2. AGENDA
INDIAAS AN ATTRACTIVE MARKET FOR PAPER BASED HYGIENE PRODUCTS
2
THE STUDY: BY VALCON
HOW CAN VALCON HELP FIRMS?
KEY QUESTIONS TO PONDER UPON
VALCON’S VIEW: TIPPING POINT IN THE INDIAN TISSUE PAPER MARKET
3. SUMMARY OF VALCON’S STUDY ON PAPER BASED HYGIENE PRODUCTS
The Study
Valcon conducted a study on the paper based hygiene products (tissue papers) to
understand the current market of paper based hygiene products in India, and evaluate the
industry’s potential
Approach
• The study was conducted pan-India over a 4 month period.
• The study included secondary as well as primary research, interviews with users (At-
Home and Away-from-Home), convertors of the tissue paper, wholesalers, retailers etc.
Valcon’s View
With changing lifestyles, growing exposure, disposable income and growth in
modern retail, there is a definite trend leading to increased usage
A number of international players are eyeing the Indian market and are wanting to set up a
manufacturing base in the country – clearly indicating that a tipping point is
approaching
There is a distinct lack of innovative tissue paper products (often found internationally) as
well as an absence of a truly pan India premium brand that customers recognize
3
4. INDIA AS AN ATTRACTIVE MARKET FOR
PAPER BASED HYGIENE PRODUCTS
4
5. THE INDIAN TISSUE PAPER MARKET IS DIFFERENT FROM OTHER MARKETS
DUE TO VARIOUS FACTORS SUCH AS CULTURE, DISPOSABLE INCOME,
PERCEPTION OF TISSUE PAPER ETC.
Factor Global market Indian market
Use of tissue as a hygiene product
Use of products such as facial tissue
and kitchen roll are a daily necessity
Use of tissue paper products is still
considered a luxury, tissue products
are often considered an unnecessary
expense
Cultural barrier towards usage of
tissues
Products such as toilet paper are a
part of the culture
There are cultural barriers towards
adoption of this product, water is the
preferred mode for cleaning
Hygiene awareness
The awareness about hygienic
lifestyles is high
The awareness about hygienic
lifestyles is low
Globally, a majority of the end-users of the tissues are also the buyers (accounting for ~60% of tissue consumption); in
India, this figure stands at ~40% which shows that most of the consumption is at places outside home where the user is
not the actual buyer
Source: Valcon analysis5
6. THE MARKET CAN BE CLASSIFIED INTO TWO BROAD SEGMENTS BY THE
TYPE OF BUYER & CONSUMER, BOTH HAVING ENTIRELY DIFFERENT
DYNAMICS
End consumer is also the Buyer (Product
costs the consumer)
All Tissues sold in the retail market can be
categorized as At-Home (AH)
AH segment also includes selling as private
labels to big supermarket chains such as
Big Bazaar etc.
The growth is mainly driven by the
development of modern retail trade and
changing lifestyle in urban and semi-urban
populations
End consumer is not the buyer of the product (Product is free for the end user).
The buyer is actually the institution where the usage is taking place
Away From Home (AFH) segment includes tissue consumption that happens at places
other than home such as office, hotel, hospitals etc.
AFH segment also involves institutional sales to restaurants and catering
businesses, medical institutions, government controlled environments such as
schools and the military
Institutional market is witnessing a slowdown in growth due to shift to more cost
effective products such as re-usable hand towels, cost-cutting by firms in general etc.
Indian tissue market
At Home (AH) Away From Home (AFH)
Hotels Corporates Hospitals Airlines
Source: Valcon analysis
Others
6
7. THE INDIAN TISSUE MARKET IS ESTIMATED TO BE ~100,000 MT PA. BY
VOLUME AND ~INR 2,200+ CR. BY VALUE
Source: RISI, Valcon analysis
* Market at the Final Selling Point (FSP includes MRP and Discounts) of products for At-home and the selling price of products to institutions for AFH segment
Indian Tissue market (consumption in ‘000 tons) Indian Tissue market* (INR cr)
1,1001,000
1,100
0
500
1000
1500
2000
2500
2008 2013
AFH
AH
9%
0
20
40
60
80
100
120
1991 1996 2001 2006 2010 2011 2013
AFH
AH
11%
6%
9%
Phase 1
Adoption
Phase 2
Increased
Penetration
Phase 3
Stable growth
INR 2,200+
7
8. TISSUE MARKET TYPICALLY CONSISTS OF FOUR MAIN PRODUCTS LINES
– TOILET ROLLS, FACIAL TISSUES, NAPKINS, AND KITCHEN TOWELS
Tissue products
Toilet rolls NapkinsFacial tissues Kitchen & hand towels
Toilet rolls made of
recycled and virgin pulp
are sold in India.
The major sales
channels are direct sales
to hotels, corporates etc.
(white label) and selling
through traditional /
modern retails (branded).
+ + +
This category contains
two sub-segments –
kitchen towels and hand
towels.
Kitchen towel is a
relatively new concept in
India with adoption being
low. Hand towels are
either C-Fold or N/M-Fold
and are mostly for
institutional usage.
Facial tissues are primarily
made from virgin paper,
and its usage is increasing
in India.
Sales is being driven by
factors such as more
hygienic lifestyles where
people replace
handkerchiefs with tissue,
increasing car ownership
Paper napkins are made
of both virgin and
recycled paper with the
virgin napkins priced at a
premium vis-à-vis the
recycled one’s.
8 Source: Valcon analysis
9. TOILET ROLLS AND NAPKINS ARE THE BIGGEST SEGMENT BY VOLUME
AND BY VALUE; FACIAL TISSUES HAVE HIGHER VALUE SHARE
Market segmentation by value (2013, INR Cr.)
33%
5%
6%
20%
36%
Toilet roll Kitchen towel Hand towel
Facial tissues Napkins
Total: INR 1,400 Cr.
Market segmentation by volume (2013, MT.)
35%
5%
10%15%
35%
Toilet roll Kitchen towel Hand towel
Facial tissues Napkins
Total: 100,000 MT
Source: Valcon analysis9
11. Source: Presentation - Diaper Market in India, Indian Nonwovens Outlook; Hindu business line (Transparency Market Research)11
GROWTH STORY OF BABY DIAPERS IN INDIA EMPHASIZES THE
IMPORTANCE OF UNDERSTANDING THE ‘TIPPING POINT’ OF MARKET
GROWTH AND AN EARLY-MOVER ADVANTAGE
57
150
310
0
50
100
150
200
250
300
350
2002 2007 2012
Baby Diapers
(Production in million units in India)
~21%
~16%
The market for baby diapers has been growing by more
than 15% every year since 2002
Two brands Huggies (Kimberly Clark) and Pampers
(Procter and Gamble) dominate the Indian market today
Both the companies have invested significantly in the brand
creation since their entry in India
When Pampers was launched in December 2006, the
category was around INR 110cr. [It now stands at
~INR1300cr]
In the last eight years, Pampers (along with few other
brands) has grown the category to more than 10 times,
and continues to spearhead the category growth
Increase in disposable income, literacy rate, nuclear
families, and improving standard of living have contributed to
the growth of diapers in India
12. 0
2
4
6
8
10
12
14
16
18
20
1991 1996 2001 2006 2011
Hong Kong
Singapore
Brazil
Malaysia
China
Thailand
Indonesia
Pakistan
Bangladesh
India
TISSUE CONSUMPTION IN INDIA HAS GROWN 4-FOLD IN THE LAST TWO
DECADES TO 0.09KG/INHABITANT; HAS A LARGE UNTAPPED POTENTIAL
Source: RISI, Valcon analysis
Per Capita Tissue Consumption, 1991-2011 (kg/inhabitant) Total Tissue Consumption, 1991-2011 (‘000 tonnes)
0
200
400
600
800
1,000
1,200
1991 1996 2001 2006 2011
Brazil
Indonesia
Malaysia
Thailand
Hong Kong
India
Singapore
Pakistan
Bangladesh
India might have the lowest per capita tissue consumption amongst other similar nations, but not the lowest overall consumption –
and given it’s population, it presents the highest potential in Asian markets
12
13. GROWTH IN THE MARKET IS BEING DRIVEN BY FACTORS SUCH AS
MODERN RETAIL, LIFESTYLE CHANGES AND INCREASED NUMBER OF
CORPORATE USERS
Higher penetration of
modern retail
Greater exposure, time
spent travelling
Lifestyle changes
Corporate usage
The penetration of modern retail is one of the major drivers for the At Home segment.
India currently has over 10,000 modern retail stores and product visibility in these stores
have contributed to product awareness and increased sales.
With changing lifestyle, nature of work and increased international exposure, the time
spent traveling outside home has drastically increased thereby leading to increased
tissue usage.
Increased hygiene consciousness, disposable income, literacy rate and standard of
living have contributed to awareness of tissue products resulting in the increased sale
of tissue products.
As India becomes a preferred outsourcing destination for IT/ ITES sector – the number of
people employed in these sectors have increased dramatically. This has resulted in
increased AFH and AH consumption.
Source: Valcon analysis13
14. WE BELIEVE THAT GROWTH IN TOILET ROLLS WILL OUTPACE OTHER
CATEGORIES
Market segmentation by volume (2022, MT.)
42%
34%
8%
5%
10%
Toilet roll Napkins Hand towel
Kitchen towel Facial tissues
Total: ~310,000 MT
Product-wise expected growth (future CAGR)
18%
15% 15%
12%
10%
TR Napkins KT HT FT
Source: Valcon analysis14
15. THE VALUE-DRIVING SEGMENTS OF THE FUTURE WOULD BE TOILET
ROLLS AND FACIAL TISSUES
Source: Valcon analysis
* Calculations based on the current average prices
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
InINRCr.
2014 Toilet Roll Napkins Hand Towel Kitchen Towel Facial Tissues 2022
~2,200*
~6,500
Value growth in the tissue industry in India (INR cr.)
Cheap poster paper napkins will also
continue to drive sales in this category
15
16. 16
BASED ON THESE OBSERVATIONS, WE
BELIEVE THAT, THE KEY CHALLENGE
FOR ANY FIRM IS TO EFFECTIVELY
LEVERAGE THE OPPORTUNITY
PROVIDED BY THE CHANGING INDIAN
LIFESTYLES, PURCHASE BEHAVIOUR &
GROWTH OF MODERN RETAIL TO TAKE
ADVANTAGE OF THE TIPPING POINT
17. KEY QUESTIONS FOR A TISSUE PLAYER
IS THE FIRM DOING ENOUGH TO TAP THE OPPORTUNITY BEFORE
THE TIPPING POINT?
17
18. DOES THE FIRM HAVE A READY STRATEGY THAT TARGETS THE
GROWING INDIAN MARKET?
KEY QUESTIONS TO PONDER UPON:
What is the firm’s strategy for India?
Short term & long term
How is the firm currently targeting AH / AFH
etc. in India?
Does the firm have a clear differentiator / brand
of tissue product?
Is the firm letting go of a significant opportunity by
not aggressively tapping into the Indian market in
the next 3-5 years?
VALCON VIEW:
Consumption of tissue paper in India is at a
tipping point
The Indian tissue paper market offers attractive
growth potential to local and global players.
Distinct pockets of opportunities exist by forging
tie-ups with AFH players and offering a clear
differentiator for tissue products in the AH
space
18
19. HOW CAN VALCON HELP FIRMS?
CREATING AN END-TO-END GROWTH STRATEGY
19
20. MANY DECISION PARAMETERS SUCH AS PRODUCTION SET UP, SALES
REGION, CHANNEL PARTNERS, CUSTOMER SEGMENT ETC. COME INTO
PLAY WHILE CREATING THE FIRM’S GROWTH STRATEGY
20
Decision
Tree
Regions
Products
Raw
material
Product
segments
Customer
AFH
AH
Channels
Production
set up
New
own unit
M&A
Contract
Mfg.
21. VALCON CAN HELP FIRMS TO SCALE UP BY CREATING AN END-TO-END
GROWTH STRATEGY FOR THEIR OPERATIONS IN INDIA
21
IDENTIFY
ATTRACTIVE MARKET
SEGMENTS
Who are my
customers?
Which parts of India are
witnessing high
demand?
Which market
segments provide
pockets of
opportunity?
1
DESIGN BUSINESS
MODEL
Do I have a brand / Can
I establish a brand?
What should be the
channel structure?
Who are my channel /
co-promotion partners?
What kind of products
do we promote
aggressively?
What should be my
sales model?
What should be my org.
structure?
2
DESIGN THE SCALE-
UP PLAN
How should I scale up
my local operations?
How should I phase my
sales and marketing?
3
ROLL -
OUT PLAN
4
23. 23
We are a management consultancy designed to create value in the evermore complex and dilemmatic
business reality.
Never have companies longed more for growth, while insisting on constantly optimising cost. Never
has the customer been more central in business strategies, much as focus increases on the processes
behind. Never has number and data crunching been more crucial to set the right direction, just as we
truly recognise that it is people and culture that will get us there.
We work for companies who respect this complexity and meet it with real ambition. Essentially, it is
about connecting strategy and operations – not only focusing on the “why” and the “what”, but also on
the “how”. That is where Valcon comes into play. We are the HOW consultancy.
It means we are of a different breed, with more experience, competences and confidence. We are
leaders who have done it before, facilitators who can hold the space, specialists not afraid of a road not
yet paved, consultants who can connect strategy and operations. People who go all the way.
And we are not satisfied until we are sure that we create long-lasting value together with our clients.
We call it leaving footprints.
We are some 300 people, grown out of the Nordic countries and we are also present in the India, UK,
China, the Czech Republic and Canada.
VALCON
25. WHAT DO WE DO?
Partner with clients to:
Develop and implement programs for profitable
growth
Identify and penetrate new markets
Develop winning value propositions
Align the sales & marketing and the fulfilment
organisation to deliver to the value proposition
Manage their business portfolio
Establish customer strategy
Sales & marketing excellence
Develop organic & inorganic growth plans
Design and implement the target operating model
including the structure, processes, KPI’s and
identify the people required to deliver the plan
Create the innovation agenda
Partner with clients for:
Throughput improvement
Procurement excellence
Supply chain design and implementation
Quality improvement
Operations excellence
Productivity improvement
Design and implement NPD processes
Integrated planning
Product and service design (Valcon Design DK)
Valcon India
Strategy & Markets (S&M) Operations improvement (OI)
Source: Valcon analysis25
27. 27
Division of Novo Nordisk
and Novozymes
White-collar
offshoring
Transformational
change
Lean from production
to administration
Efficiency and citizen
management
Successful
turnaround
Paradigm change in
Robust Design
Paradigm change
in health care
Transparency and
profitability
HERE ARE SOME OF THEM (GLOBALLY)
