Wiping up

Private label products, consumer buying habits and environmentally friendly offerings continue to shape the consumer paper goods industry. By Craig Levitt Supermarkets are losing the paper wars—as in pa­per towels and bath tissues. With consumers looking for the best deals and most convenience, it is becoming very clear that club stores and mass merchandisers have a leg up in the paper categories by offering a combination of bulk packaging and lower price points. Some grocery retailers are responding to the challenge in the $11 billion paper categories by expanding their selections and placing the products in more highly visible locations. Other factors are coming into play in this essentially flat category. While consumers have gravitated toward club packs because of their perceived value, a slower-growing segment of the category is recycled product. However, observers say that while recycled bath tissue and paper towels have enjoyed double-digit growth for the past several years, it still only accounts for about $143 million in total sales. One reason for the delay in acceptance, according to observers, is that too many consumers believe that recycled products are not as soft or as effective as the virgin fibers. “I think that belief is going to be true until you see a major culture change,” says Brian Carlson, U.S. marketing director, consumer products for the U.S. retail consumer division of the Cascades Tissue Group, based in Eau Claire, Wis. “People in the U.S. are really brainwashed into thinking the only good tissue they can get is virgin. To some extent the industry created this impression themselves as early adaptations were barely acceptable.” Making strides Carlson says the industry has come a long way from the early days of recycled bath tissue and paper towels. He adds that Cascades is “going out of our way” to help consumers understand that a good green tissue is available, referring to its Nature’s Choice product, a premium-level recycled product that is available mainly at Costco on the West Coast. Another leader in the recycled movement is Elmwood Park, N.J.-based Marcal Manu­facturing. According to James D’Agosta, senior vice president of sales for Marcal, its Small Steps brand has steadily grown in distribution since its introduction on Earth Day 2009. D’Agosta says although the Small Steps line are recycled products, it is sold as a value brand that is positioned “green” as a point of differentiation. “We talked to our consumers and they said they would like to buy products that were good for the environment, but they didn’t want to sacrifice,” says D’Aosta. He says the research showed that perceived sacrifice takes shape in three ways. One, consumers don’t want to search the products out. Two, consumers don’t want to sacrifice on quality. And consumers don’t want to pay a premium for doing something good for the environment. “So they said to us, ‘if you would address those issues, why not?,’” says D’Agosta. “That’s where the Small Steps name came from. It’s just a small step towards a greener Earth and a small step for the consumer to do something good for their family and the environment.” D’Agosta acknowledges that Small Steps is a mid-tier brand and shouldn’t be compared to the Charmins and Bountys of the world, but he says the quality has been improved to where they certainly are comparable to the other mid-tier brands on shelf. There are also plans to continually soften the product line. In January Marcal will offer Small Steps bath tissue that is 20% to 25% softer than the current product and in new configurations. Kimberly-Clark is taking a different tack to help save the environment. Instead of shifting to recycled paper the Dallas-based company introduced Scott Naturals Tube-Free bath tissue, the first consumer bath tissue in the U.S. without the cardboard tube. Going tubeless According to estimates, U.S. households use about 17 billion toilet paper rolls annually, equivalent to 160 million pounds of waste. While the in­ner cardboard tubes are recyclable, a survey conducted by the Scott Naturals brand showed that more than 85% of consumers do not recycle the cardboard tube. “The Scott brand was the first to put bath tissue on a cardboard tube and now is the first to eliminate the tube,” says Doug Daniels, brand manager of strategy and innovation for the Scott brand. “The introduction of the first tube-free bath tissue is a green step forward that exemplifies K-C’s commitment to sustainability and to developing products that meet the needs of today’s environmentally conscious consumers. By eliminating the tube, we are making it easy for consumers to help tangibly improve the environment, without com­promising on product quality or performance. We know that all adds up and we are helping our consumers make a positive impact.” The Northeast market test at select Walmart and Sam’s Club stores of Scott Naturals Tube-Free bath tissue is being supported with television advertising, FSIs, direct mail and in-store marketing and product demonstrations. Of course, not all consumers are interested in saving the environment. Many, if not most, are still more interested in paying for products that best do the job that they are designed for. As such, not all new products in the category are geared toward sustainability. With that in mind, Atlanta-based Georgia-Pacific, makers of Quilted Northern, launched Quilted Northern Soft & Strong. According to senior marketing director Patrick Davis, Quilted Northern, Soft & Strong was developed using a paper making process designed to increase strength and absorbency and is 50% stronger when wet. Davis says Soft & Strong is being supported with an integrated marketing campaign that is intended to make the “taboo” bathroom conversation easier and comfortable for consumers to discuss. It features television, print, quick response mobile technology, social media and in-store and promotional events designed to reach the brands audience. Open for discussion “Given express permission by our consumers, we are changing the discussion about the toilet paper product category,” says Davis. “This new campaign will connect with our audience and drive the dialogue about the importance of clean. As consumers try our new Quilted Northern Soft & Strong, they can talk about its improved reliability and other desirable qualities. We’ll listen, which will help make our toilet tissue even better in the future.” As manufacturers continue to offer new products, the multitude of introductions has caused a logjam on the shelves, perhaps leading to a bit of consumer confusion. In many instances a walk down a supermarket’s consumer paper aisle can bombard shoppers with a wall of product, all similar in quality. Some observers view this as an opportunity for supermarkets to scale down their offerings, thus helping consumers better understand which products they really want or need, in turn boosting sales. To significantly boost sales, however, observers say retailers may want to take closer look at further developing and supporting their store brands. They say that with the exception of Cincinnati-based Procter & Gamble’s Charmin and Bounty, most other brands sales are down for the past 12 months, while private label sales are up. “It’s almost hip to be frugal now,” says D’Agosta. “And the branded players are concerned that they are going to lose that consumer permanently. Private label quality in the past decade has certainly improved and now that retailers are getting the trial they want to retain those consumers because it differentiates and gets them loyal to their chain and it has higher margins.” Cascades’ Carlson adds that as retail buyers continue to push manufacturers to provide products that are equivalent to national brands, private label product performance continues to improve. “[Buyers] say ‘if this is going to have my name on it, you need it to be as good as the brand,’” says Carlson. Also hindering branded sales is the seeming absence of brand loyalty, with the exception of P&G. Observers note that much of the category sales are determined by what is on special for the week. “This is a very highly promoted category,” says D’Agosta. “The recession has certainly fueled that even further as across all categories you are seeing consumers migrate to private label and it seems to be freaking the big boys out. They are purposely spending less on marketing and more on trade promotion to get to the right price points.” For supermarkets to stay competitive, Bruce Woodlief, director of marketing for the Spokane, Wash.-based Clearwater Paper Corp., suggests that they would do well to continue the aggressive merchandising the category has recently seen, with pricing that stays competitive with the other retail channels. “All things considered, supermarkets have weathered the economic times relatively well,” says Woodlief. “They are recognized for providing broader tier selection than mass and club outlets and tactical aggressive promotions on multi-tiered offerings will be effective. Paper goods are destination items for the grocery trade and leveraging quality product will help build consumer loyalty.”