Paper products: nappy sales bottom out as loo roll rises

Paper products are defying inflation as the supers slash prices and put greater emphasis on own label to stem the tide of shoppers going to discount and online channels for commodity items like loo roll and nappies.

Overall, the four sectors measured on these pages have lost 2% of their value, a decline of £39.6m, on volumes that have inched up a paltry 0.1%. Nappies have suffered the most, losing £40.7m as shoppers continue to turn to the discounters’ growing babycare ranges.

Pampers (the only major brand in the UK market since Huggies axed its nappies in 2012) is responsible for the sector’s greatest loss and the fourth-biggest in this report, of £31.1m. This is the result of lower prices and lost space to own label, which has fared much better, down 7% on volumes down 2.1%.

Toilet tissue, meanwhile, looks in relatively good shape, with value and volume up and prices holding steady. But that doesn’t mean it is immune to the inflationary pressures (namely the weak pound’s impact on pulp prices and machinery) everyone is facing.

Suppliers are just finding different ways to pass on those rising costs, says Matt Carpenter, senior client analytics executive at Nielsen. “Across the paper category shrinkflation continues to be a key factor, with manufacturers opting to reduce sheet counts to maintain competitive pricing, more so in branded products,” he says. “The shrink in sheets comes despite a trend towards larger packs, as retailers look to tempt cost-conscious online shoppers buying in bulk.”

Indeed, brands such as Andrex and Nicky have seen large rises in the average price of their products (the latter by 7.3%), buoying their overall value performance (both have seen volumes fall). The sector’s biggest casualty is SCA’s Velvet, which has seen more than a quarter of its sales wiped out as a result of big losses of shelf space to own label.

“In toilet tissue and facial tissue, SCA has seen a loss in distribution,” says Nielsen’s Carpenter. “As a whole, the paper category has seen a 5% decline of total distribution points, with kitchen towel seeing the largest, of 7%. Brands such as Plenty have suffered a loss of distribution in kitchen towel where we’re seeing own-label sales increase by 2%.”

The smart brands are fighting back with NPD. Rising prices aren’t just the result of crude measures such as pack size reductions of base prices hikes. Premiumisation is also playing a part in all this. Category leader Andrex, which has seen its average price rise by 2.1%, has relaunched its top-end Supreme Quilts line (Top Launch) and added a Supreme variant to its washlets range.

It’s all part of the brand’s strategy to target premium shoppers, who spend 27% more than average shoppers in the category. Plus, it is also continuing to push its ‘Supreme Clean’ premise, encouraging shoppers to use a moist toilet tissue alongside a dry product in television ads and other media.

According to a spokesman for brand owner Kimberly-Clark, research has found that shoppers who buy into both products will spend 47% more on the total category than dry shoppers alone. “Our brand promise at Andrex is to elevate the standard of clean and our ambition with Andrex Supreme Clean is to offer families a luxurious level of clean in order to do that,” says the spokesman.

Innovation will be crucial for all parts of the category if brands are going to be able to stave off the advances of own label, says Oday Abbosh, CEO of Better All Round, manufacturer of round kitchen towel brand Ora. “Innovation is an opportunity and one way to differentiate Ora from its competitors and to elevate it from a commodity status to more of an aspirational brand,” he says. “Design and innovation is becoming increasingly important within the household category and we are seeing consumers seeking household products that are both functional and beautiful as well as innovative.”

Still, the Ora brand has lost 13.4% of its value in the past year. Volumes have fallen 17.1%. Abbosh points to the ongoing price war between the mainstream mults and the discounters. “Shoppers routinely hunt down the cheapest prices for their favorite products,” he says. “This has helped drive up market share of own-label products, which have successfully adopted an EDLP strategy in many retailers, and in others it has fuelled a more promiscuous shopping behaviour.”

He adds: “For example, shoppers might buy their wine from a convenience store, their toilet paper from a supermarket and their staple groceries from a discounter. Consumers are now much more prepared to flip between stores than they ever used to be and the often aggressive price discounting and positioning of own label is an important part of this.”

Amazon and other online outlets shouldn’t be forgotten either. “The paper category has seen switching into discounters as shoppers look to counter the effects of price rises,” says Carpenter. “Given the non-perishable nature of the paper category, shoppers are more open to purchasing these ranges in the discounters. Online is also an important trend with shoppers happy to bulk-buy these products in order to gain further economies.”

Question is, how long can bricks & mortar compete with such economies of scale?

TOP LAUNCH

Andrex Supreme Quilts by Kimberly-Clark

In its ongoing mission to make toilet tissue more than just a commodity, Andrex relaunched its premium product Supreme Quilts in July. The new-look tissue has “four deep cushiony layers of plush softness” with a “touch of silk” for added luxury. Take that, commodity tissue. Plus, Andrex has launched a Supreme variant of its washlets with silk extracts and jasmine fragrance. The idea is shoppers will use both wet and dry products together for a “super-premium clean routine”.