Paper Mandates

When lists of required back-to-school shopping items came out this summer, many parents and retailers were blindsided by the number of center store paper goods items added.

More center store paper goods items are on mandated back-to-school shopping lists than ever before.

Years ago, parents would have to buy a few stationery items like notebooks, pencils, filler paper, calculators, erasers and maybe a box of facial tissue. Times have changed, school budgets are slashed, and now students are expected to bring many more items that classrooms and schools need for basic operations. When families can’t provide, teachers are making the purchases, paying for them with their own money. Most of these purchases are being made at traditional retail outlets, including supermarkets.

While this varies by school district and even by classroom, and it’s certainly not a reason to celebrate, retailers can benefit by targeting their buying, promotions and merchandising to these needs.

Among the paper goods category items reported to be on shopping lists in various communities are paper towels, multipacks of toilet tissue, lunch bags, plastic cutlery, paper plates, paper cups and more boxes of facial tissues. Some of these items are specified by brand and some aren’t, but they add up to hundreds of dollars for parents, a heavy load for children to carry to school, and added sales for retailers who can take advantage of it.

Trend has ‘Escalated’

“The practice isn’t new, it’s just escalated,” says Robert Passikoff, president of New York-based consultancy Brand Keys. “Schools have always been under pressure in terms of supplies. In the current economic environment, where states and cities are running at extraordinary deficits, it’s become more critical that key items be supplied, and so more schools are asking parents to make the contribution.”

With increased levels of buying in the center store paper goods area, “you are looking at increased levels of price and promotional activity to capture a greater share of the marketplace,” he notes.

“All of those things they are asking you to bring are really starting to add up,” says Eric Anderson, president of Fresh Encounter Inc. in Findlay, Ohio. “It means opportunity, that’s for sure. How well we merchandise around it and make sure we are prepared is really the trick.”

While current information isn’t available, facial tissue is a staple of back-to-school lists, says Carrie Seubert, associate brand manager at Irving, Texas-based Kimberly-Clark Corp. “Facial tissue has been in the top 10 most identified items on back-to-school lists in two separate studies that the Kleenex brand has fielded over the past five years,” she notes. “Kleenex is the leading facial tissue brand specified on the back-to-school list when a brand is identified.”

Branded Paper Goods

With increased economic pressures on shoppers, as well as better quality in private label, national brands are having a tough time in the paper goods category.

“It’s mostly private label ruling the roost in paper goods for us,” says Carl Day, owner of Heber City, Utah-based Day’s Market Place. “We have a good private label that has always done well.” In center store paper goods, “private label offers a great opportunity for your store,” Day notes. “That opportunity is to make sure you have a quality private label to give people what they want for their money.”

To compete, manufacturers have launched such “value brands” as Bounty Basic and Charmin Basic, says Jim Wisner, president of Libertyville, Ill.-based Wisner Marketing Group. The jury is still out on whether this strategy has worked. “Since the launch of these products, private label has continued to grow at a double-digit rate. For paper towels, it is now at 42 percent of unit sales — a 10-share point gain over the past two years.” The brand manufacturers might be cannibalizing the sales of their other products, he suggests.

Meanwhile, sustainable characteristics are another product feature paper goods brands can take advantage of. “Our research suggests that calling out environmental/sustainable attributes of any kind are important to about 40 percent of all consumers,” says Wisner. “But while that number is significant, we see a much smaller percentage actually changing purchase behavior based on these environmental product attributes. We estimate that number to be more in the range of 10 percent or less. Nonetheless, even that is significant.” Consumers who are truly dedicated to living an environmentally sensitive lifestyle decrease their use of paper altogether in favor of towels, rags and other reusable items, he points out.

“The brands are still very competitive and advertising heavily, which is important to keep their name in front of the consumer,” Anderson of Fresh Encounter notes. “We are seeing a lot more FSI coupon drops with the branded items as well. With coupon usage at a very high level right now, that does assist with those products. As long as the branded manufacturers continue to place money in advertising, I still think there is a great position for the brands to differentiate themselves.”

Meanwhile, Fresh Encounter is seeing increased sales of smaller count sizes and pack sizes, at the expense of big multipacks. “People just aren’t pantry loading those products like they used to, because they simply don’t have the money to buy them,” he says.

With quality private label products gaining ground in this category, “the only way you do battle is to make sure that the brand itself stands for something in the mind of the consumer. It has to be more than it’s just cheaper [or] cheapest, because they can do that themselves by looking at the pricing,” Brand Keys’ Passikoff notes.

Sustainability attributes might provide an opportunity for brands, he says. “Expectations are very high regarding that, and generally, in most categories, including paper goods, unmet. So the gap between where brands are and what people expect provides an opportunity for them to take over.” As in many product areas, “find out what consumers expect and want, and meet those expectations.”

Numbers are Down

For the 52 weeks ending Aug. 8, 2010, dollar sales and units were down across the board for paper goods, as they were in the previous period in supermarkets, drug stores and mass merchandise outlets, according to Chicago-based SymphonyIRI Group. Facial tissue was down 4.08 percent in dollar sales, and 5.33 percent in units. Toilet tissue declined 1.09 percent in dollars and 3.5 percent in units. Cups and plates dropped 1.61 percent in dollars and 0.57 percent in units, and paper napkins saw a 1.92 percent decline in dollars and a 3.67 percent drop in units.

Disposable tableware’s decrease was in double digits, down 14.62 percent in dollars and 20.99 percent in units, while the subsegment of straws was up 6.68 percent in dollars and 5.83 percent in units.

Paper towels was the only major segment to see an increase, albeit a small one: up 1.21 percent in dollars, but down 3.22 percent in units, according to SymphonyIRI. The calendar year 2007 was the last time this category saw across-the-board increases.

Overall, “I see the demand in that category increasing,” concludes Brand Keys’ Passikoff. “I see expansion within the product lines themselves, and I see increased levels of competition between the generics and the brands.”