Front Issues

The Philippines: where the middle class is on the march

You are a country on the periphery of the world’s most dynamic trading region. A near neighbour is the economic powerhouse of China – by some accounts responsible for as much as 50% of total worldwide growth in tissue capacity in 2010-2012. You have faced cultural and political challenges over recent years, and the events of August were a vivid reminder of the precarious environmental risks faced by a nation located on the Pacific Ring of Fire. What price national economic prosperity?

But in fact, the prospects for the manufacturers of the Philippines look pretty good, as TW’s Country Report in this issue suggests, on a relative scale, of course. There can be no denying the potential represented by a growing 100+ million population, but it is in the way that the tissue market is beginning to develop which is creating the highest expectation. First, the global and Asia Pacific regional context: global tissue consumption was 30.5m tonnes in 2011 and is expected to increase to 31.7m tonnes this year; global growth rates in tissue consumption increased by 4.3% and 4.1% and are expected to increase by 4.5% in 2013 and 4.6% in 2014. Chinese tissue growth was up from 10% in 2010 to 12.5% in 2011, and this year it is expected at between 8.5-10%, and 10-10.5% in 2013.

In tissue terms the Philippines is a minnow – consumption a tiny 40,000 tonnes per year, the smallest T&T producing nation in the Southeast Asia Geographic Zone (SAZ); ranked fifth among the five T&T producers in the SAZ; also last in terms of the number of operating machines, and T&T machine production rates also tend to be modest. This does not look encouraging set against that population figure – the seventh most populated in Asia and twelfth in the world. Yet the signs are that the key middle class is on the march, pushing the boundaries of growth for the tissue market. A Goldman Sachs’ “Next 11” nation – those countries expected to deliver the most powerful growth outside the BRIC giants of Brazil, Russia, India and China – it is easy to see why having maintained a very strong economy. GDP grew by 7.6% in 2010, and while it hasn’t been immune to the global economic slowdown – GDP slowed to 3.7% in 2011 – it has now settled into a steady pattern of 5-7% annual growth. Middle class shoppers are the core consumers, and it’s those shoppers’ expanding experience which offers the tantalising prize for manufacturers. More shopping malls are going up, mostly in the key Manila Metro districts where 12 million consumers work and live, and better quality services and facilities offered by these complexes are proving to be the key to instilling customer loyalty and expectation – high quality bathroom facilities, good quality toilet paper, vending machines, sanitary protection. The more customers see of this the more they want.

Likewise with more fast food outlets and restaurants, bars and cafes providing a customer friendly tissue experience. Locality is key, and the development of private label is particularly interesting in developing markets where consumers on the whole look for brands. Expenditure on a first rate shopping experience, backed by competitive quality and pricing, is creating retailer brand loyalty, and boosting private label.

With an ever expanding middle class market base and an increasing hunger for higher tissue products following the recent period of economic stability, there is plenty of potential for a consistent expansion and broadening of the Filipino tissue market.

Tissue World Asia 2012 For those of you attending Tissue World Asia, welcome to the show! The event held in Shanghai is Asia’s largest international show specifically for the tissue sector. At the last show in 2010, some 3,260 visitors from a total of 59 countries participated. For those that can’t attend, the next issue of TW will offer an overview of all the news.

Tissue World 2013 Over the next few issues, TW will be counting down the weeks to Tissue World 2013 – the tissue industry’s Big One. The next issue will have the show preview, showcasing all the company’s exhibiting at the tissue industry’s leading event. There will also be a Country Report on Spain, where TW will visit some of the country’s key tissue producers. We look forward to seeing you in Barcelona in 2013!