SCA Challenge
EXIT Issues

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Tissue business: seeking an industry-tailored GPS system

Twenty plus years in the tissue business make for a long time. When I started out, back in the mid 1980s, working for the company that in a few years would become the world's market leader in the converting business, things were indeed different. I fully appreciated how big this difference had grown when I moved to the tissue making side of the game for seven years as international development manager and as such was deeply involved in setting up two greenfield sites in Europe, now up and running.

Seen from the European perspective, and on top of that from Italy, where a good 40% of production was exported - just like today, only with the difference that the total tonnage has increased dramatically since then - we, both equipment manufacturers and tissue making companies, always have had to keep in mind the great differences existing from one domestic market to the other.

That's why it was Europe, both on the papermaking and technology businesses, which made 'flexibility' the key word of the 1990s. Other areas in the world where tissue technology was manufactured - US and Japan, for example - perhaps perceived national peculiarities as a somehow more exotic need.

And that's why, I believe, most of the new technology at recent Tissue World exhibitions has come from Europe. This drive towards more flexibility did not change and continues today with a much larger number of SKU's a tissue maker has to handle to approach each country's tissue market. Hundreds here, for many of them.

The attempt to export the Big Mac concept into the consumer tissue roll market - based on the assumption that if roll A sells well in developed market B it will sell just as well in any other developed market - failed despite massive advertising and communication efforts. It's recent history we all remember.

Each market has its own peculiarities, within and - maybe only to a slightly lesser extent - outside Europe. And I don't see any sign that this will change in the near future. Tissue people who were in the business already back in the 1980s may think of those days as a forever lost heaven on earth, not only because since then their hair has turned grey but also because today the business is much more hectic, to say the least.

Back then, a tissue manufacturer and/or converter normally needed no mother's helper to get a good night's sleep. Margins were good. Products were relatively simple, and a company which had to deal with as many as, say, 50 different SKUs would most likely have ended up as a case history at tissue high school. In addition, regardless of the country they were operating from, they just didn't feel all the pressures they do today. What changed so dramatically?

I was waiting for the hourly news the other day on the radio. The last advertisement right before it went on air caught my attention. A medium-tobig retailer with interests in some EU countries was advertising its private label chocolate bars. (And by the way retailer brand is today definitely a more correct way to express the concept of PL).

It's not that these guys have a passion for this so good natural mood enhancer. Next spot, I'm sure, could have been shampoo. Or lipstick. Or toilet paper?

Here's what changed. The power of modern retailing. Now retail brands are so good they justify advertising investment. Every day, a tissue company's Brand X is on the shelf alongside the retail brand, which may actually be manufactured by the same company under licence. Today's retail brand is completely different from that entry-level product of the 1990s. Today, it competes in every respect with Brand X. Sometimes it is the same product, aside from packaging and decoration, maybe core colour and similar minor characteristics (1 mm shorter sheet length, or more likely longer?).

Brand X used to attract all the advertising and research money, not to mention the capital investment needed to purchase the latest technology. Today the characteristics of the branded product, including some of the most innovative ones, can be found in the retailer product sitting alongside it.

If this isn't a conflict of interest, then I don't really know what could be. One could endlessly debate the responsibility of the tissue industry for this major technology transfer. Someone may say it was uncalled for - at least to this extent - and that tissue makers overdid the whole thing.

My humble opinion is that we may not have chosen this economic model, which may well be the result of actions dictated more by need than reason, but we certainly cannot change it overnight. To make the picture grimmer: no matter how good products are, escaping from the commodity spiral remains a key issue.

So what can be done? Looking back only reminds us how we got here. It's important, for those who don't learn from history are condemned to repeat it, but here's where the need for looking back ends.

To conclude, I only may add that I feel that some of us in all areas of the industry, even if correctly analyzing the current situation, keep being way too much oriented to the 1990s. Thinking, acting, deciding like in the 1990s is not going to push anyone any further from where they are. There are no miracle recipes. We are living in tough times. Price is the key. Entry-level products have stopped declining and are again gaining market share. Yet the quest for web enhancement is still there, and strongly so. Where? Within the converting line.

Some parts of the world are adding new capacity. Which also means new machines for manufacturers of converting lines, orders for suppliers of ancillary equipment, work for those who are into services etc.

Those who operate in areas where caution or internal policies suggest a 'hold-on' approach never cease to seek competitive advantage, whether retrofitting units, carrying out upgrades, or implementing home-made solutions. These days, it takes courage, of course. But does the tissue industry have the power to modify the situation? Or at least to be ready for next upturn in the cycle?

No one even dreams of a pulp market different from today's. Its fluctuations have been there since the first chart was drawn. Nor can the power of modern retailing be reversed. Growth and survival will ensue from serving retailers better.

For example, by giving the majors their own product(s). Modern superflexible embossing laminating stations with on-the-fly pattern changes exist today (three minutes paper-to-paper) and can be retrofitted just about anywhere. Such developments may enable the converting industry to differentiate itself from its competition. By, for example, producing at high efficiency with machines designed to do what is required and not to break industry records that are of no consequence to customers.

Next moves? Serving retailers to fully meet their needs is a key to success. If not, for you, already, then for sure not far in the future. Further, tissue company brands must regain their edge over retailer brands. We all know that offering something different or something new is not an easy task in tissue. But our industry's history does not finish today. And that very same history teaches us lessons about our mistakes, while at he same time it also points to our enormous successes when faced with challenges. It's this attitude we must keep alive and bank on for the future. TW