Gloom hangs over Japanese tissue

Ian Bell, Head of Tissue and Hygiene Research - Euromonitor International

However, that is pretty much where the good news ends. While the global financial crisis of 2008/2009 dampened the wider economy, the 2011 tsunami hit the market hard. The combination has resulted in an extremely difficult environment for FMCG manufacturers, including those present in retail tissue.

While the industry’s major players have continued to innovate, their actions have not been able to halt category declines. Despite concerted efforts from the likes of Daio Paper Corp, Oji Nepia and Nippon Paper Crecia, 2013 saw retail tissue sales decrease by 2% in current value in Japan, with declines across every category. In fact, it is difficult to find a bright spot in retail tissue.



A catalyst for this cross-category decline has been a fall in average unit prices. A rise in volume of cheaper, imported tissue products – from China in particular – has prompted Japanese consumers to make the switch from branded products. Over the review period, private label steadily gained share in retail tissue and now accounts for 17% of the market. While these figures are nothing compared to the norm in Western Europe – private label holds 77% of Germany’s retail tissue market – the increasing presence of private label lines retailing at a lower price than the majority of domestic brands has resulted in significant downward price pressure on the market and major players alike.



Kimberly-Clark, Daio Paper and Oji Nepia together account for a 57% share of sales – and the country’s major players have faced hugely difficult circumstances of late. While Chinese imports and tough negotiation from retailers have forced prices down, rising commodity and raw material prices have pushed manufacturing costs up. On top of this, yen depreciation has affectively increased prices of imported pulp and wood chips, further reducing profit for manufacturers. According to reports in the country, Oji Nepia faced a decline in profit of ¥400 million in 2013 due to depreciation of the yen. Unable to put prices up, the country’s leading players have had no choice but to bite the bullet and reduce their margins.

This difficult environment is unlikely to change in the short term and average unit prices in retail tissue are expected to decline further over the forecast period. An increase in VAT in 2014 and 2015 is expected to result in more consumers trading down or buying in bulk in order to not have to cut back on other outgoings. As consumers continue to tighten their spending on tissue, further downward pressure will be felt on prices.



Despite the difficult circumstances, brands have continued to innovate. In such a woeful trading environment the development of ever more sophisticated and better performing products would appear to be the only route forward for brand manufacturers trying to differentiate themselves in the midst of increasing pressure from private label products. Amidst the gloom, kitchen towels and facial tissues showed a faint glimmer of hope. While pocket handkerchiefs and boxed facial tissues both saw value sales decline in 2013, the declines were an improvement on those seen the previous year and came as a result of new innovation.



Fragranced washing detergents and softeners have proven popular among Japanese consumers, so manufacturers have adopted the strategy for tissue products. Daio Paper and Nippon Paper Crecia both focused on scented features in their new product launches, using similar scents already popular in laundry care and targeting their launches squarely at female consumers. With the popularity of fragranced items showing no sign of slowing in home care, the addition of fragrances to facial tissue in particular could have the potential to help the major players regain share over the forecast period. To stand more chance of success, manufacturers will, however, have to be savvy with their marketing strategies. Fragrance samples in stores, while requiring the co-operation of retailers, is a tried-and-tested way of attracting consumer interest.



Like facial tissues, kitchen towels also posted a lower value decline than the previous year. While on the surface the category may look dormant, registering no significant volume growth in two decades, this is largely because it has been overlooked by manufacturers. Should a company be prepared to invest, it may well find that the category has latent potential.

While the premium end of the price spectrum in toilet paper is suffering – luxury toilet paper saw value declines year-on-year over the review period – this is not to say that there is no room for innovation. The tsunami of 2011 and its aftermath have resulted in heightened hygiene awareness, as well as a desire for products that do not require a water supply to be able to clean effectively. As a result, demand for wet tissue is increasing. While wipes has so far been the primary category to benefit – personal wipes saw 1% value growth in 2013 – there could be an opportunity for well-known toilet paper and facial tissue brands to expand their portfolios into wet alternatives. For manufacturers present across both tissue and hygiene, it should not require too much effort to transfer innovation in wipes to tissue and toilet paper.



Despite the gloomy retail tissue environment in Japan, it is worth mentioning that the market is blazing a trail globally in terms of the uptake of recycled products, creating an environment much of the world could learn from. Japan has a strong history of using recycled paper products, with uptake much higher than in most other countries.

In 2013, recycled paper accounted for 44% of retail value sales of toilet paper, significantly higher than the global average. While this is largely due to a cultural mindset of not wasting resources, retail tissue manufacturers have actively played their part and made recycled products an attractive proposition for consumers. Due to lower production costs, recycled toilet paper retails for less than its non-recycled counterpart – an ap-proach that certainly needs to be adopted in the West – as price remains a key factor even for the ethically-minded Japanese consumer.

Furthermore, recent innovation in recycling could also help manufacturers tackle the pressure cooker price environment in the years to come.

Japan Pulp and Paper announced plans in 2013 to build a new recycling plant that will further cut the cost of the recycling process. It is hoped that this will increase manufacturers’ ability to remain competitive, at least in terms of recycled products.


All in all, it would be foolish to say that Japan’s retail tissue market looks anything but bleak. All categories are predicted a decline in value year-on-year over the forecast period, and while branded players will do their best to bring out new products that add value to the category, this will require plenty of investment, which for the foreseeable future at least will almost certainly bring scant reward. The likes of Procter & Gamble and Georgia-Pacific have already cut their ties with tissue in Western Europe, and Japan’s major players will almost certainly be thinking long and hard about their future.

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