Alessandro Mazzeranghi, MECQ S.r.l.
Already at the beginning of the economic crisis, the tissue industry, especially in Europe, was in a condition of over-production that strongly penalized companies oriented mainly toward this market.
The crisis thus found a suffering global terrain and a direct consequence of this was the penalization of premium quality products in favor of retailer brand products or hard discount items.
THE FEARS AND THE CHOICES OF THE LAST SEVEN YEARS. In tissue companies and in companies producing cleaning products and foodstuffs, counter-measures appeared that can be expressed in one key word: caution, to the limit of paralysis. Fear of the present but above all of the future.
In mature markets, two rather distinct phases succeeded one another:First, a period during which all forms of investments were blocked, except for the completion of investments started up before the crisis began. Surviving companies mothballed older machines, reduced the number of operators and so forth. Later, in those plants that were still operating, investments were started up again, but mainly with two goals in mind: optimizing costs, i.e., reducing costs, and again reducing the number of operators. Ultimately, improving what existed already, but with not true investments. This second phase highlights two things: first of all, the fact that companies, and not only tissue companies, became convinced that the European market is still an appetizing one, although it is clear by now that margins are eroded. And secondly, that companies are not convinced that there is a European market development that goes beyond mere maintenance. They will continue manufacturing the same products, fighting the battle of competition on the costs front. Too little if the hope is to survive.
UNLESS… UNLESS WE START INVESTING AGAIN IN DEVELOPMENT PROJECTS, especially in terms of product. But here, we must consider a series of factors tied to the companies’ structure and to limits posed by the market and by society - all elements that in Europe entail clear hindrances for development.
First the companies’ structure: there are companies that are still very tied to a restricted property. They do not have that economic-financial solidity indispensable in order to obtain in Europe the support of banks today.
Other companies have a multinational organization developed throughout several continents, but when they want to invest, they prefer operating in geographical contexts where more satisfying margins can be had, and hence leave the factories located in the old continent only the bare necessities they need to survive.
THEN THERE ARE LIMITATIONS CHARACTERISTIC OF THE POLITICAL, SOCIAL AND LEGISLATIVE CONTEXT, particularly “heavy” in the countries belonging to the European Union and/or those who aspire to become part of it.
The entire union suffers from a clear excess of rules that make attaining goals difficult and time-consuming. Fair and just rules turn into veritable threats for the continuity of business.
If we sum these factors with what we said about the market situation, we can easily understand how an excess of caution that we are defining fear has become the guideline of companies’ management spheres.
If to this context we add the battle between private label and brand products, we can conclude that tissue producers’ margins will become increasingly eroded, and in the end, the result will be a deathly clash between poor and deeply declining companies. Looking around myself with the eyes of an entrepreneur, I really see no chance of salvation if we continue along this road.
FROM FEAR TO COURAGE. What can we do on a concrete level? First of all, our managers must convincingly admit that we really cannot go on like this. And then, they must acknowledge that the role of the manager is to do something good today that the company may concretely exploit ten years from now, when the person who made that decision may be working elsewhere.
People making brave choices can make a mistake, sometimes causing damage even in a very short time, and the manager who makes a mistake and causes damage pays for the consequences. But those who remain immobile in their little optimizations, in their ridiculous cost reductions, etc., at one point will have nothing left to take away and will not have generated a future, either. Rather, they will be at the company’s bedside, awaiting its sad demise.
IN OUR FIELD, THIS PROCESS PASSES THROUGH PRODUCT RESEARCH, THROUGH THE REFUSAL TO CONSIDER TISSUE A MERE COMMODITY. We must make high-range products more attractive in terms of aesthetics and performance, creating a gap between a PL product and a premium product.
AND TO DO THIS, WE MUST FIRST OF ALL TAKE THE MARKET INTO CONSIDERATION ONCE AGAIN, hypothesizing a sort of recovery from the crisis and trying to understand which premium products could better suit the styles of life to come. And simultaneously develop technologies, processes and machines to create premium products at the lowest possible cost so that there is a margin for maneuvering and adapting the price policy to the context existing when the product is launched.
Of course, if someone embarked on a road like this, it would constitute a solid signal that someone believes that we can come out of the crisis, above all if this happened in one of those fields that, like tissue, have had no specific protection from the crisis. A happy degrowth is just an illusion that tranquillizes the fearful, it is not the philosophy of a healthy society.
In my modest opinion, and against those fears that are also certainly mine, we must think about the future of this continent, and believe that it will not be a future of devastating decline.
In that case, wouldn’t the risk of perhaps collapsing but having fought to the best of our abilities be more dignified than waiting immobile for an indecorous end?