During a visit to the it’s tissue event in Lucca, Italy, PPI discussed one of the key growth markets for tissue, Latin America, with Marco Dell’Osso and Sergio Tonarelli of Futura and Valter Marcolini of Tissue Machinery Company
Apart from growth in consumption, what are the key signs that Latin America has significant potential for tissue growth?
Marco Dell’Osso: It is the level of technology which is most striking. The leading tissue producers in the region are opting for wide, fast tissue machines from major manufacturers, and adopting more flexible and automated converting solutions. in addition, an increase in tissue towel use, as is evident across Latin America, is always an indication of growing prosperity.
Sergio Tonarelli: We are also seeing an increase in the quality of the finished product. Where one ply was the norm, two or three ply is now much more common. We have also seen four-colour printing and random point-to-point embossing on toilet tissue - a real product innovation.
Valter Marcolini: Also from a technological point of view in packaging, the processes such as bundling and palletising, which tended to be manual operations in the region, are much more likely to be automated. When you see automated palletising, you know you are in a truly modern mill, and we are seeing this in Latin America more and more.
In terms of finished products, the quality is certainly improving, as is the popularity of multi-packs, which is evidence of a developing tissue market. In professional markets, napkins are building momentum.
How does progress break down geographically?
VM: Mexico, some Central American countries and also Chile and Argentina have witnessed greater automation and a proliferation of multipacks for a decade now. Brazil, as well Ecuador, is catching up but started later – say five years ago – and is now a key market to watch. Venezuela is still rather limited on product choice, and Paraguay, Bolivia and uruguay have some way to go. Peru and Colombia are growing in quality and sophistication.
What is driving the change?
MDO: Clearly there are economic factors at play, not just in terms of income but also stability. Visiting supermarkets, you can see the choice is much wider, with multipacks more common than before. To an extent, better products also drive demand. Tissue has become a more attractive purchase as the technology to make it has improved. Also, the abundance of virgin hardwood fiber in the region, with new capacity coming on lineyear-by-year, makes for a great quality product. The professional market is smaller than the
Consumer market, but growing at the same pace and benefiting from the same technical innovation and investment. The increase in visitors to the region from abroad certainly helps in this respect.
So how is the brand/private label balance?
VM: The main brands – KC, sCa, CPMC and (in certain markets) Kruger account for a very large percentage (more than 60%) of the market. But as supermarkets grow in popularity and individual supermarket operators increase their geographical spread, the power of private label is increasing and generating its own loyalty, as in Europe and the us.
ST: The major brands have certainly taken the initiative with strong investments in capacity, quality and product diversification. The private label suppliers are reacting in the region however. The key for them is flexibility. If they can switch between grades and formats quickly, they can offer an attractive, competitive package for small local shops and supermarkets alike.
What are the biggest challenges when doing business in Latin America?
VM: For suppliers, the import duties in Brazil are very severe. Of course Brazil’s tissue activity, actual and potential, justifies a foot on the ground to service the customer base, but it is certainly an economic consideration, too. There is also a matter of currency restrictions in Argentina, although unlike Brazil, there are no local suppliers to choose from, so equipment must be imported if funding can be put in place.
MDO: The very strong position of multi-national brands in the region is also a great challenge to the smaller local brands and private label producers. The leading brands have done a great job of introducing greater choice and quality, so in order to compete, the local producers have to be very nimble and smart. There are some great local-producer success stories, however, which shows what is possible when you combine product innovation with flexible technology. The technology being replaced is often narrow, inflexible and inefficient in comparison with the wide, fast, automated tissue making and converting lines which the market can now justify. Because of this difference between “before and after”, payback is quick.
What are your predictions for the next five years?
VM: Consumption growth in the high single figures should continue, which will attract more capacity based on state-of-the-art technology. Private label will provide ever stronger competition for the leading brands. In such a race to the top, the consumer will certainly benefit.
ST: With their increasing capabilities, Latin American producers will look to export both jumbo rolls and finished products even to North America. Mexico already does, of course, but with great logistics and client confidence, Latin American countries further to the south will be able to achieve the same. They have a plentiful supply of fiber on their doorstep, a fast-improving stock of manufacturing assets, and products which can compete with anything, anywhere in the world.
MDO: There is no current evidence of overcapacity, and an increasing willingness to move to a higher level of technology means Latin America has a solid basis on which to build the future. With more than half of the region’s predicted new capacity, all eyes are on Brazil, but its smaller, less populous neighbours are also making the right moves to create significant growth opportunities.
Marco Dell’Osso is Director, External Relations, Marketing & Communication, Futura, Sergio Tonarelli is Sales Director, Futura and Valter Marcolini is Executive Business Director of Tissue Machinery Company