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Overview
Discover the latest market trends and uncover sources of future market growth for the Tissue and Hygiene industry in Australia with research from Euromonitor's team of in-country analysts.
Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.
If you're in the Tissue and Hygiene industry in Australia, our research will save you time and money while empowering you to make informed, profitable decisions.
When you purchase this report, you also get the data and the content from these category reports in Australia for free:
The Tissue and Hygiene in Australia market research report includes:
- Analysis of key supply-side and demand trends
- Historic volumes and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- What is the market size of Tissue and Hygiene in Australia?
- What are the major brands in Australia?
- What are the most dynamic tissue and hygiene categories?
- What are the major markets for tissue products sales?
- What are the major markets for hygiene products sales?
Why buy this report?
- Gain competitive intelligence about market leaders
- Track key industry trends, opportunities and threats
- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Tissue and Hygiene market research database.
Sample Analysis
EXECUTIVE SUMMARY
Australians like their creature comforts
Despite the impact of the economic slowdown, the trend of Australians demanding comfort in their tissue and hygiene products has continued unabated. This has led to premium brands such as Kleenex, Quilton and Sorbent continuing, and even enhancing, their domination, whilst in sanitary protection, Australian women are making the switch from uncomfortable tampons to comfortable ultra-thin towels.
Incontinence the star category
Although compared to nappies/diapers/pants and sanitary protection it is still a relatively small category, Australia’s aging population has ensured that incontinence products experienced the strongest growth in 2010. This is unlikely to be a one off either; with Australia’s Baby Boomer generation entering old age and more elderly Australians living longer, incontinence products shall be the star category for quite some time.
Kimberly-Clark still dominant but on the wane
With its Huggies brand dominating nappies/diapers/pants, and its Kleenex brand the largest in tissues, Kimberly-Clark is by some distance the largest manufacturer in the market, with SCA Hygiene a strong second. The dominance of these two players is gradually weakening however, not – as might be expected – because of the rise of private label products – the market share of which, is actually on the decline, but of one emerging company – ABC Tissue Products – and a resurgent Australian Pacific Paper Products, under the new ownership of Unicharm Corporation.
Aldi shows the majors how private label is done
The vast majority of tissues and hygiene sales in Australia are generated through the two major supermarkets, Woolworths and Coles, although there are a variety of smaller but significant players; the most important of which is Aldi. Since its launch in Australia in 2001, Aldi has gradually grown in importance, selling nothing but private label products – and therefore encouraging other retailers to develop more competitive private label ranges of their own – and become increasingly popular during the economic slowdown. The success of Aldi’s private label products, has not been experienced by the major retailers, which actually lost share in 2010.
Demographic trends key to growth
Since most categories in tissues and hygiene are highly age-specific, the number of Australian consumers in each age group is the primary determinant of demand. Specifically, the small rise in the Australian birth rate shall produce moderate growth in nappies/diapers/pants, whilst Australia’s ageing population will ensure strong growth in incontinence products. Less dramatic shall be the gradual decline in Australian women of menstruating age, meaning that sanitary protection will at least be stagnant, if not go into decline.
Australian economy survives the depression
Despite being rightfully proud of being one of the few developed economies not to experience a technical recession – of two consecutive quarters of negative economic growth - in the aftermath of the global financial crisis, Australia’s economy is still far from out of the woods. The strength of the Australian economy over 2009 was largely due to the success of the Federal Government’s stimulus package, most notably the “stimulus payments” to Australian workers, which they were actively encouraged to spend. Whilst some consumers used these “stimulus payments” to purchase large items such as consumer electronics or a holiday to Bali or paying off credit card debt, others used it as a buffer between the need to trade down from premium to value brands.
By 2010, Australia was suffering from the hangover, both of the stimulus packages coming to their close, and the need for the Australian government to now pay them off. At the same time, strength in some sectors of the economy – such as the mining industry – continued to threaten an outbreak of inflation, forcing the Reserve Bank of Australia to raise interest rates. The result was an Australian economy in 2010 that was weaker than in 2009, with households increasingly experiencing “mortgage stress” due to rising interest rates. Most important is the unemployment rate, which only moved up marginally from 4% to 6%, before sliding down to 5% by the end of 2010; significantly better than the close to 10% unemployment rate being experienced in the US and many EU countries. The impact of the economic slowdown on most Australian households has therefore been minimal.
Current Impact
The majority of Australian households were so unaffected by the economic slowdown, that they in fact intensified their previous trend towards premiumisation over 2009 and 2010, with little or any sign of a preference for cheaper options such as private label. Australian women, for example, continued their migration from using cotton wool for make-up removal, increasingly making the decision to use the more expensive baby wipes instead. Furthermore, it was the premium brands that experienced much of the growth, with luxury toilet paper rising from accounting for 74% of value sales in 2009, up to 76% in 2010.
One reason for this is that the price difference between premium and economy brands is not significant and the difference in quality is considered to be worth the extra money. Premium brands have not wished to take this for granted however, and, concerned about the expansion of private label, are increasingly offering larger packs, to create the perception that they offer value, especially in these tough economic times.
Outlook
The fact that the Australian economy in 2010 was weaker than in 2009, underlines the concern that this trend shall continue, and that the combination of rising interest rates to combat inflation, government budget deficit, and the threat of other economies collapsing and creating another global crisis, ensure that the recovery shall be slow, with a low likelihood of another boom in the short term. The bulk of the globe’s economic problems however, are occurring on the other side of the world, in Europe, whereas Australia’s economy is increasingly tied to the growing economies of Asia, particularly China. Thus, challenges remain in relation to interest rates, and the paying back of the government’s budget deficit produced by the expense of the “stimulus package”.
One of the biggest economic influences shall be the appreciating value of the Australian dollar, which reached parity with the US$ in late 2010, and appears likely to continue to edge up, a trend that shall make imports increasingly cheaper, thereby improving the position of manufacturers which import a large proportion of their produce, such as ABC Tissues and its Quilton brand, at the expense of those which manufacture within Australia.
Future Impact
The appreciation of the Australian dollar, making imports into Australia more affordable, shall put a dampener upon the unit prices charged for tissue and hygiene products. Whilst this should theoretically benefit private label producers, which tend to outsource their products from overseas, the desire of Australians for premium brands, particularly in regards to such categories as tissues, shall reduce the influence of this trend. Instead it shall be manufacturers who are both positioned as premium, and able to take advantage of inexpensive sources of raw materials that will excel over the forecast period.
This trend shall further be driven by the slow recovery in Australia’s economy, and improvement in consumer confidence. Although the trend towards the premium end of the market continued unabated during the economic slowdown, it is likely to only intensify once consumer confidence improves. The forecast period shall therefore be characterised by a growing preference for premium brands, and a growing unwillingness to actually pay extra for this premium positioning.
Australia’s ageing population
With many categories being age specific – including nappies/diapers/pants, incontinence products and, to a lesser extent, sanitary protection – their condition is strongly influenced by demographic changes in Australia, particularly in relation to age. It is not just age however, with the growing number of migrants from Islamic countries also an influence, leading to the growth of towels and pantyliners, instead of tampons.
The first of these age-related demographic trends is the birth rate. After decades of Australia’s birth rate being in decline, this trend reversed over the course of the 2000s, with the birth rate peaking in 2008 at 1.96 per Australian woman, during which year the number of births in Australia reached the highest point ever at 296,000 births. One popular theory for this mini baby-boom is the “Baby Bonus” from the Australian Government, introduced by ex-Treasurer Peter Costello in 2002, although the expense of babies far exceeds the value of the “Baby Bonus”; which was only just over A$5,000 in 2010, although gradually increasing with inflation. More likely, it has been the result of the children of the original Baby Boomers – born in the 1970s – reaching the peak age for having children themselves.
Any further increases have not been forthcoming over 2009 and 2010, when the number of births fell from 1.96 per Australian woman in 2008 to 1.9 in 2009. Possibly this is due to the impact of the global financial crisis, which made having a baby less attractive, or else because the mini baby-boom has taken its course, with the children of the original baby-boom now beyond peak child bearing age.
It has been much discussed that much of the decline in birth rates is due to Australian women deciding to have children later in life, which therefore significantly reduces the window of having children, and the number of children in each family. Whereas prior to the year 2000, it was 25-29-year-old women who were most likely to have children, this has changed to 30-34-year-olds, with even larger growth – albeit from a lower base – in the number of 35-39-year-olds having children. The peak age for Australian women having babies in 2010 is 31-years-old, making the number of 31-year-old Australian women the key variable in determining the birth rate.
The number of Australian women of menstruating age is another major influence on the market, most notably in relation to sanitary protection. Australia’s aging population means that the number of Australian women going through menopause is trending upwards, at a rapid rate, whilst the low birth rate during the 1990s, means that there are comparatively few teenage girls going through menarche to replace them.
Australia’s Baby Boomer generation have reached an age at which they are increasingly in need of incontinence products, whereas those consumers who are genuinely elderly are living increasingly longer. To illustrate, the number of 90-year-old Australians in 2010 is over 30,000, whereas in 2000 it was under 20,000. This has created a huge growing market for incontinence products over the 2000s, whether through retail or Away-From-Home, and a huge opportunity for the future.
Current Impact
With the birth rate declining slightly since 2008, although plateauing at a level considerably higher than that experienced during the 1990s, so too has the volume growth of nappies/diapers/pants declined slightly, by 1% in 2010, ending the run of positive growth that the category had experienced over the 2000s mini baby-boom.
Instead it is those categories that can take advantage of the “toddler boom”, which is occurring instead in 2010. The most notable amongst these, are “nappy pants”, included by Euromonitor International under junior nappies/diapers, which grew by 3% in current value terms; the only category of nappies/diapers/pants to experience positive value growth.
It is also notable that it is the higher income Australians who are driving this increase in birth rates over the 2000s, consumers who, by the time they give birth at an average age of 31, have established careers and are relatively well off. This has strong implications for the decision of what price positioned nappies/diapers/pants brands should be use used, and is one reason for the growing dominance of the premium Huggies brand, whilst the more value-positioned Baby Love has remained a very distant second, even though it has made significant market share gains in 2010.
Just as the mini baby-boom has now given way to a mini toddler-boom, so are tissue marketers increasingly taking notice of a mini primary school student-boom, with Kleenex encouraging nursery and primary schools to introduce a “Sneezesafe” program in order to teach children that they should use tissues instead of their sleeve. As the children of this mini baby-boom get older, Kimberly-Clark is continuing to follow them with its marketing efforts.
The Australian birth rate of the 2000s, being considerably higher than the birth rate in the 1990s, has also impacted sanitary protection, being one of the factors behind the trend away from tampons and towards towels and pantyliners. Once women give birth, comfort becomes an increasingly important issue to them, leading to a preference for towels over tampons, which is reinforced by the general aging of Australia’s population.
Outlook
Over the next decade, around 1.7 million Australian women will go through menopause, whilst over the same period, only 1.4 million Australian girls will begin to menstruate. Although migration, much of which shall be made up of women of menstruating age, shall significantly fill this gap, these are not favourable figures for the Australian sanitary products manufacturers.
The size of the market for nappies is largely determined by the Australian birth rate, which in turn is largely reliant on the number of Australian women turning 31-years-old; the median age for giving birth. This number shall rise from 148,500 in 2010, to 170,000 in 2015, leading to a significant increase in Australia’s birth rate, which in turn shall be encouraged by the introduction of Australia’s Parental Leave Scheme.
Introduced at the beginning of 2011, families will receive the “National Minimum Wage” for 18 weeks, but if they do so they will not receive the “Baby Bonus.” Whilst, like the “Baby Bonus” this will not impact the decision of whether or not to have a baby, it may bring that decision forward. The policy of the Liberal Party, currently in opposition, is to have parental paid leave be equal to the mother’s income, for six months. If the Liberal Party keeps this policy at the next Australian Federal Election, and it won, then the impact upon the birth rate is likely to be greater. The likelihood of this policy lasting until the next election however is small, given that it was controversial amongst Liberal MPs due to the fact that it would be funded by a tax on business; the Liberal Party’s core constituency.
The most important demographic change over the forecast period, however, shall be the number of elderly people, the key target market for incontinence products, which shall increase dramatically as Australia’s Baby Boomer generation reaches their 60s and 70s. Australian Baby Boomer women, currently mostly in their 50s, have already begun to experience incontinence problems, as a result of child birth and menopause, but the issue shall gradually grow and be joined by Australian men with prostate issues.
Future Impact
2010 saw Australia caught in a lull between two mini baby-booms, and since a second mini baby-boom shall occur over the course of the forecast period, it is expected that nappies/diapers/pants shall experience a volume CAGR of 2% and a constant value CAGR of 1% over this period. The slow value CAGR being due to the migration from disposable pants to the less expensive “nappy pants” option.
Sanitary protection shall see a continuation of existing trends, away from tampons – which is expected to experience a negative CAGR of 3% in constant value terms- and towards towels, whilst declining in general as a result of more Australian women exiting the market due to menopause than entering it due to menarche. The result shall be a negative constant value CAGR of 1% over the forecast period.
Incontinence products however shall be the star category, with a volume CAGR of 9% and a constant value CAGR of 8% over the forecast period. Not only shall the category grow due to the rising number of elderly Australians, but the size of the baby boomer generation shall ensure that there is growing attention given to making incontinence products more socially acceptable. It is expected therefore that the branding of incontinence products in the future shall emphasise less that it is a medical condition, and more that it is just another part of life.
The battle against private label
Since their invention in the 1980s, private label products have long been predicted to take over the market, due to their tendency of being priced lower than other brands, and the assumption that the higher profit margins that they offer retailers would ensure that they replace many branded products. With an economic slowdown making consumers even more price conscious than they usually are, 2010 could be expected to provide the perfect opportunity for private label to make a surge in relation to market share. This however, did not occur, as the retailers were up against some of the most powerful brands in the grocery channel, with brands such as Huggies, Kleenex and Libra, particularly renowned for their high promotional spend. The failure of private label to make a larger dent in these categories is also because, through the major manufacturers’ promotional efforts, Australian consumers have learnt to value premium offerings, placing a great importance on “softness” in relation to tissues and toilet paper, for example. The importance of “softness” to Australian consumers, and their willingness to pay a premium for it, can be seen in the fact that the only brand to be able to make significant gains against the two leaders in retail tissue – Kleenex and Sorbent – has been Quilton, which it managed to accomplish by matching the leaders’ premium position.
Coles has also used its private label products to establish its “green” credentials, having produced a Coles Green Choice option for relevant categories – such as toilet paper – in addition to its low-priced $mart Buy brand and Coles private label; the latter of which replaced You’ll Love Coles as the mid-priced brand in 2009, after research demonstrated that consumers found the previous name a little presumptuous.
It has been the growing popularity of Aldi, which exclusively sells its own private label products, however that has been the main success story. As consumers increasingly patronise the ever expanding network of outlets, so has the presence of its private label range expanded, putting pressure on the major retailers to ensure that their own private label products are competitive, in order to prevent the more budget-conscious segments of consumers from migrating to Aldi.
Current Impact
The impact of private label is often overstated, since decades after their first introduction into the Australian market – by Black & Gold in the 1980s – they still only make up low single-digit percentage market share across the board of tissue and hygiene products. It is the desire amongst Australian consumers for premium brands that has largely prevented their expansion, particularly since until recently private label products have primarily targeted the cheaper end of the price spectrum. With Woolworths launching the Select brand, and Coles the Coles brand (formerly You’ll Love Coles), with mid-price positioning, the fortune of private label has improved, but, although generally performing better than low-priced private label products, they are still only able to gain a couple of percentage points of market share, in most categories. There are however, some exceptions.
There are number of categories that are commoditised in nature, and it is here where private label products have made the greatest progress and continue to gain share, such as cotton wool/buds/pads, where both Woolworths’ Homebrand and Coles’ self-named private label, have double digit value share, of around 14% each, with Coles making particularly large gains, up from 11% in 2009. That retailers can only achieve such shares in commoditised markets where new innovations are practically non-existent, does not bode well for their chances of future success.
Outlook
The battle against private label heated up in 2010, as the “dumping duties” on toilet paper was removed, thereby making toilet paper imported from China – which makes up a large proportion of toilet paper used by private label producers - even more competitive than it originally was. Both Woolworths and Coles took advantage of this situation by using their access to imported toilet paper to develop their private label ranges, significantly increasing the proportion of shelf space allocated to their own brands, particularly in toilet paper and paper towels. Still this did not lead to significant market share gains for the private label offer from either of the two major retailers, although the ability to access cheaper imports has certainly made further efforts to do so, more appealing.
One likely victim of this more aggressive push is likely to be ABC Tissues, which currently produces much of the private label products for Woolworths and Coles. A price war between Asia Pulp and Paper Products and ABC Tissues is therefore likely over the forecast period; putting significant price pressure on tissue products generally, although the premium positioning of ABC Tissues’ Quilton brand shall likely act as a significant buffer for the company.
Future Impact
Establishing a private label based on the lowest price has long been a popular strategy for retailers, as it is a simple and easy sales proposition for consumers to understand. Creating a mid-price or premium private label is a far trickier proposition, but it is this that retailers shall focus their efforts on over the forecast period. This is particularly the case given that the consumers who have already embraced low priced private label products – such as low-income families – have little in common with those that retailers are now attempting to attract – high-income families and singles. There is a growing realisation amongst retailers that they will not be able to grab any more than just a niche of the tissue and hygiene market, since competing against brands as powerful as Kleenex, Libra and Huggies is beyond their abilities. Further progress is likely to be in a gradual and piecemeal fashion therefore.
Private label products will also benefit from the growing polarisation of the market. Brands that fit into one of three categories shall succeed. Private label shall grow due to the growth at the lower-end of the market, as well as producers attempts at coming up with increasingly convincing quality brands. Premium brands shall also grow for those consumers willing to pay more for quality, thereby providing retailers with thicker profit margins. And the leading private label products will grow, since retailers realise they cannot do without them. Those brands which do not fit in any of these categories shall fade, with the most likely victims being value brands that are not private label products. This trend however, is likely to progress slowly,
Tissue marketing goes viral
Year-on-year companies have spent progressively greater and greater portions of their marketing spend on online advertising, with it estimated to make up 15% of media spend in 2010. Much of this spend on online advertising has involved various experiments with establishing a relationship with consumers, through the social media. Some of this just involves setting up and administrating a Facebook page, communicating with consumers through a Twitter account, or uploading the brands latest advertisement onto YouTube which then accidently goes “viral” (as occurred with the “Libra Pad Man” advertisement in 2010), whilst others are bigger budget and more ambitious.
In the tissues and hygiene market it has been Kimberly-Clark that has been at the forefront of such attempts; attempting to create relationships with consumers through turning its website into an information centre and offering forums about bringing up babies – in the case of Huggies – and since this was deemed successful, transferring this to the raising of children, for the Kleenex brand, so that parents could have a Kimberly-Clark brand to help them all through their child raising experience, under the slogan of “sharing the collective wisdom of Australian Mums”.
Although an innovative form of marketing, in that Kimberley-Clark is amongst the first FMCG companies to embrace social marketing to such an extent, it is pretty much still piggybacking on the parental advice sites that have emerged over the 2000s and which Australian parents are increasingly turning to: Bubhub, Essential Baby and increasingly, Kidspot. Parents have always been nervous and sought advice, and online communities such as these are increasingly filling this niche.
Current Impact
Given that most tissue and hygiene products are not amongst those that consumers are likely to engage in, and declare they “like” on Facebook, Huggies has instead attempted to attract consumers by associating itself and integrating itself into the common experience of child rearing, from conception to baby names until the child is a toddler. Once the child has become a toddler, Kimberly-Clark has another website ready, all about toilet training, known as PooPooIsland.
It is early days yet, so it is difficult to say just how well Australian parents shall respond to obtaining their advice from a branded website, but compared to an “online brochure” styled website, this is certainly a move in the right direction.
Libra concluded that the majority of consumers visiting its website are teenage girls having their first period, and looking for somewhere to turn for advice. The Libragirl website – featuring cute girlie artwork, “fun stuff” and the latest pop chart hits – is the primary website for the Libra brand in Australia, and attempts to provide a similar advice-giving function as the Huggies/Kleenex websites, but without the social media aspects.
Outlook
The use of online media for promoting tissues and hygiene brands shall only increase, with the only matter that is unpredictable being which websites shall be the most popular to promote a brand in, with rivals to Facebook likely to emerge on a regular basis, and online communities where people can discuss products and search for advice also popping up, although there shall no doubt be many failures.
Whilst creating online communities within a branded environment is the approach chosen by Kimberly-Clark, for most companies the ambition shall merely be to create hype and “buzz” about their latest product launch. The use of online communities as opportunities to reach consumers is already growing, seemingly organically, by small marketing companies trying to figure out how to utilise the power of social media. There is Vibe Village for example, where members discuss and share their thoughts about new products that they are excited by, and Womow, which does the same for smaller local businesses, mostly in Melbourne, whilst Zoupon, in the last six months of 2010 has established an impressive presence. Although the latter two are predominately focused upon promoting SME’s, similar websites for large FMCG markets are undoubtedly an option.
Whilst other websites such as The Freebies Blog and iFree, offer the opportunity to receive free products, thus helping create buzz about the products. A growing proportion of websites also offer free trials of their products to interested consumers, a strategy particularly popular amongst sanitary protection and nappies/diapers/pants brands.
Future Impact
The use of social media is likely to be a boon to the smaller players in the tissue and hygiene market, if they are able to capture the public’s – or at least a niche of the public’s – imagination, since it is a far cheaper means of advertising than television, or most other mediums, and equally importantly, has the opportunity to be “shared” amongst peer groups. This only occurs rarely however, with only a handful of advertisements ever deemed entertaining enough to go viral, although sometimes the Australian public can defy predictions. Few experts for example predicted the viral success of the “Libra Pad Man” which ended up receiving 300,000 online views in only six months in 2010.
The Green Revolution?
With the Greens Party receiving 12% of the House Of Representatives vote in the 2010 Federal Election, and 13% in the Senate, including its first lower house seat which earned it the right included in the newly formed minority government, it could be assumed that environmental concern amongst Australians is high. Furthermore, according to Roy Morgan Research around 65% of Australians consider themselves “environmentalists”, and the amount of waste being recycled by Australians is reputedly increasing each year over the last decade. Australian consumers also showed a high level of co-operation during the droughts of the 2000s, in conserving their water. Each of which would suggest that Australian consumers possess a high level of environmental concern.
This does not appear to have translated however into significant sales of “green” products. This is both the case “overall” and in relation to tissue and hygiene products. In the primary area in which recycled products are an option within the market, that being toilet paper, “green” brands have never been able to exceed a 6% value share; the share which they accomplished in 2010. This suggests that only half of Green voters actually practice what they preach, at least in relation to toilet paper.
Consumers may be concerned about the environment, but not to the extent that they are willing to sacrifice comfort for it. In relation to toilet paper for example, softness is considered by far the most important matter of concern. Also, as something of a moral issue, most consumers can only concentrate on one issue at a time, suggesting that consumers feel that if they save water they have “done their bit” and do not have to save paper.
Current Impact
There are three main reasons for the failure of recycled toilet paper in Australia. The first of these is the harshness of most recycled toilet paper, in a market where consumers consider the softness of toilet paper to be the highest matter of importance. Given the willingness of Australian consumers to spend more on toilet paper softness, as evidenced by the fact that the largest brands in Australia are premium brands – Kleenex, Sorbent and Quilton -, it is increasingly looking as though the decision by toilet paper manufacturers to also compete on low prices, as being a strategic error. Finally, it is the decision by the leading premium brands not to launch their own green brands, meaning that the development of the “green” segment has mostly been left to local brands with limited marketing muscle. This has begun to change in 2010 however, with ABC Tissue having launched its EcoPly brand. Being one of the “big three” in Australian toilet paper, with a strong position in the premium segment through its Quilton brand, ABC Tissue has strong “softness” credentials. EcoPly is not a pure recycled toilet paper however, since it is only the middle of the three plies that is recycled. Still, it is the most significant move into the “green” toilet paper market by a major player so far.
The extent to which consumers’ apparent concern about the environment has actually translated into sales has been mixed, and certainly marketing a brand as a “green” brand, is no guarantee of success. GreenSoft, a toilet paper made of bamboo and cotton, and despite an extensive media campaign including articles such as “Green Tissue Set To Wipe Tree-Based Brands Off Shelves” (in The Australian in December 2009), was withdrawn by Woolworths, the largest supermarket retailer, by the end of 2010, by which time it was picked up by the second largest supermarket retailer, Coles. Given its failure to gain a sizable niche at Woolworths however, the likelihood of success is appearing increasingly slim.
Although the popularity of “green” brands in toilet paper has been limited, it has been even more so in relation to other segments, failing to take hold at all in regards to facial tissues, whilst in sanitary protection the options are limited. The closest thing to a “green” brand in sanitary protection is Cottons, which has established a sizable niche of the market for consumers attracted to the fact that its product is more “natural.”
Outlook
In the aftermath of the Copenhagen Summit 2009 and the failure of the Earth’s governments to agree upon a framework for the lowering of carbon emissions, the Australian public became disengaged with “climate change” – as shown through opinion polls such as those initiated by Roy Morgan Research - which has long been considered as a proxy for overall environmental concern. The proportion of Australians who claim that they believe in climate change had, by the end of 2010, fallen to less than half of the population, whilst climate change deniers and those who claim that they “don’t know” have grown in number. The result of this is that overall environmental concern is likely, if not to go backwards, to at least lose much of its previous momentum. This ought to be a matter of considerable concern to any manufacturers attempting to position themselves as a “green” brand.
Future Impact
“Green” manufacturers are increasingly coming to realize that the low-price low-quality strategy that they had based their segment upon, has not worked, with consumers increasingly demanding premium products for their toilet and tissue paper. The strategy for “green” brands over the forecast period shall be to shift into the premium price range, whilst at the same time mainstream-brands shall attempt to establish their “green” credentials. No longer will simply being a “green” or recycled product be deemed to be enough. Whilst consumers had not embraced “green” toilet paper brands just for the sake of their being “green”, a mainstream brand attempting to establish its “green” credentials has a greater chance of succeeding, due to greater marketing muscle, and the familiarity of consumers with the brand. Premium “green” brands shall among the most vibrant segments of the tissue and hygiene market over the forecast period.
Highly concentrated market dominated by two majors
The tissue and hygiene market in Australia can be summarised as a competition between two companies, Kimberly-Clark and SCA Hygiene, with one of the two brands holding the top spot in the majority of categories – the main exception being cotton wool/buds/pads where the leader is McPherson's with the Dove Swisspers brand.
Ultimately, it is Kimberly-Clark that is the leading brand in tissues and hygiene with a 37% value share, although this has slipped slightly from 38% in 2009, and has in fact been in decline each year since peaking at 40% in 2006.
Over this period, SCA Hygiene has slowly edged up from a 23% value share in 2006 to 25% in 2010, considerably lower than Kimberly-Clark although with the potential to at least equal Kimberly-Clark’s market share by the end of the forecast period, particularly given its leadership in incontinence products, the fastest growing category in incontinence products.
Current Impact
Kimberly-Clark’s leadership in tissues and hygiene is predominately due to its strength both in nappies/diapers/pants where it leads with a 67% value share and in tissues of which the Kleenex brand has a 55% share. In both of these categories Kimberly-Clark has succeeded in positioning itself as a premium brand in categories where Australians tend to value comfort.
One category which Kimberly-Clark has not been able to dominate is sanitary protection, where its attempts at creating a premium brand with U by Kotex, using the slogan ‘the ultimate care down there”, have only partially succeeded, managing to rank only fourth, in a category in which several brands – including local Australian players such as Millie & More and The Woman’s Room – are competing for the same niche of women who are looking to make a statement with their sanitary protection brand, and not just functionality. Heavy promotional effort has meant that U by Kotex has seen its share grow, although SCA Hygiene’s leadership with Libra – at 40% of value – is likely to continue indefinitely.
Meanwhile SCA Hygiene’s Sorbent brand of toilet paper continues to extend its lead at 31% value share, against Kleenex’s 24%, with much of the success in 2010 due to the new premium Velvet range, showing once again that Australians value their comfort when it comes to tissue and hygiene products.
Outlook
Kimberly-Clark has made significant investment in improving its logistics in 2010, since something clearly needed to be done to reverse its deteriorating market share ever since 2006. In addition to making its supply chains more efficient, helping to improve its relationships with retailers, Kimberly-Clark also intends to speed up its new product development, as has already been seen in relation to U by Kotex in 2010, and its release of the U by Kotex Platinum range, and the Nude Liner, an extra thin Kotex Pantyliner, which is recommended to be used even when the customer is not menstruating. Kimberly-Clark is a large enough player in its categories that retailers tend to co-operate with stocking its new products, realising that they will supported by aggressive marketing efforts.
Kimberly-Clark and SCA Hygiene are not only competing with themselves, but are actually in the same boat in competing against emerging players, some of which have better access to cheaper supplies and are therefore in an improved position to compete on price: Such as ABC Tissues and the new entrant Solaris Papers which are expected to launch their own brands into retail in 2011. Meanwhile, in nappies/diapers/pants, Australian Pacific Paper Products was acquired by Unicharm Corporation in 2008, and since then has seen a renewed boost in its marketing and market share, up from a 12% value share of nappies/diapers/pants in 2009 to 16% in 2010. Having had the category more or less to itself over the course of the 2000s – although Johnson & Johnson has a large presence in sanitary protection – the forecast period is likely to witness growing competition for Kimberly-Clark and SCA Hygiene across the board.
Future Impact
Kimberly-Clark’s strength is in nappies, which shall benefit from the increase in the Australian birth rate expected over the forecast period. SCA Hygiene on the other hand is strongest in sanitary protection, where the market is tipped to decline, the result of a large number of Australian women going through menopause, although it is likely to benefit from growth in incontinence products. Thus the market power is likely to continue to migrate from SCA Hygiene to Kimberly-Clark over the forecast period, with the potential – albeit low - for SCA Hygiene to outsell Kimberly-Clark by the end of the forecast period.
The change from having two larger players making up over half of the market, both of which follow the same “premium” brand strategy, to a more fragmented market including recent upstarts such as ABC Tissues and revived businesses such as Australian Pacific Paper Products, is likely to have an impact upon the price paid by consumers. With enhanced competition, much of this competition shall be on price, and this shall contribute to a lowering of the unit price for tissue and hygiene products over the forecast period.
Paper trade wars come to the fore
Over the course of the 2000s, imports of paper pulp from China and Indonesia grew rapidly, imports that, like most other imports from those two countries, were cheaper than those from domestic sources. With the two major manufacturers in Australia, Kimberly-Clark and SCA Hygiene, sourcing the bulk of their paper from Australia, these manufacturers felt that they had been put at a disadvantage, and the matter became a political issue, with concerns being raised that these paper products were being “dumped” upon the Australian market. With prices of Chinese paper up to 25% less than that being sold in China, and 45% in relation to Indonesia, this certainly appeared to have been the case, and led to “dumping duties” of 40% being imposed in 2008, after Kimberly-Clark and SCA Hygiene complained to the Australian Customs Service.
The dumping duties were removed in 2010, after importers of these paper products appealed, after a consequent review, and the realisation that there was a third major manufacturer in Australia – ABC Tissues – which was able to sell its products at prices similar to those that were dumped, although this is partially because it imports “parent rolls” as well, which are converted into individual toilet rolls within Australia, although the company does also manufacture some products as well.
Not only has ABC Tissues survived in the face of this “dumping” but has thrived, transforming itself from a medium sized player to one of the leading players over the course of the 2000s. Much of its paper is sourced from overseas, and although not necessarily from “dumped” imports, this is likely the source of some of its advantage.
As of the end of 2010, Kimberly-Clark and SCA had taken Australia’s Attorney General to the Federal Court with the accusation that the review of the dumping duties by the Australian Customs Service was illegal.
Current Impact
The “dumped” toilet paper had a number of beneficiaries, most notably private label producers and ABC Tissues, the latter of which saw its Quilton brand’s share grow from 17% in 2008 to 22% in 2010. Threatened on the other hand are two major global players, which have manufacturing operations in Australia, through which they produce a large proportion of their retail tissue product, although much of their Away-From-Home products are imported. The extent to which they have been impacted however seems debatable, with Sorbent’s market share actually rising from 27% in 2008 to 31% in 2010, although Kleenex’s market share has declined slightly. Certainly there appears to be little evidence of deteriorating market share for the two major manufacturers, at least not in retail.
The overall impact of this situation is to put downwards pressure on prices, and suppress value growth, in toilet paper and paper towels. It has also served to increase the potential price margins received by retailers for their private label products, providing them with additional incentive to develop their private label presence.
Outlook
In addition to attempting to convince the Australian Government and Customs Office of the damage being done, and potentially to be done, by the removal of “dumping duties”, the industry – or specifically the leading duo of Kimberly-Clark and SCA Hygiene and their primary spokesperson in Federal Parliament, Nick Xenophon - is also fighting a public relations war, connecting the dumped paper, much of it sourced from Asia Pulp & Paper, with the destruction of rainforests, particularly those in Indonesia that are the habitat of orangutans. Whilst Australian producers need to source their pulp paper from plantations, this is not necessarily the case for imports, giving these imports a competitive advantage in terms of cost. In relation to the concern about at least some of these imports being illegally logged, the Australian Government has introduced legislation against the importation of illegally logged timber products, including paper.
With the market share figures of both Kimberly-Clark and SCA Hygiene seemingly being unaffected by the removal of dumping duties, it shall be increasingly difficult for them to argue that their Australian manufacturing operations are at stake. It appears unlikely therefore that they shall be reinstated. Kimberly-Clark and SCA Hygiene shall therefore need to get used to the new competitive environment.
Future Impact
In addition to putting additional pressure on those players which have manufacturing capacity in Australia, the growing proportion of the market made up of imports shall put downwards pricing pressure on toilet paper and kitchen towels in Australia, the latter because, although most of the media focus has been on toilet paper, it shall also have an impact upon kitchen towels. Both Coles and Woolworths have been especially assertive in their efforts to build their private label presence in kitchen towels, assisted by their access to inexpensive sources of paper.
The extent to which this occurs however shall be largely reliant on the extent to which those brands which utilise the imported paper – predominately private label products – are embraced by Australian consumers. Despite retailers giving their private label ranges preferable treatment in relation to shelf space, the impact so far appears to be marginal. This is because although comfort is not an issue in relation to kitchen towels, both Kimberly-Clark’s Kleenex brand and SCA Hygiene’s Handee Ultra are competing instead on strength, and are likely to continue therefore to keep one step ahead, not only of private label products, but also other manufacturers which can benefit from inexpensive sources of paper.
The impact is likely to be greater in relation to the Away-From-Home (AFH) market where it is price and not comfort that is the most crucial concern. Unit prices in the AFH market are consequently likely to be suppressed over the forecast period.
