Yuhan-Kimberly, a proven model of joint venture success

The company sees more business opportunities in China



At a crowded hypermarket in Beijing, the shelves for diapers are filled with Huggies products.

Even though their maker Kimberly-Clark has a Chinese branch, all the premium diapers sold in China are produced by Korea-based Yuhan-Kimberly at its Daejeon factory, some 160 kilometers south of Seoul.

Yuhan-Kimberly is a joint venture established in 1970 between Korean company Yuhan Corp. and U.S.-based Kimberly-Clark Corp., that entered China’s premium diaper market in 2003. In major cities such as Beijing and Shanghai, its market dominance hovered between 65-75 percent last year, according to AC Neilsen, a market research firm.

Despite fierce competition with global companies such as U.S.-based P&G and Japan’s Unicharm, Huggies diapers made in Korea have maintained the No. 1 status for eight consecutive years, the company said.

A joint venture usually faces difficulties entering overseas markets as their business is supposed to focus on the regional market. But Yuhan-Kimberly has secured global competitiveness in product quality through ongoing managerial innovation and exported its products in close partnership with Kimberly-Clark.

The company, which currently exports diaper products to 11 countries such as Australia, Russia and South Africa as well as China, logged 154.3 billion won ($137 million) in diaper sales alone last year. Its total sales in 53 countries around the world amounted to 237.6 billion won in 2010.

Behind the popularity of made-in-Korea diapers, the company says, is its constant renovations to meet the picky taste of Korean mothers. The company usually launches a new, upgraded line of diapers every six months, adapting itself to the fast growing consumer trend.

The company shows confidence in better understanding and realizing the detailed needs of consumers as well as the essential factors such as airflow and moisture absorption of diapers. And the confidence comes from the more than 30 years of history of the Huggies brand, it said.

The company has also maintained its production capacity at the world’s best level, aiming to respond promptly to the diverse and specified needs of global consumers. Among Kimberly-Clark’s global production facilities, the production line in Korea boasts the best productivity and the lowest rate of defective products, it said.

And the Korean firm has succeeded in nurturing baby and child skincare brand Green Fingers into a local market leader just two years after its launch, the fastest settlement across regions.

The company’s firm presence in Korea also helped it exert its capabilities globally. According to Kimberly-Clark’s recently released Key Performance Index, the Korean joint venture ranked first in terms of overall equipment efficiency.

The so-called Lean Project, which aims to achieve the best results from cost-effective management, was later introduced to other regions with Korean engineers joining Kimberly-Clark’s regional change agency and other coaching programs.

The company said there was a time when it struggled to compete with global consumer product company P&G. In the early 1990s, when the U.S. company entered the Korean diaper market, their market share gap had been narrowed to 10 percent.

However, P&G marketed its globally standardized products and failed to respond promptly to local demands, while Yuhan-Kimberly focused more on producing diapers dedicated to Korean consumers. The rivalry ended in 2007 when P&G withdrew its diaper business from the Korean market.

This successful partnership and Yuhan-Kimberly’s global competitiveness prompted Kimberly-Clark to establish its global innovation center in Korea early next year, the first of its kind set up out of North America.

“We selected Korea because of the 40-year success of our joint venture company and because the country is at the forefront of many great technologies and inventions that meet consumer demands,” said Cindy Panning, vice president of product development at Kimberly-Clark.

“The Global Innovation Center will help take Kimberly-Clark to the next level of global collaboration in both technology and product development.”

Kimberly has already been operating its only Innovation Center Asia in Giheung, Gyeonggi Province, since 2007.

While the existing center will continue to focus on research and development activities, the new one will join the company’s whole process of product design for consumers in Korea, Asia and the world, the company said.

Yuhan-Kimberly also believes the successful joint venture could be a role model for other international companies seeking success in the soaring Chinese market.

Many global players are eying the Chinese market by investing directly into the growing region. The company said, however, they can create synergy if they work with Korean businesses that have a better understanding of the market.

Other than its geographical proximity, Korea is equipped with well-developed infrastructure and a talented workforce. The country also can have more business opportunities through global collaborations, the company said.

By Lee Ji-yoon
(jylee@heraldcorp.com)