The disposable paper business sector in relation to market segmentation
In the following, the reader will be provided with an overview of the disposable paper industry. Due to the scope of study, the author will put limitations and take the German market into consiederation, which to some extent has a certain level of generalisablity for the Western society. The author will concentrate on latest trends and future tendencies of the industry by relating it to the current marketing issue of market segmentation.
Disposable Paper products
The disposable paper industry is highly dynamic with total value sales in retail disposable paper products up to US$ 87 billion in 2004 (see Appendix 1). However, it can be analysed that there exists a high concentration of value shares among the two major manufacturers; Procter & Gamble and Kimberly Clark (see Appendix 2). Yet, they had to suffer a loss in value shares in 2004 due to the increasing success of private label products, which profited form the global expansion of main retailers.
According to the Euromonitor (The World of Disposable Paper Products, 2005), it can be said, that world wide markets are experiencing some major challenges, like a deep penetration of households and strong price competition from private label products. In return, manufacturers reacted to this unfavourable impact by increasing research and development activities in order to add more value to their products.
Despite the intense challenges, the industry is experiencing increasing demand for premium products that facilitate everyday life, as consumer lifestyles are accelerate not only in developed markets but also in emerging markets like Latin America, Eastern Europe, Asia-Pacific and Africa, where economic conditions seem to recover. Furthermore, sales of disposable paper products in the mentioned regions are increasing due to improvements in distribution systems through supermarket channels.
As a forecast, it can be argued that markets like the US and Western Europe might suffer from stagnation due to the mentioned price competition between manufacturers and retailers and the rising success of private label brands. Furthermore, sectors such as diapers might experience a decrease in value sales because of the shrinking birth rate. On the other hand, manufacturers are constantly aiming for innovation which might boost sales in the future due to the rising ‘willingness’ of customers to spend more money for more valuable products due to higher convenience and hygiene requirements.
Global players are particularly looking for generating growth in emerging markets by introducing highly innovative products into peoples’ everyday life and “raising consumers awareness through aggressive marketing” in order to expand beyond their core markets. (Euromonitor International, The World of Disposable Paper Products, 2005)
Disposable Paper Products in Germany
Retail sales of disposable paper products in Germany were slightly declining from €3.220.8 million in 2003 to €3.141.2 million in 2005 (see Appendix 3), which is mainly due to shrinking unit prices and the shifting preference of consumers towards cheaper private label goods. In other terms it can be argued that the demand for disposable paper products remained stable concerning volume of sales.
The German disposable paper market is dominated by private label products, which “account for almost half of the market’s retail value” as they are also becoming more innovative and compete also in the premium products segment. (Euromonitor International, Disposable Paper Products – Germany, 2006) The average German consumer believes in equality of innovation between branded products and private label products. Despite the dominance of private label products, the branded market is concentrated by four leading companies, accounting for 40% of value sales.
When taking toilet paper as an example, it can be analysed that, even though dry toilet paper declined in value sales, wet toilet paper increased in growth by more than 10% from 2002 till 2005. According to research by the Euromonitor International (2006), 30% of Germans buy wet toilet paper additionally to dry toilet paper. (Euromonitor International, Toilet Paper – Germany, 2006)
In this segment of the market it is also crucial that most customers prefer multiple-ply toilet paper nowadays, which is offered by almost all branded but also private label products. Charmin from Procter & Gamble is the only exception but is commonly used as a high quality, luxury product.
Hakle-Kimberly is leading toilet paper sales with 13%, followed by SCA Hygiene (10%) and Procter & Gamble (7%) in 2005. However, private label products represent the share of value sales with 68% because consumers tend to have less brand loyalty concerning this business sector. Most of the Germans prefer to buy their toilet paper in combination with other household products which are often purchased at discount stores. Furthermore, private label products are not lacking in quality or missing product segments like wet, luxury or dry toilet paper because innovation is quickly imitated from premium products. (Euromonitor International, Toilet Paper – Germany, 2006)
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- Miriam Mennen (Author), 2007, The disposable paper business sector in relation to market segmentation, Munich, GRIN Verlag, https://www.grin.com/document/145641