Weather The Storm
The down economy has taken a toll on sales within the household paper products segment, but store brand growth opportunities still can be found in key niches.
Players within the household paper products segment probably would like to crumple the last year into a giant ball of paper and toss the whole shebang into an oversized wastebasket. Thanks to economic pressures, you see, consumers have been economizing — and have homed in on this segment as one of the easiest ones in which to do so.
Data from Nielsen, New York, show dollar sales declines for all total subcategories except toilet tissue during the 52 weeks ending May 14 (food, drug and mass merchandiser stores, including Walmart), and unit sales declines for all of them. Private label didn't fare much better, realizing both dollar and unit sales gains in only the toilet tissue subcategory.
But store brand offerings have grown market share since the economic downturn first took hold, according to “Household Paper Products — US,” an October 2010 study from global market research firm Mintel International. The report also notes that national brands have been expanding offerings at lower price points, while private label offerings have been expanding into upper price points with premium products that boast many features of the national brands.
“The consumer is accepting the quality level of store brands,” says Philip Shaoul, chief marketing officer for Global Tissue Group, Medford, N.Y. “Most store brands, when compared to the brands targeted, are equal.”
A spokesperson from Great Neck, N.Y.-based First Quality (who asked to remain anonymous) agrees.
“Consumer acceptance of store brand household paper products is healthy,” the spokesperson says. “Consumers have been embracing products at either end of the spectrum.”
Go green or no green?
To spur growth within the category's store brands, therefore, retailers need to look beyond just the quality improvements they have made to identify specific growth opportunities. Mintel points to “green” products as one niche growth area. But some eco-friendly products aren't even made from paper.
“Reusable cloth products are presented as an economical and 'green' alternative to disposable products,” the study notes. “Mintel's research finds that a third of respondents use reusable products [such as cleaning cloths]; instead of paper ones.”
Still, almost one of three respondents indicated a willingness to pay more for paper products made from recycled materials, Mintel says. In particular, urban dwellers, respondents aged 18 to 34, respondents in upper-income households, respondents in larger households and respondents with higher levels of education all demonstrated “above-average interest” in eco-friendly products, suggesting retailers could target these groups in green product development and promotion.
Do target “green” product development and promotion to consumers with above-average interest in eco-friendly products.
But higher prices — or at least perceived higher prices — appear to be a stumbling block here. In a 2010 survey of female heads of household aged 25-54, Marcal Small Steps, a unit of Elmwood Park, N.J-based Marcal that specializes in products made from recycled materials, found that 75 percent of respondents believe “environmentally friendly” paper products are priced higher than traditional paper products. And 62 percent of them cited higher prices as the reason they don't purchase such products more often.
But Brian Carlson, director of marketing, consumer products for Cascades Tissue Group, Eau Claire., Wis., says Cascades continues to see growth in the green tissue arena — and is well-positioned to help retailers develop and launch such offerings.
“Cascades has recently invested $30 million in a technology to produce Ultra grade bath and towel products utilizing recycled fibers,” he notes. “These products will be available to our private label partners very soon.”
Another supplier on top of sustainability-minded paper product innovations is Spokane, Wash.based Clearwater Paper. Bruce Woodlief, the company's director of marketing, notes that Clearwater Paper committed to aligning with pulp suppliers that are chain-of-custody certified with the Forest Stewardship Council (FSC) and Rainforest Alliance, both of which he calls “gold standards” in certifying that wood product raw materials come from wellmanaged, sustainable forests.
Don't allow store brand paper products to become victims of national brand promotions — offer a store brand alternative with an everyday low price point that's below promotional pricing, and give your own brands their fair share of promotions, too.
“With this certification, Clearwater Paper is able to provide retailers with the FSC and Rainforest Alliance logos on high-volume premium and ultra-premium quality products for bath, towel and facial tissue,” Woodlief says. “These logos add value to consumers who support environmental sustainability. To date, certified tissue products are not widely available from the national brands.“
Other opportunities beckon
Still, not everyone is convinced that green is the way to go.
“The opportunities for private brand paper products are not in the recycled category,” Shaoul contends, “but in responding to the development of re-engineered premium-brand qualities to bridge price gaps — such as the Basic labels for both Bounty and Charmin. Now more than ever, retailers of private brands should rethink their offerings of private brand paper [products] to be more in tune with the brand-switchers and the quality and price points that turn them on.”
For his part, Carlson believes the best store brand opportunities lie in both the premium and ultra-premium categories. As the economy improves, he says Cascades expects consumers to upgrade to higher-quality items, initially sticking to private label brands.
“Our challenge is to produce products that are NBE to the leading national brands in the premium and ultra grades,” he says.
And quality really counts, Woodlief stresses, adding that consumers are not even willing to trade down to lower-quality fiber products to be green.
“Currently, the best opportunities in private label are to provide high-quality offerings that are more of a price value to consumers during these uncertain economic times,” he says. “Rather than drop to lower-quality products, consumers will look to save money by using store brand products that are national brandcomparable, providing a better value and savings.”
Another significant niche opportunity Mintel singles out is tied to the growing Hispanic population, many members of which are at the “life stage of peak consumption.” In fact, both Hispanics and blacks use paper napkins, toilet paper and facial tissue at rates above the U.S. average, the market researcher points out.
Do remember that quality really counts — consumers are not even willing to trade down to lower-quality fiber products to be “green.”
“Asians and Hispanics stand out as taking on more economizing behaviors, with both groups reporting buying in bulk and buying private label products at levels well above average,” the study notes. “They should be targeted with basic no-nonsense products and store brands with lower prices aggressively promoted.”
Ultimately, store brand product success within the household paper segment boils down to understanding the needs of the consumers who shop your stores. Shaoul says the more educated retailers are about what products resonate with shoppers, the better choices they will make.
More than the product
That consumer understanding also must extend to store brand paper-product packaging, marketing and merchandising efforts. On the packaging side, Shaoul believes it's time for store brands to get back to basics.
“The label can look different,” he says, “but must tie into the national brand being matched while featuring the store brand benefits.”
But basic need not scream “generic.” Carlson says Cascades partners with its customers to help them be more “brand-like” when it comes to packaging.
“Our studies have shown that many consumers consider some private label packaging to be too generic,” he says. “We have a full-service creative department staffed with artists who are very well-versed in package design and can advise our customers on how to improve their designs.”
To build a successful store brand paper products program, Woodlief says retailers need to follow the same four Ps (product, price, place and promotion) that make the national brands successful. But retailers also have the added task of managing what's often a multi-branded, multi-tier category.
“Too much emphasis on branded promotions or over-SKUing can have a significant effect on the strength of the store brand,” he says. “Disciplined retailers develop a target category share for their store brand and manage to that share via pricing, promotions, advertising, share of shelf, share of selection, etc. Over time, with the right product mix and quality offerings, store brands will build levels of consumer loyalty just as successful national brands do.”
Don't discount the economizing behaviors of Asians and Hispanics; target them with basic no-nonsense products and store brands with aggressively promoted lower prices.
Shaoul agrees that frequent promotions on the national brand side continue to wreak havoc on store brand sales.
“The selling point of private label is that it is a cost savings opportunity for the consumer,” he notes. “Yet every week, retailers feature national brand paper products way below the retail price points of their store brand SKU's in order to attract customers.”
One of the mistakes here, Shaoul says, is failure to offer a store brand alternative at an everyday low price point that is below the promoted national brands.
But retailers also could use national brand promotions to spur trial of store brand products, Woodlief suggests. He points to the success a handful of retailers have had with buy-one-get-one promotions that promote a national brand and give the shopper the equivalent store brand item for free.
“This type of promotion emphasizes the side-by-side nature of the products, provides a great value and promotes a store brand trial experience for the consumer,” he says. “Imagine if this promotion migrated to various categories throughout the store. Over time, there would be a tremendous store brand loyalty-building effort in place.”
Of course, retailers also would be wise to invest in more promotional activity aimed solely at the store brand side, Carlson suggests. He adds that Cascades has seen demonstrations and on-shelf promotional signage work well on the marketing side, too.
“Customers react exceptionally well to both of these,” he says, “and when used together, [retailers] get very good sales lift.”
Look What's New
Smart Sense Extra Soft Facial Tissues from Hoffman Estates, Ill.-based Kmart Corp. promise to provide comfort for sore noses with the addition of lotion. Each three-ply tissue measures 9 in. by 8 in. The product retails in a recyclable pack containing 80 white tissues.
New from Hy-Vee Inc., West Des Moines, Iowa, is HyVee Soft Essentials Premium Bathroom Tissue. Said to be free of inks, dyes and perfumes, the bath tissue is safe to use in all septic, sewer and low-flush water-saving toilet systems. The product retails in a pack containing 180 double rolls, which is equivalent to 36 regular rolls. Each roll contains 286 two-ply sheets.
Fresh&Easy Green Things 100% Recycled Bath Tissue from El Segundo, Calif.-based Fresh & Easy Neighborhood Market is said to be made from recycled paper with a minimum of 80 percent post-consumer content and whitened without chlorine. The soft and absorbent tissue retails in a package designed to disintegrate at a controlled rate; the package contains four double rolls of 400 sheets, each measuring 4.2 in. by 4 in.
Recently introduced by Schnuck Markets of St. Louis, Schnucks Surely Soft Napkins are premium in quality and said to be strong, absorbent and thick enough to handle the messiest meals. They retail in a package containing 200 napkins. Each napkin measures 12.5 in. by 11.6 in.
New from San Antonio-based H-E-B are improved H-E-B Twice as Strong Giant Roll Paper Towels. Even thicker and more absorbent than before, the premium paper towels are formulated with Liquid Lock Technology, which is said to be ideal for families' most demanding messes. The towels retail in a pack of four rolls, each containing 132 sheets. Each two-ply sheet measures 11 in. by 6 in.
