Value with a Premium

As far as consumer products go, you would be hard pressed to find a more indispensable category than household paper products. Consumers reach for these products multiple times per day every day. But despite the practicality and usefulness of household paper products, consumers remain focused on savings and value. While this mindset has slowed growth for the name brands in recent years, it has boosted store brands’ category share.

According to “Household Paper Products — US,” a February 2015 report from global market research firm Mintel, sales of all household paper products were nearly flat in 2014. While two segments — toilet paper and paper towels — retain their dominance, facial tissue and paper napkins continue to suffer sales declines, as some consumers view these products as being replaceable by other products.

Slow but steady is the best way to describe private label growth in this category of late, driven by improved product quality Data from Chicago-based market research firm Information Resources Inc. (IRI) show moderate dollar store gains for all private label paper product categories during the 52 weeks ending April 19, but unit sales gains in only two of those categories. See the table, p. 62.

Think green

When people think about paper products, they usually assume that trees were used in their manufacture. But today’s savvy consumers are increasingly eco-conscious and are on the hunt for more environmentally friendly options.

“We promote farmland preservation in manufacturing our 100 percent tree-free paper by using agricultural byproduct,” says Terry Lehmann, president of TG Eco Products, Boca Raton, Fla.

The company’s patented sugar cane and bamboo grass combination allows them to create sustainable products that are soft and strong, as well as compostable and degradable.

“Fibers such as sugar cane and wheat waste residue are increasingly becoming popular,” explains Julian Gray, brand manager for Australia-based Greencane Paper, “with an increasingly aware consumer questioning the credentials of destroying forests for the purposes of everyday household paper products.”

But the recent practice of using brown or tan paper to identify eco-conscious products was not very successful, Lehmann says.

“Consumers want white paper products,” she adds, “especially [with] bath and facial tissue.”

And eco-friendly paper products are now being packaged in ways that are both “green” and attractive.

“We have focused on the removal of all plastic,” Gray explains, “which has been well-received by our customers and has led to our innovative signature packaging.”

Lehmann advises retailers to keep store brand packaging simple.

“Green denotes environmentally friendly,” she adds.

Another popular trend of late on the manufacturing side is the practice of down-sheeting paper packaging, says Daniel David, executive vice president, Global Tissue Group, Medford, N.Y. Fewer sheets or smaller sheet sizes help companies keep costs down.

“You will see [down-sheeting] across the board on the brands,” he explains, “and if the brands do it, then private label will usually follow right behind them.”

Quality/value balance

The definition of value is shifting from one based purely on price to one that supports the idea that better quality can also be a better value. With increasing stability among households, some consumers are ready to trade up to higher-priced paper products, Mintel reports.

“Ultra-premium has always been a consistent category on the private label side,” David says, “[in that it] follows the ultra-premium through-air dried products on the branded side.”

And now, private label is getting more access to the ultra-premium category in both bath tissue and towels.

But retailers also need to make sure they are serving the needs of their specific customers.

“If you understand first who your shopper is,” David says, “then you can create and tailor a private label program around that.”

Overall, today’s consumers ask more questions and want more background information about the products they buy than consumers did in the past, Gray says.

“In my opinion, the mistake we have seen being made is the assumption this would be any different in the paper product category” he adds.

Paper’s value

Even though retailers have tried to keep up with the name brands by enhancing the quality of their store brand products, they have started to fall behind when it comes to merchandising and promotion strategies. Giving away, for example, a free four-pack of bath tissue with a minimum purchase was a common practice a few years ago, David says, especially within supermarkets. Name brands still use the tactic, especially when promoting a new product.

“I could see store brands using [that tactic] especially for cross-marketing within the store,” he explains.

But many retailers have gotten away from such promotions on the store brand side despite the potential.

“It doesn’t have to be limited to just that category,” David adds. “It could be used across the store, focusing on store brands.”

Because consumer shopping habits within paper products will always have a strong focus on value, bulk package sizes are practically a given for paper towels and toilet paper in all but the smallest households. Giving customers more value for the same dollar amount remains an important trend.

“[Examples include] putting more product in the package and having promotions at certain times of the year,” David explains, “where they’ll be getting, for example, 10 percent more for the same price or getting some kind of incentive or a lower price for the same product.”

Packaging that includes large callouts to highlight the bonus product, as well as clever shelf placement, will get the shopper’s attention, he adds.

A bigger role

The household paper products category continues to evolve slowly, due, in part, to its size.

“It is such a large category in general,” David says. “More and more store brands are being [brought] out on the shelf that weren’t there before.”

But perhaps the biggest potential value of paper products is the role they can play within the overall store brand program.

“Stores use [paper products] as a big section to draw customers into becoming loyal to the store brands,” David says.