Despite the broad return of life routines following COVID-19 lockdowns and the introduction of hybrid work that underpinned the sustained growth of global retail tissue, the factors of high inflation, rising unit prices and strained supply chains cast a tale-of-two-cities spell on the category in 2022. Current value growth, largely driven by the inflation effect, accelerated to 2020’s height of 9% from a tempered 4% in 2021, widening its gap with both volume and real value (excluding inflation effect) growth from the previous year.
Volume growth weakened to a mere 1% in 2022 from 2% in 2021 as consumers coped with higher prices by switching to cheaper brands, buying smaller packages or simply cutting back
Source: Euromonitor International
Real value growth, however, though improving, still fell short of pre-pandemic levels.
Such dynamics will continue to incentivise businesses to diversify and sharpen their portfolios across the price ladder and use occasions to land the best intersection of value and efficacy for all consumers.
Inflation posts cautionary note for consumer spending and category outlook
Despite certain signs of relief ahead as pulp capacity catches up and supply-demand rebalances, the outlook for retail tissue consumption in 2023 is still cautious based on lower consumer confidence and purchasing power amid persisting inflation pressure.
The global retail tissue industry was predicted in April to grow by 2.6% in volume in 2023. Meanwhile, with a probability of 22-32%, a global stagflation scenario would bring about a notable downgrade in the forecast volume and value CAGRs for facial tissues and paper tableware, followed by paper towels and toilet paper, amid a backdrop of consumer price sensitivity and simplified routines.
With a probability of 22-32%, a global stagflation scenario would bring about a notable downgrade in the forecast volume and value CAGRs for facial tissues and paper tableware
Source: Euromonitor International
While developing regions, the core engines of retail tissue’s forecast growth, expect to be subjected to the largest growth downgrade, given local consumers’ vulnerability and tendency to cut back in response to inflation, developed regions are not immune, making it even more important for tissue players to generate value now before further deceleration in 2023.
Strong value focus and lifestyle transformation catalyse multifaceted tangible value strategies
Inflation is one reason for price increases, as confirmed by nearly two thirds of global retail tissue industry professionals surveyed by Euromonitor International in December 2022, but it can also be a stimulant for value creation. However, amid a backdrop of inflation, consumer price sensitivity, simplified routines, and evolving lifestyles such as flexible working and heightened health awareness, the path to value creation in retail tissue is multifaceted and nuanced across product types and geographical markets.
For tissue products with the strongest usage frequency and most direct health implications, such as toilet paper, brands have enhanced branding around performance-based, comfort-centred specific value, with a focus on absorbency and softness. This move is demonstrated by Kimberly-Clark’s rebranding for Cottonelle Ultra Comfort and Ultra Clean toilet paper, which features CleaningRipples texture to remove residue and absorb more moisture, and is further promoted in the DownThereCare campaign regarding tabooed “down there” issues such as skin sensitivity and humidity.
Meanwhile, fragrance, although still quite niche, is increasingly encompassed in tissue to create a heightened sense of cleanliness and a feeling of comfort and nostalgia. The move is embedded in fragrance positioning’s shift to emotional wellness and is most notably manifested in toilet paper. For example, Navigator’s Amoos Air Sense toilet paper comes with a “pearls” scent that can be activated in contact with the skin and functions as a room air freshener.
Finally, “skinification”, often referring to the incorporation of ingredients, benefits and claims originating from facial skin care, is impacting tissue innovations and value creation, particularly in facial tissues. In fact, ingredients traditionally found in facial skin care have started to emerge in facial tissues.
The “skinification” trend is much stronger in China, where 14% of consumers sought out sensitive skin suitability when purchasing skin care
Source: Euromonitor International’s Voice of the Consumer: Beauty Survey in 2022
In China, for example, Kleenex’s new facial tissues feature Japan-made milk cream that has become especially popular among consumers prone to seasonal allergic reactions such as runny nose.
Habit persistence underpins outlook in overall retail tissue, informing lifestyle-led value strategies
According to Euromonitor International’s Forecast Model, which examines various forecast drivers, habit persistence has been and will remain a significant positive driver of retail tissue’s growth.
However, product pricing remains a negative contributor to retail tissue’s forecast growth, particularly in facial tissues, which is predicted to record an approximate -1% CAGR over 2022-2027.
Therefore, tissue players that have drastically raised prices since January 2021 should not only be attentive to consumers’ price sensitivity to avoid trading down to cheaper brands, but also refocus value creation on products and markets where lifestyle shifts align well with value creation strategy.
Inversely, tissue players that have been heavily dependent on pricing to compete should question whether their current pricing strategies and product positioning are fully leveraging an anticipated recovery in consumption and quality expectation, as consumers regain financial confidence and further adapt to new life routines in the longer term.
Take toilet paper, the largest retail tissue category. As a considerable and growing number of consumers, especially younger age groups, are choosing lifestyle options that allow for greater flexibility, demand and expectation for daily essentials such as toilet paper will grow, encouraging new product features from pack size to functionality, aesthetics and fragrance that better fit and enhance new life occasions from work to dining.
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