Worldwide consumption stands at 36.3 million tonnes with estimated unmet potential at over 15 million tonnes in retail alone. As an increasingly complex and diverse marketplace presents great challenges and opportunities, Tissue World Milan drew together the industry’s specialists.
Tissue’s historic heartland always deserves something extra special… and Tissue World was proud to stage its most successful tradeshow to date at Milan’s Fieramilanocity.
Tissue World Milan 2017 hosted 3,284 participants from across 106 countries: 2,274 visitors walked the show floor while 1,010 personnel from 200 companies showcased their latest technical and innovative developments. Some 25 companies exhibited for the very first time.
The three-day conference hosted 53 speakers who discussed the latest tissue and economic trends to 234 attendees.
World tissue’s most prestigious and international tradeshow saw three days of networking and deal-making.
The Tissue World TV-corner was in full swing featuring live interviews by the one and only ‘the other Michael Jackson’, broadcasted over the entire show floor.
A top class social agenda helped smooth some of those deals through to signing. Included was a gala dinner, a happy hour and live band on the show floor.
A top Champions League football clash – it was all soccer to our American delegates – spiced up the evening.
TW was handing out awards to winners too: Hungary’s Vajda Papir winning the Best Tissue Marketing Strategy Award, while Spain’s LC Paper won the Most Energy-Aware Mill Award. Milan confirmed Tissue World’s status as the leading exhibition for the vibrant tissue industry.
We hope you can join us for Tissue World 2019, which will once again be held in the beautiful city of Milano! Below is a summary of key issues from Milan’s conference sessions.
CONFERENCE: SENIOR MANAGEMENT SYMPOSIUM
Economic Outlook: The good, the bad and the ugly.
Andrea Boltho, emeritus fellow, Magdalen College, University of Oxford, UK
The world’s economic outlook at present is, inevitably, clouded. Trump’s economic policies are, as yet, unknown. Should he stick to some of the pronouncements he made during the electoral campaign (huge tax cuts for richer households, imposition of tariffs on China and Mexico, drastic reductions in the immigrant population, etc.), he may well risk a trade war abroad and, possibly, even a recession at home.
Should he behave more presidentially (and also accept that Congress may veto some of his more extreme policies), then the US economy may not be unduly affected by the change in the White House. Indeed, it could even benefit from corporate tax cuts and a large programme of infrastructure investment. Further uncertainties relate to the unravelling of the Brexit process and, more generally, to the rise of opulism in Europe. At the time of this conference and of going to print, elections will be being held this year in the Netherlands, France, Germany and, possibly, Italy.
Successes for populist politicians seem unlikely at present, but then the same was said about Brexit and Trump. Forecasts for the world economy are at present clearly surrounded by an unprecedented amount of uncertainty.
- America and China are growing, emerging markets are recovering and activity in the Eurozone is rising. However, there is huge uncertainty due to past and possible future political shocks.
- BREXIT – A SETBACK: Brexit will have economic costs but these are unlikely to be massive. In the short – to medium term investment in the UK will be lower because of greater uncertainty, but some of this shortfall will be made up as the uncertainty dissipates. In the longer-run UK output will suffer since the country will lose unfettered access to the single market and is highly unlikely to offset this loss with (time consuming)free trade agreements with other countries. But even in a worst case scenario (out of nine) Oxford Economics sees 2030 GDP only 3.9 % below the level it would otherwise have reached. For other EU countries the effects are also likely to be negative but negligible (with the exception of Ireland where GDP, by 2030, could be 1.6% lower than otherwise).
- TRUMP: Trump, unfortunately, could be a threat both politically and economically. Very difficult, as yet, to be sure about his economic plans. Three possible scenarios:
i) Protectionist with a risk of trade wars, plus lots of deregulation and tax cuts for the rich and for corporations,
ii) Reaganite with little protectionism, tax cuts for the rich, deregulation and lots of infrastructure spending (including a wall to rival China’s Great Wall), iii) Constrained by Congress, Trump settles for more modest goals.
- RISKS TO THE OUTLOOK: Trade wars, higher US interest rates, a Chinese hard landing, Euro tensions.
- Simulating a trade war: assume US slaps 45% tariff on exports from China, 35% on those from Mexico and 20% on those from Korea … Assume all three retaliate with equal tariffs on US exports …
- THE LINGERING WORRIES ABOUT THE EURO: Greece, despite the huge costs of its adjustment programme, has not gone for “Grexit”, but the temptation must still be there; Italy is subject to the same temptation (and two political parties, including the important 5 Star Movement, have openly talked about a referendum on EMU membership); “Grexit” would, in all probability, have a serious negative effect on European growth; “Ixit” (let alone “Frexit”) would, almost certainly, lead to EMU breakdown. This, in turn, would usher in a massive recession. The political will to stick to Monetary Union is very, very strong, but economic realities also matter …
The circular economy and hygiene products: how it’s all connected.
Mario Forte, customer quality director, Global Hygiene Supply Tissue AfH, SCA, Sweden
Today’s linear “take, make, dispose” economic model relies on large quantities of cheap, easily accessible materials and energy, and is a model that is reaching its physical limits. Dame Ellen MacArthur
of the Ellen MacArthur Foundation has outlined the concept of the Circular economy as the attractive and viable alternative to the linear economy. A circular economy is a continuous positive development cycle that preserves and enhances natural capital, optimises resource yields, and minimises system risks by managing finite stocks and renewable flows.
How is the model of a circular economy relevant for a hygiene business model? With a life cycle perspective, it soon becomes obvious that tissue and personal care products makers meet both opportunities and challenges. Renewable raw material is clearly on the pro side, whereas the pulp, paper and tissue making processes will meet challenges and needs innovative re-thinking. Customer and consumer waste has to be addressed both by policy makers and the manufacturers. Unconventional partnerships will open up for finding new solutions and will inspire new business models. The Circular society is here to stay; this is a business opportunity that will require creativity, innovative thinking and new partnerships and business models.
- Responsible sourcing: SCA Global Supplier Standard, new fibre target, ensure access to sustainable and innovative materials and technologies to enable circular products at an affordable cost.
- Resource-efficient production. Striving for zero workplace accidents. Reduce CO2 emissions in mills and factories with 20% by 2020. Sustainable water management. 100% recovery of production waste by 2030. Aiming at 100% fossil free or renewable energy and electricity.
- Sustainable solutions and after use: all products and services designed for a circular society, innovating new products, aim for 100% renewable or recycled raw materials, improve circularity (re-use, recycling composting or digestion), educate consumer and customers to facilitate circularity, continuous improvements in resource efficiency in products, services and production, in partnerships develop sustainable business models for recycling.
- Working towards a circular society will inspire innovation and uncover business opportunities. Resource efficiency is a key component. Products and services must be designed for sustainable consumption with a full life cycle perspective also considering waste management.
Managing for sustainable growth: as a company, and as an industry.
Luigi Lazzareschi, chief executive, Sofidel Group, Italy
At a time of scarcity of natural resources and an ever-increasing attention paid to environmental and social impacts, Sofidel believes that businesses have the responsibility of playing a vital role not only in terms of production and distribution of goods and services, but also in guaranteeing long-term, social and environmental advantages for stakeholders at all stages of the value chain. In this light, Sofidel places strategic importance on sustainability for growth and development and through this commitment aims at increasing its competiveness in the mid-to long-term, and contributing to an improvement in the quality of life of all its employees, the communities in which it works and the world at large. Well aware of the fact that, if we want to build a positive future, it’s time for governments, businesses and civil society to join forces for a multilateral, efficient and brave action.
Each of us, in our different fields and depending on our different roles, must take on new and broader responsibilities.
- Sofidel considers sustainability as a strategic factor for its development. The company aims to: increase its competiveness in the mid-to long-term; contribute to an improvement in the quality of life of all its employees and the communities in which it works; to perform an increasingly significant environmental, social and economic role.
- Less is more: the company’s final goal is to create products with an ever shrinking ecological footprint, yet ever increasing performance. Technology innovation is the key to achieving this goal, developing products that enclose a lower share of natural capital, thanks to higher functional qualities and innovative performance.
- -19.1%: As a member of the WWF Climate Saver programme, reduction in carbon intensity (2009/2016). In 2015, – 17.8%;
- 100%: of pulp certified by independent third parties with forest certification schemes (2016). In 2015, 99.97%;
- 7.0l/kg: litres of water used on average per kg of paper produced (2016). In 2015, 7.3l/kg.
- WWF Climate Saver new 2020 targets:
- -23%: CO2 emissions reduction compared with 2009;
- -13%: indirect emissions compared with 2010;
- 8%: share of renewable energy sources against the total annual amount of fuel used.
- Fourth growth phase: In Europe, the current phase of strategic growth means increased production at existing sites in Europe. Many sites were designed to be significantly expanded. Our production sites in Germany, France, Poland, Great Britain and Spain, for example, have sufficient space to double their size and, in some cases, even triple. Organic growth is, therefore, more continuous and less disruptive.
- In the US market, Sofidel is planning to replicate the strategy already implemented as part of the company’s internationalisation process in Europe, by launching a few new greenfield investments and with new acquisitions.
- Organic growth in Spain – one NTT Valmet-supplied paper machine by Q3 2018, plus three Constellation machines by Perini by 2017. Launch of Regina brand in Spain.
- By integrating sustainability, expects the following 10 main advantages: Cost reduction, motivated personnel and qualified workers, access to tax breaks, higher market standards, customer satisfaction, responding to clients’ needs, anticipating more stringent regulation, increased credibility and trust, accessibility to capital and enhanced reputation.
Accelerating globalisation in the tissue business via new players and growing intercontinental trade flows.
Esko Uutela, principal-tissue, RISI, Germany
The global tissue business has shown its growing dynamics in the past few years. The industry reaches new peaks year after year with an average annual growth rate of 3.5% per year. This very positive development has been noted by many investors, who are not coming only from the tissue or hygienic product manufacture, but also from other branches in the pulp and paper business, as well as totally new players having interest to diversify and enter the tissue sector. Tissue belongs to the least capital intensive segments in the pulp and paper industry, which has facilitated also smaller companies to consider investments in tissue.
The new dynamics of the tissue business has changed global competitive environment very drastically in the recent years. Not only new suppliers from different continents have emerged, but also untraditional trade flows have developed. Today, China is the largest tissue exporter globally, after earlier dominance by Italy. New investments continue, driven by both existing and new players, some of which have grown very quickly with aggressive expansion plans by companies with solid financial background. Indonesia and Turkey also belong to the largest tissue exporters today, which was not the case still 10 years ago. New investments continue, driven by both existing and new players, some of which have grown very quickly with aggressive expansion plans by companies with solid financial resources behind. The competitive environment is tough and the industry structures are changing quickly so that we cannot claim dynamics are missing from the global tissue business today! But some new risk factors have recently emerged: Brexit, and what will happen to free tissue trading with increasing protectionism and possible penalty duties by new administrations, that of Trump in particular? Will tissue
exports to the USA be drastically cut and what could this mean?
- World tissue consumption – market is dynamic. China has passed Western Europe in market size, while Asia Far East and Eastern Europe soon are now larger than Japan, China since 2015 the largest producer country.
- Global Consumption: 36.3 million tonnes (2016p),
- Growth in the global tissue market – relatively stable growth until the Great Recession in 2008, volume growth slightly above 1.0 million tonnes per year, recovery took a few years but 2015 was a good year due to China, North America and Western Europe. Preliminary data suggest that 2016 also strong.
- Anticipated growth in the global tissue market – tissue consumption benefitting from improving global economic growth, but there are also uncertainties ahead.
- Expected regional volume growth of tissue consumption, 2015-2025; Volume growth dominated by China, followed by Latin America. North America expected to have very positive trend, Brazil’s recovery helping Latin America. 40% of global growth in China!
- Indonesia and Turkey with recent major investments have invaded the world’s top tissue producer list.
- Several companies have expanded strongly, APP and SCA in particular, followed by Hengan, Sofidel, CMPC and WEPA.
- China APP and SCA have been the most aggressive players in the past 10 years while North Americans have used more defensive and margin-focused strategies.
- New players entering the tissue sector.
- Long-term growth trends in the global tissue market: International trade in tissue shows higher growth rate than tissue consumption, a clear sign of business globalisation. Parent roll trade has accelerated in recent years.
- The USA is the largest tissue importer of the world and until now rather open for any foreign attractive offers. In Europe, the same applies to Germany and the UK. China and Italy are the main global tissue exporters, followed by Germany.
- Canada continues to be the main US import source for tissue, but China has jumped into second position ahead of Mexico and Indonesia.
- BREXIT: uncertainty. Nobody knows exactly the possible influences of Brexit on different businesses, and tissue is no exception.
- There is a lot of commotion in the UK regarding Brexit. Possible effects on the future of the tissue business include: effects of weaker currency on consumer behaviour due to lower purchasing wer (At-Home) and squeezing budgets in the AfH sector; industry, investments and financing issues, threats to the current free trade agreements; consumer confidence at a low level, tissue as a daily necessity may not be the product most sensitive to changes in purchasing behaviour and we cannot exclude the possibility that consumers could slow ongoing product upgrading and perhaps even exclude some products other than toilet tissue from their normal shopping list; the AfH sector is always more sensitive to the economic cycle than the At-Home sector and any economic slowdown has an immediate effect on this business sector—buyers’ budgets are often squeezed and downgrading in quality is also common.
- Additional effects include: if the financial centre of London sees major departure of banks to other countries, this alone could result in unemployment and fewer jobs could have a negative effect on tissue consumption; the domestic tissue industry has not made any major investments recently and in the current uncertain conditions the overall environment for financing investments, especially those of smaller producers and converters, is not favourable; the UK is one of the main tissue importers in the world and almost half of tissue sold in the UK is based on imports, but the weaker currency may make them less attractive to export suppliers, which could help the domestic industry; what will happen to the current free trade? The UK has been open to imported goods and if any import duties emerge for tissue, it could help the domestic industry but not necessarily total consumption.
- POSSIBLE TRUMP EFFECTS: tissue may not belong to the most critical product groups but if some restrictions or penalty duties will be launched with selected trading partners, they may concern all imports and also have influence on tissue trade; US tissue imports are approaching the one million benchmark and some of the main tissue trading partners, including China, Indonesia and Mexico in particular, could be affected by duties; for the domestic (and Canadian) tissue industry major penalty duties for tissue imports could mean need to invest even more to be able to replace the declining import volumes.
- CONCLUSION: the global tissue business continues to grow with steady growth rates and without any major substitution threats seen in some other paper business sectors; tissue is no longer a locally manufactured products as 20 years ago but an increasingly internationally traded commodity; there are clouds on the skyline through new political trends with protectionism and populists possibly becoming effective.
Global Tissue Markets in 2017 and beyond: realities, challenges and opportunities in the increasingly-complex demand side of the marketplace
Svetlana Uduslivaia, head of industry research, Euromonitor International, USA
Tissue products in the developed markets continue to face a number of challenges, from saturation and slow population growth that affect retail sales to structural changes that impact the AfH channels. At the same time, the emerging and developing regions offer a significant potential for further expansion. With estimated unmet global tissue potential at well over 15 million tonnes in retail alone, the global marketplace offers a solid platform for the future industry growth. However, in the increasingly complex and diverse world of consumer and AfH tissue marketplace, the realities, challenges and opportunities for growth vary from market to market.
- Geographies: opportunities in the developing markets, with India as one of the key growth markets; China is the world largest tissue market by total volume for combined retail and AFH and remains open to value-added tissue products; Developed regions see only modest increase, with limited unmet potential left for future growth.
- Retail: fundamentals beyond industry control – GDP and population – play key role in retail demand in developed regions. At the same time habit formation and soft drivers are instrumental in the developing regions, thereby providing opportunities to drive consumption through innovation, improved retail access and consumer awareness; pricing pressures, including private label, strong in developed regions and are becoming more notable in the developing markets, in part supported by expansion of modern retail in urban areas.
- AfH: growth in developed regions hindered by saturation, structural changes in the institutional space, and budget cuts; demand in developing regions is supported by a host of factors, including employment expansion across institutional channels; opportunities in higher quality products in the developing regions, and stronger focus on customisation in the developed countries.
The Retailer’s Power: a major buyer’s view on market developments
Patrick Boateng, senior buyer for Tissue Paper Products, Major Supermarket, USA
The retail environment is going through a period of rapid change. The landscape has become more incredibly competitive than ever, as there is no single formula to serve the specific needs of every customer. Retailers are navigating the changing landscape and engaging the customer through actions such as:
- Using size and capacity to influence actions in other channels to create value for the customer.
- Strengthening digital capabilities to increase efficiency and convenience.
- Improving transparency of supply chain.
How are these changing landscapes, and the actions mentioned above, impacting the tissue paper products category?
With a focus on the North American retail environment:
- The world’s four largest retailers maintained their positions on the leader board in 2015.
- Industry dynamics in terms of mergers and acquisitions, divestitures and others shuffled the rest of the top 10.
- Walmart continued its dominance as the world’s largest retailer.
The landscape has become more incredibly competitive than ever.
- Increased channel fragmentation and non-store retail on the rise.
- Mix bag of retail formats targeting the sophisticated customer.
- A combination of multifaceted dynamics are going on today, all in the effort to serve the customer.
- Today’s consumer-driven trends include the following: Online ordering, personalisation marketing (loyalty programmes). Social media marketing.
Retailers’ response to the changing landscape
- Consolidation, mergers and acquisitions, in order to stay competitive.
- Digital and online marketing – retailers are using advanced technologies and online to better serve customers.
- Supply chain transparency with value stream efficiencies.
- Impact on Tissue Paper Category
- Rationalisation of product range to reduce complexities – responsible sourcing through chain of custody certificate.
- Shelf space allocation for private label – pressure to reduce cost.
Impact of the changing landscape:
- Sustainability has gained traction with consumers and retailers. Certification and new technology. Consumers – Millennials especially – want to buy from socially responsible companies.
- Consumers want the convenience of online purchases, larger packs, custom size.
- Today’s consumers place a high value on cost and quality.
- New heights of innovation for convenience.
- Enhanced absorbency, multi-purpose usage for scrubbing, napkins as well as towels.
How to meet the challenges of the changing retail landscape
- Set cost reduction goals.
- Develop smart, transparent supply chains to increase supply efficiency in order to
- keep costs low.
- Set strategic priorities for cost improvement and support clients’ promotional activities as competition won’t wait.
- Provide innovative products that consumers want in order to fulfil their multipurpose tissue needs.
- Be ready at all time, changes will not go away. Listen to your retailer customers’ complaints and create immediate solutions.
- Speed – Improve process execution and performance of your products.
AWARDS: Hungary’s Vajda Papir and Spain’s LC Paper awarded prestigious awards during Tissue World Milan
Hungary’s Vajda Papir and Spain’s LC Paper have been awarded prestigious awards during Tissue World Milan 2017.
The Mill Awards recognise marketing strategy and energy efficiencies. Vajda Papir won the ‘Best Tissue Marketing Strategy Award’ with its “Ooops!” brand and the marketing one-liner: “Whatever happens!”
The mill has developed the ‘Ooops’ sanitary paper product line, with the aim of making a high quality product that is affordable to all.
LC Paper was awarded the Most Energy-Aware Mill as the company has demonstrated a strong history and track record of energy reductions since 1993.
In 2012, the company developed tissue paper OnePly, replacing two layers with a higher weight layer. This resulted in a 19% reduction in energy consumption.
In 2014, the site’s PM2 was modified for OnePly, with two presses at 90kN/m and 120kN/m, a Steel Yankee with high conductivity and a hood with the use of the gases of the second gas engine of the cogeneration plant.
This resulted in an energy consumption of 1,100kWh/t, which meant an additional 35% saving.
In 2016, a new converting machine was started-up and using OnePly technology it created 8” autocut rolls with a length of 800ft, weighing 1.7 kg, in cartons of six rolls. This resulted in a savings of 45% in transport energy.