In recent years, the most frequently heard buzzword is 'supply-side structural reform,' which is essentially a deepening of market-oriented reform. Investment is the most important and effective means of GDP growth.

In recent years, with rising incomes and the advent of an aging population, the consumption structure has undergone profound changes, but the inertia of investment-driven supply persists, leading to redundant construction, repeated investment, and overcapacity. This is because the supply side is not sufficiently market-oriented; supply-side structural reform is actually a reform to let the market play a dominant role in resource allocation.

During the period when the U.S. economy dominated the world, it experienced three waves. The first wave was the industrialization wave, giving rise to industrial giants like Carnegie, Rockefeller, Ford, and Morgan. After World War II, the 'baby boom' emerged, the middle class rose, and the consumer era arrived, producing consumer-led enterprises and entrepreneurs such as Disney, Coca-Cola, McDonald's, and Hollywood. The third wave was informatization. The spread of computers and the internet, and now wireless connectivity, dominate the consumer era. The U.S. has given birth to new representative companies like Facebook, Google, Apple, and Amazon.

In the forty years of reform and opening up, China has undergone a similar process. Initially, industries like petroleum, coal, and textiles took off; after the 1990s, consumer-grade industries such as FMCG, pharmaceuticals, and home appliances became popular.

Today, China is at the forefront of global informatization, and the great consumer era has arrived. Chinese people are paying unprecedented attention to the quality of their lives. Many of our peers have realized that consumption is currently the biggest 'windfall' in China and the greatest opportunity for Chinese entrepreneurs to innovate.

In the past, we lacked food and clothing, and eating delicacies was a symbol of success. Now, consumption concepts are transforming, with everyone prioritizing quality of life and social responsibility.

The key for entrepreneurs is to be the best in their niche industry to gain the greatest value. Whether in manufacturing, services, or high-tech, having distinctive features in a field allows you to go further and last longer.

From Scarcity to Abundance

Looking back over the past thirty years, all areas in China were scarce—materially and spiritually.

After reform and opening up, the release of huge demand and insufficient production capacity were a contradiction that lasted over twenty years. During this period, as long as your product was passable, marketing was good, especially with a sufficient advertising budget, your product could sweep the market and be called a 'brand.' This gave rise to 'abnormal' enterprises like 'San Zhu,' 'Qin Chi,' and 'Ju Neng Gai,' which became famous overnight and disappeared just as quickly.

Today, the scarcity problem in China has been basically solved, and a turning point has arrived: our basic material needs are met. Our manufacturing has strong capabilities, producing enough products for several generations. Information flows rapidly, allowing us to know what products look like worldwide. Alongside material abundance, the spirit of society is more positive, with 'Three Outlooks' becoming more positive and horizons broader.

From Usable to Liked

People born in the 60s and 70s experienced the planned economy era, mostly born in rural areas, with hard work and frugality ingrained in their bones. No matter how abundant materials or increased income, they only buy what they need, feeling content that things are much better than before.

In contrast, the new generation born in the 90s and 00s grew up in an environment of material abundance and developed information. Unlike their parents who focused on 'having or not having,' they care more about 'Can I choose better, things I like more?'

From Inferior to Quality

The shift from scarcity to abundance is synchronized with the shift from inferior to quality.

We have such abundant products, and we are the world's largest manufacturing and exporting country. Why do we still go to Japan to buy milk powder, sanitary napkins, condoms, and other products? These products are not high-tech. The reason is simple: compared to ours, their products are of better quality and reasonably priced, while ours are expensive with poor quality and service.

Therefore, I have my own view on overcapacity:

So-called overcapacity is actually overcapacity of backward production capacity; good products are always in short supply. Just as when the iPhone appeared, Nokia became redundant. Our products show two extremes: high quality and good service but too expensive, or low price but poor quality and service. Either extreme makes consumers hesitate.

So, in the era of great transformation and mass consumption, what are the trends for tissue paper?

We believe there are five obvious trends:

1. The Arrival of the Product Era

In the past, consumers didn't know how to choose products due to lack of product knowledge and information sources. To avoid buying inferior products, they could only choose products from large enterprises.

But what is a large enterprise?

Consumers had no standard for selection, using only very basic judgments: whether the product came from developed regions like Guangdong, or whether it was advertised on major TV stations. If so, they considered the enterprise large and the product a brand, so they chose it, leading to high sales.

This is also why CCTV's 'Bid King' prices hit new highs year after year.

In the product era, people only care about product experience and service. I don't care who produces it or whether the company is big; I only care if it suits me and if I like it now—'only care about today's possession, not about forever.' This is also the 'new domestic product' concept proposed by some companies: good product quality and reasonable sales price.

2. The Arrival of the No-Brand Era

In the past, any company with advertising was a brand; advertising on strong media was a symbol of strength, and people bought based on ads. This is changing now. The future is a no-brand era—word-of-mouth is the brand. In the information age, it's easy to get product comparison information, and recommendations from friends with experience become important. In the self-media era, everyone is an advertising carrier.

At the same time, the development of the sharing economy makes word-of-mouth increasingly important. In the past, we could only share good things with a few people we met often. Today, social circles allow friends from all over to share information; many people have hundreds or even thousands of friends, not to mention alumni groups, homeowner groups, and other social groups.

Of course, some friends might say they hardly look at their social feeds, especially those who frequently post products. I agree! Because social feeds are a relatively new phenomenon, we suddenly have many 'friends'—known, unknown, and long-lost. We add them all as friends without time or means to filter. Only over time, through settling, limiting, or even blocking, does the real social feed appear, and others are ignored.

Consumers will still seriously consider products and services recommended by filtered social feeds.

The current state of social feeds is the chaos of rapid development. Therefore, vertical e-commerce will definitely develop rapidly, and word-of-mouth as a brand is certain.

What did we look at before? We looked at who had the largest display area in supermarkets and who had the most ads; advertising meant brand.

The no-brand era does not mean abandoning brand management and brand value, but rather making a new product feel like a brand, allowing consumers to immediately have a brand consumption experience.

In the past, advertising was the brand; today, product is the brand, platform is the brand. In the past, we produced products first to solve survival, gradually building the brand. Today, the market demands higher: born as a brand. The so-called 'prenatal education' is long and costly. If a decision-maker makes one mistake and gives birth to a 'defective child,' there is no chance.

3. The Arrival of the OEM Era

Since 1998, high-grade tissue paper began mass production in China. After over two years of market incubation, it entered a decade-plus of rapid development. During this period, several major brands were in short supply, and because tissue paper has lower gross margins than other industries, a strong OEM industry chain like in daily chemicals or apparel never formed.

Now, in the era of great transformation and mass consumption, this situation is changing.

First, papermaking investment is excessive;

Second, post-processing equipment upgrades have surplus capacity;

Third, natural-colored paper has higher gross margins than white paper and future market expectations.

Therefore, in the next 5-10 years, there will definitely be 2-3 'Foxconns' in the tissue paper field, focusing on products, processes, workflows, and efficiency, serving as brand production service providers. Their profits and cash flow may be higher than sales-oriented companies.

In the past, large enterprises with big brands were unwilling to do OEM for others, and small enterprises lacked the capability. So in the future, OEM enterprises will rise in the tissue paper industry. It depends on who lays out early and can fully integrate the upstream and downstream industry chain. Liwen's Yongchuan factory model is moving in this direction, but not exactly.

4. The Arrival of Rapid Development of Natural-Colored Paper

In 2016, the market penetration rate of natural-colored paper was only 5%. It is expected to reach about 15% in three years, entering an explosive period for natural-colored paper consumption.

Regarding the product itself, there are currently three prominent characteristics:

Terminal Performance Natural-colored paper performs significantly better than white tissue at the terminal, whether in display area, promotion frequency, or investment costs, calculated per sales unit, far exceeding white paper.

Take RT-Mart as an example: the display area for natural-colored soft packs and rolls is basically around 30%. Especially bamboo fiber natural-colored paper shows a clear growth trend, supported by gross margins, with huge competitive advantages;

Traditional E-commerce Natural-colored paper also performs well in traditional e-commerce because many natural-colored paper brands lack financial resources and can only choose traditional e-commerce, which has low investment, high output, and low risk. In recent years, natural-colored paper has performed excellently in traditional e-commerce. Take Quanlin Bense as an example: in 2016, e-commerce sales reached nearly 100 million yuan, accounting for over 20% of total sales;

Vertical E-commerce Vertical e-commerce is developing rapidly. Models like 'Zhufei' are growing fast, with resource-based enterprises requiring low investment and quick results.

5. Increasing Environmental Protection Efforts, Stronger Tissue Paper Enterprises

Earlier, smog was the main target of regulation and improvement, so related polluting enterprises were key targets for supervision and shutdown. After effectively curbing smog and improving air quality, authorities began targeting paper mills, the source of water and soil pollution. After solving air pollution, they are now taking heavy action on water and soil pollution.

Starting in the second half of 2016, environmental governance began, and by the end of the year, prices of carton paper and cultural paper rose.

This year, the Baoding and Sichuan sectors of tissue paper have entered governance stages, with small and medium tissue paper mills facing severe tests for pollution control and discharge. Since tissue paper is still in a period of periodic overcapacity, the benefits are not obvious. However, we predict that the long-term benefits for large tissue paper enterprises will be significant.

The environmental protection high-pressure policy is not a short-term campaign or a temporary policy but a long-term strategy. It is a concrete manifestation of President Xi's new governance philosophy, because only in this way can high-energy-consuming and low-efficiency enterprises be eliminated, and only then can true industrial upgrading to consumption upgrading be achieved.

Highly polluting enterprises consume a lot and pollute heavily, harming the social environment; low-quality and counterfeit products harm consumers; tax evasion harms the government. These three 'harms' will be eliminated by the market's 'invisible hand' and the government's 'visible hand.' This is the general trend; do not harbor illusions.

Conclusion

Based on the above five trends, tissue paper enterprises should conduct objective comprehensive assessments based on their own funds, teams, equipment, products, brands, etc., and formulate business strategies favorable to their development to adapt to future needs.

The era of mass consumption is coming; grasp the trends!

Zhang Weihong; Chief Consultant for Tissue Paper at Guangzhou Zhang Weihong Management Consulting Co., Ltd.; General Manager of Dangdang Packaging Design Company; dedicated to helping tissue paper enterprises (brands) improve short-term sales performance and achieve long-term brand value. With twenty years of practical experience in tissue paper brand management, he has led project cooperation, marketing consulting, training, and coaching for dozens of tissue paper enterprises, published over fifty industry articles, is a contributing writer for 'Tissue Paper' magazine, and a speaker at the International Tissue Paper Forum. He served the 'Xin Xiang Yin' brand of Hengan Group for ten years, held the position of first General Manager of Hengan Group's Paper Market Department, and was Marketing Director of C&S Paper. Email: changshazhang@126.com

2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will closely focus on the theme 'New Forces, New Ecology,' inviting 1000+ distributors, 500+ brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to jointly explore new chapters of cross-industry integration!

Click the links below to review the highlights of the first and second FMCG + Internet Conferences:

2016 'FMCG + Internet' Summit Forum

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