OTHER NEWS 1 Oct 2015
Changing patterns in the global tissue market: private label versus brands
A Pöyry Point of View on the key trends shaping the international tissue market
The global tissue market as we know it is a moving target. Pöyry Management Consulting forecasts shifts in consumer purchasing patterns challenging the dominance of legacy brands in established markets, while China represents medium-term growing pains but long-term optimism.
A new Point of View by Pöyry argues that the dominance of legacy brands in the tissue market is under threat from shifts in consumer purchasing behaviour. The North American tissue market is traditionally characterised by strong legacy brands but private labels have closed the gap in market share by 9% in the past ten years – now standing at 27% (in Western Europe, private labels hold 63% market share).
‘Changing patterns in the global tissue market: private label versus brands’ details how the increase has been driven by recession awakened frugality, increased availability of high quality private label tissue and the emergence of a new force shaping the consumer market – the millennials. Private label preference and consumption is higher among millennials than more mature consumers. Significantly, millennials’ will make up 46% of consumers by 2025, an increase of 15% from the 2014 level.
Millennials have grown up in the middle of a multitude of private labels across a range of sectors. For them, a private label does not appear as suspicious as it might for their parents. Frugality has encouraged them to take the leap of faith and they haven’t been let down by product quality. Brand status for many just appears as an unnecessary premium. This mentality has significant implications for manufacturers. They need to adapt to cater to this ever growing consumer group - Sanna Kallioranta from Pöyry Management Consulting
Tissue brands have been fighting back by introducing more affordable, less fluffy or strong “basic” versions of the branded products. They are also reaching into their deep pockets for promotional strategies to sway the price sensitive tissue market having realised that millennials have significantly higher price sensitivity than mature consumers.
The key driver for high private label penetration in Europe - in addition to general higher consumer value orientation, a challenging recent economic situation and the cultural challenges associated with building a pan-European brand - is the highly consolidated nature of the retail sector in many markets. For example, in Germany, the market is controlled by the top five retailers and private labels enjoy over 80% of market share.
Discount stores, as well as super and hypermarkets with a focus on economy products, have gained in popularity in Europe. These stores have strong private label programs and hence, developing and driving private label program growth has been a key strategy for the largest European retailers to counter their growth. The major chains, such as Carrefour and Tesco, have been developing private label lines with more upmarket positioning to attract higher income consumers.
Growth in tissue demand in China since 2008
China is still a young tissue market – both for brands and especially for private labels. Tissue demand in China has grown by 8.4% per year since 2008, yet it still only represents 22-50% of the per capita consumption levels in the West. Momentum in the Chinese retail sector structure bodes well for private label growth, however. The Chinese retail sector has been very fragmented and international chains have struggled. The sector has therefore entered an era of active mergers and acquisitions. As European markets demonstrate, a more consolidated retail sector typically brings better opportunities for private label market growth.
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Pöyry is an international consulting and engineering company. We serve clients globally across the energy and industrial sectors and provide local services in our core markets. We deliver management consulting and engineering services, underpinned by strong project implementation capability and expertise. Our focus sectors are power generation, transmission & distribution, forest industry, chemicals & biorefining, mining & metals, transportation and water. Pöyry has an extensive local office network employing about 6,000 experts. Pöyry's net sales in 2014 were EUR 571 million and the company's shares are quoted on NASDAQ OMX Helsinki (Pöyry PLC: POY1V).