While per capita tissue consumption is higher than pre-Covid levels, the mature UK market is still normalising with private label performance strong. Analysis by Per Brandberg, Consultant, Euromonitor International.
The tissue market in the UK has had varying experiences in 2023, with volume declining but value increasing. Inflation, raw material cost increases, unit prices increasing and consumers being more cost conscious have all been key influences on the past year. Brands will have to take multiple factors into account such as affordability, convenience, as well as a comeback for sustainability among consumer demand to set themselves up for growth in the coming years.
To put the United Kingdom tissue market in context, it has one of the highest retail tissue volume per capita consumptions in Western Europe with 10.6kg per person in 2023, only surpassed by Germany, Austria, Ireland, and Greece. Like with most other countries in Europe, the category was heavily impacted by the pandemic in 2020, which spiked the per capita consumption. However, it has been on a declining trend in the years since as the market is still normalising. The per capita consumption is still higher than pre pandemic levels though, and is not expected to drop down below those levels soon either, indicating that there has been a change in consumers’ tissue consumption habits.
However, the main story of 2023 has rather unsurprisingly been a continuation of the inflation impact. Even though inflationary pressures in 2023 marginally eased when compared with 2022, it continued to exert strong influence on the demand for tissue products across the UK. Sales mostly rebounded in the second half of 2023, although not sufficiently to avoid volume declines for the third consecutive year. Value sales vastly outperformed volume sales, primarily due to the recent surge in raw material costs as well as increased manufacturing costs over the last year or so, which were passed on to the end consumer in the way of unit price increases. Throughout 2023 there were significant decreases in pulp costs, which enabled manufacturers and brands to decrease prices – with private label brands usually taking the lead on price cuts.
Even though the brunt of the impact has already been experienced on the market in previous years, the gradual return to workplaces, either partially or fully, continues to negatively impact the tissue category as well as other social activities such as outdoor dining, leading to less demand for retail tissue products. Many consumers still spend a large part of their leisure time at home, with cooking at home remaining popular and a way for consumers to cut down on costs when high inflation has made many more conservative in their spending. This is acting as a positive demand driver for retail tissue products in the UK and is keeping the market at a higher level than when comparing with 2019 numbers.
Even though categories such as paper towels and toilet paper experienced a decline in volume terms in 2023, some smaller categories managed to stay in the positive. For instance, facial tissues witnessed growth in both volume and value terms in 2023, with consumers opting for the product to ease their hygiene and cleanliness worries and with products incorporating antibacterial and skin moisturising properties.
RIVATE LABEL: 65% OF UK VOLUME SALES IN 2023
Looking at the competitive landscape in the UK’s tissue market and we find well-known companies like K-C, Essity and the Sofidel Group, and yet the category is dominated by private label brands. Accumulated, private label represents over 65% of volume sales in 2023, with value sales coming in a bit lower at 44% because of the usually lower price point.
Private label had a very strong performance in 2023, increasing in both volume and value terms while other brands struggled with declines in terms of market share. The rising cost of living continued to strongly influence shopping behaviour, prompting consumers to continue the shift from branded to private label for essential items as a moneysaving strategy. Private label producers effectively leveraged this competitive advantage by investing in convenience and sustainability while keeping prices lower than branded counterparts. Retailers such as Sainsbury’s and Aldi pioneered in passing on raw material cost reductions to their private label tissue products in the second half of the year.
AfH
Another dimension to the tissue market is the AfH tissue categories, which offered a similar picture in terms of growth. Inflation once again played the most important role in driving value growth because of increased prices of raw materials, such as pulp, while volumes marginally increased in 2023 because of consumers returning to the office more frequently and resuming more regular trips to foodservice establishments and public settings such as shopping centres.
As travel heavily decreased in 2020 and consumers spent considerable time at home, AfH tissue was particularly impacted in public places, with offices and airports experiencing a notable reduction in foot traffic. The return to work and travel habits has been a gradual process, with inbound arrivals to the UK not expected to recover to 2019 levels until 2024, which is likely to support the full recovery of AfH tissue volumes. This was also evident in Euromonitor International’s Voice of the Consumer: Lifestyles Survey (fielded January to February 2023); while the number of respondents in the UK indicating they would increase their spending on travel grew in 2021 and 2022, this had decreased in 2023 as inflation and high prices forced consumers to reconsider their plans and reprioritise their costs.
Another factor that has had a major impact on the AfH channel is that many employees are still working from home, at least as part of a hybrid model. As with retail tissue, the main part of the impact has already been experienced in the immediate years that followed the pandemic. However, the continued effect of a change in consumer behaviours following the pandemic and lockdowns are still playing a significant part in the development of the category.
Working from home during the pandemic considerably reduced the need for AfH tissue, resulting in a shift to retail tissue instead. However, with restrictions easing, most companies have adopted a hybrid approach to working where employees attend the office on a more regular basis, which acts as a positive demand factor for AfH tissue. This is also visible in survey data, where according to Euromonitor International’s Voice of the Consumer: Lifestyles Survey (fielded January to February 2023), there was a decline in the number of respondents in the UK indicating they work from home weekly between 2022 and 2023, falling from 26% to 21%.
Future outlook
Both retail and AfH tissue products are expected to experience stable growth in both volume and value terms throughout the forecast period. In an environment where low population and consumer expenditure growth is expected, and with the demand for tissue products mature and well-established, the forecast period is likely to see low volume expansion.
Inflation affecting raw materials and consumer goods is likely to ease, alleviating some of the pressures on consumers’ income and thereby supporting modest revenue growth in the coming years. This presents a major challenge to players aiming to remain competitive while fostering growth in a mature category.
Companies are expected to continue to explore strategies such as themed packaging, a broader range of sheet sizes and sophisticated designs, while efforts to meet increasing demand for convenience and sustainability will be another challenge for manufacturers and brands within the industry.
Facial tissues, a category that managed to grow in a difficult environment, is well situated to continue this positive trajectory through continued innovation in both packaging and product. However, the product will need to tackle the sustainability concern that comes with disposable tissue products, which the rest of the category will need to as well.
Private label lines are investing in more sheets per roll and plastic-free packaging, while brands that use bamboo as their fibre source and offer plastic-free packaging are entering the local market to target consumers willing to pay a higher unit price. This places pressure on established players, which may face share losses in this competitive environment.
