AFH offers rewards for U.S. converters
From restaurant napkins to hospital patient packs,tissue products for use away from home provide steady growth for U.S. converters across many niche markets

by Susan Stansbury

If tissue is the reliable anchor of the paper industry, away-from home tissue products are sailing beyond. The total U.S. tissue market is nearing 8 million tons. Away-from-home (AFH) tissue products comprise about a third of the tissue market where growth at 3 percent is generally outpacing overall tissue demand. Some converting segments are growing more than 5 percent. In addition to its decent general growth rate, AFH products are attractive to tissue producers and converters due to the steady, generally dependable nature of the marketplace. According to Harold Cody writing for Paper Age early this year, key tissue producers are Koch/Georgia-Pacific with 33 percent of the North American Market; Kimberly-Clark with about 17 percent; and Procter & Gamble with 15 percent. These three account for 65 percent of North American capacity, according to Cody.

Other tissue manufacturers include SCA, Cascades, City Forest, Cellu and Little Rapids. Many of these companies typically have their own away-from-home brands. For example, Cellu Tissue manufactures a variety of specialty tissue hard rolls used in the manufacture of various end products, including facial and bath tissue, assorted paper towels and food wraps; in addition, Cellu converts tissue and paper towel products. Many of these companies also outsource to independent converters.

MARKET DRIVERS

A number of elements drive AFH segments and are crucial to continued predictability:

MARKETS AND NICHES

AFH markets include offices and buildings, hotels and restaurants, institutions and other out-of-home settings. AFH is also defined as commercial and industrial tissue products. Market niches then break down into governments, schools, stadiums, amusement parks, airports, hospitals, colleges, work places and more.

The supply chain and distribution channels are often different from segment to segment so that suppliers may be very strong in one area and weak in another, even with the same essential product offering used in each. Capability and quality is no guarantee without sales and marketing expertise within niches.

Major product categories include bathroom tissue, facial tissue, napkins, towels and wipers. In the bathroom tissue category, tissue overwrap is also included. The global wiper market alone is about $4.5 billion of which a significant portion is AFH tissue.

ENVIRONMENTAL FEATURES

A number of companies are touting their AFH products' environmentally-friendly features. Wausau's Bay West Division, Harrodsburg, KY, with its EcoSoft™'99 and Green Seal®'ae products promotes them as "the most environmentally preferable towel and tissue lines available in the away-from-home market." Green Seal Inc. is a Washington D.C. group that sets standards for towel and tissue products. For example, here's an abbreviated summary of what paper towel products must include:

CONVERTING CORRIDORS

On the U.S. east coast and in the Midwest, dozens of converters serve the AFH segments. Both tissue and nonwovens substrates producers supply these value-added product manufacturers. And converters are not overly concerned about foreign competition. Jeff Berk of Berk Wiper, Bridgeport, PA, says the costs of transport coupled with timely supply to AFH markets gives his company a regional edge.

Looking at the synergies in just one corridor of the U.S., in Wisconsin, shows how the substrate-to-finished AFH product process equals real regional strength. For starters, some of the largest tissue machines are there and smaller mills, too. For example, a specialty mill, Shawano Paper Division of Little Rapids supplies tissue for institutional products through its Graham Medical group and also sells tissue to AFH converters. Among the converters on this corridor of manufacturing are significant numbers of companies whose vision for small-to-midsize business startups came from their previous work at the big paper mills. A 2005 Midwest U.S. manufacturing study showed the area as number one or two in most of the manufacturing categories they reviewed where small-to-midsizeproduction occurs.

Precision Paper Converters of Kaukauna, WI, is an example of an entrepreneurial converting company supplying institutional segments of the AFH market. With a lot of expertise gained from working at large mills, the group of investors who manage PPC work with insiders' knowledge. The company converts paper, film and tissue products with capabilities ranging from folding to precision sheeting, rewinding and packaging specialties. "Our bedside facial tissue packs lead our lineup of away-from-home products," says Jack Mason, President. "We produce several private label brands of C-fold and interfolded facial tissue products that are sold primarily through healthcare distribution."

A number of nearby Wisconsin converters produce food service, janitorial and office products including napkins, cleanup towels and restroom tissue products. These include Green Bay Converting, MSP Disposables, Swanson Wiper and Waldan Paper Services. Parent tissue rolls are rewound, slit, sheeted, folded, printed or otherwise converted and bulk packaged for North American distribution. While converters compete, they often outsource to each other since converting equipment is often very specialized.

AFH SUPPLIERS

The health of this region includes allied suppliers from testing laboratories to equipment providers. "Our growing presence in tissue and nonwovens markets is due to our expertise in testing sanitary products," says Debra Cherney, President of Cherney Microbiologial Services. "We make it easier for converters to enter the marketplace when we take on the tasks of product safety testing, sanitation audits, shelf-life studies and routine microbiological testing."

Area printers work with these converters to print brand names, instructional or other enhancements to AFH products. Flexographic converters including Larsen, Nichols, and Tufco print jumbo tissue rolls for wipers, towels, tissue overwrap and other AFH products. Supplying patterns for embossed products is Industrial Engraving Corp. Preparing proofing and prototyping designed for tissue products is Midwest Imaging. Formulating inks especially for tissue products are specialists like Press Color Inc. This aspect of AFH tissue converting has changed rapidly in the last few years as marketers have become more brand-oriented in commercial and industrial tissue products, and ink quality has met the need. "With the demand for largescale economy and increasingly intricate print designs on tissue, we also have developed special colorants and extenders for flexo printing," says Dennis Curtin, Press Color Vice President. "We also take into account particular needs for products that become wet and need special rub resistance properties."

On the equipment side are companies including Curt Joa, Optima and S&S Specialty Systems. "The latest modular equipment for small and mid-size businesses allows entrepreneurial converters to supply their niches and expand for growth, with inline printer add-ons and other options" says Patrick St. Germain, S&S President. "And the latest folding equipment offers AFH marketers new options for smaller packages that dispense large napkins, wipes and towels."

Currently, it's smooth sailing for converters and allied suppliers in away-fromhome markets. Commercial and industrial tissue products are not taking a backwater position in these nimble manufacturing segments. TW



Susan Stansbury is a converting industry consultant and founding member of Converting Influence (www.ConvertingInfluence.com)