Growth in the European tissue business moving from West to East

By ESKO UUTELA, Principal,Tissue, RISI

Russian tissue market alone expected to grow more than German and UK markets combined.

We do not yet have statistics for the whole of last year but based on data for the first 9-11 months it can be concluded that 2013 did not show any significant break in the recent slow growth trend in Western European tissue consumption (1.3% in 2010, 1.4% in 2011, 0.0% in 2012). Currently we do not expect more than about 0.9-1.0% growth for 2013, although there are some indications from the marketplace that the last quarter recorded slightly more positive developments and so the final growth rate could climb to the same level as in 2010-2011.

Southern European problems continue to have a negative effect on consumer spending, including tissue consumption.

High unemployment has reduced AfH tissue consumption radically, and the lower-than-before purchasing power of people has limited consumer tissue purchases to the necessities such as toilet paper while other grades, napkins and kitchen rolls in particular, suffer from squeezed household budgets. Tissue consumption in Spain and Greece has been most strongly influenced by the miserable economic situation, followed by Portugal and Italy, while France shows growth for 2013. In Spain, statistics for the first nine months suggest a decline of even 3-4% in tissue consumption last year (but we hope there was a small improvement in the last quarter). Southern Europe accounts for more than 40% of Western European tissue volume, and the expected 1-2% decline in this sub-region pushes the Western European average growth down substantially despite relatively good developments is some other markets, such as Germany and the UK.

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In Eastern Europe, tissue consumption generally continued on its growth track, with a few exceptions. Russia has been the main growth driver recently, and its tissue consumption grew by approximately 8-9% last year, with slower economic growth pushing the growth down only slightly from the double-digit rate recorded in 2012. Of the other largest markets, Poland and the Ukraine showed good growth and Hungary some growth in 2013, while Romania and the Czech Republic disappointed, at least according to currently available information. On average, Eastern European tissue consumption grew by an estimated 5% in 2013.

‘Southern Europe will continue to suffer the consequences of economic crisis for some years and growth potential has shrunk. The northern and central markets, while still growing, are maturing and growth rates are declining.’

The role of Eastern Europe in the European tissue business is increasing. In 2000, Western Europe accounted for 88% of Europe’s total tissue consumption, Russia for only 3% and other Eastern European countries for 9%. By 2012,

Russia had doubled its share to 6% and the share of other Eastern European countries had grown from 9% to 15% (Figure 1). One may say that the share of Eastern Europe is not yet more than 21% while Western Europe continues to dominate. However, this is changing quickly and by 2022, we expect Eastern Europe to account for about 30% of the total European tissue market.

When considering expansion potential in the European tissue business, Eastern Europe is attracting most of the new investments. Most announced new projects are in Eastern rather than Western Europe. This makes sense as our latest tissue consumption forecast predicts about 55% of the European volume growth in 2012-2022 will be in Eastern Europe and 45% in Western Europe. Russia’s tissue market alone is expected to grow more than the German and UK markets together, and Poland’s volume growth will be of the same magnitude as Germany’s (Figure 2).

Ten years ago we used to conclude that the European tissue market growth would concentrate on Southern and Eastern Europe. Recently the situation has changed: Southern Europe will continue to suffer from the consequences of the economic crisis for some years and its growth potential in the long term has shrunk. The Northern and Central European tissue markets, although still growing, are maturing and growth rates are declining. The focus of the European tissue business expansion has irrevocably moved from Western to Eastern Europe.

Esko Uutela, principal, tissue, works out of RISI’s EU consulting office close to Munich, Germany, and can be reached at:
Tel: +49-8151-29193 or
Email: euutela@risi.com

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