Tissue markets overview and trends that will shape the next 5 years - Paper Technology International 2023 - Paper Technology International 2023 - Flipbook - Page 23

Tissue markets overview and trends that will shape the next 5 years - Paper Technology International 2023

PAPERTECHNOLOGYINTERNATIONAL Paper Technology International 2023
Trends to Watch
Trend prediction is risky business today, as uncertainty may be more
pronounced now than it has been in several decades. Between the
unexpected global pandemic we experienced over the last two years
and the first “major” European land war in 70 years, trend predicting
isn’t as reliable as it once was. However, the antidote to uncertainty
is scenario planning – identifying risks, addressing them and finding
the underlying truths that are likely in most scenarios.
In order to scenario plan, we must identify the risks by asking critical
questions such as:
• Will capacity (especially in private label) create a bubble?
The chart below illustrates North American announced Tissue and
Towel capacity and the expected demand. Assuming North America
as a whole grows at about 1%, we can compare the expected
demand with the announced capacity, and what we see is the
likelihood of an expanding gap between capacity and demand as
announced capacity is exceeding gross demand. Of course, as the
chart below reflects announced capacity, it is altogether possible that
we will see additional announcements 2-3 years from now.
North American announced T&T capacity and expected demand.
Source: FisherSolve
When we dive deeper and look a bit closer at the details, we
can see that a significant amount of new capacity over the 5-year
period will come from companies that focus largely on the private
label market.
• Will private label market demand grow enough to absorb
all of the new capacity? Let’s examine three factors that will impact
the direction of this growth:
Tons Per Year (FST)
North American tissue capacity change 2021-2025
0
Source: FisherSolve
1. Costs: The chart right illustrates a cost
curve (supply curve) at the case level. Using data from
FisherSolve, we can adjust for differences in advanced
and conventional pressing. When applied, we can see that
private labels can be low cost and cost competitive as half
of 1st and 2nd quartile consumer advanced non-integrated
mills are private label.
Source: FisherSolve
Consumer paper towel shelf priceand absorbancy (NCSU)
2. Quality: When looking at the results from the
North Carolina State University (NCSU) published tissue
study comparing the shelf price and absorbency of towel,
private labels can compete on the shelf in terms of quality
compared to national brands. However, the question
remains: will towel consumers pay 60-80% more for 10-20%
more absorbency?
Source: FisherSolve
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