Esko Uutela, Principal, Tissue, Fastmarkets RISI
The Covid-19 pandemic has drastically changed daily life around the globe, including freedom to move, employment, operations and liquidity of companies, and the global economy as a whole—which is undoubtedly now in a major recession. It is difficult to estimate how long and deep the downturn will be, but most economists share the opinion that it will be more serious than the 2008-2009 financial crisis now known as the Great Recession. Covid-19 has had distinctly different consequences on the consumer and AfH tissue sectors. The consumer tissue sector has seen a boom and record sales, while the AfH business has started to suffer from drastically less public traffic, unemployment, more home-office working, travel restrictions and downtime in the HoReCa segment.
Generally, the pandemic has been a global phenomenon; however, there are some regional differences regarding how much it has affected daily life and the tissue business. In Europe, the second wave has been worse than the outbreak phase in March-April, while in North America the pandemic has continued raging and recently reached the new record of more than 180,000 daily new case (at the time of writing). But China, where the coronavirus originated, according to current knowledge, has been saved from the second wave and announced only very few cases per day, amazing when compared with the huge size of the country. In China, life has practically normalised already.
For the tissue business, the pandemic has been more positive than negative until now, with the exception of the suffering AfH sector with volume losses of 15-20% during the pandemic months because of home office working, limited public traffic and lockdowns. Throughout the world, as the pandemic began people started panic buying toilet paper as well as other tissue products and disinfectants. Through this hoarding of tissue goods, many sales outlets had empty tissue aisles for weeks, and companies reported sales doubling and all stocks sold out.
Toilet paper has benefitted very much, with 15% more sales throughout the week 2020 compared with the period of 2020. In the US, the growth in consumer bathroom tissue has been even more, close to 20%.
The consumer tissue business has seen a very positive year, and capacity limits have restricted the availability of the most popular brands, particularly in the US. Globally, we expect that the total tissue consumption will grow by around 5% in 2020, if not even more with continuing pandemic and intensive buying for reserve stocks at households. The outlook for 2021 is difficult to forecast. It is likely that the first half and the second half of 2021 will show different features. We believe that at least the first quarter and the beginning of the second quarter will not differ much from the current situation with consumer tissue doing well and the AfH sector continuing to be a bear market. From May-June onward, we expect that the pandemic will gradually release its hold, also as most likely vaccinations for part of the population should have begun for the risk groups at least. The AfH market is likely to survive, but not yet fully to the pre-pandemic level, and the consumer tissue business and shopping behaviour will return closer to its normal level. Global growth of 3.5%-4.0% can be expected for tissue consumption in 2021.
In the longer term, there are some positive factors helping tissue consumption. It is likely that people will continue to be concerned with hygiene issues, such as hand washing, which then requires drying. And many washrooms have reportedly turned off air hand dryers because they have been found to be virus slings. This is a positive for paper towelling, at least in North America, Europe and Japan, and probably also in other regions.
In the consumer tissue sector, households are likely to maintain higher stocks at home than they had been—reports are saying at least two weeks’ worth instead of one. And folded hand towels are also being found in households for hand drying, reducing the use of cloth towels.
Globally, the general awareness of the importance of good hygiene for protecting health is expected to have positive effects for tissue, and the number of tissue users will likely grow in countries with no tradition in tissue use.