CHICAGO (Reuters) - Kleenex is hoping that consumers will pay significantly more per tissue to soothe their noses with coconut oil, aloe extract and ingredients often used in anti-aging creams.
The patent-protected Kleenex Cool Touch tissues cost about 65 percent more than other premium Kleenex tissues, but Kleenex owner Kimberly-Clark Corp (KMB.N) thinks that consumers will be willing to pay extra, despite an economy that may be bordering on a double-dip recession.
Kleenex, which debuted in the 1920s, is a big business for Kimberly-Clark and one that is gaining market share even though shoppers have traded down to store branded goods in other categories such as paper towels and food.
Now, Kleenex hopes that despite the difficult economic climate, U.S. households will buy more than the average five boxes of tissues they purchase each year. A lot of that buying comes during the fall and winter, when cold and flu rates soar.
Kleenex Cool Touch tissues feel thicker than traditional tissues and react with body temperature to send a cooling sensation to people’s noses. They also cost a lot more than regular Kleenex.
“Consumers are willing to pay a premium for what they perceive to be a value-added benefit,” Craig Smith, Kleenex brand director, said in an interview.
In Kleenex’s research, shoppers were even willing to pay more than the price the company set for the new tissues, said Tracy Buelow, Kleenex senior brand manager.
Kleenex Cool Touch have a suggested price of $2.19 for a box of 50, or 4.38 cents per tissue, though initial prices will likely be lower to get people to try them. Kleenex lotion and ultra soft tissues, two other high-end varieties, go for $1.99 for a box of 75 tissues, or roughly 2.65 cents per tissue.
“Innovation has to come without the price, that’s the problem that we have in this environment,” said RBC Capital Markets household products analyst Jason Gere, who has an “outperform” rating on Kimberly-Clark.
“As long as the sticker price seems more in line with some of the other products out there it should do OK,” Gere said, referring to the price per box, not per tissue.
Tissues are one category where store branded products have had less of an impact. Different varieties of Kleenex rang up more than $461 million in U.S. sales during the 52 weeks ended on August 7, excluding sales at Wal-Mart Stores Inc (WMT.N) and wholesale chains such as Costco Wholesale Corp (COST.O), according to data from Chicago-based SymphonyIRI Group. While sales of Kleenex increased, sales of private label tissues fell, according to the firm’s data.
Kimberly-Clark said Kleenex gained 2 percentage points of market share in North America during the second quarter. Puffs, from Procter & Gamble Co (PG.N), are a distant No. 2 player in the category.
“If you have a consumer who wants the lotion and all of that stuff they’re going to stick with a brand, whether it’s Kleenex or Puffs,” said Gere.
While Kimberly-Clark appears comfortable with its Kleenex pricing strategy for now, the company is keeping an eye on prices for northern bleached softwood kraft, a benchmark for pulp paper prices in the industry. The company is cutting costs to help offset the higher material costs it faces and is raising some prices.
Kimberly-Clark is basing expectations for the year on the price of pulp staying between $1,000 and $1,020 per metric ton, versus $970 in the first quarter and $1,030 in the second quarter, Chief Executive Tom Falk said during a July conference call.
Reporting by Jessica Wohl, editing by Matthew Lewis