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Category review: The paper chase

March 27, 2012
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The battle lines are literally paper thin between national brand and private label paper products

Sales of paper products - a staple in the majority of U.S. households that includes everything from paper towels, to facial tissue, to toilet paper - proved to be nearly recession-proof from 2008 to 2010.
Indeed, the recession paved the way for strong private label dollar and unit sales growth in the last two years as consumers tightened their budgets and experimented with private label paper products, often finding the same quality product in a private label.  
A May, 2011 research report from Euromonitor International, Ltd., Chicago, Tissue and Hygiene in the U.S., notes that private label penetration in retail tissue increased from 16 percent in 2005 to 19 percent by 2010. “As consumer confidence remained low throughout 2010, expenditure on household goods continued to be steered towards private label alternatives. The improving quality of these products and greater sophistication in marketing techniques has, in some cases, rendered the products comparable to major branded competitors,” notes Euromonitor.
Agrees Dan Murphy, vice president, sales and marketing, for Great Neck, N.Y.-based First Quality,  “Quality continues to create demand. Economic conditions have driven consumers to look for price/value for the household paper products they purchase, and store brands that offer premium quality at a value price bode well.”
Medford, N.Y.-based Global Tissue Group’s executive vice president Daniel David, echoes the sentiment.
“The new trend in the paper industry is the reformulation of paper qualities. Many national brands have reformulated their paper products to meet specific retailer price points and consumer needs. Independent converters have followed by reformulating the store brands in order to be national brand performance-equivalent.”
However, though private label paper goods experienced solid growth in recent years, it appears branded products are fighting back and protecting their turf with innovation, new product launches and, due to the increased cost of raw materials, price increases. Their efforts may account for the latest data from Chicago-based research firm SymphonyIRI Group, which indicates flat to moderately decreasing private label dollar and unit sales in sub-categories across the board for the 52-weeks ending Oct. 2, 2011.
Overall toilet paper dollar sales were up 2.9 percent while private label sales were down slightly, 0.6 percent. Overall paper towels sales were up 1.24 percent with private label down 1.44 percent. Private label sales of facial tissue and napkins were down 3.3 percent and 2.23 percent, respectively.
“Economic conditions have forced nationally advertised brands to heavy up on consumer promotion, which has largely been directed to retail price reductions,” says Murphy. “This is a share maintenance strategy, which has impacted some store brand marketers - some in a good way, some not so much.  Retailers who maintain a meaningful price gap between nationally advertised and store brands have kept/grown store brand market share.”
FOCUS ON QUALITY
The key for retailers now is to hold on to those consumers who migrated to private label during the recession, and continue to attract new converts with a diverse array of high-quality offerings.
Bruce Woodlief, director of marketing for Clearwater Paper Corp., Spokane, Wash., says, “Retailers can leverage their paper tissue category to help boost their overall store brand awareness and trial. This category is generally one of the top three in center store sales.” Retailers should take advantage of multi-tiered quality offerings in tissues rather than settling with one quality level for bath and facial tissue, paper towels and napkins.
“The paper category is one of the best tools retailers can use for marketing and driving traffic to their stores. No matter which retailer you visit, supermarket, dollar store or club store, the majority of shoppers have some type of paper product in their basket,” adds David.
Providing consumers with the quality they’re looking for is essential. For paper towels, wet strength and absorbency drive performance, says Murphy, and for bath tissue it’s the combination of softness and strength. “Larger pack sizes are faring well, as consumers look for the best value per roll,” he adds. “For paper towels and bath tissue, large roll counts have increased about 2 percent in the last 52 weeks, while lower counts declined 2 percent.”
Woodlief adds that a notable trend is an increased level of higher quality products in the ultra-premium segment of bath tissue as both branded and private label manufacturers investing in through-air drying (TAD) tissue technology to provide consumers with overall better quality bath tissue.
Global Tissue recently released a newly engineered embossing pattern with Drimatic pockets to allow for better absorption and softer paper feel. Clearwater has plans to introduce an ultra-quality tier of bath tissue in Q1 of 2013 that it believes will be the highest quality bath product offering available for private label.
CONSUMERS CARE ABOUT GREEN
According to Euromonitor, “a substantial shift in the industry’s focus on environmentally-friendly tissue and hygiene products took place in 2010,” and although green brands are still a small segment of the category, expanded distribution, marketing and increased consumer awareness suggest the trend is not going to disappear anytime soon. Euromonitor reports that 93 percent of Americans believe companies “have a responsibility to help preserve the environment,” and “most Americans are making their own efforts in their personal lives to reduce their impact on the environment.”
Innovation in packaging is one way manufacturers are upping their green credibility.
“Manufacturers now have the capability to supply bulk packs without having the individual paper roll on the inside wrapped in poly/paper. This allows for the manufacturer to use less packaging material and cost savings,” says David.
Last year Clearwater Paper introduced private label tissue products that were Forest Stewardship Council (FSC), and Rainforest Alliance certified. 
“Certified product logos on packaging communicate to consumers that the fiber used in making the tissue product came from well-managed forests,” says Woodlief.


Eye on the national brands

The holiday shopping season can make or break the year for many retailers, but when it comes to paper goods, do festively themed products add to the bottom line?
Kimberly-Clark launched a limited-edition line of Huggies Santa diapers and coordinating holiday wipes for the 2011 Christmas season. The disposable diapers are essentially the brands’ Huggies Little Movers with seasonal winter and Christmas designs. The soap- and alcohol-free wipes feature three different holiday designs. In addition, Kimberly-Clark is donating 22.5 million diapers to the Every Little Bottom charitable program which works to eliminate diaper need in low-income communities through existing diaper banks.
But when it comes to taking advantage of holiday consumer spending, even in a contracting down market, research from Euromonitor suggests that retailers and manufacturers would be wise to expand their holiday offerings. Private label in particular should think creatively and offer “quirky and affordable luxury staples with a festive theme,” including toilet paper, napkins, paper towels and tableware. The strategy is two-fold, the report explains. “First, it’s an opportunity for one-off premium-ization; secondly, it’s an opportunity to raise brand visibility at the point-of-sale.”

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