Toilet paper sluggish growth highly commoditized and little innovation for product
Came up withblack toilet paper at a cirque de soleil performance and made commercials with men and long streams of toilet paper
2005 - Western Europe market for disposable tissue and hygiene $26 billion –
Disposable tissue = 13 billion includes toilet paper at 7.6 billion kitchen towel rolls 2.6 billion facial and pocket tissues 1.6 billion table napkins 1.3 billion
Stagnant growth at 2.4% between 2002 and 2005 due to stagnation in customer population and market saturation
Western European Toilet paper market is experiencing polarization – strong growth for premium brands, stagnations for standard and economy brands and rapid growth for private labels.
2003-05 Spain premium brands increased 16% and private labels increased 12% and standard/economy increased by 3% - Growth of private labels in Europe is driven by improvements in the quality of marketing of their products AND growing power of retailers which are consolidated and able to impose relentless pressure on every supplier.
Renova in western Europe has less than 1% market share
Competitors in tissue industry are
$57 Bill Proctor and Gamble – Charmin TP and Bounty Kitchen rolls
$16 Bill Kimberly Clark – Kleenex TP and facial tissue, Scott TP and Kitchen rolls, Cottonelle
$21 Bill GP paper company – Angel Soft, Lotus, etc
$13 Bill SCA (Svenska Cellulosa Aktiebolaget)- Velvet and Tempo
Retailers that are competitiors AS WELL AS Renovas SOLE customers – * Carrefours – 64 bill sales in europe * Lidl – 40 bill sales in Europe * Tesco - $37 bill sales in europe * Also medium size European paper producers that could get into Portuguese market – mainly Sofidel - $800 mill in sales and 4th largest tissue company in Europe – owns Nicky and Regina brands – strongest in Italy but rapidly expanding to Spain(right next door to Portugal) and other countries; and also Tronchetti - $200 mill in Italy that produces Foxy TP.

Market segmentation in western Europe for TP is based on quality and price –
Range between .10E and .70E per roll
Substantial Variation in packaging –
Packs of 6, 12, 24 and some promotional jumbo packs of 48- disguises up to 7 fold difference in unit price which allows them to price their products according to customers sensitivity to value and quantity PORTUGAL
Disposable tissue paper - $220 mill of which
$135 mill is TP
$37.2 mill is table napkins
$35 mill is kitchen rolls
$12.8 mill is facial tissues
Portugal Customer TP attribute surveys:
60% Price – * 55% of all customers check price before making a choice vs 35% do not check price before making selection * 46% - take 15-30 seconds ; 28% less than 15 seconds and 24% take between 30 seconds and 1 minute RENOVA BUYERS SPEND MORE TIME CHOOSING TP AND CARE MORE ABOUT QUALITY THAN PRICE
30% quality – 3 most important attributes – softness, strength and absorbency –RENOVA BRAND CONSUMERS
8% brand
2% format
RENOVA – * 2005 Sales of 104E – increase from 80E in 1990 * Paula Pereira da Silva is CEO, art and design oriented and very creative; since 1984 rose thru ranks though part of the founding family way back. * employs 600 people * 2 industrial units in Portugal * Commercial branches in Portugal (portuguese), Spain(Spanish) (since 1990), France (french)(since 2002), Belgium, and Luxembourg * Products seen as Spanish but majority of sales come form Portugal * Production capacity is 100,000 tons of paper per year * Sales – TP – 50%; Kitchen rolls – 20%; Napkins – 17% and Tissue – 10% * Marketing campaigns were trying to focus Renova as a well being product * Unconventional Avant garde sexual and male nude advertising banned in Spain and France – likely not good future markets; and beatitudes campaign focused on love and compassion banned in France. * Earlier marketing campaigns were designed to attract females and mom’s with children

Renova in Portugal
Strong brand awareness and image in Portugal – 2005 BRAND awareness is 87%; followed by L’Oreal at 78%; and close to Sony -88% and Danone – 92%
Brand awareness very high among young consumers and high social classes – rated a prestige brand as 7.5 on 1 to 10 scale – like L’Oreal at 7.21 and not far form Danone at 8.10
Value share in disposable tissue category 35% or 17% when hygiene products taken into account – so they have 18% market share of diapers and hygiene products
Market share of the 17% is:
34% for toilet paper
37.6% for table napkins
29% for kitchen rolls
29.5% for facial tissues
Portugal Overall toilet paper--due to universal market penetration above 90% and limited population growth has grown 1.5% per year over last 3 years and projected to do the same in future.
Prices are high compared to other European countries due to low market share of private labels relative to other European countries caused by lower retail competition and fewer hard discounters and strong power of domestic brands such as Renova.
Competitiors are same as rest of Europe except for mostly local retailers.
#1 Renova 33% * Renova super 25% - oldest best selling brand – 18 pack * Reniva progress – 5% - 32 pack * Fraicheur - < 2% - * Fragrance <2% * Humido <2%

# 2 $16 Bill Kimberly Clark – Kleenex TP and facial tissue, Scott TP and Kitchen rolls, Cottonelle * Kimberly Clark – 22% Scottex – 10% and Kleenex- 11%
#3 $21 Bill GP paper company – Angel Soft, Lotus, etc * Georgia Pacific – 7% colhogar – caters to men and gives a free magazine rack and has BIG roll toilet paper
#4 Pampi –Lar – 2%

Private labels – 33% OF THE MARKET
Private labels are fastest growing category in Portugal– gaining market share because of superior quality/price ratio. Started with offering a basic toilet paper product and are expected to expand into premium products as they have done on other categories – such as Lidls Floralys – has superior quality reputation – MOST SHOPPERS ESCPECIALLY YOUNG SHOPPERS BELIEVE PRIVATE LABELS ARE JUST AS GOOD AS NATIONAL BRANDS.
Retailers have enormous power to extract high trade margins with national brands which increases the price gap with national brands and private labels – * difficult for second and lower level market players to get good shelf placement and secure reliable distribution IF THEY DO NOT HAVE UNIQUE FEATURES. * Disposable paper aisels are the blandest and least differentiated areas in the stores leads customers to focus on price * Price and sales promotions – offering larger packs, and buy 1 get 1 free offers, coupons and price discounts – ALL HEAVILY USED TO BOOST SALES * Most marketing budgets in TP are devoted to trade promotions, temporary price reductions, slotting allowances and other instore marketing actions. * Result - A LARGE SEGMENT OF POPULATION HAS BEEN ACCUSTOMED TO BUYING TP DEAL TO DEAL
Carry only 3-4 TP brands * Their own private label * The leading brand * 1-2 national brands
Private label retailers
#1 FMCG retailer in Portugal Retailer Sonae Distribucao – 2.2Billion in sales and owner of 2.9 billion Modelo Continente
#2 Grupo Jeronimo Martins - $1.7 billion is sales with 2 supermarkets –Pingo Doce and Fiera Nova
#3 Os Mosquereiros - $2 billion - 1 supermarket Intermarche #4 Auchan Group - $1.8 billion – Jumbo supermarket
Also – Hard discounters Lidl - $1.4 billion – gaining market share

PREMIUM PRODUCTS
National brands competed with private labels by experimenting with innovations and technological advances to improve attributes – absorbency, strength and softness
Examples – * GP launched Moltonel in 1981 – thick strong and soft TP in France – over past 20 years – premium segment has come to account for 25% of the total category growth and now represents 15% of all rolls consumed in France – a segment value share of 20%. Success due to strong support from retailers who took on product and provided high visibility in store. * Also 3 and 4 ply papers were successful and no one counts sheets so this was successful in marketing absorbency and strength attributes. * Italy – Sofidel innovated by improving shopping and usage convenience with Regina Rotoloni “BIG ROLLS” – bigger paper length than competitors – 10 rolls in 4 – gave customers security in longer lasting roll and the advantage of having the same quantity of tissue in less space, easy storage, quick delivery, lower stock outs and higher profitability per shelf space for the retailer. NEVER ENDING ROLL segment represents 35% of the Italian market and continues TO GROW. This is currently not available in Portugal. NO bigger than big rolls from 40 years ago. * Rolls have shrunk over the years because unit prices in Portugal are computed on a “per roll” basis – not per kilo, linear meter or square meter, which obviously encourages firms to reduce the size of rolls in Portugal. – same issue in UK where unit prices are computed per sheet and length of TP sheets has considerable declined over the years. * Moist toilet paper was significant innovation – research showed that a significant proportion of consumers were wetting toilet paper before usage – popular in Germany and Switzerland – accounted for 8-10% of revenue. Renova introduced first in Iberian markets, but accounts for less than 0.1% of the market. * Also Tp impregnated with lotions and balms – Renova innovated as the first in the world to do this with Fraichur – very instrumental in brand penetration in France in 2002. * Kimberly Clark introduced in UK market – Andrex Aloe Vera – aloe vera and vitamin E – instant success and GP launched Lotus luxury targeted at women with a cleansing balm on 3 ply tissue because research showed women found it inconvenient to use moist wipes and TP together. * Limited editions and colored holiday papers were tried but no success and are not deemed healthy and bad for environment because of dyes and are not on the shelf.