The March issue of PaperAge had a lot of cheerful information about the North American tissue market. Both Ken Patrick and AF&PA's 44th Annual Survey had positive things to say about it, so did Alan Rooks in Solutions. I think they did so because it's the only grade that's seems to be performing. We all need a bit of good news at the moment.
This grade is also good news in Europe. It's even become mildly controversial. SCA Hygiene is promoting its Velvet range of bathroom tissue on UK television with the slogan “Love your bum.”
Tissue grades are unique because their consumption directly reflects the standard of living. If the standard is high, consumption is high. Where the standard is low, consumption is low.
The new European market of 40 different countries is a classic example. In the developed west, per capita consumption is about 20kgs. In the emerging east (Poland, Hungary, Czech Republic etc), it's around 7kgs-the Ukraine consumes 1kg and it's pretty scratchy stuff! Total European consumption is 6.3 million tonnes, almost matched by the 7 million tonnes of production.
The leading manufacturers are SCA Hygiene, G-P, P & G, K-C and a few but significant Italians like Perini, Recard, Sofidel, Tronchetti and Toschi.
Central Europe (Germany, France, UK,) accounts for 45% of consumption followed by Southern Europe, (Spain, Portugal, Italy, Greece) with 36%. Yet these countries are mature markets. There's a limit to how much bathroom, kitchen, baby, personal and AFH tissue one can consume. The manufacturers have marketed tissue that is scented, moistened, embossed, thicker, softer or stronger, but consumers in these countries appear to have enough of it in their bathrooms, kitchens and workshops. So where, and what, next?
New markets. Almost certainly new markets are developing to the east and south-this includes all the former Communist countries that became members of the European Union on May 1. Manufacturers, machinery suppliers and consultants are flying into cities whose names lack vowels and which never used to appear on airline schedules. The outstanding exception here is Russia, which is consuming more and more tissue but with very little new investment. Increased production in this country has been based on machinery rebuilds and improved efficiency. But it will soon need new capacity.
Future demand in these emerging markets, according to analyst Esko Uutela (EU Consulting, Germany), will be driven by:
- Economic growth
- Population growth and demographic changes
- Product penetration levels-big differences between east and west
- Developments in product quality
- Away From Home (AFH) tradition-if any
- Promotion and advertising
But these drivers are often deflected by unique conditions in the east. The degree of urbanization is often more important than the size of population. Of Poland's 40 million people, 75% is rural. In the AFH sector, company and public budgets are notoriously strapped for cash. All the new members are hoping for hand-outs by Europe's grant and aid commissioners. They will be deeply disappointed.
Despite this unpromising prospect, 15 tissue machines are under construction in the region and slated for start-up by 2005. Six of them will be in Poland, the other nine are spread-out (one in each country) over the Ukraine, Romania, Hungary, etc. Seven of these are new and the remainders are a mixture of rebuilds and second-hand machines. Total new capacity will be 267,000 tonnes.
In contrast in the west, and despite its mature market, 19 new mills are planned by 2006-seven of them in Italy and the rest in France, Spain, UK and Sweden. Total new capacity is 640,000 tonnes.
For the region as a whole (east and west), 34 tissue machines are under construction or in the planning stage, and will produce new capacity of 904,000 tonnes by 2006.
Mixed products, but low TAD. There is little indication what products the new machines will make, but Uutela estimates that, in Western Europe, the mix will be mainly bathroom tissue, followed by AFH and incontinence products. Demographic trends in the west show that the population is ageing and the birth rate falling, so less diapers and more incontinence pads are needed.
In the east the population needs most lines; mainly bathroom, kitchen and personal tissue-AFH is way behind the field.
The real market leaders are the private or retailer labels which have 60%-70% of the retailer consumer tissue market. (In North America, company brands by P&G, KC and GP still account for 75%-80% of the market).
The big surprise in Europe is the low level of Through-Air-Drying (TAD) technology. Uutela identifies only 11 TAD tissue PMs with a total capacity of 540,000tpy in five countries in Europe. This is just 8% of the total European capacity of 7 million tpy.
In my view, tissue is probably the only grade in our industry that is not, and unlikely to, be challenged by the on-line culture that now shapes us.
