Good afternoon, everyone, and thank you for joining us. I'm pleased to welcome you to a Fireside Chat with Kimberly-Clark today. The company is in the midst of a strategic evolution, a significant one, reorienting the portfolio by reducing its international consumer tissue exposure through a joint venture with Suzano while expanding into consumer health with the proposed acquisition of Kenvue, which will create a broader platform across personal care and consumer health. To discuss the strategy, the rationale behind these moves, and how management is thinking about execution and value creation from here, I'm joined by Mike Hsu, the company's Chairman and Chief Executive Officer, Nelson Urdaneta, the company's Chief Financial Officer, and Christ Jakubik, Head of Investor Relations. Thank you all for being here, and thanks so much for making the trip to London.
Great to be here, Lauren. Thank you.
We'll get started. First thought was that given many investors here today have a somewhat outdated perspective of the company, I wanted to start off at a high level. Just about over two years ago, you announced the Powering Care strategy. Mike, could you start by giving an overview of that strategy and perhaps where it suggests the greatest change from how the company was operating previously?
Okay. Yeah. Thank you, Lauren. Yeah, I think the core idea of Powering Care is, you know, the concept of getting the company on a virtuous cycle of growth. You know, most companies talk about that, Lauren, and that's something I think, you know, most companies aspire to. You know, the thing about it within CPG, as you well know, there's a lot of factors conspiring to kinda knock companies off of staying on that virtuous cycle. It's notoriously hard to do, right? The core elements of what we're trying to do is really, you know, make products better that the consumers want to drive volume, drive great marketing to get consumers interested in our products, great execution in stores, and that will drive the volume.
At the same time, we're working to get much more efficient on cost and then reinvest that savings back into product quality or marketing or advertising or anything else. Hopefully, if you get that cycle right, it starts that virtuous cycle of growth. I think that was kind of the goal. I think the key elements of the strategy, I mean, there's really three big components. You know, one we call Accelerate Pioneering Innovation, right? The real thing about that is, at the time, and you've seen this for a long time, I think, you know, at the time I joined K-C, there was a question about whether superior performance was possible in these categories, right? A lot of people externally, and even some within the company said, "Aren't these categories commodities?" You know?
"How are you really gonna differentiate a diaper or bath tissue or whatever product you wanna think about?" I would say, so for us, step one is that, hey, superior performance is possible, and it's not only possible, but it's necessary. I think over time and I think you've seen what's driving our volume is that we've really found a way to make our product superior and desirable, right? That's part one. Part two is, what's another thing that's really changed is our cost structure, and I think we've been driving industry-leading productivity gains over the last few years. I think the big change in K-C over the last maybe 10 years or so is, turns out there is one best way, right?
I think we were kind of a decentralized confederation of companies that operate in local markets. Products were different in markets, our manufacturing process could be different, our assets, our manufacturing assets could be different. I think what we've learned over time is now consumers are more similar. Doesn't mean all products are identical between the U.S. and China or Brazil, but they're more similar than they are different. It does turn out there tends to be one best way to make stuff efficiently. That's kind of what's behind the margin improvement that you're seeing with us. The last thing is a change in our operating model.
You know, I think a calling card of K-C and, you know, what makes us special is we're very attuned to local market competitions. We run our business through the markets, that's something we'll always want. I think what we've done is, you know, overlaid that local agility with a little more considered global scale to help the markets go faster. I think those are the big changes that are driving the performance that you're seeing.
Okay. Great. With that as context, let's talk about top line trends over the past years for North America and then the international personal care business. Organic sales have performed well, and more notably, volume mix has been positive, which is not what we can say for most of U.S. staples.
No. No.
Just to specify for people here who don't know, you, the company had 1% volume mix growth in 2024. That accelerated to 2.5% in 2025, and they grew 3% in the first quarter of 2026. How is it that you've been able to drive this in categories that I think many think of as sleepy and really just linked to population growth at best?
I think the main thing I'll say, Lauren, we'll see if you think this is interesting, superior product performance equals superior value. You know, a lot of time when you say value, people think you're gonna pull price down, right? Price matters, I actually, we believe, you know, since people experience our products, and if you're wearing a diaper, whether a baby or a senior adult, or a Kotex pad, you're wearing it 24/7, right? It's on you. People really notice differences in performance. I'd say, you know, we've made a conscious effort to differentiate our products. We think they are superior than anything that's in the category, it's been that way for a few years now, I think that's what's driving the volume.
How did we get there? You know, we, you know, if you rewound 12 years when people thought these were commodities. You know, I think what we ended up doing was going through a process of like, "Hey, we're gonna get pickier about how consumers use these products." You know, they're not just looking for absorption, right? Things about, like, comfort, fit, breathability, skin health, you know, all these things matter. We're gonna spend a lot of time trying to understand how needs will evolve. I will tell you, Lauren, our big exposure and big business in China really helped us, 'cause I think that's where, you know, we saw both in Korea and China, the Asian markets, the sophistication of the consumer over the last 20 years has really accelerated.
There's a lot of manufacturers, a lot of brands. In diapers alone, there's 200 brands in China, so the competition is very aggressive and that competition forces companies to get better and forces companies to innovate. I think what we did was really kind of, you know, develop multiple angles of product differentiation, whether that's on comfort, fit, absorption. I will tell you, we have a big pipeline. You know, we are very proud of, you know, big ideas that we have in the pipeline that's coming. You know, a lot of the growth that you're seeing is on what we call a Gen 3 diaper core. We have Gen 4 and 5 in the works that's gonna be better than Gen 3. We're really excited about that.
The other thing that's happened this year, you know, maybe it started happening in 2024, was our emphasis on the value tiers. You know, you know, it turns out, you know, consumers in a market like North America are really under stress. While our premium business continues to grow and we're driving the premium business, you know, very hard with innovation, 90% of the population has incomes at 100,000 or below, right? We, you know, as category leaders, we don't really wanna ignore, right, the bulk of the population. We decided to innovate as aggressively in our value tiers.
In fact, in the U.S. on Snug & Dry, I think you understand that, you know, we brought our best innovation and most advanced technology and launched it in our value tier first, before we've launched it into our premium tiers, and that's what's behind a lot of the volume momentum that we're seeing right now.
It's really interesting you brought that up, because one of the things that I have very casually said when asked by investors, like, why do I think there's no volume growth or what's the big challenge in the industry overall, and I always come back to 80% of U.S. consumers are under a lot of pressure, and the staples companies have to sell to all 100% of U.S.-
Right
consumers.
Right.
Not just the top 20.
Right.
We care about you know, our industry cares about everyone.
Right. We decided we're not gonna be a niche premium company.
Yeah.
Right? We're gonna serve everyone.
Yeah.
Or try to.
No, that's great. Okay, I wanted to touch quickly on the impact you've seen from the conflict in the Middle East. Back at earnings just last week, you noted the potential incremental inflation should oil remain elevated, but you stopped short of including that in the formal guidance. Can you just walk through that decision, you know, why not to bake it in?
Yep
Just kind of what mitigation might look like as you think through the rest of the year?
Yeah. Let me just make a quick comment and then Nelson will-
Yeah.
I would say it's an unfortunate circumstance that the company and our management has become very accustomed to dealing with these situations, right? This is, I think, the third military conflict. You know, the first one in Ukraine and Russia was the first one kind of on our watch for a multinational deal within quite a long time. You had Israel, now this one. I think, you know, operating in a volatile environment is something that we're becoming accustomed to. You know, our underlying principle, which I think Nelson will wanna talk more about, is, right, PNOC or Price Net of Commodity Cost discipline, right? Generally, we expect our PNOC to be neutral to positive, right?
Adhering to those principles is pretty core to how we think about our business.
Lauren, just to provide a little more color on the situation. Two things. One, from a capability standpoint, as we went through the whole COVID situation, all these learnings have been built into our toolkit. As you remember, we overcame $3.4 billion of costs between 2021 and 2022, and we emerged out of that fairly successfully. We recovered our margins and actually started expanding our margins beyond pre-pandemic levels at the end of 2023, and we've been on that trajectory. As it relates to the outlook in particular, for the second quarter, we did include, and we advised that we expected about $50 million of gross input cost inflation, largely related to the volatility we're seeing in the oil markets.
As a reminder, we have about 80% of our input costs already covered, either through contractual structures or programmatic hedging programs. As it relates to oil-linked commodities or costs, about 25% of our basket is exposed on that, on one extent or the other, and if you add distribution, it's a little bit higher than that. The $50 million that we included for the second quarter, we expect to be able to fully mitigate it as the year progresses. That also includes a slight impact from the California distribution center fire that we experienced a few weeks back. What we don't know is gonna happen in the second half of the year, because prices have remained fairly volatile in terms of oil, as well as some of the surcharges and force majeure that's being declared by some of our suppliers.
We did some estimates around a scenario of what if oil were to stay at around $100 a barrel, and that's what yields a scenario of around $150 million-$170 million of gross input costs that we would face in the second half of the year. That's not built into the outlook, neither any mitigating actions that we would take to tackle them. As Mike pointed out, you know, our teams know that we expect them to manage to at least neutral pricing net of cost over time, and they need to leverage all the toolkits within the integrated margin management approach that we've developed over the last few years.
That includes Revenue Growth Management, productivity, where we've delivered 6% gross productivity in 2024 and 2025 in Q1, and we're projecting that for the full year, as well as the always-on overhead savings that we've been delivering over the last few years. Our plan is we should have much more clarity in terms of what that'll be, gross impacts, as we close the second quarter. When we give the update on performance for the second quarter in August, we'll be able to provide a more clear view of what that will look like from a growth standpoint, how much of that can we mitigate, and what, if any, net impact we foresee to the bottom line in the balance of the year.
All right, great. Before we get into talking about Kenvue, I wanted to just talk about the joint venture with Suzano a little bit. For those in the audience who might not be aware, when Kimberly-Clark announced Powering Care, there was a third segment as well called International Family and Professional. In June of 2025, they announced a deal to sell 51% of that to Suzano, forming this joint venture we're gonna talk about. Could you just talk a bit about the strategic rationale for that transaction, why Suzano and also why Suzano is the right partner?
Yeah. They're a great partner. I think that this transaction's really about building a better tissue business. You know, I think we realized, Lauren, that, you know, wholly controlled by ourselves, I think we had structural challenges to enable us to do that. What were the structural challenges? You know, our International Family and Professional business, or the tissue business, maybe the biggest component is here in Western Europe, right? So Andrex here in the U.K., and then we're in most markets on the European continent. You know, given the share positions in Europe, you know, I would say the margins in Western Europe are structurally lower, right? Because of that, our earnings were highly volatile. Why were they highly volatile? The only thing that fluctuated was pulp costs, right?
It made it difficult within our control, we had to cope with the volatility of the input costs while the margins were kind of at a fixed amount. Really the magic of this transaction is, you know, in partnership with Suzano, which is our second partnership, we did a similar transaction with our Brazilian tissue business, and we sold that 100% to them a few years back. Their cost structure on fiber is inherently stable, right? The only thing that fluctuates is the price, right? What you're marrying and creating a business that has, you know, stable prices, stable costs, and they can operate more effectively in this environment. On top of that, I would say both companies have operating strengths.
Ours is paper making or tissue production. Theirs tends to be more industrial, pulp production, agriculture. Ours is also commercial execution, right? Selling, you know, marketing, all those things that they don't do as well. The reason why it's a joint venture is we both bring strengths to the party that we both value, right? We think there's a great structure, and this is gonna build a business that's gonna be a very good tissue business.
Okay. In Brazil, though, you sold it 100%. Just did they have a different capability set in that market with regard to the commercial aspects or the paper making that made Europe a different decision?
Not because of that. I would say they're doing a great job with it. I forecast this will go very well here as well. I think maybe the reason why it wasn't a full exit is, you know, I think we will evolve over time. That's part one. Part two is there's more behind what we're doing on either side, right? They have more capability they're developing. We're having more capability we're developing on the tissue business. We both wanna be able to participate and share in that. There's a reason why it's kind of a measure. You know, I think over time could they increase their ownership stake? It's possible.
Okay.
Just to add, I mean, three things where we see also benefits from how we structured the transaction, Lauren. The first one, you know, with a 49% stake, once the transaction closes, we expect our shareholders to participate in the value creation that we foresee in the following years. Secondly, there's an important cash amount that'll be received by Kimberly-Clark at the moment of the close, which we will deploy for the Kenvue acquisition as part of the cash consideration, which again, will allow us to maintain a strong balance sheet post the close of Kenvue. Lastly, adding on what Mike said, there is a fixed mechanism for us to be able to exit at a time when Suzano offers to purchase our remaining stake.
Okay, great. Perfect lead-in to Kenvue. That was June. In November, you announced plans to acquire Kenvue.
It was a busy year, huh?
Busy year. Yeah. Thanks, guys. While I'm sure most of the room are well aware of the deal, maybe you could just talk a little bit about the strategic attractiveness of this business combination, or just, you know, plainly, like, why are Kimberly-Clark and Kenvue better together?
Yeah. Okay. I know for some outsiders, it may not be the most intuitive. We're excited, and we're excited about, in our minds, creating the preeminent health and wellness leader globally, right? That's kind of what we're doing. What do we mean by that? You know, one, there's a couple things. You know, covering our categories, you know? I think we've done a great job growing our categories. You know, I would say, you know, our categories this year are growing about 2%. 2.5% .
2.5 %.
You know, that's kinda the historical range of kinda where we are. I would say the Kenvue categories grow at a higher rate to start with, they have built-in multi-decade tailwinds. That was both in health and wellness, driven by the logic of a globally aging population, right? As the population ages, demand for the Kenvue portfolio, along with ours, like our adult care businesses, will continue to grow. There's some strong built-in tailwinds. Really, what we're trying to do is similar to what we talked about with diapers, serve the 100% of the population. What we really wanna do and believe we can do is raise the standard of care for all. Our goal is to provide extraordinary care for all. You know, what does that mean?
I would say our view is, you know, a lot of these health and wellness categories, particularly within self-care, you know, we view are lower penetration and relatively underdeveloped, even though they're great solutions and have been around for a long time. So, you know, we believe working together and understanding kinda markets and need spaces, need spaces more structurally, that we can help expand the categories over time in a more disciplined manner. I think obviously there's tremendous geographic complementarity between our portfolios. If you're not as familiar, they're very big in Europe. They're about a $3 billion business in Europe. You know, after our IFP or our Suzano transaction, we'll be about $100 billion in Europe, so there's an opportunity for us to grow our business here.
Similarly, they're very big in India, which is a market that we've struggled in with our Huggies brand. We think there's great opportunities there. If you flip it around the other way, we're about a $3 billion business in Mexico, they're just a few hundred million USD there. I think, you know, we see from a geographic perspective, Lauren, you know, an opportunity to kind of grow both businesses through distribution, right? That's kind of one set of areas. The other is if you think about the consumers that we're serving, we're covering basically the same life stages through different ends of the category. We're in baby. Obviously, you know they started their business or their company within baby care, and we're obviously in baby.
You keep going, you know, serving women, whether that's through feminine care products or skincare or beauty, or whatnot. You know, all family. You know, we do it primarily through tissue, but they have a lot of products like Listerine and Band-Aids that cover all family. Finally, the active aging, which we primarily do through Poise and Depend. We think there's a lot of complementarity in terms of serving life stages. Maybe the opportunity for us, Lauren, is, you know, we've been working in a lot of markets, primarily in Asia and the U.S., but increasingly across our other Focused Markets to develop a advantage consumer engagement model powered by digital. We've made a lot of progress, I would say, over the last 10 years.
I think that's an opportunity that we feel like we can really expand, you know, with the Kenvue portfolio as well.
Okay. Great. One pushback that we've heard pretty often is that Kenvue's categories are fundamentally different-
Yeah
From yours. You know, things mentioned are, like, channel mix, seasonality.
Yeah
Competitive concentration, barriers to entry. I'll skip the geographic exposure.
We just commented on that.
Yeah.
Just even expertise. How would you respond to that, the fundamental differences between the businesses, the categories?
All right. Here's my argument, Lauren.
Okay.
I wanna tell you that when you ask about Powering Care.
Yeah
I'll say the tenets of Powering Care apply to Kenvue's categories too, right? If you just click through, what are those? You know, I would say how we've been able to you know, manufacture growth in what you would characterize are slower growth categories, I would say it's a deep understanding of need states and really being, I would say, very specific about what sophisticated consumers are looking for. Consumers, it's very hard for consumers to say, "This is what I want for the future," right? You have to kinda piece it together, right, through insights and research and understanding. I think we've been able to do that, right? Like one example, right?
This whole thing around our current product on Kotex that's selling great globally, you know, has, you know, this liner that pulls the menses or the liquid away from the surface of the pad and then channels it into other parts of the pad, right, to spread it out and disperse it, right? That's No consumer can ever tell you that's what they want, right? What they said was, "We wanna feel dry," right? That's kinda how we deliver it. I think the core idea is we gotta understand what the need states are and what they're trying to solve. What we do well is we declared, like, "This is what we're gonna win on," and we declared that, like, ten years ago.
Then we kinda plowed all of our financial kind of R&D researches into solving those kind of problems, right? So I'd say, kinda need state and then aligning the tech pipeline to support those need states. Second, this consumer relationship model. You know, I think interestingly, you know, I told you we've been investing a lot in digital. Our e-commerce shares, and I think you probably know this fact, our e-commerce shares are 700 basis points higher in North America than our offline shares, right? So, you know, we think we have an advantage model. Our, you know, we have an advantage model in China, in Korea. Increasingly, I think we're feeling great about Indonesia and Brazil and what we're doing online there.
You know, we do think there is a different engagement model that's gonna be much more efficient than the traditional marketing model that also applies to the Kenvue brands. The third area, I talked about margin management. You know, I think it's early, but we're excited about the integration planning. I think even though they're high margin, I think our average is close to 60, right? Our average is approaching 40, so they're much higher margin, but we also think there's much more opportunity to improve the margins on the Kenvue side through cost discipline. Our calling card kind of given that our margin structure is lower is cost discipline, execution discipline, and I think a lot of that applies to Kenvue.
You know, I think while the categories look and feel different, I think as you know, may be familiar with, you know, in the world of CPG, I think the basic principles apply. Honestly, the three of us that are sit in the front of the room, you know we all came from Kraft, and we didn't even know how to spell diaper if you spotted as the D, you know, 12 years ago, right?
I'm sure your spouse is like, "I know that you know this.
Oh.
That's a good one.
Sorry. I didn't mean it to sound that way.
I know. I'm kidding. I know, I know, I know. Okay. A few weeks back, you announced a leadership team for the combined entity. Not surprisingly, many come from K-C, there's a few that come from Kenvue. Can you just give an overview of the new organization structure for the combined company, the leadership team, and sort of that decision calculus when bringing over talent from Kenvue?
Yeah. Okay. Interesting. World-class team. I'm excited. The process, I'll just give you a little on the process. Obviously, I met with all the leaders on both sides. We put everybody through this rigorous process with a third party, you know, assessment, right? You know, that team evaluated them, and then I had my own individual discussions with every leader. Rigorous assessment, but we wanted to set the principle of we're just gonna take the best of both. Like, we don't really care which side they're from. It's we're just gonna pick the best, right? That's part one. I will say, you know, part number one, exceptional market and operating expertise.
You know, if you looked at our business leaders, a couple of them, Jon, who runs North America for us, Katy, who runs Focused Markets, and you met her. I mean, everything's growing. I think you saw in the quarter, I think Jon, 95% of his sales were growing share. Katy, 84% of hers. And by the way, for Katy, all of her markets when I gave her those markets were declining when she got them. You know, I think 18 months later, they're all growing and growing share. I think we've got exceptional leaders on the K-C side. Jon's gonna lead North America. Katy will have five markets, you know, primarily in Asia, which includes China and Indonesia and things like that.
I think on the Kenvue side, you know, Carlton, who runs their EMEA business, Leo, who runs Latin America, I think if you look at those two businesses, this is what happened when we started doing our internal business reviews just to get to know the categories. I said, "Wow, I don't think we have any markets that performed as well as you guys did." You know, like. You know, we're pretty proud of our performance, but I think what got lost, Lauren, is there's some pretty outstanding performance that they've had on their side that kinda got swamped by a few big problems, right, out there. We know those markets, and they're very difficult to operate within. You know, I think they've done a really nice job.
I'd say with those leaders, you know, Carlton, Leo, Andy in Asia Pacific for, Andy's gonna lead enterprise markets, which is part of Asia and Latin America together with Leo. I'd say they've got exceptional market expertise. I think they've done a great job with the Kenvue brands. Andy's newer, but has engineered quite a turn in performance in some of the businesses in Asia. We're excited about, you know, I would say, the market operational capability of the team, functionally, again, we pick the best of both. I'd say primarily with a focus on the capabilities that we think we need to grow the business now. I would say on R&D, you've met Craig. Craig has experience in some of the Kenvue categories.
He spent a long career starting at Procter & Gamble and Unilever before going to Campbell's and then coming to us. I think he's a real R&D pro. I think Tamara, you know, she's helping us deliver multi-year industry leading productivity, and she's gonna be great at that. Interestingly, on the growth side, we tapped Carlos from Kenvue and Jon Halvorson from the Kenvue side. Why? You know, I think we were really excited with Carlos's experience, you know, having been a operator and coming from Procter & Gamble, right, in his past, but detailed operator for a long time and having a disciplined operating mindset to think about category growth. We really love that idea. Together with Carlos and Jon and Mike Wondrasch, who is gonna be our digital leader, you know, I'm going all in on digital, right?
This whole thing around the consumer engagement model, you know, that thing is going to be a competitive advantage for us, and we're investing a lot to build it.
It's interesting, too, because obviously Kenvue and Hans didn't stand still, right? When Kirk came in, they made some really fantastic hires that you're now bringing over.
Right. Yeah.
Let me go. Looking at time. Cost synergies that you've discussed are on the high end as far as CPG deals go, $1.9 billion or 13% of Kenvue's 2025 sales. You've given us good detail on the breakdown, just for anyone here, it's 30% in sales and marketing, 30% in COGS, and 40% in G&A, and timeline largely realized by year three. We still get pushback that the number's just too high.
Yeah.
Like, just it's too high. How would you respond to that?
Yeah. A few things, Lauren. We've continued over the last months since November third of the announcement, to, you know, build our clarity and confidence on the path to delivering and or exceeding the synergies. I mean, Russ, last week at our earnings update, was providing some updates around all the hundreds of work streams that are underway, getting ready for that day one.
You look at the benchmark in deals, yes, in traditional consumer staples deals, the average is more around the 8% level. When you look at consumer health, that average is actually 13%. Our 12%, which is kind of the number, is very reasonable when you look at it from that end. The other element that's important to note is that, you know, the three sources that you've quoted as it relates to how we drive and attain those synergies are things that we have been executing over the last four years at Kimberly-Clark.
That's what's allowed us to drive in the last two and a half years, increasing better performance on the top line, driven by volume mix gains consecutively quarter by quarter, expanding margins, increasing our investments behind innovation and brands, driving better cash flow, and at the end of the day, all of this happening simultaneously. If you look at the three buckets on overheads, it's not just the duplicate structures that we will tackle. It's the fact that, you know, by us leveraging our plug-and-play approach that we've been talking about, we'll be able to accelerate things like Revenue Growth Management or Global Business Services. If you look at cost of goods sold, it's the same thing. We've chatted about the benefits we'll derive on the transportation side, because there's synergies, they weigh out, we cube out.
On procurement, there's a lot we've done over the last three years in terms of driving digital capabilities in procurement that's driving the productivity, and then in sales and marketing execution, we've done a lot in that space. Think of all the agency consolidations that we've done. Look at how we've optimized in our working media spend. Look at how we've optimized trade spend. That's what's been allowing us to grow over the last few quarters, and that's what's gonna bring, you know, all these synergies to life as we go into the deal closing. We're very excited about what they've announced earlier this year in terms of their organizational structure changes, because that's basically just setting it up for a way that for day one, we'll be much ready to execute.
Okay. Talk about revenue synergies. Actually, no, I'm skipping revenue synergy. We might run out of time.
All right.
I'm gonna come back to that.
Whatever you want to talk about.
I'm gonna skip it.
Yeah
'Cause we'll come back if we have time. I wanted to talk about the scale and then the long tail within Kenvue's portfolio.
Yeah.
They've shared finally that they have 115 brands, and 74% are less than 25%.
percent of sales, right? 74 brands. A significant portion of SKUs are just 1% of sales. We haven't seen any divestitures yet from them. I'd thought that that would have happened by now. Prior to, you know, Kimberly's involvement. Just sort of what's your approach gonna be, do you think? Should we think about divestitures? 'Cause there's a lot to be cleaned up there, it would seem.
Yeah.
That's what it seemed to me.
Yeah, I'll say, I think Nelson will have some comments too. I would say, yeah, the portfolio can always get better, right? I think portfolios are never fixed. I would say a couple things. You know, one, we're seeing it. I think one of the reasons they're pausing it is with the deal and everything happening, there's a lot going on. You know, I think we're waiting to kinda make sure that, you know, we can close properly and get all the work done. The thing that I also say is it is not as complex as it appears, you know.
What happens is, because of regulatory requirements on a country basis and some brand choices they made, you know, they're, again, they are probably at some point in time, they operated very decentralized, right? There's a lot of brands and formulations for the same category, right? If you add it up by category, let's say pain care, you know, yeah, there's dozens of brands and different formulations, but it's all serving the same kinda need, right? On the surface, it looks very complex, but from an operating perspective, a little less.
Part two is, while there is a tail, and Nelson and I have some experience from our Kraft days, we also ran a portfolio that was incredibly complex at Kraft, but it also delivered all the profit of the company or most of the profit of the company. I would tell you that the tail is profitable in general, right? and then the third thing that I will say is a lot of the tail's in international, and I think I had just mentioned, you know, international, particularly in Latin American and EMEA, is where the performance has been good. I think they've developed a way or a path to manage that complexity effectively.
Doesn't mean that it's gonna stay fixed this way, because I think over time, there will be some things, you know, that would say, "Hey, not a great fit long term, you know, for what we wanna do." There may be some things that we may wanna come into the portfolio at some point, depending on how we think about need states and everything else. I would say there's always gonna be an opportunity to get better, but Nelson is gonna say we're gonna stay disciplined on capital allocation.
Just to add to Mike point, we've demonstrated, Lauren, over the last three, four years, our discipline around portfolio management. Where we identify that there's no clear path for a right to win, be it for a brand, be it for a country, be it for a category, we will make determinations on the portfolio. Back in 2023, we sold our Brazilian tissue and professional business. Back in 2024, we sold our personal protective equipment business. We exited private label largely. We right now will be probably less than 1% of our revenue exposed to private label. We're executing the transaction in the International Family and Professional Care business middle of this year.
We'll be disciplined. We always wanna make sure that we are creating and protecting shareholder value. It's an always on, and of course, it'll apply to the new portfolio once we've closed the transaction with Kenvue, but in a disciplined manner.
Okay. Great. Need to talk about Tylenol.
Also Talc, particularly since we're here. Big concern from investors still that we definitely get questions about. From the S-4, we know that your bid from K-C for Kenvue, you know, came down pretty substantially.
throughout the process, given all of this, the elevated risk. Just maybe you could share with the audience how you grew comfortable with the potential liability, that's again, a potentially unknown size.
One, I'll start with the science supporting the safety and efficacy of acetaminophen continues to grow, you know, there was a report that came out at the beginning of this year that kind of, you know, further supported the safety. In fact, it's, I think even today by almost every governmental health agency, including the U.S. FDA, still recommends Tylenol as the only safe, you know, pain and fever reliever, you know, for pregnant women, right? So we stand behind, you know, with Kenvue on the science and we're confident in that.
In addition, and as we went through our due diligence process and recognized that we have directors like Sheri McCoy who ran this business for a long time, and Joseph Romanelli, who was at, who was at Merck, and Sylvia Mathews Burwell, who was the head of the Department of Health and Human Services for the U.S. The board requested that we really get thorough, and so we did bring in some of the best advisors. Kenvue has hired excellent counsel, who's been defending the case very well. They're from Kirkland & Ellis. We brought in Gibson Dunn, Theodore Boutrous, who I think is generally regarded a top litigator within the U.S.
You know, we brought in King & Spalding, who's been arguing and defending successfully some of the Zantac cases. I think we brought in, you know, a really accomplished advisory team. We went through with an econometric firm to estimate what the liabilities are and everything else. I would say, number one, we feel very good about the science and the defenses of Tylenol itself. Then, you know, I think I've said this publicly a few times, and we've gone through different scenarios of litigation, I would say all scenarios end up being significant or I would say generational value creation, you know, even if you assume some number, you know, for the litigation side. We feel very good about both the science and then the economics of the deal.
Okay. To round this out, I want to maybe take a step back. You know, the company's in the midst of a transformation that is finally taking hold optically standalone Kimberly-
Yeah
I think from a, fundamental standpoint. Clearly really excited about the opportunities.
Yeah
In front of you. M&A of this scale often proves more disruptive.
Yeah
Than initially expected. I guess why acquire Kenvue and introduce more complexity to it now, to a story that was really beginning to take off?
Yeah.
You know? What do you think Kimberly-Clark looks like in five years?
Yeah. That's exactly the que-, you know, I will say, Lauren, 'cause I think you're channeling a subset of investors, Chrisake.
Are a little frustrated with me because they saw like the play happening.
It's happening.
Powering Care working. They, you know, it's gonna move in the right direction, right? Finally, right? All that kind of stuff.
I guess my retort is, okay, we definitely believe in, we believe our organic play is going great, and Powering Care is going to continue to go great. We're very confident. I think the thing is though, you know, we're building a company for the next 50 years, not for the next five. If you look at, you know, the portfolio combined, you know, I think there's going to be built-in tailwinds that are going to be tremendous for multi-decades. I think, you know, not in 50 years, but in like I would say in five years, you're going to be saying, "Oh, I can't believe you didn't think about this earlier." You know? And we're going to do it the right way, right? By generating a virtuous cycle, you know, and we're really excited about the potential.
We're really excited about the Kenvue team, the organization. Our cultures end up being surprisingly similar, Karen, Lauren, in the fact that care is kind of at the core. Like what motivates K-sters and what motivates Kenvuers is taking care of their consumers and helping them live healthier lives. I think we'll be able to do that together better.
Okay. Great. We have to wrap there. Thank you so much. I learned new things today, despite how much I already know about your company. Thank you.
All right. Thank you.
Okay.
Thank you, everyone.