There are only 21 million people living in Australia. But whether
it's on the cricket pitch or in the pool at the Olympics, Australians
are used to outperforming and taking on tough competition
The
same is true of ABC Tissue, the tissue maker that has emerged
from humble beginnings as a family-owned import business and
expanded into a leading producer for the Australian market.
And now the Sydney-based company, which is already more than
holding its own against global heavyweights in its home market,
is planning a round of expansion that will bring it face to
face with tough competition in a leading tissue market in Asia
- Japan.
The Ngai family started up ABC Tissue about 20 years ago.
The company was initially an importer of tissue, and it then
moved upstream into converting. Then, in 2003, the company seized
the opportunity to again move upstream into production. ABC
bought up Softex Industries in Queensland. The former Softex
mill has 19,000 tons/yr of capacity on two 2.7-m-wide tissue
machines at its mill in Carole Park, Brisbane, and it now operates
under the name Queensland Tissue Products.
ABC Tissue's next step was to fill a startling gap in the
Australian tissue industry. Until a few years ago, there was
no tissue capacity in Sydney, Australia's largest city. At the
end of 2004, ABC Tissue placed an order for a new tissue machine.
It started up the new tissue machine at Wetherill Park in
Sydney's western suburbs in March 2007. PM1 is a 3.4-m tissue
machine from A Celli with a design speed of 2000 m/min. It features
a high temperature Premiair hood. It also features a conventional
yankee dryer. The energyefficient steam and condensate system
for the dryer was supplied by Novimpianti. The machine uses
imported NBKP and LBKP from South America and Canada, says ABC
Tissue founder Henry Ngai.
PM1 has a design capacity of 45,000 tons/yr. "The tissue
machine is not running at full speed yet," says Henry Ngai.
NOVEL PROMOTION
ABC Tissue has numerous converting lines at Wetherill Park
for toilet tissue, facial tissue, napkins and kitchen towels,
including a fully automated facial tissue line. The lines produce
a variety of products and brands, including the flagship Quilton
brand of toilet tissue. This premium brand has good surface
softness and strength properties, which result from ABC's use
of high-quality pulp and its converting knowhow.
In promoting their toilet tissue brands, most tissue makers
opt for conventional advertising messages that depict soft,
clean images of puppies or memorable jingles. But imagine describing
a premium grade of toilet tissue as a product that "loves
your bum" and Cupid firing arrows at people's bottoms -
could such direct promotion work?
The answer is yes, the creative television campaign from Sydneybased
advertising agency Gorilla Communications that was launched
in 2005 has worked well. Perhaps the slogan suited the well-known
Australian preference for blunt, 'fair dinkum' talk and earthy
humour.
At any rate, shoppers boosted Quilton's share of the premium
toilet tissue market to top spot. Three-ply and four-ply Quilton
had a 25.2% share of the Australian premium toilet tissue market
at the end of 2008, according to national chain store scan data.
The two competing premium brands - two-ply Sorbent and single-ply
Kleenex Cottonelle - followed close behind on more than 23%
each. Mid-range, private label and recovered fibre-based grades
made up the rest of the toilet roll market. (Note that ABC's
competitors point out that market shares fluctuate frequently.)
Apart from Quilton toilet tissue, ABC Tissue also makes Softly
brand medium-quality toilet tissue. In facial grades, it makes
Quilton premium facial tissue, which holds about 5-7% of the
premium facial tissue market in Australia. Its Symphony brand
of budget priced facial tissue has about a 9% share of its market.
ABC Tissue also produces kitchen towel, and 100% recycled fibre
Naturale toilet tissue.
Meanwhile more products are on the way. "We are carrying
out plans to expand into other products", says Henry Ngai.
The major launch in 2009 will be into environmental products
that would reduce wastepaper going to landfill by 25,000 tons/yr,
if it takes 100% of it market. Apart from producing its own
stable of brands, ABC is also a large supplier of private label
brands to leading supermarkets, including Woolworths, Coles
and IGA.
ABC Tissue faces tough competition from its domestic rivals.
These comprise two global leaders and another privately-owned
producer.
What it calls "unfair" import competition
is a greater source of concern for ABC Tissue than domestic
rivalry, but the recent Australian Customs Service ruling that
some imports from Asia were being dumped in Australia could "restore
a more level playing field". Customs is expected to apply
anti-dumping duties that will slow the flow of imports, but
no action will be taken until the Attorney-General's Department
completes a review of the Customs ruling.
Meanwhile ABC Tissue and its Australian tissue making peers
have been dealt another blow from an unexpected quarter. The
Australian government's Carbon Pollution Reduction Scheme, which
is decided to put a price on carbon and cut emissions, will
drive up their energy costs. "Natural gas prices will rise
by 30-40%," says ABC Tissue production
GROWTH PLANS
At the beginning of last year, ABC Tissue's then marketing
manager Sunny Ngai announced that ABC/Queensland Tissue Products
group had bought land for an expansion in Brisbane, Queensland
(Sunny now heads up the management of the family-run company
founded by his father Henry). The plan also involved consolidating
the Carole Park tissue machines at the new site.
Then, in February this year, Henry Ngai announced the details
of this expansion. "We plan to install a 60,000 ton/yr
machine", he says. Planned installation is about 2-3 years
away at least. The project is delayed by a funding hurdle -
that is, the global financial crisis has made banks reluctant
to lend. "If it was up to me, I would go ahead with the
project now", Ngai says.
The project would give the Australian industry a major boost.
But rather than encroaching onto its rivals' shares of the domestic
market, ABC Tissue is planning to target its added capacity
at export markets.
"We will export to Japan and Hong Kong",
says Henry Ngai. He sees an opportunity for premium brands in
both of these markets. He concedes that freight costs are an
important issue in exporting to distant markets, but he is confident
that his good relationships with shipping companies will reduce
freight costs to manageable levels. Meanwhile ABC Tissue has
already begun to export jumbo rolls to New Zealand and the Middle
East, with finished products to Hong Kong.
Finally, Henry Ngai says that his strategy for ABC Tissue
is to seek out and pursue growth opportunities. In Australia,
that means developing new products, and striving to capture
a good slice of growth in the market. "The domestic market
grows at 2-3%/yr, and our aim is to catch about half of that",
says Henry Ngai. And, as noted above, ABC Tissue is pursuing
export opportunities as well. So watch for more developments
as this innovative tissuemaker prepares for the next round. TW
