Reviving economy perks up paper.
Only two minor categories, wax paper and paper household bags, suffered declines--and only small ones at that--in sales and tonnage, according to SAMI warehouse withdrawal reports. Sales and tonnage gains for other paper categories ranged from merely good to outstanding. Plastics did very well, especially flatware, plates and cups.
Always a big department in terms of space and number of items, paper is a powerhouse in sales, accounting for 3.67% of total store volume. Gross profit contribution is less, 3.03% of total, but that's not surprising given the brawling nature of the department. Suppliers to the department win and hold shelf space only through relentless combat, unleashing an unending stream of product variations, promotional allowances, coupon blitzes and media campaigns. Price cutting comes with the territory.
Over the past few years major paper suppliers have taken a leaf from the candy makers' book, shrinking their product to keep costs in check. The size of rolls or sheets has been reduced, the number of plies or sheets decreased and sometimes, in economy packs, the quality of the product itself.
Al Lee, vice president of marketing for Georgia Pacific, maker of Coronet paper towels and napkins, says, "We all used to have a 360- or 400-count bath tissue, but now it's 300- to 360-count, and often single-ply rather than two-ply. It was one way to stay competitive with private label and generics."
Secondary brands have also become an answer. Procter & Gamble's Banner toilet tissue, priced about 20% lower per case than P&G's premier brand, Charmin, has helped to offset the flow of sales away from the company's--and the industry's--biggest bath tissue seller.
John Berliner, sales merchandising manager for P&G, says Banner is doing well. Originally introduced in just a few midwestern states, it is now being rolled out as far as the Rockies.
Another P&G price alternate that is also said to be doing well is White Cloud. "White Cloud in a 6-roll pack has been around for about five years and recently has been picked up with good results by big accounts. Bounty towels in a 3-roll test in Dallas have gotten a good reception. The move is to big sizes, it appears. The nice part is that these jumbo sizes build category sales because they build pantry stocks. Even if consumption doesn't increase, consumers tend to keep more product in stock."
But all is not well for P&G, the premier marketer of the grocery industry. Published figures show the company's share of the toilet tissue category--the largest within the paper department--has slipped a bit, to 30% from 31% five years ago. Its Banner brand picked up a 1.5% share and White Cloud held steady at 8.5%. But Mr. Whipple notwithstanding, the Charmin got squeezed, dropping 2.5 share points to 20% of total market.
The beneficiaries of Charmin's fall were James River's Northern brand, which gained 1.5 points to reach a 10.5% share, and Scott Paper Co.'s price brand, Cottonelle, which leaped to a 5% share from only 2% five years ago. Regular Scottissue held steady at 12%.
When the dust had settled at year's end, SAMI reports show, volume was up about 1.5% and units about 3.5%. Observes a buyer, "Bath tissue is the most frequently used product, with 95% of households using. How much could it decline?" The bottom line
While bath tissue was eking out small gains, disposable diapers, the second largest paper category, was on a real tear. Unit sales were up about 6% over the year before and dollar sales zoomed almost 11%. (Note: Previously this category was reported under baby care needs.)
Within the category, the shifts were more pronounced, and even shocking as P&G has uncharacteristically been caught with its diapers down. Squeezed between Kimberly-Clark's higher-priced Huggies and P&G's own premium-priced Luvs, on one side, and a multitude of less expensive private label and generic disposables on the other, Pampers, the former world's champ, took a dive.
Ten years ago Pampers dried 75% of the baby bottoms in the U.S. Now, according to Advertising Age, its share is 37%. Worse, upstart Huggies has nosed out Luvs for leadership in the high end of the line. Luvs declined two points last year to a 17% share of market, while Huggies snared a 24% share, up a full 10 points.
To make matters worse, at least two Japanese diaper makers successfully competing with P&G at home are reportedly eyeing the U.S. market. One brand is bound to draw smiles if not sales. Its name is Moony.
Of the brouhaha brewing in the disposables business, one thing can be sure: P&G will use its uncontested clout as an advertiser--it spends more than any company in the world--and its well recognized marketing genius to good effect. Says a competitor, "Don't ever underestimate P&G."
Paper towels, the number three category within paper, has enjoyed more of a tonnage than a dollar boost at retail, about 5.5% and 1.5%, respectively. Georgia Pacific's Lee says that level reflects the overall picture. "A reviving economy has spurred volume while new and improved production facilities have helped most paper makers to produce more economically. And like other marketers, we have detected a definite flattening of generics' volume among various categories. In fact, in the latest period, some generics' shares went down more than a point. We think it represents a long term trend rather than just a short time fluctuation."
Other suppliers interviewed concur, but, like Lee, they also admit that private label shares are holding steady for the most part. But says one producer, "Let's look on the bright side. Operating rates are up six to seven points over last year and order backlogs are running three times the rate of a year ago."
When paper and plastic shared the shelf last year results were mixed. Paper and plastic plates tonnage (count) rose 9%, and paper and plastic cups were up about 4%. Plastic household bags rose about 3.5% in tonnage, but paper household bags continued its long term slide, losing 0.5%. A much smaller category, paper and plastic paper freezer wrap, racked up a 9% gain.
The heavyweight sales generator among these categories is plastic household bags. Like all plastics, they are better able than paper products to play the game of "new and improved." Paul Lucksinger, vice president of marketing and sales at Mobil Chemical Co.'s plastic packaging division, notes that "Hefty, already the leading brand and formulated in different ways, is now treated with a biocide which resists odor creating bacteria and mildew. Our new Steel Sacks are bigger and stronger than ever. We've introduced Denslon, an extra protection freezer bag that's microwave proof.
"Our competitor, Glad, has introduced a sack with a tie handle. Typical...we're all out to win new sales based on increased consumer convenience and better products. And most of us are enjoying the fruits of improved technology that result in lower costs for these new products, compared to only a few years ago."
Such success breeds imitators. A SAMI report notes that the number of operators--340--shipping generic household bags was highest among 14 popular paper categories, compared to only 10 operators shipping generic paper household bags and 29 shipping generic waxed paper.
One paper category that seemingly shrugs off plastic incursions is coffee filters. In 1983 unit sales were up about 7% and dollar sales about 10%. Meanwhile, the much larger aluminum foil category maintained its tonnage (square feet) while gaining a bit in dollar volume. Says one buyer, "It's sort of like old faithful. Keeps on steaming along."