MarketIssues
MI
MI
MarketIssues
TISSUE WORLD VIRTUA THE ROUTE MAP FOR 24 speakers - six sessions for all tissue industry members – world-class content designed for the international tissue industry,
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risk and resilience, consumer behaviour, manufacturing process developments, fibre and energy, converting solutions, process automation and optimisation.
Key topics included consolidation, sustainability, drivers for tissue business post pandemic, global influences and trends,
Tissue’s route map is being refreshed. Here, we summarise key topics raised.
n September, Tissue World hosted eight hours of critical insights over the course of two days, analysing how the tissue market is preparing itself for change and emergence from the pandemic.
Tissue World keynote speech: Key drivers for the tissue business post-pandemic Esa Kaikkonen, Chief Executive, Metsä Tissue The tissue business has been volatile during the last year and half. The first few months we saw high demand for our products, and then soon after a shift to negative demand due to lockdowns. Gradually the volatility is going away, and we start to see the return of a normal business environment. Now we face new challenges and opportunities. I won’t touch on the high inflation that is applicable to all industries and which must be tackled by all of us as part of our commercial tactics. The key issues are:
Consolidation is likely to take place in the tissue industry
The tissue industry is likely to consolidate in the coming years in our main European markets. The reason for this lies in our customer base. Take consumer tissues, in the past couple of decades the retail sector has been consolidating, driven for example by the brisk growth of hard discounters. For instance, the German retail sector is controlled by the four largest companies, claiming a combined market share of almost 90%. This consolidation amongst our customer base has happened in the past 4
Tissue World Magazine | September/October 2021
couple of decades and has meant lower margins for the industries that provide goods to them. The German food retail market can currently be characterised by consolidation, market saturation, strong competition and low prices. This development in the central European region has left shrinking margins in our businesses, and it’s been going on for far too long. Powerful retailers can negotiate cheaper offers from suppliers to keep the retail segment profit high. While strong players are controlling the consumer retail segment, this same consolidation can’t be said for the tissue business. In the future, and to be able to share the large retailers’ business, the tissue industry is likely to consolidate. Currently the tissue market in Europe is fragmented, and a consolidation would have happened earlier if the interest rates were higher. The low interest rates have supported the trend of low margin business. Even in other B2B industries we’ve seen intense investment activity - the same can’t
be said for the tissue industry. This will eventually lead to a deterioration in the assets base, and the tissue business itself. The comparable operating results are also clearly lower in Europe than in the USA. I believe business owners will not tolerate these losses in Europe for much longer. The tissue industry in Europe is fragmented, but to be able to serve large retailers effectively the industry is likely to consolidate. Larger producers could then deliver big volumes demanded by large retailers, reach higher efficiency and have more power in commercial negotiations. Currently the capacity of some 11 million tonnes is divided between about 140 companies, and the six largest producers account for 50% of the capacity.
