ABOVE THE FOLD

SARAH MULHOLLAND

The paper goods category continues to grow, led by multipacks in the toilet tissue and paper towel segment, and a steady demand for the economical convenience of disposable dining ware.

According to statistics from Information Resources Inc., Chicago, toilet tissue posted an 11.4% gain in dollar sales for the 52-week period ended April 22, 2001, generating $4.5 billion for the food, drug and mass channels combined. While the food channel exhibited a robust 9.3% increase for the category, mass posed a significant threat, with a 14.9% increase for the same period.

Paper towels follow a similar pattern, showing a 7.6% increase across channels -- a $2.7 billion category overall -- with mass outpacing the food channel by a healthy margin, each exhibiting dollar gains of 12.3% and 5.3%, respectively.

However, retailers SN spoke with said they have not seen any significant deterioration in sales.

"Our paper goods sales look better than ever in this company," said Jim Gordon, a buyer for Minyard Food Stores, Coppell, Texas. "There's a lot of volume and a lot of profit to be made if you handle the category correctly."

Gordon noted the particular strength of multipacks in the paper towel and toilet paper segments, and said some of his stores had recently made adjustments in product assortment to accommodate the larger sizes. The 24-packs of toilet paper, as well as the double rolls of 12, are selling very well, he said. When it comes to paper towels, the Bounty 8-packs are leading the way.

According to Gordon, the segment does not require much promotional flair. For example, the store rarely promotes the 9-pack of Charmin toilet paper, yet the product continues to do very well on a day-to-day basis, he said.

Gordon attributes much of the success of the larger sizes to changing lifestyles.

"People don't necessarily go the store every week like they used to," he said. "So when they do go, they're stocking up."

Indeed, it would appear that multipacks of household staples, such as paper goods, are a necessity in today's retail environment as consumers continue to flock to club stores and mass merchandisers in search of bigger bargains. Gordon acknowledged the difficulties of being a small, regional retailer trying to compete with the national chains. However, his stores have experienced increased manufacturer support in the paper goods category of late.

"The Wal-Marts and Targets often fare better on price breaks because of sheer quantity," he said. "But we've started to get better deals from manufacturers than we used to."

Gordon said his stores have begun to move enough product to offer this merchandise to consumers for a real value.

Despite the growing popularity of multipacks, Gordon still moves a considerable amount of the smaller sizes, due to a sizable minority customer base.

"We sell more 4-roll packs of toilet paper than anyone in this area because we have a lot of Hispanic and African-American business. Our Hispanic customers really like the Coronet label."

Still, the multipacks are the real opportunity for maximized profit.

"If a customer buys that 8-pack of Bounty paper towels, it's a bigger ring at the register. It really helps increase volume while deflating labor costs, as opposed to dealing with that single roll," Gordon said.

Scott Anderson, a store manager for a County Market in Worthington, Minn., is witnessing similar trends in his store.

"We still have a few people looking for 4-packs of toilet paper, mostly the elderly population," he said. "But the 24-pack single rolls and 12-pack double rolls of toilet paper, and the 3- and 8-pack rolls of paper towels, are pretty much the package now."

According to Anderson, facial tissue is headed in the same direction, with the 3-packs of Kleenex performing solidly in his store.

At the Seattle-based Food Market Northwest, paper goods remain one of the more consistent categories, according to Mark Takagi, a grocery specialist for the chain. Sales of multipacks are strong in his stores as well, although the trend is more evident with toilet paper than it is with paper towels.

The 3-packs of paper towels are fair sellers, but the 12-packs of toilet paper are the strongest, Takagi said. While the 12-packs do better than the 24-packs at Takagi's stores, he thinks this is largely the result of more advertising for the 12-pack size at the store level.

At Food Market Northwest, the only single roll of toilet paper is a recycled entry from Envision. In addition to Envision, the chain offers a 4-pack of an environmentally friendly toilet paper called Green Forest.

"The Green Forest has done very well," Takagi said. "It's more of a mass market item, and it's priced more competitively."

Ecologically sound paper products maintain a distinct niche, yet success appears largely contingent upon geography. The green political landscape in Washington renders the Green Forest line an indispensable asset for the Northwestern chain. However, according to grocery merchandisers in Texas and the Southeastern states, recycled toilet paper does not hold much sway.

Private-label products do fairly well in the paper segment, with many store brands keeping abreast of consumer trends by offering multipacks of toilet paper and paper towels. According to Minyard's Gordon, his stores' Hy Top brand -- in the 9-, 12- and 24-pack toilet paper and 3-roll paper towel packages -- is doing well.

Yet County Market's Anderson finds it hard to get solid pricing differentiation on private-label multipacks in the face of competition from national players.

"Most of these products are known value items. Consumers know the value and they know what they want to pay. You've got to be right on it," he said.

Private label does not fare as well in the cups and plates category, as consumers opt to go a step up in price to buy the sturdier, leak-proof varieties. Food Market Northwest carries Associated Grocer's Western Family label, and according to Takagi, the brand's light-weight paper plates do not sell particularly well. At his stores, the hardy Chinette products are the top sellers.

While paper plates and cups are a solid segment year-round, retailers witness seasonal spikes, particularly during the summer months with the onset of outdoor entertaining.

"They're doing great right now for graduation parties," said County Market's Anderson. "But it doesn't end with summer. We see an increase in sales around Thanksgiving and Christmas as well."

For the summer season, Anderson will dedicate display space throughout the store, cross merchandising with fruit punch, or 2-liter soft drinks. During the winter holidays, he doesn't focus too much on the paper products due to spatial constraints.

Minyard's also makes use of seasonal displays, placing shippers and floor stands throughout the store in conjunction with barbecues and picnics, according to Chuck Moore, another buyer for the chain. For Moore's stores, the cheaper plates fare better during the summer months, and the Chinette moves more during the winter holidays.

At Foodmarket Northwest, Takagi generally positions holiday-themed dining ware in-line with standard plates and cups, while having additional product available in the stores' sizable housewares departments.

Of course, parties are a regular occurrence, yet some retailers find it difficult to capitalize on that segment on a daily basis in the shadow of party stores. Mark Polsky, senior vice president of Magruder's, Rockville, Md., suspects party favors to be a more price-sensitive commodity in the grocery store than in a store made specifically for party needs.

"When they're in a party store, they're willing to spend, within reason," he said. "We can't compete space-wise with a party store. They've got 18 colors; we've got traditional holiday colors."

Polsky held up a major paper goods manufacturer's failed attempt to compete with party stores a few years back in support of his opinion.

"There was a big in-line display -- plates, cups, napkins, flatware -- and the colors changed every three to four months. It just didn't work and it only lasted for about a year and a half," he said.