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Paper Chase

January 14, 2010
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As fans of “The Office” might recall, Michael Scott, the bumbling branch manager of the fictional Dunder Mifflin paper enterprise, once promised “limitless paper for a paperless world” in a commercial promoting his company. But here in the real world, you’ll still find the demand for paper strong - particularly outside the office environment in the consumer paper products space.

Although data from Chicago-based Information Resources Inc. do show slight to moderate unit sales declines for the total facial tissue, toilet tissue, paper napkins and paper towels categories for the 52 weeks ending Nov. 1 (U.S. supermarkets, drugstores and mass merchandisers, excluding Walmart), the private label side posted strong dollar and unit sales gains. Cristian Vergara, director of retail sales for Haines City, Fla.-based Stefco Industries, credits the recession for the boost in store brand trial - and high store brand quality for bringing folks back for more.

“I think what the economy did was it gave the end user the opportunity to experience something new - private label,” he says. “Then they found that the product was as good as the [national brand] and, in some cases, manufactured by the same company.”

Quality improvements are notable across the entire paper products segment, and not restricted to private label products, notes David Shapiro, Stefco Industries’ senior vice president of sales and marketing.

“The bar for quality has gone up substantially over the last few years,” he says. “The demands [of] the retailer and their customers are much higher now than they were five years ago. … The end user is looking for better-performing products across all categories, whether they be perforated roll towels, bath tissue, facial tissue or napkins.”

Keep the Converts

Brian Carlson, U.S. marketing director, retail products for Cascades Inc., Eau Claire, Wis., says retailers’ greatest opportunity in store brand paper products now lies in retaining the buyers who have migrated from the national brands.

“As the economy gets back on a solid footing, the consumers that moved from branded products to the private label offerings may be tempted to once again become branded consumers,” he says. “However, a good marketing plan will instead move them from one quality grade of private label to a finer grade of private label product.”

Carlson stresses that retailers must get the “as good as or better than the national brands” message out to their shoppers. Studies show that people who have converted to private label products will stay if product quality is high enough, he adds. Retailers that accept a lower-quality product to save a little money could be at risk.

Bruce Woodlief, director of marketing for Spokane, Wash.-based Clearwater Paper Corp.’s Consumer Products Division, maintains that strong store brand offerings in all quality tiers will be important going forward.

“Consistent product quality builds consumer loyalty to store brands,” he says. “Retailers who are committed to their own brand will see the benefit of sourcing their tissue products from single suppliers who make their own paper and who convert their paper into a full line of premium-quality tissue offerings,” he adds.

Speaking of higher quality, one trend in bath tissue and paper towels is a heavier fiber content per sheet, Woodlief notes.

“This provides increased performance in key attributes of absorbency, strength and softness,” he says. “To offset the added fiber cost, sheet counts and lengths are reduced per roll. Marketing these product improvements suggests that fewer sheets are needed for each task.”

Larger roll sizes also represent a current trend, Woodlief reports. In addition, they promote better freight efficiency and a higher retail unit ring than lower-count regular rolls.

Shapiro agrees, adding larger multi-packs - also with larger sheet counts - to the trend list as well. And “greener” products also are of some interest here, Woodlief notes, although the eco-friendly definition is changing somewhat here.

“Historically, environment-friendly in the paper tissue category referred to products made from recycled paper,” he explains. “Increasingly, the new environment-friendly products will be those that are made from certified sources of good forestry management. One such certification is FSC - Forest Stewardship Council.”

Because a recycled sheet does not offer a performance on par with a regular product, only a small subset of consumers will be willing to make the switch, Shapiro adds.

“When we talk green, perhaps this becomes an opportunity for both the retailer and the manufacturer to present other alternatives,” he says. “They could present high-count and bigger packs, reduce their carbon footprints and look at how the products are made. For example, in manufacturing, we use about 65 percent less water than the industry average.”

Shapiro notes that Stefco Industries recently worked with a major retailer to develop an innovative double-layer product that also could be viewed as greener than average. It is a one-ply product, but the basis weight, combined with the fiber mix and the embossing, makes the product perform as well as a two-ply version.

“Let’s say a two-ply bath tissue is made out of two 10-pound basis weight sheets,” he says. “And let’s say we make our double-layer product out of an 18-pound one-ply sheet. The economies of producing that product from the standpoint of the paper mill [are tremendous], and it’s also a greener product because you get more product per roll and make and transport more product with less energy.”

Eye on Innovation

Consistent quality improvements and innovations such as the double-layer design will be important not only for retaining existing customers, but also for adding new converts to that customer list. To excel here, Shapiro recommends that retailers develop true collaborative partnerships with their paper products suppliers.

But innovation is not limited to products. A little creativity in packaging, marketing, promotion and even logistics also goes a long way to build a store brand.

Everyone knows that a strong package design can do wonders for building a brand, but Shapiro says retailers must support even a strong design by managing store brand paper products just like any other brand. That requires an investment in promotional activity, in-store signage and displays for own brand paper towels, napkins and bath and facial tissue.

“Some retailers are outstanding in building their own brand and are at a 25 to 20 percent share,” he adds.

Woodlief says retailers could cross-merchandise or “cross-coupon” private label paper products with complementary store brand items (perhaps facial tissue with over-the-counter cold remedies or paper towels with cleaning liquids). And they also could highlight any product improvements directly on packaging and in-store signage.

Sampling works, too, Carlson adds, particularly with store brand facial tissue.

“Sampling is the best way, with a strong promotional push using a ‘compare to’ statement as a support,” he says. “A seller needs to get the product into the naysayer’s hands. If their buyer has done his job in setting the specifications of the private label product, they will likely experience a strong conversion rate.”

On the logistics side, Vergara points to potential cost benefits from combining shipments from one supplier here.

“A retailer needs to be able to combine and use the synergies that they have from a supplier at retail,” he says. “Perhaps they could combine shipments with an away-from-home customer and share the freight cost. Or they could [source] the products that they use in the delis, that they use in the bathrooms and the office from [a] current supplier that also is doing their private label.” PLB

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