Kimberly-Clark SA launches premium toilet paper plant

The group on Friday, 9 April 2010, launched a premium toilet paper converting plant worth more than R100m at its Enstra mill in Springs to “solidify its market leadership position”. MD of the South African operation, Garth Towell, said that during tough times last year the one-ply segment declined 6% in volume terms, while the premium segment (two-ply and three-ply) increased 4%.

“We have seen movement from branded to private label, but not from a two-ply to one-ply,” Towell said. However, there has been trading out in the one-ply segment as more consumers — particularly lower end — struggled to make ends meet.

Target: emerging market

From a Kimberly-Clark perspective there is a move towards investing in developing and emerging markets.

“There is a huge demand for better product and these numbers indicate that,” Towell said.

“There is definitely a recognition from Kimberly-Clark that growth is going to be driven by the developing and emerging markets over the next five to 10 years and SA is one of these countries.”

The South African tissue market is estimated at R2bn, with the premium (two- and three-ply) accounting for 39.2% and the value (one-ply) accounting for 60.8%. Towell said total tissue usage in SA was 74%, and 50% of consumers in the lower LSM were not using toilet tissue.

“That's the first opportunity,” he said.

Kimberly-Clark's headquarters is in Dallas, Texas. It operates in 150 countries and owns the Baby Soft, Carlton, Kleenex and Huggies brands.

Towell said the group was now focusing on bringing on board even those that did not use toilet tissue into the premium product through the Calton brand.

'A better experience'

“Meeting the needs of consumers is key and we want to provide a better experience,” Towell said.

“Which you are not going to get using newspaper.”

In the past five years premium tissue penetration had doubled from 6% to 12%, and only 40% of the higher LSM (9 - 10) consumers use the two- and three-ply toilet tissue. “That is where the opportunity is,” Towell said.

Towell said there was big growth potential in SA and the group hoped to double the premium product penetration, but that required more production capacity, hence this investment.

Kimberly-Clark SA produces 50000 tons of tissue a year.

Competition

The premium brand Baby Soft has 45% market share in the segment in SA, and Kimberly-Clark SA as a group has 30% of the total tissue market share.

The group's main competitor is Nampak Tissue. Although there are other small players, they trade mostly in the one-ply segment.

The group remains hopeful that as consumer confidence picks up, confidence in luxurious tissue will also improve and make this investment worthwhile.

“Our focus is driving premium tissue and not driving value,” Towell said.

Business Day