White Living Tissue are Facing Five Pressures

Posted by suavetissuenapkin on November 19th, 2017

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People can’t be nice all the time and neither can the flower be red for over hundred days. Make a plan as early as to avoid empty at lost.

After 10 years of gold development, the market are now enduring five pressures after the major brands of white living paper earn high profits, the good old days gone.

The first pressure: the rise of raw material costs caused by the modest increase in pulp prices. 

Brazil's largest pulp producer, Fibria SA, has increased its pulp sales price to Asia by $ 20 per ton on October 1. According to Brazil's "Economic Value" reported that the the Asian market provides an important opportunity for the continuous rise of the pulp’s price in the next ten years which is different with the decline in prices of iron ore. With the previous international commodity pulp cyclical relatively large ups and downs, the long term low pulp price in the lasted few years have brought huge profits to several major tissue enterprises. So the modest rise of pulp’s price in the future will bring problems to several major brand manufacturers, for reason of rising price is not sufficient while small company do not give the opportunity to rise price, but it will consume gross margin space bit by bit without rising price.

The second pressure: the rise of logistics management costs caused by overloading management

The "overtaking transport vehicles road regulations" issued by ministry of Communications began to take effect on September 21, 2016. Impact by the new transportation policy, the transportation costs of living paper increased significantly which cause a serious impact on the small company with less production base and big sales radius. Some enterprises began to raise prices in accordance with the delivery costs, which is difficult for dealers to accept as the market competition has been quite fierce and operating profit has been very thin. Such low price and fluffy goods like living paper is not suitable for long-distance delivery, so the enterprises which pursue for long-term development need long term consideration.

The third pressure: compression of gross margins due to the dropping of terminal retail prices 

Terminal retail price is now lower and lower, even the four brands also join the wave of price cuts. It is said that a major brand which have been stability for price and quality decreased the price recently due to the squeeze of market share. Not long ago several dealers complained that a few years ago, they bought the wood pulp paper from Hebei more than eight thousand a ton and sale them more than ten thousand while now the prime costs are more than seven thousand and the sell price are more than eight thousand. Dealers complained about their low gross margins at the same time also showed a deep concern over the low retail price. In the past, the channels of company's products are only (KA and A stores) and traditional channels (B, C, D class Stores). But now even the electricity providers also add the competition to fight for low price and big share with the internal KA, dealer. Will there be channel gross profit with the decrease of end price?

Fourth pressure: the shrink of large supermarkets lead to weak channel advantage 

The market position of supermarkets has become increasingly weak with the appearance of electric shocks and convenience stores. The large terminal dominated by the domestic and international supermarket chains has been important channels for big brand to enhance brand influence and market share. While small and medium brands has no such advantage due to the lack of funds and talent. However, everything is changing ... ... Since 2015, the shut off of Carrefour, Wal-Mart and even large RT-Mart stores who once threaten not to close a store have begun to close stores. Thus, the big brands in the big terminal sales will gradually reduce, so the channel advantage will be weaker and weaker. Therefore, big brand need to strengthen the other areas to stabilize the their status.

Fifth pressure: the loss of quality customers  caused by natural color tissue attracting high-end consumer groups.

A few years ago, natural color tissue turned out and changed people’s old acquisition toward the rough and poor quality of old yellow paper by its new image of soft, delicate, environmental protection and healthy. In particular, the  Sichuan bamboo fiber as the representative of bamboo pulp hit the consumer's pain point become popular soon. The natural color paper have become high-end, fashion, environmental protection and health product in some people's minds.

The above analyze the five main external pressure of current white paper, but more frightening aspect is that the thinking of some companies are still stuck in the level of a decade ago with confused strategies of brand, product, team and others. In addition, the current round of real estate rose drained the ordinary people’s cash, increased their debt to banks and increased the worry about their own assets. What’s worse,  the overall economic downturn will suppress the demand for impulsive consumption and offline retail Industry shrinking will also make the price competition of white paper in excess capacity more intense.

Beyond the bamboo grove, several peach trees are in bloom;

The river is warming, which the ducks are first to know.