Benefits, please

Although many consumers have historically identified store brand paper goods as a lower-price and lower-quality alternative, more shoppers now are expecting these items to match the functionality of national brand products.

Revenues for store brands are growing in a multitude of paper sectors as product quality increases and shoppers view the selections as a better deal than those under national brands, global market research firm Mintel notes in its February 2015 “Household Paper Products — US” report.

“While an overarching economizing mindset is keeping category growth in check, opportunities exist for brands that find new ways to show that better quality can mean better value,” Mintel states.

Interest in paper selections that represent value is evident among all income groups, Mintel reports. Nineteen percent of adults with household incomes of at least $150,000, for instance, say they use private label toilet paper most often, while 27 percent of the higher income groups primarily use private label paper towels.

Toilet paper and paper towels together account for more than 80 percent of total sector sales. The facial tissue and paper napkin categories are less active and underwent sales declines between 2009 and 2014, indicating that some consumers may view the products as discretionary or replaceable, Mintel notes.

Flat overall 2014 paper product sales, meanwhile, indicate that greater quality “can only go so far” in boosting private label activity and market share, Mintel states.

Focus on the target customer

Nevertheless, retailers are still in a position to generate higher store brand revenues by working with their suppliers to create products that meet the needs of specific customer segments and capitalize on sector trends, says Nadia Durasamy director of marketing for Kruger Products USA Inc., a Bentonville, Ark.-based manufacturer of bathroom tissue, facial tissue, paper towels and napkins.

Such consumers include the large base of millennial who are more willing than their parents and grandparents to try store brands and will stay with the products if they have a positive experience, she states.

“There is an opportunity for retailers to benefit from the changing attitudes by delivering better-quality selections,” Durasamy says. “But they must target the type of consumer they are trying to attract.”

Retailers seeking to lure eco-conscious shoppers, for instance, should offer a higher ratio of earth-friendly selections, she states.

“It is crucial to deliver what the target customer wants and to keep up with the trends — such as the move towards toilet paper with larger rolls that consumers do not have to change as often,” Durasamy notes. “But it also is important to fill any gaps in the market.”

Stand apart through innovation

In addition, retailers could create more interest in store brands by offering innovative selections, says Simon Roozrokh, CEO and partner of Select Products Holdings LLC, a Huntington, N.Y.-based producer of bath tissue, facial tissue, towels and napkins. The company’s inventory includes “green” products that consist of at least 50 percent bamboo.

Recent Select Products innovations include facial tissues that come in a box that contains a compartment to dispose of used tissues. The design also enables consumers in automobiles to situate the box in easy-to-access locations such as on the inside of doors, on the top of sun visors or between the console and seat. In addition, the company is developing a paper towel that has separate damp and soapy sections to enable quick sanitizing, along with a box that fits in a bathroom tissue dispenser and dispenses both toilet paper and wet wipes.

“It is important to offer products that make life easier for consumers,” Roozrokh states. “People are looking for more functional products, as well as health-oriented items.”

Merchandising high-performance store brands also is crucial, as more consumers are expecting the selections to be as strong and useful as those of the national brands, notes Don Scuvotti, vice president of sales and marketing for Atlas Paper Mills LLC, a Miami-based supplier of bath tissue, facial tissue, paper towels and napkins that use both virgin and recycled fiber.

Work closely with the supplier

Developing appropriate products requires a synergistic relationship between the retailer and manufacturer, which includes having retailers share their go-to market strategies, Scuvotti notes.

“Understanding their strategy puts us in position to be a partner and not just a vendor,” he states. “Retailers usually conduct market research and understand customers’ perceptions of products. Sharing those perceptions with manufacturers can translate to new possibilities in what suppliers can develop.”

It also is important for vendors to have the flexibility and competence to produce products that meet a wide range of specifications, which will better enable retailers to differentiate their offerings, he says.

Yet, any upgrades or changes to products are likely to be nominal.

“Innovation in the paper industry occurs at an incremental rate,” Scuvotti notes. “It is very unusual to see giant steps being taken. But having constant product improvement is a key for attracting customers.”

In addition to making frequent product improvements, retailers need to spotlight the benefits for shoppers.

“It is not hard for private label to compete against the national brands if people like the branding and the items are at the right price,” says Terry Lehmann, CEO of TG Eco Products, a Boca Raton, Fla.-based manufacturer of bath tissue, facial tissue, paper towels and napkins, all of which consist of sugar cane with bamboo.

“But it is necessary for retailers to first get consumers to try their selections.”

Messaging on packages is a valuable means for highlighting product attributes to generate interest, Scuvotti says. That can include, for instance, indicating the softness or strength of an item; the number of sheets in a roll; and the specific national selection that the retailer intends the store brand to compete against.

In addition, retailers should leverage signage that contains unit pricing so consumers can easily compare products of different sizes, Roozrokh notes. He adds that labels also can signify if a product falls into the “value,” “premium” or “ultra” category. The classes of products typically vary in accordance with the weight of paper.

Differentiation also exists among “green” selections, with variances in product composition and the effect on the environment. While some eco-friendly selections use recycled paper that was originally created from trees, others are derived from grass-based bamboo.

To best merchandise “green” alternatives, Lehmann says it is important for selections to be price competitive with traditional paper items and for retailers to highlight features such as “biodegradable” on packages. In addition, she recommends that retailers give own-brand paper products adequate facings so products stand out on shelves.

Respond to sector trends

Ongoing trends will include a greater interest by consumers in eco-friendly products, along with a stronger focus on higher-end private label tissues, Scuvotti says.

“More shoppers are seeing some private label paper products as upgrades from the national brands, and such perceptions are likely to intensify,” he says.

Durasamy agrees, noting that many retailers also no longer want to have only lower-performing value products on shelves.

“Many retailers and suppliers are transforming commodity private label tissue products into brands with consistently high quality,” she states.

Indeed, strong opportunities exist for expanding sales of premium-quality products.

Mintel research, for instance, found that nearly 40 percent of consumers agree than thicker or stronger toilet paper saves money because they use fewer sheets, and nearly 50 percent have a similar view concerning paper towels.

“While an overarching economizing mindset among consumers is likely to keep growth in check for the overall category, the opportunity still exists to trade some consumers up to higher-priced paper products based on the idea that better quality can also be a better value,” Mintel states, adding that “the super-premium products that have appeared recently in that segment have more room to grow.”

Do add innovative paper products such as bamboo-based items to the assortment.

Don’t set the price too high for eco-conscious alternatives.

Do consider adding ultra-premium options in the bath tissue category.

Don’t leave the supplier in the dark when it comes to your own-brand paper products strategy.