Resilience and ambition going forward at Japanese producer Doh-Ei Paper.
A Tissue World report
As tissue plant locations go Doh-Ei Paper’s site on the northern Japanese island of Hokkaido is hard to beat.
The region has many outstanding attributes, not least of which is its spectacular natural beauty. On the snowy approach to the recycling paper and converting plant the beautiful single peak of Mount Yotei rises up as the backdrop to the town of Kutchan.
Established in 1978, Doh-Ei Paper, one of the country’s most forward-thinking tissue producers, has made and will continue to make optimum use of the landscape.
From some of the clearest rivers in Japan more than 8,000 tonnes of crystal clear water pour down from the mountains and are used in the mill every day. And all of the company’s tissue paper products (facial tissue and toilet tissues in a 50/50 mix of AfH and private label products) are made from 100% recycled paper, sourced locally.
Recycling has been an enforced choice which responds of necessity to one of Japan’s geographical limitations, according to chief executive Masashi Kobayashi: the lack of natural forest resources has forced the hand of many tissue manufacturers.
Japan’s struggle with a protracted period of retraction even before recent natural disasters is well documented. Our Euromonitor report puts tissue’s performance into context: estimated volume declines for 2011 in the region of 6% for AfH sales, with napkins, hand towels and toilet roll all likely to see 5- 8% volume declines.
Set against that background what is Kobayashi’s strategy for the near future? It’s primarily twofold with product innovation with sales expansion locally, nationally and where possible internationally, and investment in new equipment.
The plant now produces coreless toilet paper, a patented product, for which he says there is mass demand in Japan.
Private branding has been increasing in Japan, and some of the other five mills within Doh-Ei Paper’s parent group Corelex now produce some 60% private label products. However, Kobayashi says the price of such products is also decreasing due to stiff competition among retailers. Doh-Ei Paper has wanted to increase the price of its branded products in order to keep a profit, but Kobayashi says this hasn’t always been possible.
In April 2011 an Andritz-supplied PrimeDry Steel Yankee was ordered to upgrade a previous drying line, a 4,200 mm cast-iron Yankee dryer. Start-up is expected in May 2012.
The projected reduction in energy consumption costs, important across the global industry, is especially so in Japan where oil and gas price increases have been exacerbated by severe restriction in electricity use following the recent disasters.
After the 2011 Tohoku earthquake electricity became a major issue. Many companies were affected and have had to save energy for six months. Some tissue producers have had to stop production because of the lack of electricity.
One short-term sales benefit resulted. The companies that TW visited reported a sales surge after the quake hit with toilet paper products flying off the shelves. People stockpiled the product.
The Hokkaido, Doh-Ei Paper mill fortunately didn’t suffer much damage following the quake, and there was no direct impact on machines. However, some of the mills in the group were forced to stop operations due to limits on the use of electricity in the Tokyo area. They stopped for five days per month between mid-March to August.
Kobayashi says the company invested in the PrimeDry Steel Yankee because the cast iron dryer used too much energy and had to be changed: “By using steel, we can achieve higher energy efficiency because of the higher proportion of contact drying,” he says. The investment was also made to increase production capacity and runnability due to the thinness of the shell. The company needed to dry both of the sheet’s side edges using heated-air drying.
“From a material standpoint, cast iron is solid, but it has less effective heat conduction,” he says. “Steel is a highly heat-conductive material, but it doesn’t have enough hardness and is easily scratched. Coating with highhardness metal should settle the problem, but there were no Japanese machinery companies that could produce big steel dryers with high efficiency back then. Following the implementation of this kit, our energy A efficiency will be very good and our production output will be very high. So it will come in useful for us going forward.”
Another challenge facing Japanese tissue producers is 6-7% overcapacity. Kobayashi says: “There are a lot of small to medium sized tissue producers in Japan that produce less than 1,000 tonnes per month and sell their products cheaply. This is having quite an impact on the market: that is a lot of extra capacity in a somewhat stagnated market.”
In Hokkaido, the mill produces 19,000 tpy: 14,500 of toilet tissue and 4,500 tonnes of facial tissue. The site operates a 4,200 mm, cylinder PM1 that produces 55 tonnes per day.
While Doh-Ei’s business is made up of local demand, it is eager to explore the Russian market. However, assistant mill manager Koji Yamamoto told TW that is unlikely due to transportation costs, and a strong and competitive Chinese presence already in place. In Japan, Yamamoto says that tissue demand is very gradually declining and he puts this partly down to the changes in the Japanese population and birth rate. The country has had a crisis with its demographical structure. The increase in single occupancy has had an influence, but in terms of volume it is simply down to the number of people. The struggle over the last few years has been operating in a stagnating market without any growth in population. Japanese tissue makers have mainly been able to respond only by competing on quality and price.
Yamamoto says it is going to be even harder for Japanese companies to compete with Chinese companies, as they have the advantage of low labour costs. Another significant challenge is that of the Chinese presence in the Japanese tissue market. He says that Japanese businesses are being impacted on by cheaper products coming in from China, which are of good quality, manufactured using virgin fibre and competitively priced.
As for competition within the local Japanese tissue market, Doh-Ei Paper is a fairly small player. There is some safety to be had in numbers, however, and the Corelex Group is looking to enhance its cooperation among its group companies. Such a move could mean that the business will have more of a combined market share and be able to go after a different sort of client. However, Kobayashi is adamant that the company’s main strength is its local focus, where it has a 30-40% market share. It’s this, he says, that is its biggest strength.