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RISI 30th Annual North American Conference: What the Future Holds

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RISI, a leading information provider for the global forest products industry, held its 30th Annual North American Conference over 28-30 September in Chicago. Experts from various sectors of the forest products industry converged to share their latest insights and discuss future growth for the industry. Below is an account of presentations that highlight trends in the tissue and hygiene industry both in North America and globally.

Future growth of feminine care and incontinence products

The conference kicked off with the presentation of the North American CEO Award, which was given to David Scheible, CEO of Graphic Packaging Holding Company. Mr Scheible gave the keynote address on “Capturing the Financial Moves that Restructured Graphic Packaging”, and the event then proceeded with the CEO/Executive Panel Discussion which included several regional executives operating in the paper products space.

PH Glatfelter’s Advanced Airlaid Materials business unit provides absorbent materials for hygiene and personal care products. During the CEO panel discussion, Dante Parrini, the CEO of Glatfelter, indicated that he sees absorbent materials for hygiene and personal care products as Glatfelter’s fastest growing business unit. According to Mr Parrini, Glatfelter’s Advanced Airlaid Materials business is currently operating at full capacity and he sees growth looking at future demand trends in both the feminine care and incontinence categories. His input and analysis were part of a much broader discussion among the panel of CEOs from Graphic Packaging Holding Company, WestRock and Smurfit Kappa Group, which focused on growth through merger and acquisition activity, the overall health of the economy and the overall state of the industry.

Euromonitor International forecasts that the global sanitary protection category will post a 4% value CAGR in constant US dollar terms over the 2014-2019 period, while the global incontinence category will register an even stronger value CAGR of 7% in constant US dollar terms over the same period.

North American forest products in a global context

Peter Berg, Director of Knowledge for Paper and Forest Products at McKinsey & Company, gave an overview of some of the short-term changes that he believes the North American forest products industry needs to make in order to be successful in the future. In a presentation titled “Perspectives on the North American Forest Products Industry in a Global Context”, Mr Berg mentioned that there does not seem to be a lot of money for large-scale growth, while paper margins and returns have been rather lacklustre over the past couple of years. In his opinion, lack of organic growth opens the door for more consolidation to occur within the industry through mergers and acquisitions. The industry must be willing to change and adapt to the economic climate. Mr Berg also highlighted that increased regulation, resource scarcity, new social expectations and changes in consumer tastes will affect the industry with regard to sustainability-related areas and that this is something that the industry must address over the next 20 years. In conclusion, Mr Berg stated that the North American forest products industry faces many tough challenges ahead, and there are no easy solutions to these challenges.

Consumer tissue trends and challenges

Marco Dell’Osso, founding member of Tissue Italy and Corporate Director at Futura SpA, gave a presentation titled “Tissue is Perfect?”, which discussed consumer tissue products and innovation. Tissue products have progressed over time in terms of texture, strength, absorbency and aesthetic appeal. However, Mr Dell’Osso indicated that this progression is far from over and that innovation continues to occur within the industry, driven by consumers and manufacturers. Ideas such as more paper per roll, ecological positioning and new ways of dispensation are all examples of the evolution of tissue. In addition to the evolution of the product, the pace and direction of innovation are also changing the layout of production facilities. Furthermore, Mr Dell’Osso argued that a smaller more nimble manufacturing facility would create cost efficiencies for manufacturers, where less space still creates more output. A compacted mill has a smaller environmental footprint, lower costs and less manpower, while more automated processes within the manufacturing facility would create a safer work environment.

Esko Uutela, Principal Economist at RISI, presented “Outlook for the Global Tissue Business – What is Now Up in North America?”. Mr Uutela reviewed world tissue consumption by region. He highlighted enormous potential in Latin America, Eastern Europe, China, the Middle East and Africa due to still low per capita consumption of tissue. He reminded us, however, that it will take time, investment and education for these regions to reach their full potential.

The conversation then turned to the more mature North American market – the US and Canada - where growth has slowed over the last several years. Mr Uutela stated that manufacturers in North America have started to concentrate more on product value and have lost volume growth due to “lightweighting”, which is the process of reducing weight per product sheet. Additionally, he highlighted the ongoing fight between private label players as a significant trend that is shaping the industry. Specifically within the US, he mentioned that brand owners were using special price promotions to combat private label offerings, while in Canada brands were being sold through “half-price” actions. Another key point Mr Uutela brought up was the recovery in away-from-home demand, primarily from the horeca channel, as a result of increased hotel occupancy rates, restaurant sales and higher employment.

Euromonitor International reports that in 2014 private label accounted for 24% of overall value sales in retail tissue in the US, while posting a 5% value CAGR in constant US dollar terms over the 2009-2014 period. In Canada, private label held a 27% share of overall value sales in retail tissue and posted a 2% value CAGR in constant US dollar terms over the 2009-2014 period. Current Euromonitor International forecasts expect retail tissue to post value CAGRs of 1% and 2% in the US and Canada, respectively, in constant US dollar terms over the 2014-2019 period.

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