Innovation is the only way to inject value into paper categories, says Kimberly-Clark’s Alberto Cappellini. Liz Hamson reports

Italians, it’s fair to say, have a unique take on driving and Alberto Cappellini is no exception. When he first arrived in the UK from Turin, he almost caused an accident by flashing oncoming vehicles, giving them the cue to proceed, when Italians use it to indicate “give way, I’m coming through”.
Luckily, he soon wised up to the rules of the road here. Much the same could be said of his navigation of the UK grocery market. After 17 years at Kimberly-Clark in Turin, the gregarious Italian relocated to Reigate to take up the reins as European president of family care in October 2004 with responsibility for Andrex and Kleenex.
Despite the deflation in toilet and facial tissues - the latter fell 4.3% last year to £172m [ACNielsen] and the company as a whole posted a 17% slump in net profit for the fourth quarter of 2005 - he is confident that both can be rescued. “We are very committed to innovation,” Cappellini declares in accented but perfect English, pointing to a raft of products spread out on a nearby table. “It has been our biggest year of investment in Europe and the UK is now the number one market.”
He’s not exaggerating. This month, the company launches a new Disney range of facial tissues under the Kleenex brand, extending its franchise arrangement with the entertainment goliath in the US. It is also testing moist toilet tissues for kids in Spain and Portugal, which could lead to a new product launch in the UK. “There could be an Andrex Junior,” he says, giving a nod to the huge success of Procter & Gamble’s Kandoo.
And, like its rival, it is considering whether to extend the brand into new areas, raising the prospect of its first foray outside the world of paper products. “It is an idea that we’re entertaining. Clearly we have a lot of potential to explore, both with Andrex and Kleenex.”
Much of the recent innovation has been underpinned by a mammoth piece of consumer research dubbed Mega Insights, carried out across Kimberly-Clark’s global network. “We are trying to leverage areas that we can cross-fertilise - such as the iconic Andrex puppy.”
Dotted around the meeting room are boards bearing slogans such as ‘A flock of individuals’ and ‘Capture me’. He explains: “Ask a consumer what they want and they’ll say: something that makes my life easier. But that means something different for each person. We discovered that there was a clear need for a segment called pamperers. Also, women are interested in absorbency, even if they don’t want it emblazoned on the packaging. That’s something else we need to explore and is one of the reasons we introduced Andrex Quilts last May.”
That’s not all that has hit the market over the past year. At the start of 2005, Kimberly-Clark launched Andrex Moist Toilet Tissue in a tub format. Last September, Kleenex Ultra Soft was relaunched as a more premium product with silicone-treated tissues and brown and cream packaging. Kleenex Anti-Viral, which is claimed to kill 99.9% of known germs, followed in November. The company has also reduced the number of colours in its Andrex range from six to four “more modern” colours.
“We needed to reduce our assortment to optimise the supply chain,” reasons Cappellini. “Six colours were too much. It’s better to focus on four. It gives us better shelf presence as well as space for our new products.”
Much of the NPD has a new focus. “Health, hygiene and well-being are our new vision,” says Cappellini, adding that creating innovative products that encourage people to trade up is the only way to inject value. “We are trying to reverse category devaluation and price erosion,” he says of facial tissues. “There’s no need for it. Volumes are not growing. Blaming the retailers is too strong a way to put it, but we see there is a significant price differential between own label and branded goods. This is a big opportunity for retailers to trade up.”
It also appears to be working for the manufacturer. It is early days, but Anti-Viral is already beating sales forecasts by 50% and has built a 2.7% market share, he says. Andrex Quilts carries a 15% price premium yet, says Cappellini, sales have been “fantastic” and it has already built a 2.5% market share. Retailers have been supportive, he says, adding that he hopes for similar success from the new Disney range, which carries a 10% premium.
Such generosity of spirit comes as a surprise from the company that pulled Andrex products from Sainsbury after a pricing spat three years ago. But Cappellini believes suppliers and retailers alike face the same challenge: creating value. Better on-shelf display is key, he says. “I’m amazed by the bread aisle and the good job they do in segmentation and merchandising.”
However, he suggests, retailers need to do more to help tackle out of stocks in the toilet tissue category. “Out of stocks are too high. Retailers see it as a problem they can solve on their own, but we need to work together. There’s a lot of information we could share.”
Another huge concern this year is rising production and energy costs. Any business producing bulky paper products uses up a lot of energy and Cappellini is trying to mitigate this with a 9% price rise across Andrex and Kleenex. But he is wary of the knock-on effect this could have. “Cost management is probably our biggest priority at the moment after innovation - I struggle with it every day. We don’t want to compromise innovation.”
Judging by his determination, Cappellini is putting his tendency not to give way to better use these days. Q&A
A day in the life
How did you get to where you are now?
I joined the company as a product manager in Turin 17 years ago. It was quite hard to explain to my mum that what I wanted to do after completing an MBA in electronic engineering was sell toilet rolls. I started in sales because it was a good way of entering the business - you have to get into the world to understand the world.

How have you found life in the UK?
I was worried about the kids. But they’ve been fine. They’re at an international school in Cobham that has 1,800 kids. It’s more like Club Med than a school!

What has been your strangest source of inspiration?
I introduced a squeezable toilet roll. We were shipping them to soldiers in Korea and I thought maybe it was a clever idea to bring to the consumer market.
So we launched the roll, which features a lighter than average core that springs back into shape once unpacked. It took off in Italy, but was not launched in the UK.
There was a lot of consumer concern about quality - the perception is that it’s lower quality because it doesn’t squeeze back perfectly.

How is the 9% price increase going down with retailers?
For a business such as ours, energy costs are huge, but if you compare the price four years ago to the price today, consumers are paying less now. It’s the one area in which there’s some tension, but there’s also recognition of the need to do it.

Some retailers have accused you of arrogance - what’s your response?
We have done many customer surveys with retailers. They need big brands and big brands need big retailers. I don’t consider Kimberly-Clark arrogant.
Health, hygiene and well-being are our new vision. We are trying to reverse this category devaluation and price erosion