SCA
hit the German consumer tissue market with three new products in the 2nd-3rd
quarters of 2009: Tempo toilet paper, a line extension to the Zewa toilet paper
range, and a re-launch of the Zewa Wisch&Weg household towels. The moves
are part of the company’s response to the need to migrate Charmin and Bounty
users when its licences run out, though the company stresses the new ranges
are not clones. SCA acquired temporary rights to the Charmin and Bounty brands
when it took over P&G’s European operations in late 2007.
The moves follow the launch of the Tempo hanky brand innovation ‘Tempo sanft
und frei’ (Complete Care) in October 2008. This innovative product, with a P&G-patented
surface-balm treatment, came in response to a declining share of the key German
market, where private label continues to extend its reach. Supported by a 360°
media campaign, Tempo hankies have boosted their share to 30% of the market,
according to SCA Marketing Manager Region Central Jochen Sandelbach.
The changeover will be demanding on SCA but the strategy is clearly mapped
out. For example, the company believes half its consumers for Charmin toilet
paper buy it above all for the strength of the brand, while the other half are
attracted by the TAD qualities of the sheet. Tempo is being positioned to appeal
to the former, while the new Zewa toilet paper line extension is being re-positioned
to appeal to the latter. To replace Bounty, Zewa will grow from three grades
to six and the Bounty replacement will be clearly marked as such.
SCA is market leader in Germany with annual volume of around 600,000 tons/yr.
As our other articles on the country make clear, brands generally have a relatively
small share of the market here because of the predominance of private label
and also because of competition from other producers large and small.
Overall, in Germany tissue brands have a 22% value share (YTD April 2009 Nielsen):
45% for pocket hankies, thanks largely to big daddy Tempo, about 16% for the
rest. This is a result of the strength of the discount retail sector, which
represents half the total retail market for household products such as tissue,
much higher than in most other countries. Number one discounter chain Aldi alone
has 26% of the market for tissue products – 29% for toilet tissue, 26% for household
towels, 18% for pocket hankies. SCA takes the view that the industry is so capital
intensive, that a presence in both sectors – PL and brands – is essential to
efficient operation. Fortunately for Germany’s manufacturers, PL prices have
also increased in the recent past.
Germans have not yet really felt the impact of the recession, according to
Thomas Günther, Marketing Director Region Central. They are of course aware
of the serious economic situation and have moved to cut spending, with more
emphasis on the discount sector and, in particular, on promotions. Growth in
household towels has primarily gone to PL, for example. But many brand customers
are older, loyal and, thanks to higher incomes, less vulnerable, so the impact
on brands is modest.
AWAY FROM HOME
The away-from-home market is highly fragmented. SCA as the clear market leader,
together with K-C and GP, between them have around 50% of the German market,
according to Regional Director Central Europe Markus Stojan. A far cry from
the 80+% for the big three in the US, largely because Germany has open borders
and a highly concentrated, dense and homogeneous market that has attracted imports
from its neighbours. Now, with demand booming in Eastern Europe, the pressure
from imports is easing.
Private label in Germany can be low priced. SCA responds to this competition
in two main ways. First, it differentiates itself from the competition by stressing
cost in use with the help of the quality and systems outlined above, a message
it preaches to customers and end users with good results, according to Stojan.
Second – and a key point of differentiation from other manufacturers – it works
closely with the retailers to develop common business.
At the low end of the market, there has been a lot of price pressure recently
as the global downturn hits many companies. Here, where in-andout volumes are
the rule, distribution partners are calling for significant price cuts. In the
branded sector, though, quality and cost in use are effective and prices are
stable.
The main pressure from the crisis has been in the away-from-home market. Car
makers and their suppliers have been very hard hit by the crisis. Hotels and
restaurants have also felt the impact and have cut back on purchases, though
fast food has bucked the trend. The negative impact of this trend has to some
extent been compensated by a boost to the consumer market, however. People are
eating out less, so they are spending more time at home, increasing their volume
consumption, even if there has been some movement down market.
One of the big factors working in SCA’s favour, particularly in the German
market, is the environment. The country has a long ‘green’ history and Germans
consider eco-consciousness essential. SCA does not particularly stress the environment
when selling its brands but it does put a lot of emphasis on its pre-eminence
as a role model and is proud to proclaim itself No 2 green company in the world.
“Among tissue companies we are the world leader. The environment is our home
field,” says Stojan. The European market has been growing more homogeneous over
the years but there are still important differences. One is in the different
approaches to the environment, according to Jaap Stolk, Director of Business
and Intelligence. Whereas, for the UK consumer, sustainability is the key concept,
he said, the German consumer is overwhelmingly concerned by recycling rates.
Other differences include the limited success of TAD for consumer tissue toilet
paper in the German market. Lesley Cordial, Vice President Category Consumer
Tissue, notes that Charmin was launched as a twoply TAD toilet tissue in Germany
but was rejected by the market because Germans, unlike their UK counterparts,
like three-ply or more. Grades with up to five plies exist, she said.
INNOVATE TO THRIVE
It is no secret that successful innovation can be a key to success in tissue.
Little surprise, then, that SCA lays stress on developing new product ideas.
The launch of Tempo toilet tissue may be the most striking example yet – taking
one of the industry’s oldest and best-known brands and launching a new product
with its name seems like an obvious move but had not happened in the 80 years
of Tempo history.
But SCA has a number of other innovations to its name in recent times, according
to Stojan and Günther:
- A new line of aluminium dispensers has won the Purus design award. Among
other advantages, fingerprints do not show on the aluminium as they do
on stainless steel
- A new line of everyday dispensers in plastic has been launched, designed
by Thomas Meyrhoffer. Even before its official launch, this line won
the IF Design award and recently received the Red Dot Design Award.
- A new design of interfolded napkins – an idea imported from North America
– that gives a 25% saving on material used and has been a huge success
in the fast-food business
- A new hybrid TAD/crepe towel with coloured glue for branding purposes has
met market success and is now being imitated by competitors Household
towels containing their own soap
- Various packaging innovations designed to make packs easier to open and
to read, which have been made popular in Germany and beyond.
With its financial muscle, wide range of products, support for the retail
sector and AfH customer base, its strong environmental reputation and its
track record as an innovator, SCA is well positioned to maintain its position
in the German market. Says Günther: “Our combination of qualities and added
services makes us unbeatable.” TW
