Entrenched hygiene routines, rising population, expanding middle class, urbanisation, unmet potential … underpinned by the country’s projected above average 3.1% rise in GDP. Report by Euromonitor International’s Liying Qian, Industry Manager for Tissue & Hygiene.
Despite tight financial conditions and high inflation, the overall tissue demand in Türkiye shows resilience in 2023 and near future thanks to essentiality and lack of substitution. Both retail and AfH tissue saw stabilising volume growth from previous years’ fluctuations to a single-digit percent that’s above pre-pandemic norm.
More specifically, retail tissue demonstrated a slightly accelerated low-single-digit volume growth in 2023 from a period of destocking in previous years, supported by bulk purchases ahead of significant price increases in mid-2023, increased promotional campaigns by manufacturers and retailers and population growth-induced need.
AfH tissue on the other hand saw slightly moderated high-single-digit-percent growth from more drastic recovery period of 2021 and 2022, thanks to increased patronage of restaurants, cafés, retail establishments and entertainment centres.
Moving forward, as high inflation continues to moderate and economic development gradually recovers, volume growth will continue to stabilize in the range of single-digit, while nominal value growth in USD set to soften to lower double-digit.
Positive outlook of fundamentals serve key growth pillars for Türkiye’s tissue demand
Much of its positive tissue outlook is built on the daily essentiality of tissue goods’ nature, entrenched hygiene routines, and, more importantly, still below-region per capita penetration and positive fundamentals such as urbanisation, and an expanding middle class.Population levels too are set to remain positive with growth up to 2040 mainly driven by natural change as births continue to outweigh deaths.
Economically, following real GDP growth slowdown in 2023 and 2024 per projection, Türkiye’s economy is forecast to expand at a CAGR of 3.1% in real terms over 2023-2028, surpassing the Western European average of 1.6% and indicating potential for significant future economic development.
With all being said, persistent macroeconomic and structural issues, such as rampant inflation, local currency devaluation, sluggish productivity growth and low employment rates, are among key weaknesses in Türkiye’s economy, which will underpin sustained price sensitivity across the bulk of the economy and underscores the importance of value.
In 2023, the country ranked 17th in Western Europe for average gross income, despite a significant increase in per capita disposable income. High inflation and income disparity remains a challenge, as the richest 20% of the population holds nearly half the total income.
Cost pressure strengthens private label’s dominance and intensifies competition
The depreciation of the Turkish Lira, rising costs associated with importing raw materials and finished products, and the VAT increase from 8% to 10% further exacerbated cost challenges for manufacturers and consumers alike. Down trading behaviour has contributed to rising private label’s collective market dominance, whose market share grew from 34% in 2019 to 36% in 2023. Its growth is also supported by the dominance of discounters in the country’s grocery retailing landscape and their rapid expansion of their store networks.
Discounters are expected to strengthen their position as a preferred distribution channel for retail tissue products in Turkey. Moreover, leading discounters such as BIM and 101 have strategically focused on promoting their private label products, capitalising on the growing popularity and consumer demand for these offerings. As a result, discounters are poised to further increase their market share by leveraging their extensive reach and the appeal of private label products, driving growth in retail tissue.
For market players, growth is a balancing act of navigating cost challenges effectively while ensuring continued product attraction and competitiveness. Strategies such as cost optimisation, supply chain efficiencies, and product diversification are key to mitigate the impact of price increases and maintaining profitability in the face of evolving market dynamics.
Additionally, fostering partnerships with retailers and exploring innovative pricing strategies could help manufacturers mitigate the effects of VAT increases on consumer demand, ensuring sustained growth in retail tissue despite prevailing challenges.
For top players targeting higher-income consumers – such as Eczacibasi and Hayat Kimya -added health benefits and durability which are key to communicate differentiated value propositions. Both companies have unveiled new offerings aimed at attracting consumers with higher disposable incomes, such as Eczacibasi’s Selpak Extra Antibacterial Protection Shield toilet paper, boasting advanced antibacterial properties and Solo Bamboo-Enhanced Toilet Paper with enhanced durability.
Versatility and durability underscore paper towels’ leading growth prospect and broader innovation
Among retail tissue products, paper towels are predicted to emerge as the most dynamic category in terms of volume growth. This trend can be attributed to the increasing recognition of paper towels as essential household items. Versatile in their usage, paper towels find applications in both kitchen and bathroom settings, often replacing traditional napkins and boxed facial tissues. The multi-functionality of paper towels enhances their appeal to consumers, driving higher demand and contributing to robust volume growth in this category.
Stimulated AfH tissue sales with the rise of on-trade and retail establishments
In the near term, the AfH tissue demand is shaped by the diverging forces that include – on the positive side, resumption of pre-Covid-19 lifestyles and recovery of Türkiye’s tourism and the hospitality sector, which is responsible for a good bulk of AfH tissue consumption; and on the cautioning end, cost-cutting and digital transformation offers to reinforce convenience and affordability of services and business profitability.
In the projected period, AfH sales of tissue products are expected to witness a notable increase, propelled by the anticipated growth in the number of on-trade and retail outlets. As the economy gradually recovers and consumer confidence rebounds, there will likely be a resurgence in the hospitality and retail sectors, leading to a higher demand for tissue products in public settings. Moreover, heightened awareness and emphasis on health and hygiene, particularly in light of recent global health crises, are projected to drive greater demand for tissue products through AfH channels. The emphasis on cleanliness and sanitation is expected to persist, further fuelling the demand for tissue products across various establishments.
