[edited extract from Pulp & Paper Edge, the monthly trade and market data and intelligence publication published by IndustryEdge]
Australia’s total tissue products market was worth just less than AUD1.7 billion in calendar 2013, according to Retail World. Valued at AUD225.7M, facial tissue accounted for 13.2% of the total value. After many successive years of growth, the value of the Australian facial tissue market declined for the second successive year in 2013. In 2012, the total value was AUD236.0M, with the peak apparently reached in 2011 at AUD247.7M.
The situation is amply displayed in the following chart.
Facial Tissue Sales by Value: 2003 – 2013 (AUDM)
Source: Retail World
While Kimberley-Clark Australia (KCA), easily retained the number one position, it lost significant market share to the increasing strength of the private label products that are driving the market and its value downwards.
In 2013, KCA held market share of 38.7% down from 55.3% in 2012. The 33.4% decline in the value of the leading company’s sales came as the total market declined 4.8% on the previous year.
Of the other domestic manufacturers, ABC grew its market share to 22.6% in 2013, up from 11.8% in the previous year, while SCA’s market share fell to 15.4%, down from 19.5% in 2012.
Private label brands take over second place
The remaining sales can be attributed directly to the private label offerings of the major food and grocery retailers. In 2013, sales of private label facial tissue held second position behind KCA accounting for 23.0% of the total, up from 13.4% in 2012.
Sales channels for facial tissue remain dominated by the food and grocery manufacturers (95.8%), with the pharmacy channel accounting for just 4.2% of the total or AUD9.5M in calendar 2013. Efforts to grow alternative sales pathways have not proved successful.
Domestic manufacturers have instead been forced into manufacturing the private label products. In many cases, this is a difficult position for the manufacturers whose margins on production are squeezed to the point of unprofitability at the same time as they produce the unbranded products that are cannibalizing their own offerings.
Simultaneously, imports of facial tissue are increasing (their value rose AUD9.9M or 12.7% in calendar 2013). The majority of imports are finding their way to the private label products, adding further competitiveness pressures onto the already stressed domestic manufacturers.
Turbulence across the tissue market is clearly reflected in the movements in sales of facial tissues. The sector’s overall value declined, while estimates suggest volumes were stable or even higher than in calendar 2012. This is the influence of the private label offerings that have the dual effect of churning market shares and driving average prices down.
Manufacturing is not easy, but it isn’t supposed to be rendered near impossible.