By Adrian Atterby, Disposable Paper
Products Analyst Euromonitor International
When analysing the global tissue products market, attention
is usually focused on North America and Western Europe.
Nevertheless other regions can offer manufacturers excellent
opportunities for differing reasons. Australasia, while
being a relatively small market, offers manufacturers
a culture, language and business environment similar
to that which they are accustomed to in either North
America or Europe.
Asia, meanwhile, offers something completely different;
a business environment and culture which are totally
dissimilar to what Western manufacturers have previously
experienced, but at the same time offering excellent
possibilities for large scale growth, particularly in
China.
TOILET PAPER KING OF ALL MARKETS
The toilet paper market in Australia is the most dynamic
tissue product segment according to Euromonitor International.
In 2005, the sector witnessed a 10% value growth, driven
by the launch of wet toilet tissue, SCA’s Sorbent ‘Clean & Fresh’ being
the leading example, and trading up of the product.
However,
in 2006, the segment could only manage 1% value growth,
despite a 3.5% expansion in volume sales. This was due
to stern competition and increases in pack sizes, which
restricted any potential price rises. Only 9% of total
toilet paper revenue is generated through the sale of
private label products in Australia, which is small compared
to the Western European markets, and in fact has dropped
since 2001 by almost 2 percentage points according to
Euromonitor’s research. Toilet paper sales in New
Zealand are under even greater pressure, having experienced
a revenue decline in 2006 of 6%, despite a 1% growth
in volumes. Increasing competition amongst manufacturers,
as well as growing consumer preference for larger pack
sizes, contributed to a drop in the average price per
roll, which then impacted on the overall revenue.
Unlike the Australian market, private label commands
a large share of New Zealand toilet paper, with around
28% of the market, although this share has remained stable
for the past five years.
A number of premium products have been launched onto
the New Zealand market recently, with Sorbent’s ‘Clean & Fresh’ wet
toilet tissue again being one of the best examples. However,
sales were disappointing, probably not helped by the
lack of a major advertising campaign to explain to consumers
how to use wet toilet paper. Although it was introduced
in 2005, wet toilet paper currently commands less than
1% of the New Zealand toilet paper market in value terms.
In order to fully exploit this new product, manufacturers
will need to determine reasons why consumers may want
to use it (some medical conditions mean wet toilet paper
is more comfortable to use) and then focus promotional
and educational activities on the groups most likely
to try the product.
SCA and Kimberly-Clark are currently the dominant players
in the New Zealand toilet paper market, accounting for
more than a 65% share in value
terms. However New Zealanders prefer to purchase domestically
produced goods whenever possible and Cottonsoft, New
Zealand’s
largest domestic toilet paper products producer, has
seen its share of the toilet paper market grow by 2%
in recent years. It has rolled out a new range of economy
toilet tissue with features usually only found in premium
brands and which have provided strong competition to
the global brands.
BOXED FACIAL CLAIM
LION’S SHARE OF TISSUE
REVENUE
Despite the Australian tissues market being dependent
upon boxed facial tissues for 90% of its sales, the most
interesting developments of recent times have occurred
within the pocket handkerchief segment, particularly
in relation to Kimberly-Clark’s anti-viral
tissue. This is a classic example of innovative and functional
product development influencing consumers’ choice
of product. This is particularly the case where premium
products have functions that mark them out as unique
and exclusive but are still sold at affordable prices.
Interestingly, Euromonitor International’s research
shows that private label takes a relatively small share
of the facial tissue market in Australia, only 7%, especially
low when compared to West European markets such as Germany
and the UK. This is probably due to the less mature nature
of the Australian retail market. However in the past
18 months both of Australia’s leading retailers,
Coles Myer Ltd and Woolworths Ltd, have launched premium
private label tissues, helping to raise the profile of
private label nationally. With global retail businesses
such as Tesco’s actively looking to buy a presence
in Australia it is not likely to be long before private
label is challenging brands for significant market share.
The
opposite is the case in New Zealand, where private label
accounts for 23% of the market and where manufacturers
such as Progressive Industries, who supply tissues to
three of the major supermarket chains, have started to
produce premium products which are challenging established
brands such as Kleenex and SCA’s Sorbent. It was
also expected that health alerts such as SARS and bird
flu would encourage better hygiene with consumers preferring
disposable tissues over cloth handkerchiefs.
However, this has not been the case as sales revenue
from tissues dropped by 6% in 2006, despite volume growth
of 1%, probably due to price pressures resulting from
such a high presence of private label products. Environmentally
friendly features are also proving to be increasingly
popular across all tissue product segments in Australasia
according to Euromonitor’s research. New Zealanders
in particular like their clean, green environment and
are keen to preserve it. Some disposable paper products
are seen as a threat to this and consumers are demanding
choices that ease their conscience. The popular media,
the New Zealand education system, and the actions of
green lobby groups are keeping environmental
issues to the fore and more and more members of the general
public are making their own choices to be environmentally
sound.
JAPAN OFFERS STABILITY; CHINA OFFERS GROWTH
Sales in Asia mainly come from the established market
of Japan and the emerging market of China. While revenue
generated through the sale of tissue products has remained
stable in Japan in recent years, due to a fluctuating
economic situation and unfavorable demographics, China
has raced ahead. In 1997 income from toilet paper sales
was roughly similar in both countries. However as Chinese
economic prosperity has increased, sales have risen dramatically,
and in 2006 the Chinese market was worth double that
in Japan: $US3.3 billion versus US$1.6 billion.
The Chinese toilet
paper market is currently dominated by domestic players,
with the exception being Asia Pulp & Paper.
However the majority of the market is split between small,
local producers, with nearly 70% of the market going
to manufacturers who individually account for less than
1% of the market in value terms according to the latest
figures from Euromonitor. As the vast majority of their
sales come from economy products, local producers have
spent revenue winning market share through deep discounts
and multi pack offers, rather than investing in R&D.
Although this strategy helped initially, as consumers ‘trade
up’ to higher quality products, this lack of investment
will leave the local players extremely vulnerable to
increased competition from high quality manufacturers.
Usage of tissue products in many of the major Chinese
cities mirrors that of major Western markets, with consumption
levels reaching 8 kg per person per year and consumers
increasingly demanding premium quality products. The
vast majority of sales in China, over 80%, occur through
the supermarket/hypermarket channel. This allows larger
players, such as Vinda Paper Company, to dominate as
they can provide supermarket tissue buyers with a broad
range of branded products across numerous categories,
something which the smaller producers cannot match.
This continued growth of toilet paper in China, 9% in
2006, has attracted the attention of Western manufacturers,
and SCA recently acquired a 20% stake in Vinda Paper,
the number two player in toilet paper in China, for around
US$50 million.
INNOVATION MAINTAINS CONSUMER INTEREST
IN JAPAN
Little opportunity for volume growth exists in the Japanese
market, due to unfavorable demographics, according to
Euromonitor International.
This has forced manufacturers to innovate at a quickening
pace in order to protect both volume shares and revenue.
Japanese consumers have a strong predilection for products
which are both visually appealing and come complete with
fragrant aromas. This has resulted in toilet papers featuring
butterflies and music themes (Kleenex Print from Crecia),
flowers (Ellair Shower from Daio), toys, balls and rabbits
(Nepia Japan no Bi from Oji Nepia) as well as light floral
scents.
A further key marketing tactic has been the release of
limited edition products, particularly in the facial
tissue category, to spark interest and drive sales. Japanese
consumers are keen to purchase limited edition products
as a way of guaranteeing exclusivity. One of the most
extreme examples of this tactic was seen in February
2007 when Oji Nepia launched its ‘Cho Hana Celeb’ boxed
facial tissue product. Sold in a 2-pack set for 3,000yen
(nearly US$25) and limited to Internet sales only, the
3,000 packs made available sold out in a matter of minutes.
Japanese brands have also focused on using technology
to improve sales in the facial tissue market. Nippon
Paper Ltd launched the ‘Crecia Fabree’ product
at the end of March 2007 offering 220 double-ply tissues.
The major difference between this and other boxed facial
tissue offerings is that the carton comes complete with
photocatalytic decontamination technology which acts
as an air care solution, deodorising and freshening the
air. Nippon hopes to sell the product to consumers
with pets and babies and for use
in cars. This could be the perfect time to launch
such a product in Japan as it is currently experiencing
a large pet boom and people are very conscious about
bacteria and odours.
MULTIPLE MARKETS, MULTIPLE STRATEGIES
In order to exploit the
opportunities available in the tissue products markets
of Asia and Australasia manufacturers will need to
adopt a number of differing strategies. The Japanese
market has always been the preserve of domestic producers,
who understand the uniqueness of its culture in a
way that multi-nationals simply cannot. So far, only
Kimberly Clark has managed to compete on an even-footing
and even it is coming under increasing pressure from
local firms such as Oji Paper Co Ltd, which has seen
its share of the largest segment, toilet paper, more
than double in the past five years.
Other markets in Asia,
and particularly China, offer excellent growth opportunities
for brands. Consumers in these countries are keen to
buy into the Western lifestyle, the implication of
which is that it should be easier to create successful
marketing campaigns. Initially, Euromonitor International
believes it will be crucial for manufacturers to present
the correct product mix to consumers. Although they
may wish to sell large quantities of premium products,
securing higher margins, the reality of the situation
is that consumers are only able to afford economy products,
and it is these that brands need to concentrate on
providing. The only exception to this rule will be
in the large cities in China, where average income
and consumption levels for large parts of society have
already reached Western levels, and demand for premium
products is high.
The situation in Australasia is somewhat similar
to Western Europe, in that markets are being squeezed
by unfavourable demographics, fierce competition
and a very innovative private label sector. In order
to achieve success here, Euromonitor International
predicts that manufacturers will need to focus on
innovation, whilst at the same time keeping prices
as competitive as possible. Freight costs, for example,
are having a negative effect on New Zealand manufacturers
and in April 2006 Cottonsof announced the downsizing
of its Dunedin plant in favour of opening a new factory
in the heart of the company’s biggest
customer base, Auckland.
For every NZ$1.00 Cottonsoft was spending on the Dunedin
factory, it was spending NZ$2.00 getting its products to
consumers on North Island.TW
