Did private label save the household paper products category during the early stages of the COVID-19 crisis?
Some industry observers, including a number of retailers, said that the private label and store brand paper products played a huge role in their ability to fulfill demand for this highly sought-after category in the spring and early summer.
In fact, many retail executives said they turned to their private label paper products suppliers and pleaded with them to supply as much toilet paper, facial tissue, paper towels and napkins as possible. The result: “Let’s put it this way,” said one retailer. “If they did not come through I am not certain what I was going to do. Thankfully, our private label paper supplier turned the engines on and got us through those crazy days.”
It was a crazy time, indeed. According to a March survey by Shopkick, 47% of consumers reported stocking up on essential items, and 85% of consumers agreed that “brand names do not matter during times like these."
What matters is availability, and manufacturers are working to make sure retailers have private label paper products in stock. “Business is very strong in this ‘new normal’ environment,” said John Sarraf, CEO of U.S. Alliance Paper, based in Edgewood, N.Y. “I believe we’re still in a pantry-loading environment. Consumer purchasing behavior continues to be skittish and panicky, and is subject to events in the news.”
Consumers are buying more household paper products because they are not working in their commercial and office settings, and are spending more time at home. “We don’t see the work-at-home trend reversing anytime soon, so I can only assume that business will continue to be strong in the foreseeable future,” Sarraf said.
U.S. Alliance Paper is helping retailers adapt to this spike in demand. “Our customer relationships have always been built on collaboration in an effort to help optimize their household paper aisles,” Sarraf said. “Working closely with our retailers is even more important today.”
The company is helping stores shift their focus. Before the pandemic, U.S. Alliance Paper was working with several retail customers on customization projects, including super-sized roll products, custom product bundles and specialty packs. Then the pandemic hit, supply chains were disrupted, and shoppers famously stripped the store shelves bare. Instead of custom or specialty products, retailers turned their attention to keeping their shelves stocked.
“They are focusing on the basics and will gladly drop slower-moving SKUs in favor of a predictable source of standard household paper, especially roll products,” Sarraf said. “We can best help them by ramping up manufacturing and our case volume to make up for gaps left by other suppliers.” In August U.S. Alliance Paper announced its plants were running 24/7/365, and had installed robust medical screeners, separated workstations and staggered hours to keep workers safe.
Focusing on Supply Chain
Sarraf said the company plans to increase capacity in 2021 by adding computerized equipment and additional lines. “We feel that, as a company, we can best serve our retailers by delivering volume, predictably, when and where they need it,” he said.
Other suppliers say their new products will be larger packages. Medford, N.Y.-based Global Tissue Group is launching larger pack sizes, additional mega roll offerings, and new ultra-premium category items. “Full private label paper programs are coming back on line as we reach the end of the year,” said Daniel David, executive vice president. The company is working with retailers on SKU rationalization to increase efficiencies and output and commitments to customer volumes.
Innovation is not the most important driver in household paper product sales, according to a pre-pandemic report from Mintel. In its “Household Paper Products US February 2020” report, the market research firm noted that several paper towel brands had improved paper-based cleaning systems as part of an effort to compete with nonwoven wet wipes and sponges. Meanwhile facial tissue brands had created antiviral substrates and “phase change technology to cool sore noses.”
Still, the Mintel report noted, consumers were not necessarily interested in these innovations from national brands. They were instead looking for store brands, so much so that private label brands outpaced growth of national brands. “Store brands have closed the quality gap to the point where many consumers no longer see a functional need for premium-priced name brands,” the report authors wrote.
According to IRI, a Chicago-based market research firm, for the 52 weeks ended Oct. 4, in total U.S. multi-outlet stores, dollar sales of private label toilet paper increased 22.3% compared with the same period the previous year, while sales of national brand toilet paper increased 14.4%. Sales of private label paper towels increased 21.1% compared with 18.3% for national brands. For facial tissue, the growth was 10.5% for private label and 9.1% for national brands, and for paper napkins, private label sales grew 13.9% compared with 1% for national brands.
Millennials and the Environment
Paper packaging also is seeing growth in private label. “As a result of the coronavirus, and likely more meals at home requiring more multi-serve beverages from the grocery stores, several of our categories grew,” said Katie Simmons, marketing director for Evergreen Packaging in Memphis. “We saw an impact in our production for retail products.”
Simmons noted that certain key segments for private label paper packaging reported by Nielsen saw large gains for the 40-week period ending Oct. 3 for the Total US xAOC market. There were increases in milk, milk substitutes and juices, which she noted reflect the coronavirus-related trend of people eating more at home. “These categories continue to run at higher levels than last year, and we continue to focus on meeting customer demand,” she said.
Evergreen Packaging encourages retailers to stay focused on the longer-term sustainability benefits of paper-based packaging, as these benefits are attractive to younger shoppers. “Millennials and Gen Z consumers are not going away, and half-gallon packaging that provides about 80% renewable materials from trees as well as recyclability adds real value to how consumers see their retail brand,” Simmons said.
In January, Evergreen Packaging released a report, “How Millennials Will Change Packaging Forever,” showing key factors that drive purchase decisions related to packaging. Among the findings: 64% of millennials said they are willing to pay more for eco-friendly products.
Retailers are increasing their use of sustainable packaging in their store brands. One of Evergreen’s customers recently announced that PlantCarton packaging with Renewable Plus board is now being used in the organic milk category. “We always welcome discussion about how Evergreen Packaging can help support our retail customers with applying the latest board technologies or optimizing their sustainability story with our packaging,” she said.
Consumers will continue to buy private label household paper. According to a March study from AlixPartners, 65% of U.S. consumers had tried a new brand or private label in at least one consumer product category. In household paper products, 23% had tried private label, and 25% that tried private label paper said they will continue to buy it.