By Charles Yip
Kitchen towel is a new product for Chinese consumers,
different in concept and purpose from the products that
are now well established: bathroom toilet tissue, facial
tissue, handkerchief and interfold toilet tissue. It
has been available in the market for many years in the
form of imports – though consumption has been negligible – but
it is relatively new for China’s producers, who
started making it a mere 10 years ago.
Current Market
Review
By the end of 2006, annual tissue consumption in China
was over four million tons, with an average per capita
consumption of 3 kg. The forecast annual growth rate
is 8-10% up to 2010.
Though kitchen towel has a long
history, significant quantities from local producers
did not start hitting the market until 2000.
The target
customers are mainly from the premium segment in major
China cities such as Shanghai, Beijing, Guangzhou and
Shenzhen, where most of the expats and overseas working
groups are living. They were the initial target group
for towel producers and still represent a major slice
of demand.
There are no official statistics available
on gross national consumption of kitchen towel but it
is estimated that current capacity is below 10,000 tons.
However, the growth rate is even higher than for tissue
in general, thanks to the still-low volume base.
Consumers
need education
According to Marcelo Cheng, marketing director of APP
China, a number of important point emerge from a recent
survey that APP has carried out, notably:
| • |
Consumers misunderstand kitchen towel,
seeing it as a kind of hand towel |
| • |
24% of consumers are aware of kitchen towel, compared
to 98% who are aware of bathroom toilet tissue; |
| • |
3% of consumers buy kitchen towel, compared to
85% who buy bathroom toilet tissue |
| • |
60% of consumers say they do not need kitchen towel |
| • |
25% of consumers do not buy kitchen towel because
the price is too high. |
The above data shows that consumer awareness of kitchen
towel is very low and that there is a strong need for
suppliers to offer education on the product, how to use
it and how it is is different from other tissue prodcuts.
In
China, most families commonly use cloth towel instead
of paper kitchen towel in their kitchen and consumers
have the false idea that using paper towel is environmentally
unfriendly. People have not yet become accustomed to
the concept of using kitchen towel.
Modern life style
Kimberly-Clark launched its Kleenex kitchen towel as
the premium brand in the market in 2000. However, the
product is still at penetration stage and not yet even
at at the introduction stage. Through years of promotion,
though, consumer consciousness of the product has increased
and it is now increasingly seen as a part of the modern
life style.
Previously, users were mainly expatriate
foreigners who had experience of using kitchen towel
before moving into China for work or living. Now, the
consumer group has expanded to take in local white-collar
workers who live in the urban areas and who have greater
disposable income than in the past.
Vinda introduced its kitchen
towel product in 1996. It has supplied towel both for
the domestic market and for export. In the early stages,
it introduced the product through institutions, then
moved to consumer groups and has most recently aimed
at high-spending consumers.
Today, Kimberly-Clark, APP,
Hengan and Vinda distributed kitchen towel mainly through
supermarkets and hypermarkets. The distribution channel
is very limited and restricted to major cities and a
limited number of other localities.
Sales are mainly focused
in main cities such as Shanghai, Beijing, Shenzhen, Guangzhou,
Tianjin, Xiamen where expats, foreign residents and white
collar groups are the target consumers It is noteworthy
that stores located in areas with higher-level target
consumer profile have a significant better sales performance.
Marcelo Cheng explained that, for example, the store
in the Gubei district outperforms that in the Changning
district of Shanghai city. Gubei has a large community
of expats, foreign residents and overseas Chinese groups.
Effective
promotional effort
As the sales volume is still very low, none of these
key players has considered it worthwhile to invest
through mass media such as TV, radio, newspapers, magazines
etc. They worry that such investment may not bring
a reasonable return.
Aiming at the top premium market
segment, Kimberly-Clark is promoting two-colour, point-to-point
and laminated kitchen towel with in-store promotion and
an educational programme. Other than the traditional
towel product, it has an innovative design of box pop-up
kitchen towel to attract consumer interest.
APP is hiring
promoters to demonstrate the two-colour, point-to-point
and laminated kitchen towel applications, demonstrating
the strong absorption power of its product in a bid
to lure consumers away from cloth towels. It is also
pushing its sales by bundle-pack promotion, combining
its box tissue pack with a kitchen towel for the target
consumer to try.
In July 2007, Hengan channeled kitchen
towel through its own sales distribution network to introduce
two-colour, random laminated products to the market,
with results it describes as “very exciting”.
It conducted sales promotions in key middle-class residential
areas. Hengan, as a late comer, may use a more aggressive
media influence to increase consumer awareness of its
brand in future.
Vinda is marketing the non-print, point-to-point
and laminated kitchen towel through hypermarkets and
supermarkets with in-store sales promotions. Its concept
is to promote the non-print towel as clean towel.
Barrier
of growth
Almost all key players admit consumers are lacking awareness
of their products and of its differentiation in the
market. This is the main barrier for the future growth
of kitchen towel. More educational promotion efforts
are considered essential to change consumer habits.
Marcelo
Cheng believes price may not be the key driving force
for the high income consumer group. APP has tested the
market with lower sprices without any significant increase
in sales volume.
However, Mr Xie, product manager of Hengan,
thought differently. His view is that the current retail
price is still unaffordable to many consumers. Price
reductions will help to expand the consumer volume
in the medium segment of middle class and white collar
employees. Kleenex as a known international brand has
an advantage over the others in the market. Brand building
will be one of the key success factors for consumers
to recognize the product value.
Last but not least,
the distribution will not be limited to hypermarket/supermarket.
The development of distribution nationwide and locally
through convenient store chains and independent food
stores will be an important factor in expanding the market
among China’s rapidlygrowing
middle classes. TW
Charles Yip is Executive Director of Tech Vantage International
based
in Hong Kong. E-mail: charles.yip@tech-vantage.net
