruzes (São Paulo) and Camaçari (Bahia). One brand that will have more products made in Brazil is Intimus. Today, some items in its portfolio come from Asia. They will be produced at the plant in Bahia, both to meet the domestic market and to export, at first, to Chile and Peru. The company expects the production to supply the entire region in the coming years.

The growth of domestic production also benefits product lines driven by the change in consumption habits during the pandemic, as is the case of the product Scott Duramax. At the beginning of the second half, the conversion line focused on local production will start operating, replacing the current import operation from Colombia. The product will be made in the Mogi das Cruzes plant. The local output is expected to grow 40% in the first year of operation.

The expansion plan also includes the use of local raw materials, a strategy that gained prominence after global supply chain disruptions caused by the pandemic. Almost all the inputs are Brazilian or imported by local suppliers, the executive said. “Verticalization and local production become more important and necessary, besides being a competitive advantage versus imports,” he said, citing advantages like the more guaranteed supply and the reduction of freight costs.

The Colombian executive believes that the moment is one of rearrangement of the global industry – not only for Kimberly-Clark. “It is an opportunity for Brazil to export even more to Latin America and the world. This is also happening in Mexico and Colombia. Latin American markets must take advantage of this trend.”

Source: Valor International

https://valorinternational.globo.com