The battle for Sh2.4b tissue paper market

Chandaria Group of Companies Chief Executive Officer Darshan Chandaria during the interview at Chandaria Industries head office at Baba Dogo, Nairobi.

In the olden days, sailors used the frayed end of a rope dipped in saltwater, while rural folks made do with corn cobs hung in outhouses to clean themselves after using the toilet.

This was long before tissue paper became a byword for hygiene after visiting the small room.

It is no surprise that when the first case of coronavirus was reported back in March and rumours started doing the rounds that the country would soon go into lockdown, tissue papers were one of the essential items that flew off the shelves as Kenyans braced for a lengthy stay indoors.

Baby diapers, another crucial sanitary item, was also in huge demand alongside food items such as sugar and maize flour.

Over the period, Kenyans took to social media to post videos and photos of their stock of tissue paper and baby diapers, minting millions for manufacturers.

“In March, we saw tissues flying off the shelves, and our sales were tremendous, but this meant that in April, May and June our sales dropped because the panic buying did not mean that the consumption of tissue paper doubled; they (customers) just stocked up,” said Chandaria Industries Group Chief Executive Darshan Chandaria.

While the panic buying was short-lived, demand for the crucial item has never been in short supply. 

Annually, the sector banks Sh2.4 billion in sales, translating into Sh600 million per month.

Industry insiders say the sector employs more than 50,000 people directly and indirectly. 

The growing demand for tissue paper has seen new entrants seeking to dislodge major players such as Chandaria Industries, which have taken care of the country’s toilet hygiene needs for 55 years.

The company is the largest toilet paper converter in East and Central Africa, boasting six of the leading tissue brands through its Jubilee Tissue Industry, Propack Ltd, Twiga Stationers, African Cotton Industry and Kappa Industries subsidiaries.

There are more than 20 recognisable brands in the local market, excluding those made and sold by small companies or imported illegally into the country.

But the players in the industries agree they cannot satisfy local demand, which has been on an upward trajectory over the last few years.

Since the turn of the millennium, most rural homes have embraced the use of tissue paper, dumping other crude methods of toilet hygiene.

According to the 2019 census, more than 52.4 per cent of households in the country used covered pit latrines as a sanitation facility, twice the number in the 2009 census.

Interestingly, with improved sanitation in the country’s tissue industry, there has been an upsurge in the manufacture of low-quality tissue paper, made from recycled paper, to cater for the poor in informal s ettlements and in rural areas.

The battle for the lower end of the market is being fueled by efforts by the Health Ministry and non-governmental organisations in promoting public health and sanitation in the country.

The big six industry players’ entry into the market segment has consequently seen the price of tissue paper drop by double digits in recent years.

A spot check by Financial Standard established that all the tissue companies have a product targeting the low-end market, retailing at between Sh12 and Sh20.

Competition for the high-end market has also gone up a notch higher, with the firms now squaring it out in marketing tissue paper made from virgin pulp.

This cut-throat competition has seen imports of the virgin pulp go up as it is not available locally.

According to data from the consumer insight, Tena tissue paper, from African Cotton Industries, and Velvex from the Chandaria Industries are the most preferred virgin pulp toilet tissues.

Poshy Roll Tissues, Panda, Neptune and Cosy are some of the other brands made from virgin pulp, targeting high-end customers.

The rising competition has seen the sector take a backward integration approach in doing business.

This means companies now own every stage of the production process from raw materials to finished goods services.

“We have two players who are currently doing the backward integration. They import huge amounts of pulp and produce tissue paper and other associated products in a bid to stay ahead of the competition,” said an insider, who did not want to be named.

According to the Kenya National Bureau of Statistics 2020 Economic Survey, the country has seen an increase in imports of paper from 3.3 million tonnes in 2015 to 4 million tonnes in 2018.

Surprisingly, the imports of paper dropped to 3.5 million tonnes last year.

The increasing competition has forced brands to offer discounts while holding frequent promotional campaigns in supermarkets to woo buyers.

“The demand will always be high, with the vast majority of Kenyans now adopting good hygiene practices,” said Chandaria Industries’ Darshan.

But changes in technology that have seen more and more companies go paperless have meant less paper for recycling to make tissue paper.  

“Waste paper in the country has been on the decline since the emergence of the new technology. People no longer print on paper. We hugely depended on this to produce our tissue paper. The decline in volumes has forced us to incur more in importation,” said Darshan.

Players in the industry also complain of the unregulated illegal importation of tissue paper from countries like Tanzania and Egypt, mostly targeting the low-end market.

They estimate to have lost nearly 25 per cent of their market share to the illegal imports.

“Illegal imports are a big problem for us, but we have engaged Kenya Association of Manufacturers on this together with the Kenya Bureau of Standard, and we hope to see a reduction on this,” said Darshan.

Interestingly, a roll of tissue acts as a source of livelihood for close to five families in the value chain, particularly among the low-end segment of the market.

The same roll mints hundreds of shillings for operators of public toilets in major towns, who subdivide it into small pieces that they provide to customers, charging Sh10 per piece for visit to the little room. 

“I cut it into six or seven pieces that I give to my customers at Sh10. I have never heard any of my customers complaining about the type of tissue that I give to them. I don’t see the difference,” said Boniface Gacheru, a public toilet operator in Nairobi. 

According to the Nairobi County Government, there are 68 public toilets in the city, 17 of which are located within the central business district.

Until 1999, the public toilets were run by the now-defunct city council before they were transferred to private entities after incessant complaints from city residents of their deplorable conditions. Interestingly, most of the imported tissue paper is not branded.

It is mostly in cheap wrappings, hence the lower pricing.  

“I cannot tell you where I buy my tissue papers, but what I can tell you is that they are cheap if you buy in wholesale,” said Agnetta Awino, a vendor.

Some of the product targeting the low-end market is manufactured in the small-scale factories in the counties.