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MARKET PULSE 2023: AMERICAN TISSUE’S ROLLERCOASTER RIDE IS NOW ON THE SMOOTHER TRACKS

AfH is largely back to pre-pandemic levels. AH is seeing structural changes in buying habits, pressure on spending power, a rise in private label, and the return of the frugal consumer. US market survey by AFRY’s Sanna Sosa, Senior Principal, and Sivashankari Bharathi, Consultant. A TWM report.

North American tissue demand has been on a rollercoaster ride since the first days of the Covid pandemic in early 2020, characterised by double digit ups and downs in market demand. 2022 year-end market indicators show another slump in At-Home tissue demand during the second half of the year, coinciding with consumers’ struggles with spending power. The AfH tissue market was in recovery mode through 2022, driven by increased mobility and return to service sector patronage.

To gain insights on what to expect in 2023, AFRY surveyed over 300 American consumers to take a pulse on people’s mobility and spending habits. Will the tissue market volatility continue? How are consumers translating pressures on their wallets into tissue paper purchases? Are people back at pre-pandemic levels of service sector consumption? Has there been a structural shift in mobility impacting AfH tissue demand long term?

AfH tissue market in recovery

The pandemic has been an especially tumultuous time for the AfH tissue sector and producers. Before the pandemic, American AfH tissue demand was steadily growing close to the rate of GDP, at about +2% per year, until Covid-19 shut down parts of the AfH market due to stay-athome orders. People cocooned in their homes and shifted spending from services and experiences to goods. AfH tissue consumption hit a decade low in 2020 at 2.6m tons after a close 15% drop in demand. However, since then the AfH tissue segment has been in recovery as people have been returning to service sector consumption.

Results from AFRY’s consumer surveys – which have been conducted every six months since 2021 - illustrate how, by the beginning of 2022, people had increased spending on services rather than goods (Figure 1), which coincides with the recovery of the AfH tissue sector. However, AFRY’s latest consumer survey conducted in January 2023 shows the smallest difference in consumers increasing spending on services vs. goods. If 2022 was a strong recovery year for service sectors, including the AfH tissue sector, the growth in 2023 is likely to moderate as most of the pent-up service sector demand may already have been released and the concerns over inflation, economy and spending power weigh on consumers’ wallets.

The AfH tissue market consists of five main end-use service sectors, as shown in Figure 2. Over 40% of North American AfH tissue consumption is estimated to take place in food service settings or in take-out. The travel industry represents about a quarter of AfH tissue demand, followed by healthcare, office buildings and

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