The U.S. Paper Towel Market: A Competitive Profile

Abstract

This is the fifteenth paper that follows the footsteps of fourteen studies that have tried to analyze the competitive profiles of U.S. consumer markets: Men’s Shaving Gel, Beer, Shampoo, Shredded/Grated Cheese, Refrigerated Orange Juice, Men’s Razor-Blades, Women’s Razor-Blades, Toothpaste, Canned Soup, Coffee, Potato Chips, Alkaline AA Battery, Facial Tissue, and Toilet Paper.

Michael Porter associates high market share with cost leadership strategy, which is based on the idea of competing on a price that is lower than that of the competition.

However, customer-perceived quality—not low cost—should be the underpinning of competitive strategy, because it is far more vital to long-term competitive position and profitability than any other factor. So, a superior alternative is to offer better quality vs. the competition.

In most consumer markets, a business seeking market share leadership should try to serve the middle class by competing in the mid-price segment; and offering quality better than that of the competition: at a price somewhat higher to signify an image of quality, and to ensure that the strategy is both profitable and sustainable in the long run.

Quality, however, is a complex concept, consumers generally find difficult to understand. So, they often use relative price, and a brand’s reputation, as a symbol of quality.

For 2008 the U.S. Paper Towel market had sales of $2,448 million.

Using Hierarchical Cluster Analysis, we tested two hypotheses: (I) That the market leader is likely to compete in the mid-price segment, and that (II) Its unit price is likely to be higher than that of the nearest competition.

For both 2008 and 2007, the results did not support Hypothesis I, because the market leader Bounty was a member of the super-premium segment.

However, the results did support Hypothesis II for both 2008 and 2007, because Bounty’s unit price was higher than that of the runner-up, Brawny in 2008, and Sparkle in 2007.

We found that relative price was a strategic variable, as hypothesized.

A pattern is emerging in price-quality segmentation analysis. In ten of the fifteen studies—that exclude Men’s and Women’s Razor-Blades, Ground Coffee, Toilet Paper, and Paper Towel—the market leader was found to be a member of the mid-price segment, as we have hypothesized.

Results in seven markets supported Hypothesis II.

We also discovered four strategic groups in the industry.

The production and consumption of paper towel leads to adverse environmental effects. It contributes to deforestation, chemical pollution in freshwaters, and fill up our landfill. But there are several ways to reduce their footprint: microfiber cloths; cotton napkins; paper towel made from 100% recycled materials; and newer innovative hand dyers, such as Dyson Airblade, that blows room-temperature air—not hot air--onto wet hands: a process that takes just 14 seconds to dry them.