SWEDEN is at the fringe of Europe, but at the centre of tissue market development
By Ian Bell, Euromonitor International’s global head of tissue and hygiene research
Although Sweden is a country with a population of just nine million and it lies on the fringes of western Europe, it has developed into something of a model for the tissue industry as a whole. The idea that Sweden represents some kind of paradigm is nothing new as the country is widely vaunted for its progressive society and its lifestyle is broadly aped. Its modes of business are also often adopted overseas, with Swedish companies, such as IKEA, seeing homes around the world take on a distinctly Scandinavian, if not Swedish nature.
In terms of retail sales of tissue products, value growth ran to 3% in 2010, with similar growth expected through to the end of 2011. This is admittedly pretty unspectacular when compared to the developing power houses of Latin America and Asia Pacific where in China, for example, 15% growth in 2010 saw US$1bn in incremental growth, which was three times larger than the entirety of the Swedish market itself. So given its relative lack of importance on the world scale in terms of market size, what is so special about the Swedish market for tissue?
BRANDS FIGHT BACK
Certainly Sweden’s key domestic producer SCA is a leader in European tissue and hygiene production and sees the Swedish influence on the world market, especially on developing regions, grow year-on-year. The real key to the Swedish market is, however, how the country has maintained growth in what is seemingly a mature and saturated marketplace. Part of the explanation comes from the Swedish attitude towards tissue products; Swedes on the whole look for quality when it comes to tissue purchases, and this has underpinned the strength of brands. Whilst private label has risen to take a 52% share of value sales of tissue in western Europe as a whole, this figure is a little under 30% in Sweden.
Private label came relatively late to Sweden, and followed the initial growth of discounters since the millennium, which fuelled private label growth. Since the global financial crisis, however, value sales of private label tissue products have actually been on the retreat in Sweden. This is comparable to the wider European trend in hygiene as well as home care products, which has seen private label pushed back by strong product innovation and promotion by branded manufacturers, with the likes of Procter & Gamble’s Dry Max absorbent core technology making its debut in nappies/diapers. Tissue producers have, however, struggled to replicate this in western Europe, with consumers still in ‘recession mode’ and unwilling to invest in brands which have struggled to convince them of improved efficacy or indeed value for money. However, this has not been the case in Sweden.
TISSUE AS A STYLE ICON
Both Metsa and SCA continue to develop and promote branded products that strike a chord with Swedish consumers, offering efficacy but at a price. For the consumer, it is typically about quality and a desire to spend on this most important of features. This desire saw boxed facial tissues grow at a rapid 6% in value in 2010 on the back of broadening usage, on the one hand, but also as a result of alternative uses, as these tissues, due to their high quality, are often used as an alternative to facial cleansing wipes. Even Kleenex, a brand which has struggled right across Europe during the recession, continues to see sales growth in Sweden as consumers buy into its repackaging.
Design also plays an important role in encouraging consumers to continue to invest in products which might ordinarily be considered commodities. In the case of kitchen towels, for example, which still do not enjoy penetration rates in Sweden anything like in markets such as the UK, companies have used design as a key weapon through collaborations with leading designers and temporary launches. SCA’s Edet Torky brand is a case in point, with SCA launching a brand-specific dispenser in several ‘designer’ options, achieved through collaborations with wellknown celebrity TV interior designers. The company has also established an online shop offering designer kitchen products, such as those from Alessi and Stelton, once again encouraging a link between kitchen towels, good design and modern modes of living.
Most significantly, the Swedish market would appear to represent the future when it comes to matters of sustainability and corporate governance. Whilst the prevailing trend across the continent (with the exception of Scandinavia) is consumers being largely unwilling to pay a premium for green or sustainable products, especially during a recession, the opposite appears to be the case in Sweden. Consumers are on the whole reported to be interested in finding out more about a company’s environmental credentials and expect products which offer the best in terms of environmental concern and overall product quality. The prevalence of the Svanen (Swan mark) environmental labelling system across the Swedish tissue market is an indicator, illustrating the centrality of sustainability to consumers. Indeed, companies in Sweden often highlight their broader environmental standing in advertisements, something which has dovetailed with broadly held consumer sentiment.
GREEN PRODUCTS IN THE MAINSTREAM
The availability of a broad range of environmentally sensitive products is a stand-out feature of the Swedish tissue and hygiene market, and toilet paper is a case in point, with some 80% of value sales reported as having recycled material in them. This compares very favourably to the European average, which is just 15% by value. It also illustrates how seriously Swedish consumers take their own positions as green consumers, and the extent to which domestic manufacturers and retailers will go to make and stock these products.
Interestingly, whilst a product’s green credentials certainly prove a boost to sales in Sweden, many of those that do not exhibit the features Swedes look for in this regard tend to struggle. Wet toilet tissue for example went through two periods of new launch activity, in 2003 and again in 2006, with products quickly withdrawn, Procter & Gamble’s global Kandoo brand for children was withdrawn soon after its launch in 2004. Even SCA with its Eden Soft, a product launched after success in Germany under the Zewa name, failed due to the conservative nature of Swedish consumers and the fact that many people perceive such products to be full of chemicals and therefore not environmentally friendly, illustrating the Swedish market to be multi-faceted and difficult to predict even for domestic operators.
A PREDICTABLE ENDING ?
What is predictable is that Sweden, and Scandinavia in general, will continue to be something of a model for wider European development. Whilst Scandinavian tastes in product design or high-quality tissue might be more difficult to push on consumers hooked on cheap private label, the Swedish example does show there is a way for brands to develop in the face of private label competition. Looking at the wider European market, manufacturers need to find some way to bridge the gap between consumers’ price perception of brands and the advantages brands can provide in terms of quality, features and ethos. The use of design is certainly one avenue which can be explored; however, the one area in which Sweden is surely a glimpse into the future is the widespread use of recycled and sustainably sourced products. Sustainability will inevitably become less of a novelty across Europe, and, by the end of the next decade, the average Western European consumer will likely become a little more Swedish in his/her approach to sustainability, an area in which the country continues to take the lead.