Tissue and Hygiene: Quarterly Statement Q2 2017

Impact of GDP and pricing - warning signs for profitability

Yet another forecast downgrade with the latest quarterly update signals persistent pressure on the industry stemming from GDP weakness and downward pricing trends in a number of markets. While habit persistence and soft drivers leave the industry room to influence consumption in developing markets, short- to medium-term profitability is at risk.

Limited effect of potential policy changes in the US and Brexit

Brexit and potential changes to US trade policies will impact sales and margins in a number of markets, mainly those heavily relying on imports, such as the UK and Mexico. The impact of trade wars on the Asian markets will be mitigated by the increasing emphasis on local production and supply chains.

China hard landing still on the agenda

Although China continues to see healthy GDP growth, a hard landing scenario is not off the table and can have a significant negative impact on industry revenues in the country, far exceeding the potential impact of Trump trade wars.

Investing in premium quality - focus on the right categories in more evolved markets

Premium innovation remains in focus, due to expectations of better margins by manufacturers. However, with the unmet potential skewed towards developing markets, most with a high proportion of low-income consumers, investments into premium products must consider carefully each market’s stage of development and product categories to provide better return on investment.

Successful strategies to win over consumers in developing markets - balance quality and price

With the majority of unmet potential now found among the lower-income segments of the population in the developing markets, successful strategies to expand consumption and build brand loyalty include a good balance of quality and price, to ensure better access to affordable products, which however brings forth again the question of cost efficiencies and profitability.