By Adrian Atterby
After a long period where economic performance underpinned growth in most FMCG categories, many consumers looked to rationalise their spending in 2007. This was a result of uncertainty in the housing market, driven by poor performance across the wider economy. In spite of this, levels of innovation in the tissue products market were high, whilst changes in segmentation strategies were also prevalent.
Tissue product markets, particularly the toilet paper sector, have been categorised by an endless supply of new products, purportedly meeting the needs of a newly identified group of consumers. Although segmentation is a basic tenet of business, oversegmentation can result in confused consumers who then make the decision to purchase a competitor’s product due to a more easily defined offering. In order to counter this problem P&G re-launched its Charmin brand during 2007, with a simplified range featuring more distinguishable product names. Charmin Ultra has evolved into Ultra-Soft, whilst regular Charmin has been upgraded to Ultra- Strong. The range also features a oneply product, Charmin Basic, for consumers on a tight budget. P&G spent $86 million promoting this new range throughout the US, with campaigns on television, in print and on the internet.
Overall value growth in the US toilet paper sector was 5% in 2007, which is lower than in previous years, probably as a result of fewer consumers trading up to higher-quality products. This was also reflected in a slight decline in usage per capita, as cheaper products weigh less. Value growth in the economy segment was highest at nearly 10%, whilst the luxury segment saw an increase of 3% despite both categories being of a similar size, providing further evidence of growing consumer caution. In the kitchen towels segment, however, P&G continued its policy of segmenting the market with the launch of Bounty Super Duty. This product is aimed primarily at men and is to be used in the garage or garden to mop up oil, grease and dirt. As such, it is considerably stronger with a heavy-duty texture. However, this added strength comes at a cost with the product priced at a considerable premium to other products in the range.
This launch, combined with the aggressive marketing of the other Bounty products in its range, helped P&G to see a rise in its overall share of the US kitchen towels market in 2007 by 1.5 percentage points. This resulted in a 5.5% increase in its revenue, meaning that the brand significantly outperformed the wider market in which revenues grew only by 1.5%.
FOCUS ON USAGE
Segmentation, as well as co-branding, also played a significant role in the tissues market during 2007. The availability of substitute products has always restricted volume growth in this category, particularly in times of economic uncertainty. The share of the market accounted for by private label products in value terms is also increasing, up 3% since 2005. In order to counter these threats both leading brands - Kleenex and Puffs - have attempted to offer additional value in different ways. Kleenex has worked hard on its packaging, trying to drive increased usage by providing more attractive containers which are then built into a room’s design instead of being hidden away in cupboards.
Puffs, on the other hand, launched a new version, co-branded with another P&G product, Vicks, and containing aloe, camomile, vitamin E, menthol and camphor to provide consumers with extra relief when suffering from a cold.
Unfortunately, neither of these launches helped to significantly boost sales in the boxed facial tissues market, which only saw revenues rise by 1%, despite volume increases of 2%. As a result, the value of the market was a little over US$1.7 billion last year. This low level of growth was due to the escalating threat of private label as well as retailers offering discounted products and 2 for 1 promotions.
Much more exciting, however, was the pocket tissues market, where despite volumes actually declining by more than 3%, value sales were up 7%, meaning consumers are much more likely to ‘go premium’ in this should see this as a great opportunity to increase the overall size of the pocket tissues market, which currently is much smaller in overall value terms than that of boxed facial tissues. In 2007 its total sales slightly exceeded $56 million. Products, such as Puffs with Vicks, as well as Kleenex Anti-viral tissues, which meet consumers’ desires for solutions to aid their general health and wellbeing, should be more aggressively marketed as well as being merchandised in more suitable locations, placed next to cough and cold remedies in retail outlets, which should help to drive more impulse purchases.
DEVELOPMENTS IN MARKETING
The way in which companies are using new technology channels to market products has also changed dramatically over the past 12 months. P&G, in particular, has been at the forefront of this change, experimenting with the use of social networking sites, as well as partnering businesses, such as YouTube.
In support of its Bounty brand, P&G launched a competition in the US via a special section of its website. Customers are asked to send in video stories regaling their successes in cleaning up spills and messes with a single sheet of bounty. The entrant with the best story won a $30,000 kitchen makeover, whilst other winners received a $8,000 makeover or a year’s supply of Bounty products.
Kimberly-Clark is using a range of innovative marketing techniques in its largest ever non-traditional campaign, which is aimed at driving increased usage of its Cottonelle toilet paper brand. The ‘Be Kind to Your Behind’ campaign integrates branded web sites, internet advertising, bus and train station advertisements, FSIs, in-store promotions, redesigned product packaging and public relations activities, as well as traditional television and print advertising.
The company has also embraced the internet to promote its Kleenex tissue brand. In support of its ‘Let it Out’ campaign, which encourages consumers to ‘have a chat’, sharing emotional stories with a packet of Kleenex on hand to wipe away any tears, it requested customers to email in video clips of their favourite emotional moments. More recently, it has started a Kleenex blog as well as a specific Olympics ‘Let it Out’ campaign. Marketing developments of this kind serve a number of purposes. Firstly, they aim to develop a stronger connection between the brand and the consumer, generating a deeper level of loyalty by creating additional value. Secondly, they allow the brand to collate a wide range of information on each consumer, including email addresses, meaning they can be targeted with precise marketing campaigns. In the longer term this should enable marketing campaigns to be more effective, improving returns on investment.
ECO-FRIENDLY
Environmental concerns are playing an increasingly important role in the development of new products within the tissue products market and manufacturers have a number of choices in how they can boost their eco-friendly claims. Firstly, they can try and source sustainable raw materials, which is something they have been doing in increasing numbers. Alternatively, they can use recycled materials. Until now this has not been as popular an avenue to explore due to consumer concerns regarding quality and softness.
However, towards the end of 2007 Kimberly- Clark announced plans to expand its consumer trial of Kleenex Naturals facial tissues and Scott Naturals bathroom tissue and paper towels in the US. Available since late 2006 in a small number of Wal-Mart stores, these products contain a mix of high-quality, post- consumer recycled fibre and virgin fibre. Despite the ‘Naturals’ branding, Kleenex facial tissues contain only 20% recycled fibre and Scott toilet tissue 40%. Of the three products on trial, Scott paper towels have the highest recycled content at 80%, suggesting that consumer desire for recycled products only stretches as far as cleaning up spills and mess and not to those which come into contact with their bodies.
This idea is backed up by the size of the recycled toilet paper market. In 2007 it accounted for 1.5% of value. Therefore, it is likely that this market will continue to be served by niche players such as Seventh Generations, through specialist retailers.
LOW GROWTH SET TO CONTINUE
Euromonitor International expects the trend of low growth across the US tissue products markets to continue in the period until 2012. It is likely that any value increase that is achieved will be as a result of inflationary pressures and not because of consumers trading up to more luxurious solutions. Manufacturers therefore need to work hard to maintain prices, which in itself could be difficult due to rising raw material costs.
Ideas around sustainability will also become more prominent, particularly in marketing campaigns, which themselves are expected to make further use of the new media channels now available to brands.
Finally, we are still likely to see some quality and softness improvements; however these are likely to be fewer in number as manufacturers try to respond to new consumer drivers, particularly concerns about the environment. Although consumers have proved resistant to the use of toilet paper products manufactured from recycled raw materials, companies should focus resources on developing more environmentally friendly packaging as well as making claims about the logistical savings that can be made by consumers all switching to larger sized rolls. In Europe, for instance, the comparable Cottonelle Double Roll product is marketed as being an environmentally friendly choice and this has helped to boost sales. TW
Adrian Atterby is Industry Analyst, Disposable Paper Products, with Euromonitor, based in London, UK: email adrian.atterby@euromonitor.com
