Tissue360 - Spring/Summer 2017 - 33

feature

How Will the Tissue Connection
Between Europe and North
America Continue?
Although many European producers are casting
covetous glances westward, increased competition
and oversupply may temper any opportunities
ESKO UUTELA

For several decades, North America and Europe shared some
of the same tissue suppliers. However, during the last decade a lot has
changed. Previously, North American companies were expanding into
Europe, and now exactly the opposite is taking place. European tissue
companies have shown increasing interest in participating in the North
American tissue business, while in recent years every North American
supplier, with the exception of Kimberly-Clark, has withdrawn from
their former European operations. This is an interesting issue. Here we'll
discuss some developments and reasons why this is happening.
We believe it was in the 1950s when the first North American tissue
company, Kimberly-Clark Corporation (K-C), became active in Western
Europe, namely in West Germany and the UK. Scott Paper followed a
couple of decades later, as well as Kruger with its acquisition of a tiny
mill (Velcarta) in Italy; Kruger later entered the UK market.
James River expanded into consumer papers in the 1980s and a
couple of acquisitions that included tissue capacity in France and Spain
were part of its European shopping tour. Procter & Gamble (P&G) was
the last main player that came to Europe through the acquisition of
the VP Schickedanz tissue assets in 1994, expanding further thereafter. In 1995, Scott Paper merged with K-C and in 1997 James River
purchased Fort Howard to form Fort James. In 2000, Georgia-Pacific
acquired Fort James and in 2005, Koch Industries acquired GeorgiaPacific. However, today, the first entrant, K-C, is the only remaining
North America-headquartered tissue supplier still active in Europe,
although it recently rationalized its supply scope by closing or selling
a number of its mills.
A DIFFERENCE IN MARKETS
Until the late 1980s, North American suppliers were able to use their
well-known brands and strong marketing support to establish a healthy
position in the European markets. However, in the 1990s this started
to change very rapidly, mainly for two reasons: private or retailer
labels started a very fast initial growth phase and competition became
extremely fierce because of sub-regional overcapacity after too many
investments, in France and Spain in particular; and the aggressive
expansion of Italian suppliers in the export markets, which was tightly
linked with the private label growth. This competitive situation resulted
in shrinking profitability, and retailers saw a chance to achieve better
margins through selling private labels than participating in brand
promotions together with the brand owners. The same strategies used
in the US market did not work in Europe, and this was very difficult

Why is the industry
developing in a completely
different direction from
before? The answer is actually
very simple. Companies are
well aware of where money
can be made more easily
and where higher margins
are likely. For the past 10-15
years, or probably even
longer, this has been in North
America rather than Europe.
to understand by the managements of the leading marketing-oriented
consumer goods companies, such as P&G and K-C.
Kruger was the first to withdraw from Europe. First, the company lost
the Italian mill in a serious fire only a few years after the acquisition and
decided not to continue that operation as heavy investments would have
been needed. In the UK, it also closed some capacity in the early years
of the last decade, but its final retirement from the UK (and European)
business did not take place until late 2009. However, the first major
hammer hit was made by P&G when the company decided to withdraw
from the European tissue business after heavy and costly promotional
efforts did not bring the targeted market shares for its brands in Europe,
and the company sold its assets to SCA. After its acquisition of G-P,
Koch Industries was very suspicious about the European business,
with which the owners did not have much experience, and the rumors
of the company's departure were flying even before SCA acquired
the European tissue assets of G-P in 2012. K-C might have also been
interested in withdrawing from the European tissue business, but the
deal between SCA and G-P removed the only reasonable purchasing
candidate for all the assets, and the company's only alternative was to
sell some of its non-core assets to improve profitability.
EUROPE TURNS ITS FOCUS ON NORTH AMERICA
Meanwhile, on the other side of the equation, European tissue companies seem to have become very interested in North America. SCA was
Tissue360ยบ SPRING/ SUMMER 2017

33



Table of Contents for the Digital Edition of Tissue360 - Spring/Summer 2017

Setpoint
Tissue Industry News
ST Tissue Launches PM 5 Conversion to Tissue at Virginia Mill
Global Survey Shows Trends in Yankee Dryer Deliveries
How Will the Tissue Connection Between Europe and North America Continue?
St. Croix Tissue: The Strong Newcomer in the US Tissue Business
Sustainability is Central for Sofidel
RISI and TAPPI to Co-Produce Key Tissue Event in 2017
Tissue360 - Spring/Summer 2017 - intro
Tissue360 - Spring/Summer 2017 - cover1
Tissue360 - Spring/Summer 2017 - cover2
Tissue360 - Spring/Summer 2017 - 3
Tissue360 - Spring/Summer 2017 - 4
Tissue360 - Spring/Summer 2017 - 5
Tissue360 - Spring/Summer 2017 - Setpoint
Tissue360 - Spring/Summer 2017 - 7
Tissue360 - Spring/Summer 2017 - 8
Tissue360 - Spring/Summer 2017 - Tissue Industry News
Tissue360 - Spring/Summer 2017 - 10
Tissue360 - Spring/Summer 2017 - 11
Tissue360 - Spring/Summer 2017 - 12
Tissue360 - Spring/Summer 2017 - 13
Tissue360 - Spring/Summer 2017 - 14
Tissue360 - Spring/Summer 2017 - ST Tissue Launches PM 5 Conversion to Tissue at Virginia Mill
Tissue360 - Spring/Summer 2017 - 16
Tissue360 - Spring/Summer 2017 - 17
Tissue360 - Spring/Summer 2017 - 18
Tissue360 - Spring/Summer 2017 - 19
Tissue360 - Spring/Summer 2017 - 20
Tissue360 - Spring/Summer 2017 - 21
Tissue360 - Spring/Summer 2017 - 22
Tissue360 - Spring/Summer 2017 - 23
Tissue360 - Spring/Summer 2017 - 24
Tissue360 - Spring/Summer 2017 - Global Survey Shows Trends in Yankee Dryer Deliveries
Tissue360 - Spring/Summer 2017 - 26
Tissue360 - Spring/Summer 2017 - 27
Tissue360 - Spring/Summer 2017 - 28
Tissue360 - Spring/Summer 2017 - 29
Tissue360 - Spring/Summer 2017 - 30
Tissue360 - Spring/Summer 2017 - 31
Tissue360 - Spring/Summer 2017 - 32
Tissue360 - Spring/Summer 2017 - How Will the Tissue Connection Between Europe and North America Continue?
Tissue360 - Spring/Summer 2017 - 34
Tissue360 - Spring/Summer 2017 - 35
Tissue360 - Spring/Summer 2017 - 36
Tissue360 - Spring/Summer 2017 - St. Croix Tissue: The Strong Newcomer in the US Tissue Business
Tissue360 - Spring/Summer 2017 - 38
Tissue360 - Spring/Summer 2017 - 39
Tissue360 - Spring/Summer 2017 - 40
Tissue360 - Spring/Summer 2017 - 41
Tissue360 - Spring/Summer 2017 - 42
Tissue360 - Spring/Summer 2017 - Sustainability is Central for Sofidel
Tissue360 - Spring/Summer 2017 - 44
Tissue360 - Spring/Summer 2017 - 45
Tissue360 - Spring/Summer 2017 - RISI and TAPPI to Co-Produce Key Tissue Event in 2017
Tissue360 - Spring/Summer 2017 - cover3
Tissue360 - Spring/Summer 2017 - cover4
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