Situated on the border between Europe and Asia, with ambitions of entering the European Union in the not too distant future, Turkey is an important emerging market. There, a new player in the tissue business, Hayat, has moved rapidly to build a significant market position.
Hugh O’Brian
There aren’t too many places in the world where you can sit in one continent and look across the water to another one. But in Istanbul, Turkey, the city is divided by the Straits of Bosphorus, which separates the Asian side of Turkey from the European side. Thus when you visit Istanbul, you quite often refer to the Asian side or the European side when you are describing where you’re staying, where you’re doing business or where you are going.
But no matter which side you’re on, if you are working in the tissue business you will certainly notice some new names on the market. We recently visited with Hayat, which is a real newcomer in the tissue business, having started its first production of tissue in January 2006. Thanks to its strong position and relationships in retail distribution channels, the company was able to very rapidly build up a respectable market share with its new tissue brands, Papia, Familia and Teno.
Hayat’s first tissue machine, PM 1, started up on January 17 last year, essentially at the same time as the first converting lines were started. By December 2006 Hayat estimated that it had a market share in Turkey of around 12% on a tonnage basis, which is a rather notable achievement in less than one year.
The company is using the classic “good, better, best” marketing architecture with the Teno brand being the “good “ level, the Familia brand covering the “better “ sector and the Papia brand occupying Hayat’s top quality, premium offering. The company is not making any private label tissue as it wishes to concentrate only on brands.
Based on the rapid success of the PM 1 project, Hayat is already moving ahead with possible plans for another paper machine, with a potential go ahead decision coming as soon as May of this year. There is even some talk that PM 2 would be a TAD machine, although it is somewhat hard to see this market accepting TAD quality or, more importantly, being willing to pay for it.
HAYAT MEANS LIFE. Hayat was founded in 1937 with the word Hayat meaning “life” in Turkish. The company now has three major activities with the first being the detergents or soap business based on both liquids and powders; the second the wood based industry mainly making MDF (medium density fiberboard) for the building and furniture industries; and the third main business focused on the personal hygiene and tissue sectors. It was thanks to the company’s already well-established distribution channels, due to a strong position in the detergent, feminine hygiene, and diapers businesses, that it decided that it made a lot of sense to enter the tissue business.
Therefore around 2000 Hayat started thinking seriously about entering the tissue business. In 2003 a team consisting of four or five experienced tissue and papermakers began to be assembled. Among the key people are Muammer Timur, the paper project coordinator and Lüfti Aydın, the paper mill director. Also part of this team is Cemal Özkök who has a long experience in the tissue converting business, having previously worked at Ipek Kag˘it (Georgia-Pacific) and Viking, two of Turkey’s other major tissue producers. Other key managers include Aysel Aydın, the Tissue Category Manager who came from Toprak and is working with marketing questions, Hayrettin Kutluok, the paper production manager and S¸ahin Civelek, a young engineer who has become the converting production supervisor.
The Hayat tissue plant is based in I˙zmit, which is about 100km east of Istanbul on the Asia side. The paper mill and associate converting plant were constructed in a new building on the site of Hayat’s existing detergent factory.
The paper mill is housed in an extremely modern looking plant.
MODERN MACHINE FROM PMT. The heart of the operation is the new state 5.5 m wide PM 1 crescent former from PMT. Nominal capacity for the machine is 60,000 tons per year. It’s a very modern machine including an optimized stock preparation system complete with two lines for short and long fibers and a broke line; a two-layer headbox with a consistency profiling; a jumbo press with a design that includes the possibility to be rapidly retrofitted with a shoe press; a reinforced Yankee that allows a working pressure of 170 KN/m; a hood fed 100% with the exhaust gases coming from a Combined Heat and Power (CHP) plant installed in the mill; a center wind assist installed on the PMT fully hydraulic reel. On the converting side equipment includes machines from Perini, KPL Packaging, Senning, W+D, OMET and Focke, among others.
EXTRACTING EVERY CALORIE OF ENERGY. The CHP plant is a rather unique feature of the I˙zmit mill, as this highly efficient energy production system allows Hayat to use the heat in four stages. Ahmet Is¸ıklar, Energy Expert of HAYAT Group, has worked in cooperation with Brunnschweiler of Spain to develop the system. In the first stage, the purchased natural gas is burned to turn the two 7.5 MW turbines, which of course produce electricity. The exhaust gas from the turbines is then fed as hot air to the tissue machine Yankee dryer hood for drying energy.
Blow through air from this second stage is then used to boil water to produce steam to be fed to the inside of the Yankee dryer. Finally the exhaust from the Yankee dryer is sent to an absorption chiller system which produces cold air and water for cooling the machine room as well as electrical circuits and switch rooms.
SMALL TEAM WORKING RAPIDLY. The Hayat tissue operation is quite impressive, especially considering that less than three years prior to starting up the company had no experienced tissue personnel. Muammer Timur, the paper project coordinator, I˙smail Tamer Altılar, the consultant and Lüfti Aydın, the paper mill director have clearly been very important in deciding which equipment to use and positioning the company for rapid growth. Muammer had worked for ten years with Ipek Kagit (Georgia-Pacific), and then ten years selling machinery to the paper industry, before starting in 2001 to work as a consultant to the paper industry. Lüfti also has extensive papermaking experience, having worked at Toprak for many years and also other paper companies such as Modern Karton, the big packaging materials supplier in Turkey.
“The key to making the right decisions, we believe,” says Muammer, “is that we visited many, many references before deciding on which equipment to purchase. Essentially we took the best ideas that we could find and put them together to create what we think is the best overall solution.”
Another big step in the development of the paper mill was the recent introduction of the SAP software system in September 2006 which gives total plant-wide control of the process. S¸ahin explains that the SAP system now controls and manages the entire process and material flows from the raw materials through the planning, production, warehousing, shipping and logistics operations. Thus it was a big project to implement the system, with managers going to four months of training previous to the implementation but now Hayat has an extremely useful, modern tool for managing its entire process.
GOOD MARKET GROWTH BUT SOME CONCERNS. Muammer and Aysel Aydın estimate that the tissue market in Turkey is growing at over 12% per year for consumer grades and even higher for the away from home (AFH) sector. The total Turkish tissue market is estimated to be about 195,000 tons in 2006, with around 142,000 being consumer tissue and 53,000 AFH. Based on a population of about 75 million people, this gives a per capita consumption of slightly over 2.6 kg per capita.
A key trend in the market is the move to higher quality premium grades with Hayat showing data which indicates that for every one of the four main categories, including kitchen towel, bath tissue, hankies and napkins, the proportion of premium grades increased from 2005 to 2006. Indeed, Hayat claims that its new Papia premium product is the first successful three-ply bath tissue in Turkey. Although other companies had tried three-ply product in the past, it had not been accepted in the market, says Hayat. The success of Papia’s new three-ply design may be further proof of the increasing quality levels of the Turkish market.
A further general trend is that the large supermarkets are taking a bigger share of the total retailing market and that the big packs of tissue products are growing, while the smaller grocerers and medium-size retailers are losing market share. Of the tonnage produced by Hayat, about 65% is sold in the region surrounding Istanbul with some of the other tonnage going to different parts of Turkey. Some tonnage is also sold as jumbo rolls and exported.
Having gained a market share of 12% in the first year of operation, Hayat has big ambitions for the future. Thus the need for another paper machine. It is hoping to have about 20% of the market by 2008 and a reasonable target for five years from now, meaning 2012, is perhaps 35% of the Turkish market, it says. However, there are some possible clouds on the horizon as there are concerns that there may be too much capacity coming into the market at the same time. There are also worries that the government’s anti inflation policies will limit the possible upside movements in prices for tissue. You can be sure Hayat will be keeping a close eye on these developments.
TEAMWORK AND CLOSE COOPERATION. Lüfti, the paper mill director, says that the greenfield project with Hayat has been extremely fulfilling. “We came to a company that had no tissue operations, only an idea about entering the business in a high-quality manner. So the project has involved enormous amounts of work and quick thinking as we moved along, but the results have been excellent, which makes it worth the effort. We have a very small but experienced core staff who have worked closely with the many new employees who were basically given on-the-job training. So it’s been a fast learning curve for many of the people but I think everyone is satisfied that we have done a great job.“ •