15 January 2024

Tissue and Packaging on the move



By Jim Thompson

For a long time, I have stated the future of the pulp and paper industry is in the grades known for their physical properties--tissue and packaging. When one looks at the financial and asset activities taking place today, this holds true.

Sofidel is expanding their tissue mill in Circleville, Ohio. They are also purchasing ST Paper's Duluth, Minnesota mill. On the heels of this, Kimberly-Clark has purchased a brownfield site in northeastern Ohio and more land adjacent to their mill in Beech Island, South Carolina.

The tissue business is a fight for market share at the retail level. Hence, expect more moves from Procter & Gamble and Georgia-Pacific in this sector. Essity may not be far behind.

In the old days, tissue players overbuilt consequently cratering pricing. We'll see if they have the discipline to keep capacity under control and in line with population (there is a very strong correlation between population size and tissue use).

One way they are controlling pricing is with sheet count. Look in your local store and see if you can figure out the sheet count price on bath tissue.

One that I notice is the facial tissue cubes. I worked at Procter & Gamble when we introduced "Posh Puffs"--P & G's answer to the facial tissue cube. In those days, a box had 300 count. There is a Kimberly-Clark tissue cube sitting on my desk today with a count of 60. I suspect the box costs more than the contents.

Last month I mentioned the pending acquistion of WestRock by Smurfit Kappa. Since then there has been a wrench thrown in the works--Primetone Capital, holder of 0.8% of Smurfit Kappa, is urging the Smurfit Kappa board to nix this idea and revisit an offer from International Paper several years ago (see my take on this here).

This will give the other containerboard manufacturers an opportunity, I think. Of particular interest now is Georgia--Pacific, the only cross grade player in both tissue and containerboard. How GP allocates capital in these times could affect both tissue and containerboard for a long time to come.

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Note: Neither I or anyone on the Paperitalo staff own any individual pulp and paper stocks.

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