In the tissue sector, the battle for market share takes place every day in the supermarket or hypermarket. But how long will it be before copy paper producers get drawn into a similar fight?

by Jim Kenny

Tissue could provide lessons for other producers

As you will have gathered by now, this month's issue has been very much focused on the tissue sector to coincide with PPI's Tissue World show in Nice, France. Even though we have concentrated on what are supposedly the "mature" markets of western Europe and North America, each of the commentators on this particular market segment have made reference to the rapid and fundamental shifts that are taking place in today's tissue world. As Soile Kilpi and Gary Helik point out on page 47, this is definitely not a staid or static market.

Indeed, these changes are so profound that it is getting to the stage where the tissue sector is beginning to bear little resemblance to the broader paper industry. And if Mark Payne's vision for the future of the sector outlined on pages 39-43 should prove correct, things are likely to be transformed even further.

The prospect of the likes of Sara Lee or Kraft Foods gracing the pages of the PPI Top 150 is certainly an idea to conjure with, but the impact of such changes raises a number of issues for papermakers outside the sector.

The major element that sets many of the large tissue makers apart is found in the way they do business. The fact that most of the larger groups spend vast amounts of money to market their goods, while displaying an almost fanatical determination to grab shelf space in supermarkets around the globe are some of the more obvious characteristics that suggest tissue producers are not quite an average "commodity" paper producer.

But while tissue is certainly a discrete paper segment at the moment, just maybe the differences between certain commodity grades will not be as great in the future after all. For a number of paper producers in particular market segments, this is almost certainly the time to start studying the tissue market very closely. Why? Because this is what you're your business will probably look like in the not too distant future.

At present, there is a very real opportunity for producers to make the great leap that will transform them from staid commodity producer into high-tech retail business. The uncoated woodfree sector exhibits the most obvious parallels to the trends that have been witnessed in the tissue market in recent years. As we have seen from this month's Viewpoint by Janheim Pieterse of Buhrmann, distribution channels are set to see some radical changes over the next few years. But that change could turn out to be even more dramatic if copy paper follows the path of tissue.

Now this is just a "what if" scenario. But what if a single cut size producer decides that it really wants to be the Coca-Cola of copy paper grades. Certainly, the home use market is growing and as the number of SoHo (small office/home office) customers increases exponentially, this could well prove to be a rather lucrative market for someone. The question remains though, who has the determination - and the multimillion dollar marketing budget - to make it happen?

As we have seen in the tissue articles included earlier, we are talking about some large-scale advertising expenditure here. For a single producer to reach 'Coca-Cola status' would require megabuck marketing investments - and spare cash is not something that most companies happen to have had lying around in abundant quantities recently. Combined with the current mania for pruning expenditure across the board, it is unlikely that stock market analysts or CEOs would look very kindly on $200 million ad campaigns in this area. But equally, the opportunity is there for those brave enough, or perhaps foolish enough, to attempt it.

Up your adspend

That is not to say that all paper companies have been blind to opportunities for marketing their products. Champion and MoDo spring to mind as businesses with management teams that could be well prepared for the task of getting involved in the battle for supermarket shelf space. Worthy as their attempts may have been so far though, they are still far short of anything the tissue sector currently takes for granted as a minimum marketing investment in a new product launch.

In all likelihood, copy paper producers are eventually going to find themselves sailing out of the relatively quiet waters of a commodity-oriented business and into the retail sector maelstrom that has bloodied the noses of many tissue producers down the years. This will also take papermakers into the same sea of conflicts that tissue producers have faced in the past and will have to deal with in the future.

Copy paper producers are eventually going to be asking themselves why they shouldn't control every aspect of their precious brand from production right the way down to retail distribution management. They will also face stiff competition from retailer's own labels, just as tissue producers have done, and they will want to develop new technology that gives them a competitive edge in the fight for supermarket shelf space.

Obviously, no-one can say for sure how things will pan out. But if they follow the tissue segment as it develops in the next few years, at least they may have a template to work from.