Country Report: South Africa
By Magdalena Kondej
After a year of dynamic value growth, the South African tissue products
market looks certain to slow, writes Magdalena Kondej of Euromonitor International
The tissue products market in South Africa reached R2.4 billion in 2008, growing
by 12% in value terms. Earlier in the decade, value growth in the country was
driven by rising disposable incomes, developing retail channels and growing
urbanization, but in 2008 economic conditions became tougher and the market’s
dynamic value growth was largely a result of manufacturer price increases. Toilet
paper, for example, saw a constant value unit price increase of 4% in 2008 on
the previous year.
These price rises were necessary to combat difficult economic conditions,
including rising production and distribution costs, which also served to erode
consumers’ disposable income levels significantly during 2008. So, despite the
strong value growth, all tissue product sectors, with the exception of toilet
paper which registered 1% volume growth, posted falls in volume.
Local manufacturer Nampak leads the way in the tissue products market, holding
a 22% share, followed by Kimberly-Clark with 20%. In 2008 Nampak achieved the
strongest share gain on the previous year thanks to the success of its Twinsaver
brand, which offers affordable disposable paper products manufactured in South
Africa. As consumers’ economic concerns grew, more opted for the value products
produced by Nampak, and the company gained three percentage points to overtake
Kimberly-Clark and become market leader. Private label, which accounts for 28%
of the tissue products market, also gained share in 2008 on the back of consumers’
economic concerns.
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TOILET PAPER
Toilet paper is by far the largest tissue products category in South Africa,
accounting for 72% of the overall market, which reflects its
necessity status. The category registered 14% value growth in
2008, double that of the previous year, driven by the price rises that impacted
tissue products as a whole. As a result of these price rises, volume growth
suffered and many users of 2-3-ply toilet paper downgraded to single-ply
products. By the end of the review period, single-ply toilet paper accounted
for 75% of total volume sales in toilet paper.
Nampak gained five percentage points in toilet paper to reach a 25% share
in 2008 as consumers opted for the company’s lowpriced single-ply Twinsaver
brand. As well as being cheaper, this brand benefits from strong recognition
and has a reputation for being of good quality. Innovation in toilet paper
was largely limited to packaging and pack sizes, in particular increasing
pack sizes to appeal to larger households. Kimberly- Clark launched a 24-pack
2-ply variant in hypermarkets in July 2008 to appeal to costconscious consumers
seeking a lower unit price. |
While manufacturers’ current focus is on the value end of the price spectrum,
toilet paper is the only tissue products sector expected to register value and
volume growth, albeit slower than during the review period, throughout the forecast
period. Although premium products may lose share in the short term, as the economy
improves luxury products are expected to return to the fore and regain share.
As a result, most future branded product innovation is likely to focus on the
premium end of the market, with Nampak likely to launch a premium product of
its own, further upping the battle with Kimberly-Clark.
TISSUE POLARISATION
Tissues account for 11% of the tissue products market and the sector grew
by 6% in 2008 to reach R254 million, again as a result of price increases and
value-added product launches. Pocket handkerchiefs formed the most dynamic category,
registering 9% current value growth in 2008. However, it remains dwarfed in
size by boxed tissues.
Kimberly-Clark dominates the tissues sector in South Africa, commanding a
41% share through its Kleenex and Carlton brands, while Nampak holds 31%.
Both manufacturers concentrated on added-value products in early 2008, with
Nampak launching Twinsaver Luxury Leaf and Kimberly-Clark launching Kleenex
Calendula 3-Ply Tissue. K-C followed this with an antiviral variant in 2009,
which initially proved popular. However, as in other categories, the impact
of the credit crunch provoked volume declines as impulse purchases fell and
consumers turned to cheaper, alternative products such as toilet paper.
As a result of the lingering economic worries, average annual volume growth
is predicted to fall to -1% to 2013, while value growth will fall to -2% and
private label products are expected to gain share. This is likely to result
in increased polarization in the sector, with branded manufacturers expected
to continue with added-value launches targeted at affluent consumers, while
private label manufacturers will continue to compete on the grounds of price
and cater for cost-conscious consumers.
KITCHEN TOWELS
As yet, kitchen towels have yet to catch on in South Africa and the sector
remains a niche, accounting for just 3% of the overall tissue products market.
In 2008 the market was worth R81 million and growing by 3%, the smallest
gains achieved by any tissue product. Since many consumers continue to regard
kitchen towels as luxury products, again the sector felt the impact of the
difficult economic climate and in volume terms sales declined by 4% as consumers
switched to textile alternatives to save money despite manufacturer efforts
to increase prices below the level of inflation.
Kitchen towel leader Kimberly-Clark, which holds a 37% share, has been
the most active of the major manufacturers. In late 2008 the company discontinued
its value-added Thick & Thirsty brand as the product fell victim to the
economic downturn. The manufacturer chose instead to focus on its Carlton
range, launching new packaging, paper designs and improving the quality of
the product, increasing the brand’s share by one percentage point as a result.
However, due to the lack of consumer interest in kitchen towels, there is
expected to be little activity from the major manufacturers in the short
term at least, and value sales are expected to decline year-onyear as the
sector assumes a more commoditized positioning, dominated by price competition
and private label products.
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PAPER TABLE WARE
Paper tableware is the second strongest tissue products sector in South
Africa, standing at R324 million and accounting for 14% of the overall market.
The sector also registered the second strongest growth overall in 2008 of
9%. However, again this was coupled with a sharp decline in volume sales
as consumers cut back on products regarded as unnecessary or luxury purchases.
Nampak saw the strongest growth in share in 2008 on the previous year, quadrupling
its value share to 2%. This was due to the low price of its Twinsaver Serviettes.
As a result of the sector’s non-necessity status, it is expected to register
the largest fall of any tissue product, both in volume and value terms, over
the forecast period. However, there remains some hope that growth can be
re-established once the economic crisis has fully passed by tapping into
the aspirational nature of the country’s emerging mid-income group. This
would require careful innovation and marketing and is likely to be best achieved
by local players – which currently dominate the fragmented sector – which
can fine-tune their product offerings to meet consumer demands.
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GROWTH AHEAD
While there is no doubt that economic concerns are expected to impact tissue
products over the forecast period, over the longer term South Africa will return
to growth. For the time being major players in the country are expected to seek
means of further reducing their costs, thus enabling them to reduce unit prices
over the forecast period, allowing them to establish a more competitive position
on which to capitalise when growth returns.
