The Market for the Product
The tissue market is among the rapidly growing segments of the paper sector. Toilet paper is a very competitive market due to a large number of countries that manufacture it. Averagely, individuals use 57 sheets of toilet paper each day, which amounts to about 20, 805 sheets per year (Cheng, 2015). People purchase toilet paper irrespective of income fluctuations hence it is an income inelastic good. The large brands of Procter & Gamble, Kimberly-lark and Georgia-Pacific control approximately 65% of toilet paper production. The products of these organizations are placed on the shelves in Trinidad and Tobago, which makes the domestic tissue sector highly competitive. Venezuela is a perfect market for manufacturers due to the shortage of household products in the country, including toilet paper (Cheng, 2015).
Factors that Influence the Demand for the Product
The increasing population of the world and adaptation of Western lifestyles and hygiene habits in developing countries cause the gradually rising demand for toilet paper. China and several Asian nations are projected to have increased demand due to economic development, high living standards, increased travels, hotel businesses and fast food chains (He & Barr, 2004). Historically, the use of toilet paper has risen about 1.13 times faster than the GDP globally. High population is directly linked to the growth of world hygiene consumption. Quality upgrades is also a significant driving force behind the high demand for toilet paper.
Factors that Influence the Supply of the Product
Toilet paper production is closely associated with increased GDP and higher standards of living. The growth of the market was hindered by economic recession but the industry position is still positive because of persistent growth in the emerging markets, such as Spain and European markets. The developing trends in innovation have led to high supply of toilet paper, as companies are taking risks of producing new products to target new market segments
A high number of tissue mills and tissue machines increase supply of toilet paper. For instance, the total tissue paper volume in the world at the end of the year 2011 was about 34.2 million tonnes every year. The number of tissue mills was 951 with more than 3,300 tissue machines. Several pronouncements in China, Latin America, and North America contributed to a new investment pack in 2013 with an increased net capacity of 24 million tonnes. New investments also contribute to increased supply, for instance, the Chinese market for tissue paper alone adds about 500,000- 600,000 tonnes per year of new capacity every year (He & Barr, 2004). Consolidation impacts supply and has been prevalent in Oceania and North America. In Western Europe, consolidation is lower compared to North America, although the 10 largest suppliers control about 81% of tissue capacity.
How the Changes in Supply and Demand Affect the Equilibrium Price of the Product
Oversupplied market and lower demand for toilet papers leads to gradually falling prices (The Dirty Little Secrets of Toilet Paper, 2015).The supply of recovered paper is reducing slowly as the demand for and manufacture of toilet paper falls in many nations (Paper Products Industry Profile: Global, 2012). This results in increased prices for recovered paper and high demand for fresh fibre pulp.
Lower paper usage or demand, mostly in the developing countries, results in steadily rising cost of waste paper. In addition, as waste paper prices increase over time, it leads to additional demand for pulp since many producers will work towards minimizing the pricing risk and turning to pulp as a raw material that has less pricing volatility (Paper Products Industry Profile: Global, 2012). With reduced demand for paper and higher usage of tissue in the world, the trend of tissue will become highly significant for pulp prices because tissue consumes a lot of pulp. Persistent price increases for toilet paper is caused by much resistance from buyers who most of the time found themselves in desperate and fixed situations. According to several market players, there is a balance between supply and demand. Prices will take off due to higher price ranges caused by a strong demand for new suppliers for emerging market coinciding with lower stock levels from cautious producers.
Changes to the Demand and/or Supply of this Product in the Near Future and their Drives
The demand for toilet paper is expected to increase with an annual growth of about 4%. The rise in volume will exceed 16 million tonnes, which is 1.5 million tonnes every year. China will be respoinsible for 40% of the growth because of increased consumption in the nation. Latin America will be second with 15% and Western Europe with 11-12%. The main significant variables that will drive future demand for toilet paper are economic growth and population growth. Toilet paper also experiences few threats of substitution (The Dirty Little Secrets of Toilet Paper, 2015).
Irrespective of whether it is produced from virgin pulp or recycled paper, toilet paper is a significant part of life in developing nations and Western countries that emphasize on improved hygiene to alleviate health issues.
Cheng, C. (2015). Paper Products Manufacturing. TIER Industry Report – Paper Products Manufacturing, 1-13.
He, D., & Barr, C. (2004). China’s pulp and paper sector: an analysis of supply-demand and medium term projections. International Forestry Review, 6(3-4), 254-266.
Paper Products Industry Profile: Global. (2012). Paper Products Industry Profile: Global, 1-37.
The Dirty Little Secrets of Toilet Paper. (2015). Consumer Reports, 80(10), 20-23.