With just 20 million people, despite its vast land mass, Australia
hits above its weight in world markets, and nowhere more so than
in tissue
Australia
is better poised than other developed economic regions to weather
the 2008-09 global financial crisis. Its labour market is stronger
than that of either Europe or the US, and its main trade partner,
Asia Pacific, is still expected to grow in 2009. Nevertheless,
cooling housing markets, depreciating currencies and plunging
commodity prices will undoubtedly have an effect on the Australian
economy, and subsequently the Australian tissue market.
Despite its small population, Australia remains an important
market for the tissue industry. Retail tissue per capita consumption
stands at almost 10 kg, placing the country in sixth position
in the global rankings. In value terms the country is even further
up the rankings thanks to relatively high prices.
Kimberly-Clark and SCA continue to dominate the Australian
tissue market with a combined value share exceeding 70% in 2008.
The strength of both companies is derived from a combination
of powerful brands and broad representation across tissue categories.
Both companies recorded an increase in market share over the
past two years but growth has been somewhat stifled by the increasing
strength of premium private label products and recent activities
from local manufacturer ABC Tissue Products.
Following the acquisition of a tissue mill in Queensland in
2002, ABC Tissue Products has managed to gain a significant
share of the Australian tissue market and is showing an appetite
for more. Apart from the ongoing development of its manufacturing
facilities in Wetherill Park, Sydney, the company is also planning
a major expansion of its Queensland plant.
While it will prove difficult for ABC Tissue to increase breadth
of coverage sufficiently enough to significantly undermine the
position of either Kimberly-Clark or SCA, the company's recent
activities are set to strengthen its position and increasingly
challenge the two multinational giants in terms of innovation
and pricing.
Innovation at the premium end of the sector has created relatively
strong growth in recent years in toilet paper. In 2008 this
seemed to work against manufacturers as in the face of an economic
slowdown, consumers began to look for ways to cut back on essential
items. Toilet paper has been edging towards 100% penetration
and one way in which the major players have fought to keep sales
rising has been to offer a high level of new product development
in quilted and other types of premium products.
Over the short term, however, consumers are likely to continue
to shift way from luxury products and towards economy and standard
brands if the economic outlook remains grim. The key players
will try to improve their value shares by launching new products
with added enhancements such as fragrances or decoration. They
will need to renew their focus on standard and cheaper products,
however, if they want to capitalise on the current consumer
trend. Innovation is also likely to focus on premium toilet
paper.
ENVIRONMENTAL CONCERNS
The
traditional consumer requirements of softness, strength and
functionality are now being extended to include environmental
concerns.
Some brands, including Safe from Merino and Delsey from Kimberly-
Clark, are marketed as unbleached papers and presented in paper
wrapping. Merino has extended the environmental friendliness
of Safe with the introduction of Safe Natural Blonde, which
is not re-bleached and is produced from 100% recycled paper.
Over the next few years consumer awareness is expected to
increase as a result of recent efforts from major tissue and
consumer organizations promoting an environmentally-friendly
message to consumers.
Following the removal of Woolworths' private label tissue
products from 
supermarket aisles in 2007 due to claims that
Woolworths' 'sustainable forest fibre' is misleading, a number
of organizations including A3P (national body for plantation
products and paper industry) and Choice (consumer organization)
have touched on the issue of false claims regarding environmental
labelling. Furthermore, consumers are increasingly being encouraged
to support good forest management by buying products which are
marked with either of the two credible sustainable forest management
certification schemes operating in Australia, the PEFC and the
FSC Standards. In July 2008 Kimberly-Clark Australia achieved
full PEFC accreditation for promoting sustainable forestry and
the PEFC logo has already been added to its toilet paper range.
PRICE COMPETITION HEATS UP
Australian retailer Woolworths was judged the cheapest supermarket
in October 2008 based on the grocery price survey run by the
government's new price comparison website grocerychoice.com.au.
Following a well-publicized competition enquiry on pricing
and the resurgence of competing supermarket chain Coles, following
its takeover by Wesfarmers, grocery prices in Australia have
become a major focus of attention. The website was launched
in August in order to increase price competition in the Australian
market, and already claims 3.75 million hits from price-conscious
consumers. It also claims that, by October, the price difference
between Coles, Woolworths and independent retailers had narrowed.
With the largest two retailers involved in fierce pricing
competition
it will be
up to tissue suppliers to use their negotiating muscle to gain
good terms for their brands. Furthermore, the intensifying trend
among retailers to rationalize shelf space in favour of private
label products on top of pricing pressures on main brands will
also result in smaller brands being squeezed out of the supermarket/hypermarket
channel.
PREDICTIONS FOR 2009
Although consumption in Australia is softening, strong employment
figures may work in favour. Unemployment measured 4.4% in Australia
in November 2008, up from a 30-year low of 3.9% in February
2008, meaning the labour market is still tight and, while job
losses are anticipated, they are expected to be low compared
to other developed economies.
Within tissue, given the relatively high unit pricing of tissue
products,
it is likely that in the current economic environment the industry
will see growth of economy brands, with low-cost private label
products benefiting the most. With price increases unlikely,
tissue players may look to increase volume sales to achieve
savings and claw back some value, which could lead to a return
to smaller and more profitable pack sizes. TW
