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APRILY
By Adrian Atterby
 The North American tissue market is dominated by the
USA, which accounted for 90% of sales in 2006, according
to the latest research from Euromonitor International.
However, despite being next door to each other, the markets
of the USA and Canada offer different opportunities for
brands, not only in terms of how products should be sold,
but also in terms of category growth.
Sales of tissue
products in the USA grew by 4% in 2006, adding over US$500
million in revenue. However, nearly 80% of this growth
came from toilet paper and, while kitchen towels also
added US$125 million, facial tissue sales were stagnant
and the paper tableware segment actually lost value.
Euromonitor’s research shows that this compares
unfavourably to the Canadian market in which all four
segments recorded growth of between 5-8%.
Toilet paper sales
dominate in each market accounting for slightly more
than a 50% share of total revenue. Both countries performed
well in 2006, with revenues increasing by more than 7%.
However, due to high existing penetration rates and unfavourable
demographics - according to Euromonitor international
population growth is only around 1% per year - much of
this increase was due to price rises and consumers trading
up.
Quality is uppermost in American consumers’ minds
and there is a definite correlation between the economic
situation and the quality of products purchased. The proportion
generated by premium papers in the US increased by 1% point
in 2006 and now accounts for nearly 20% of the total toilet
paper market. Much of this growth is being driven by the
brands as they look to add value through product innovation.
Softness
and premium quality are also buzz words in the Canadian
market. Kruger Inc has attempted to tap into consumer sentiment
for quality products with the launch of its Cashmere brand,
supported by an innovative marketing campaign. While other
brands such as Irving Tissue’s Royale continue to
use the ubiquitous fluffy animals in their promotions,
Kruger has promoted its new brand by featuring white cashmere
garments to emphasise the softness and thickness of its
premium product.
 Brands in the US have also started using
alternative marketing techniques in order to boost awareness
and value of their premium products. P&G promoted
its Charmin Ultra brand by providing an upmarket public
toilet in New York’s Time Square during the 2006
Christmas holidays and the launch of Renova Black saw
design featuring in the toilet paper market for the first
time, with its totally black toilet paper costing nearly
US$3 for a single roll.
Euromonitor International’s
data shows that sales of wet toilet paper continue to
disappoint, however, accounting for less than 1% of the
market in Canada and less than 3% in the US. This is
despite major marketing efforts in support of products
such as Cottonelle Moist Wipes Flushable or Charmin Fresh
Mates Cloths. One reason for disappointing sales is that
consumers are confused as to the nature of the product.
Should it be used as a stand-alone or in conjunction
with traditional dry toilet paper?
Looking at other countries
like Switzerland or Germany where sales revenue accounts
for 8-10% of toilet paper expenditure, room exists for
significant growth. However, in order to achieve this,
manufacturers need to clearly communicate the purpose
of their products. Attempts to launch child-friendly
toilet paper, like Kimberly-Clark’s Cottonelle
for Kids, which combines dry paper with wet wipes in
one dispensing system, suffered due to poor positioning
and the launch of competing products positioned as children’s
wipes and which leveraged existing brand names, for example
Pampers Kandoo.
In an attempt to head off increasing private
label interest in the toilet paper market, a number of
manufacturers have extended their brands into the economy
segment. P&G, for example, launched Charmin Basic
in the USA, a one-ply product costing as little as US$6.99
for a 24-roll pack.
TISSUE SALES UNDER PRESSURE
Growth in US facial tissues was sluggish in 2006, with value sales increasing by only 1%, while volumes actually decreased. The Canadian market meanwhile saw revenue growth of 7% despite volume growth of only 1%. One of the similarities between the markets is the revenue split between boxed and pocket handkerchiefs, with both countries dominated by boxed tissues. Value sales have been affected in both markets by the increasing tendency of consumers to purchase private label products due to improvements in quality. Indeed, Euromonitor’s research shows that US private label products have secured an additional 2.5% points in the last two years, making them the number three ‘brand’.
In order to try and increase revenues and stabilise prices in North America, Kleenex has focused on redesigning its packaging to add value. The result is its Expressions Ovals range, available in nine different designs, which consumers are supposed to display in their homes, prompting greater usage. The company has also started a service which allows consumers to send in digital pictures which are then copied onto the side of an Ovals box, thus making it an ideal gift for Mother’s Day, as a stocking filler for grandma at Christmas or featuring a picture of a new born baby. In addition, Kleenex has also launched a global marketing campaign under the tagline “Let it out”, which encourages people to share their emotions on the letitout.com website, which supports the campaign.
Kimberly-Clark continued to push its premium anti-viral tissues, which now hold 4% of the US market, having generated sales of US$140 million globally since 2004. In order to boost sales and improve customer awareness of the brand, the company promoted these tissues as a key ‘back to school’ item as this time is one of the biggest selling periods for facial tissues. It launched anti-viral tissues on the Canadian market just before Christmas 2006 and will be hoping for similar results.
Sales revenues for kitchen towels in the US rise in times of economic growth as many consumers use towels more generously. When consumers are not feeling prosperous, they tend to use kitchen towels sparingly, even reusing them or abandoning them in favour of substitutes. Revenue generated through the sale of kitchen towels increased by 4% in 2006 in spite of a small decline in volumes and an increase in the share of revenue accounted for by private label products. Because of limited opportunities for volume growth, brands have focused much of their attention on product development in an attempt to drive up value sales. P&G has launched a number of task-specific products, releasing ‘Bounty Cooking & Microwave’ and ‘Bounty Glass & Surfaces’, as well as ‘Fat Rolls’ which contain 50% more sheets on each roll.
Manufacturers have also increased the strength and absorption qualities of their products, allowing them to charge a higher price point and also meaning they can compete with traditional cleaning cloths and rags. One result of this increase in strength has been the launch of ‘Bounty Super Duty’, which has been developed specifically for use in garages and workshops. The launch was supported by a sponsorship deal with Kevin Harvick, the 2007 Daytona 500 winner.
In addition to core developments in quality and task-specific segmentation, design is also playing an increasing role in how products are positioned. The number of seasonal, decorative prints available has increased over recent times as typified by Bounty’s Home Décor and Designer’s Touch ranges.
Many of the same developments are occurring in the Canadian market, where strength and sponge-like absorbency are the main focus of attention. Developments such as these resulted in unit price rises which helped value sales rise by 7% despite a small fall in volumes. However, while the US market is dominated by Bounty, the Canadian market is dominated by local players, the market leader being Kruger Inc’s Sponge Towels, which is continually supported by strong marketing campaigns. Improvements have not been confined to the standard and premium categories, however. Growth in the share of revenue taken by private label has forced manufacturers to launch products aimed at the economy segment. P&G introduced ‘Bounty Basic’, which, although more expensive than some value-priced brands, has found a niche in the market appealing to price-conscious consumers who still prefer a branded product but are willing to pay only a small premium.
In 2006 the market also saw a first in kitchen towels as Georgia-Pacific launched Sparkle Lemon Scent. The use of fragrances is becoming increasingly popular in disposable paper products as a way to differentiate brands from those of competitors, and this launch is likely to result in a raft of further launches from rival manufacturers.
PAPER TABLEWARE - A CATEGORY LOST TO PRIVATE LABEL?
Euromonitor International’s research shows that the US market for paper tableware declined by almost 2% in 2006 in both volume and value terms as consumers continued eating out, meaning they required fewer napkins at home. Consumers also hoarded napkins after visits to restaurants and from takeaways, further reducing the need. Product development in this category has been low recently, mainly as a result of a highly fragmented market, with 12 brands having at least a 1% share and private label being the market leader with 33%. Paper tableware is considered a non-essential purchase and will therefore struggle to grow as consumers are finding other products on which to spend their cash. There are also a number of substitute products that consumers can use and which are already present in the home, such as kitchen towels or even toilet paper.
The market in Canada is in complete contrast, having experienced growth of 5% in 2006, albeit from a much smaller base and despite a minimum volume increase. A further fact differentiating the two markets is that Canada is dominated by branded products with private label accounting for less than a 4% share. This is due partly to the extensive use of substitute products by less affluent consumers which means there is little demand for cheaper products.
Moving forward, Euromonitor International forecasts that volume growth will be difficult to achieve as most tissue product segments already have high levels of penetration. Therefore, in order to stimulate market growth, brands should focus on product development as a way of driving revenue. However, it would be a mistake to concentrate solely on product performance.
The launch of Renova Black, along with its advertising campaign, shows the way in which elements of design and fashion can be used to increase the value of a paper product. Kimberly-Clark is also trying to change consumer attitudes towards tissue by trying to create an emotional attachment between customers and tissue products with personalised packaging.
Those brands which are able to segment the market, creating superpremium categories as well as serving the lower end of the market, will be the ones to benefit the most. TW Adrian
Atterby is with Euromonitor International For more information
about Euromonitor International’s global tissue
products market research please call Saskia Adriaens
on +44 (0)20 7251 8024 Ex.3504 or visit www.euromonitor.com/Disposable_Paper_Products |
