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Saturday, October 20, 2007

Rise of a tissue culture

You reach out to it when you sneeze or sweat in your car, when you wipe your kitchen counter, while drying your hands in the office washroom or when you want to take off the excess oil from your evening samosa. A tissue paper.

"My father began this business in 1977 and the Indian market was practically stagnant till 1997. Business began taking on a new dimension after that, but the biggest spurt has happened since 2004," says Rakesh Gupta, director of Delhi-based S R Group, the company that manufactures tissue papers under the Mystique brand.

Evidently the pristine white absorbent paper has eased out the handkerchief, created a niche for itself in shiny dispensers in washrooms and is now looking hard at the kitchen. With increased travel kindling exposure to international habits and greater awareness of hygiene, the tissue paper has created a strong market, making itself an almost indispensable item in India today.

'The need for tissues has been driven by the advent of large MNC offices, where tissues are essential in washroom hygiene. Also, tissues are being seen as an ideal replacement for wiping hands in restaurants and commercial spaces, since water is becoming scarce," says Manoj Pachisia, CMD of Origami Tissues. International brands like Kimberly-Clark and Kleenex too are fairly visible in the Indian market, though primarily in the institutional space.

However, compared to the international market, consumption levels in India are low. 'If in the US, the per capita consumption per annum is 6.5 kg, in India, it is a mere 7 grams. We're still trying to create awareness in this market," says G G Shenoy, MD of Premier Tissues, one of the largest players in the tissue paper industry.

Tissue papers are still considered an expense—an upmarket one at that. Tissue paper manufacturers are working at bringing costs down to drive greater volumes of usage. "Since the market is still largely trader-driven, margins are high. Once usage increases and more players step into the market, prices will drop," says Gupta.

The increase in organised retail has been one of the main drivers of the sales in the home market. 'That has also given room for innovation," says Shenoy, who's now pushing rolls of kitchen wipes in markets.

Most players in this market are regional, since freight and transportation charges are huge for this high volume, low value product. Some, like Origami, combat this challenge by setting up conversion units (that package tissues from jumbo rolls in individual packets) across cities. There are only four or five national companies like Premier and a total of over 25 organised players in the market.

Institutional purchases form around 50%-60% of the domestic purchases from tissue manufacturers. These include hospitality chains like Taj and Oberoi, hospitals like Apollo and Manipal, F&B retailers like Cafe Coffee Day and Pizza Hut, private labels for retailers like the Future Group and Metro or even in banks like Canara and Syndicate Bank and shops.

Premier is looking to innovate in this space and design disposable capes for customers at hairstyling salons. Origami is innovating with designs for kitchen and party usage. It's early days to be able to peg a figure to this market and estimates from insiders vary from Rs 200 crore to Rs 450 crore. The market is said to be growing at a breakneck pace of 85% annually. Most of the large players in the market rely on exports and the international market is much larger than the Indian market. But more companies are looking at diversifying into this business primarily for the domestic market.

Margins currently vary from 15% to as high as 40%. But in the coming years, experts expect to see margins across board slump to under 12%. 'Tissue paper will become like the mobile phone, which everyone will have and no one will think twice about using," says Shenoy.

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