Sitting somewhat apart from the rest of the forest industry, tissue is the paper product closest to consumers. In western markets, profitability is under pressure from the big supermarkets, but the development potential in new markets is enormous.Future potential remains almost unlimited, no matter how digital the world becomes.
In 2020 China will surpass North America as the largest market for tissue.
The forecast is made by Esko Uutela, a long-time forest industry consultant who specialises in tissue. He sees no end in sight to the world’s need for tissue products.
Esko Uutela, who now runs his own consulting business after many years with Jaakko Pöyry, is convinced about the vitality of the tissue market.
“If you think about magazine paper or fine paper then the future 50 years from now may seem somewhat uncertain. But when it comes to tissue, I can’t see any threat, not even in 50 years’ time.”
Strong growth
So far North America and Europe are still the major markets for tissue consumption. But as growth here slows, it will increasingly gain speed in emerging markets, especially in China and Latin America. In 2015, China is expected to be a bigger market than Western Europe and Uutela projects that North America will be surpassed in 2020. The journey appears somewhat hair-raising if you consider that per capita consumption in the US today is 24 kilos annually, in Sweden 20 kilos, and in China – just three kilos!
“It’s probably reasonable to consider tissue a welfare product, in some cases a better measure of general living standards than GDP.”
“Tissue consumption is not so directly connected to people’s incomes, but is more a measure of general quality of life in the country. The use of so-called Away From Home products (AFH) is normally more widespread in mature, developed markets,” he says.
At the same time, tissue is a so-called necessity product, something we use as part of everyday life regardless of economic cycles. Total global growth is therefore expected to remain stable at around four per cent, at least until 2015.
Consumers and quality
Consumers have a lot of power and a successful tissue producer must know his market well. Suitable pricing and product quality vary extensively between different countries, different stages in development and different groups in society.
“The emphasis on product releases and market adaptation is so strong that there are some that say the tissue industry is not really part of the forest industry,” says Esko Uutela.
“I usually just say that it’s a different part…”
In Europe in particular, the major supermarket chains are tightening their grip on tissue producers. Through large private label purchases they are bypassing the wholesaler and thus increasingly dictating pricing terms.
Consumer demand is increasingly moving towards quality tissue, with an ever-higher share of new fibre being used to achieve optimum quality: Softness (in products such as toilet paper, facial tissues, towels and handkerchiefs) and absorption (in products such as household paper) are crucial.
Fragmentation
Another differentiating factor for the tissue industry is its high level of fragmentation. While four major companies (Kimberly-Clark, Georgia-Pacific, SCA and Procter & Gamble) control 45 per cent of world production, innumerable small and medium-sized manufacturers fight over the remaining space in the market.
“In Europe alone there are more than 100 tissue producers,” says Esko Uutela.
“If you add converting companies to that number, we’re up at over 200 and with all the companies involved in marketing, there are even more.”
Today, Italy is the clear leader in tissue production in Europe and it is the fourth largest in the world after the USA, Japan and China.
As far as tissue is concerned nothing seems to be pointing to a slowdown, on the contrary, new markets and new players are still joining the game…
Footnote:
Away From Home products (AFH) refer to tissue products for public places.