Going coreless in the Philippines
Around 40,000 tonnes is consumed per year in the Philippines tissue market – a small figure compared to the US and European, but also with developing Asian countries. However, the range and selection of consumer tissue goods represented on shelves of supermarkets and drugstores reflects all modern trends in the tissue industry from premium and economy brands to private label and even the local coreless and ecologically-friendly bathroom tissue rolls. Multinationals continued to dominate within the retail and hygiene sectors in 2010 through existing and extensive distribution channels. However, some time ago the global leader in tissue output, Kimberly- Clark, pulled out production capacity from the Philippines, replacing it with imports (under brand names Joy and Kleenex) from neighbouring countries such as Malaysia.
While major international companies might take a conservative approach in a country of 100 million potential consumers, the brave locals take the lead and succeeded in developing local tissue market segments that did not exist ten years ago.
In 2010, the country began to improve its economy after the effects of the 2008-2009 global financial crises. As a result, consumer spending grew and tissue consumption as a significant part of it grew as well. While a growing number of Filipinos enjoy improving employment prospects, they are more willing to evaluate new product launches and begin to buy hygiene products that are thought to be non-essential, such as kitchen towels and table napkins. Private label and economy brand consumption increased during 2010 since the quality of such brands was reaching a higher standard, while price remains the most important aspect in the purchasing decisions of Filipino shoppers.
Environment and tissue production
Ecological responsiveness in the Philippines marked its beginning in 2007 when the Department of Trade & Industry was considering a total ban on exporting waste paper, following Taiwan and Malaysian actions. Out of the 1.25m tonnes of waste paper processed in the Philippines on an annual basis, nearly 0.5m tonnes is imported to the Philippines and local paper makers felt a threat to the security of their “green” raw material supply. Despite the difficulties with secondary fibre supply, local companies are currently making an effort to “go green”, offering eco-friendly choices or stressing the fact that they offer such products in their product range. Quanta Paper Corporation, founded in 2006, declared its mission to save trees and protect the environment by promoting the use of tissue products made from recycled materials. Sanitary Care Products Asia (SCPA), which is profiled in this issue, launched its Sanicare Ecolayers bathroom tissue brand; a combination of one recycledgrade sheet and two 100% virgin pulp sheets.
While imports from the world’s multinationals Kimberly-Clark, SCA and APP lead the tissue product supply from household goods to incontinence aids, there are several local tissue producers in the Philippines like Bataan 2020 from Quezon City, Quanta Paper Corporation from Pampanga and Papertech Inc. from Makati City.
Bataan 2020, Inc. is a leading manufacturer of fine quality paper, board and tissue in the Philippines. Currently, the company runs three paper machines located in two sites, one in Samal, Bataan and the other in Baesa, Quezon City. The only tissue machine located in Samal, PM2 with 87.5 in (2.22m) working width and about 20,000 tonnes per year capacity, dedicated to bathroom tissue, table napkins, kitchen towels and facial tissue. PM2 uses conventional wet press (CWP) technology and is oriented to 100% virgin and mixed fibre production with tissue grades up to 42 g/m2. Bathroom tissue rolls are manufactured with a 1 or 2-ply plain and embossed pattern (16-20 g/m2), 41.5 g/m2 grade kitchen towels are made always 1-ply.
Quanta Paper Corporation was founded in 2003 and started production with four paper making machines and four converting lines using secondary post-consumer fibre as raw material. Currently, Quanta Paper Corporation employs nearly 700 people making about 6,000 tonnes of tissue in parent rolls and converting 24 tonnes per day. In addition to conventional converting the company runs quarter and inter-folding lines and table napkin machines. Due to its environment friendly commitment, Quanta remains focused on recycled tissue products marking its place among the country’s competitors. However, in recent years, following the market trend towards premium grade products, Quanta launched production of premium brands using virgin pulp. The company maintains brand names connecting price with different quality standards. Vanita 3-ply and 4-ply bathroom tissue and 2-ply kitchen towels, Smile 2-ply bathroom tissue with a core or coreless and pocket hankies as well are made of virgin fibre and marketed as premium quality brands. Eco-Pal and Fresh bathroom tissue, Harmony, Wing and Kami table napkins are sold in economy niche and made of mixed grade tissue. Papertech is a privately-owned tissue converter with a manufacturing facility in Makati City, the modern business hub of Metropolitan Manila. The company’s primary business is retail and Away from Home tissue products with well indorsed economy brands Extra and Freshies. The production of private label tissue products for principal chain retailers, such as toilet paper, kitchen towels, napkins and boxed facial tissues, also represent a significant share of Papertech’s sales. The sales portion of private label brands has been increasing in the Philippines and following this trend Papertech’s private label brands are positioned towards the growing budget end of the market. All of the retail and private label tissue products that the company produces are sold in the Philippines.
Retail tissue status
In 2010, supermarkets and hypermarkets accounted for 56% of tissue and hygiene retail sales and continued the slight growth trend over 2009, which can be accredited to the determined expansion of retail chains into areas that were previously only served by alternative sources like public markets, sari-sari stores and independent small groceries. However, low-income consumers dominating the country’s population still assure the growth of sari-sari (traditional mom and pop convenience stores) due to their value-added services such as credit facilities that allow regular customers to buy products on tab and pay on a weekly basis.
Retail and drugstore chains such as SM Investments Corp. (SM Supermarket/ Hypermarket), Mercury Drug Corp., Robinson’s Retail Group and Rustan’s Retail Group significantly increased the number of outlets in 2010 especially in provincial areas of the country as a planned expansion into untapped markets. Purchasing tissue products in supermarkets, hypermarkets and chained drugstores is gaining popularity due to the fact that they offer a broad selection of brands (including own private labels), one stop shopping accessibility, and eventually lower price offers through discount coupons and promotions.
All major retailers promote their own private label brands with recognisable names and graphic design. SM Supermarket (SM Investments Corp.), the country’s leader in retail sales for tissue products, promotes its private label brands SM Bonus and Value. Mercury Drug Corp, the second largest retailer company behind retailing giant SM Investments Corp sells the tissue brand Cleene (bathroom tissue, kitchen towels and napkins) supplied by Philusa Corp, its 100% owned affiliate. Rustan’s Supermarkets with 20 branches in Metro Manila and 2 in Cebu distinguished itself within an upscale niche for tissue products by packaging its private label brand SureBuy in gold-black wrap.