Kimberly-Clark opened its first factory in Russia and Eastern Europe on Wednesday after investing $170 million in what it hopes to be a launchpad for expansion in the region.
The facility, located in Stupino, a small town in the south of the Moscow region, is one of Kimberly-Clark's largest capital investments in the last two years, Jonathan Tarr, the company's managing director in Russia, said in a statement.
The U.S.-based producer of personal care products began construction on the facility, which will initially produce Huggies-brand diapers, in 2009.
Total investment in the project, including infrastructure, amounted to $170 million, but the company plans to increase investment to expand output at the site, chief executive Thomas Falk said.
"Obviously, this site is expandable, so we have a great ambition for the growth of our business in Russia and Eastern Europe, and investment made in Stupino will be an important part of this investment strategy," he said at a news conference.
Kimberly-Clark launched two manufacturing lines for Huggies diapers and plans to launch additional lines for other personal care brands.
Given the company's experience in Russia, Kimberly-Clark hopes that its new facility will become profitable "almost immediately," Falk said, declining to provide a timeline.
The company has seen 10 years of consecutive sales increases, the statement said, and posted sales of $19.1 billion last year, according to its web site.
Given the sustained demand Russia has produced, Kimberly-Clark plans to continue its expansion, Falk said. "We have aggressive plans to grow our business and to invest in building our brands and expanding our franchises across Russia."
Kimberly-Clark products are currently imported from the United Kingdom, Czech Republic, Turkey and Korea, the company said.
The 400,000-square-meter factory will manufacture diapers and personal care products for 12 countries in Eastern Europe, including Russia, Ukraine, Kazakhstan, Belarus and Azerbaijan.
An improving economic environment has bolstered consumers, as declining unemployment and rising wages boost retail sales figures.
In April, the jobless rate fell for a third consecutive month to 8.2 percent, according to State Statistics Service data released last month, while real wages gained 6 percent year on year to their highest level since October 2008. Retail sales figures responded in kind, rising 4.2 percent year on year, up from March's growth of 2.9 percent.
Demand for personal care products, however, is unlikely to show a big increase by the end of the year, said Filipp Lysenko, a consumer analyst at Financial Bridge.
These products have become a traditional part of the consumer basket in most big cities of Russia, and the demand for them remains stable, he said.
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