Renova Toilet Paper In Portugal Business Marketing Case Study Analysis I need help writing 4 pages marketing analysis for toilet paper company.Please find

Renova Toilet Paper In Portugal Business Marketing Case Study Analysis I need help writing 4 pages marketing analysis for toilet paper company.Please find the case, and the question must be answered in the attachment. After reading the case, write an analysis of Renova that answers the following questions:
1. Describe the competitive landscape for toilet paper in Portugal. As part of this analysis,
analyze how the toilet paper market in Portugal has changed over the years. What are of
the implications of these changes for Renova, since Portugal is its home market?
2. Describe consumers’ behavior when it comes to buying toilet paper. Essentially, how do
consumers “think” when it comes to toilet paper purchase? Include in your discussion the
process, criteria and tradeoffs consumers make.
3. Evaluate the evolution of Renova’s print campaign as illustrated in the case. Decide
whether this campaign contributes to or diminishes Renova’s brand equity. Make the
strongest case you can for your position.
4. The case ends with Pereira evaluating five strategic decisions. Come to a decision about
which of the five directions (if any) makes most sense for Renova. Make the strongest
case you can for your choice (or a choice not listed) by framing your analysis in terms of
strategic marketing objective(s) and how the successful implementation of your choice
achieves that/those objective(s) for Renova. Note: Be realistic here. There are always
tradeoffs. Consider those fully.
Renova Toilet Paper
Avant-garde Marketing in a
Commoditized Category
This case was written by Raquel Seabra de Sousa, INSEAD MBA 2009 and consultant with BCG, under the supervision
of Yakov Bart, Assistant Professor of Marketing, Pierre Chandon, Associate Professor of Marketing, and Steven
Sweldens, Assistant Professor of Marketing, all at INSEAD. The video material was produced by Shellie Karabell and
Julian Boudier from INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation.
Copyright © 2010 INSEAD
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Las Vegas, New York-New York Hotel and Casino:
Paulo Pereira da Silva, the Swiss-trained physicist and CEO of Renova, a privately-owned
Portuguese paper company, was attending a performance of Zumanity, the for-adults-only
Cirque du Soleil production, together with Luis Saramago, the company’s marketing director.
Watching the trapeze artists holding on to black fabric stripes, Paulo Pereira da Silva thought
about Renova’s own artsy advertising campaigns showing nude men and stripes of Renova
toilet paper. This is how he first came up with the idea of black toilet paper.
Black toilet paper? To see how far-fetched the idea is, bear in mind that toilet paper is a
highly commoditized category with sluggish growth and little innovation. Even though
Renova is a relatively strong brand in Portugal (its home country), it is just a medium-size
family business facing fierce competition from such consumer goods behemoths as Procter &
Gamble, as well as from multinational paper manufacturers such as Kimberly-Clark and
Georgia-Pacific. Moreover, in a category where private labels are beginning to outsell
national brands, Renova also has to deal with powerful retailers who are both customers and
Although the strategic challenges facing Paulo Pereira da Silva are common to all mediumsize companies facing giants in commoditized consumer markets, it does not make them any
easier to resolve. Without a clear cost advantage, distinctive brand positioning or unique
product features, how could Renova grow the business in its current markets or expand into
new markets?
The Tissue Industry
Industry Overview
Western Europe
In 2005, disposable tissue and hygiene is a $26 billion category in Western Europe equally
split between disposable tissues and hygiene products (diapers, sanitary protections, etc.). The
$13 billion disposable tissue category includes toilet paper ($7.6 billion), kitchen towels and
rolls ($2.6 billion), facial and pocket tissues ($1.6 billion), and table napkins ($1.3 billion).
Between 2002 and 2005, the market grew by a mere 2.4% per year due to a stagnant customer
population and market saturation.
As Exhibit 1 shows, Renova’s share of the Western European market in 2005 is less than 1%.
Its main competitors in the tissue industry are $57 billion Procter & Gamble (which entered
the market in 1994 with Charmin toilet paper and Bounty kitchen rolls) and $16 billion
Kimberly-Clark (owner of Kleenex facial tissue, Scott toilet paper and kitchen rolls, and
Cottonelle toilet paper). Competition also includes giant paper companies such as $21 billion
Georgia-Pacific (owner of Angel Soft, Lotus, etc.) and €13 billion SCA (Svenska Cellulosa
Aktiebolaget, owner of Velvet, Tempo, etc.). Retailers are the third group of competitors, with
the added twist that they are virtually Renova’s sole customers. Leading European retailers
include Carrefour (€64 billion sales in Europe), Lidl (€40 billion), and Tesco (€37 billion).
There are also a number of medium-size European paper producers that could potentially
enter the Portuguese market. Prominent among them is €800 million company Sofidel, the
Copyright © 2010 INSEAD
fourth largest tissue company in Europe and the owner of the Nicky and Regina brands.
Although the company is strongest in its domestic market in Italy, it is expanding rapidly in
Spain and other countries. Another potential competitor is €200 million company Tronchetti
(also Italian) that produces Foxy toilet paper.
The profitability of the tissue sector is low and strongly affected by energy prices, which have
doubled between 2003 and 2005, and by the cost of paper pulp, which has remained stable
after substantial fluctuations in 2000-2001.
In 2005, total sales of the disposable tissue paper category (excluding diapers and other
hygiene products) are approximately €220 million, of which €135 million come from toilet
paper, €37.2 million from table napkins, €35 million from kitchen rolls, and €12.8 million
from facial tissues. Renova’s value share of the disposable tissue category is 35% (17% if we
take into account hygiene products as shown in Exhibit 1). Its market share in each subcategory is 34% for toilet paper, 37.6% for table napkins, 29% for kitchen rolls and 29.5% for
facial tissues.
Due to almost universal market penetration (above 90%) and limited population growth, the
toilet paper category has grown by just 1.5% per year over the previous three years and is
expected to grow at the same pace in the foreseeable future. Competitors in this category are
the same as in the rest of Europe, except for retailers, which are mostly local. The number one
FMCG retailer in Portugal is Sonae Distribução (€2.2 billion sales, owner of €2.9 billion
Modelo Continente), followed by Grupo Jerónimo Martins (€1.7 billion in sales with Pingo
Doce and Feira Nova supermarkets), by, €2 billion Os Mosquereiros (Intermarché) and by
€1.8 billion Auchan group (Jumbo). Although not as strong as in other parts of Europe (e.g.,
Germany), hard discounters (such as €1.4 billion Lidl) are present and gaining market share.
As shown in Exhibit 2, private labels and Renova each have about one third of the market.
Renova’s sales come mostly from Renova Super, the oldest and best-selling brand with a 25%
market share. Renova Progress has a 5% market share, but the shares of all other Renova
brands (Renova Fraicheur, Renova Fragrance, and Renova Húmido) are below 2%. For more
information, see Exhibit 2, which shows the value market share of the main toilet paper
brands in Portugal, and Exhibit 3, which shows the typical package sizes and prices of
Renova’s brands in Portugal.
According to Euromonitor data, the number two company in the Portuguese toilet paper
market is Kimberly-Clark which has a 22% market share thanks to its two main brands
Scottex and Kleenex (with 10-11% market share each). Georgia-Pacific is in third place with
Colhogar (7% market share). The Portuguese company Pampi-Lar is fourth with 2% of the
market. Exhibit 4 shows the main competitors’ products as well as sample ads.
Toilet paper prices in Portugal are relatively high compared to other European countries,
partly because of the relatively low market share of private labels (caused by lower retail
competition and fewer hard discounters) and partly because of the strong power of the
domestic brands (including Renova).
Copyright © 2010 INSEAD
Industry trends
Toilet paper has a rich and interesting history (see Exhibit 5 for details). The current market
segmentation in Western Europe is based on quality and price. In Portugal, toilet paper prices
range between €0.10 and €0.70 per roll (see Exhibit 6). There is also a substantial variance in
package sizes. Although toilet paper is mostly sold in packs of 12 or 24 rolls, packs of 6 are
common, and some jumbo and promotional packs can have up to 48 rolls (see Exhibit 6). This
variation in size helps companies to disguise up to a seven-fold difference in unit price,
allowing them to price their products according to customers’ sensitivity to value and
When asked about the most important attributes of toilet paper, 60% of Portuguese consumers
mention price, 30% quality, 8% the brand, and 2% the format. In terms of quality, the three
most important attributes are softness, strength, and absorbency. 55% of Portuguese
consumers report checking the price of toilet paper on the shelves before making their choice,
whereas 35% said that they do not check the price beforehand. 46% of Portuguese consumers
say that they take between 15 and 30 seconds to choose their toilet paper, with 28% taking
less than 15 seconds, and 24% taking between 30 seconds and one minute.
Private labels
The Western European toilet paper market is experiencing the classic phenomenon of
polarization, with strong growth for premium brands, stagnation for standard and economy
toilet paper, and rapid growth for private labels. In Spain, for example, premium brands grew
by 16% in value between 2003 and 2005, private labels by 12%, whereas standard and
economy brands grew by only 3%. The growth of private labels in Europe is driven not only
by improvements in the quality and marketing of their products, but also by the growing
power of European retailers which are strongly consolidated and, consequently, able to
impose relentless pressure on every supplier.
In Portugal, private labels are the fastest-growing category, gaining market share thanks to
their superior quality/price ratio. Although they started by offering a basic toilet paper
product, they are expected to expand into a wider range, including more premium products, as
they have done in other product categories. Lidl’s toilet paper Floralys, for example, already
has a superior quality reputation. Most shoppers (especially the younger ones) strongly
believe that private labels perform just as well as national brands.
Retailers typically carry only three or four toilet paper brands: their own private label, the
leading brand, and one or two additional national brands. This makes it very difficult for
second (and lower) market players to secure reliable distribution and good shelf placement,
especially if they do not have any unique features. In this context, retailers have enormous
power and use it to extract higher trade margins from national brands, increasing the price gap
between national brands and private labels.
Even when distribution is secured, the retail environment presents other hurdles. Disposable
paper aisles are often the blandest and least differentiated areas in the store, leading
consumers to focus their attention on price (see Exhibit 7). As a result, price and sales
promotions (usually offering larger packs, but also deploying “buy-one-get-one-free” offers,
price discounts and coupons) are heavily used to boost sales. Consequently, a large part of the
Copyright © 2010 INSEAD
marketing budget in the toilet paper category is devoted to trade promotions, temporary price
reductions, slotting allowances and other in-store marketing actions. The net result is that a
large segment of the population has become accustomed to buying toilet paper from deal to
Premium products
To counteract the growing popularity of private labels, national toilet paper brands have
experimented with a number of technological advances over recent years. Most innovations
are designed to improve the most important physical attributes of toilet paper: absorbency,
strength, and softness.
In 1981, Georgia Pacific launched the premium segment with Moltonel “thick, strong and
soft” toilet paper in France. Over the last two decades, the premium segment had come to
account for a quarter of the total category growth, and now represents 15% of all rolls
consumed in France, generating a segment value share of 20%. This innovation success was
largely due to a strong support from retailers who quickly took on the product and provided
high in-store visibility. The introduction of 3-ply and 4-ply papers was also successful
because it demonstrably improved the strength and absorbency of the paper. Initial fears that
this would lead consumers to use fewer sheets per usage occasion (hurting volume sales),
were not borne out by the sales track records. Apparently consumers do not measure the
number of sheets used on a regular basis. The number of sheets used is more likely dependent
on consumption habits. As such, consumers tended to use as many sheets of the 4-ply paper as
they used from the 3-ply paper, so contributing positively to volume sales.
Other brands have innovated by improving shopping and usage convenience. In Italy,
Sofidel’s Regina Rotoloni (“big rolls”) introduced rolls with a much greater paper length than
its competitors. This “10 rolls in 4” product gave consumers both the security of a longerlasting roll and the advantage of having the same quantity of tissue in less space. In addition,
it provided easy storage, quick delivery, lower stock outs, and thus higher profitability per
shelf space for the retailer. The “never ending roll” segment represents 35% of the Italian
market and continues to grow (but not currently available in Portugal). Ironically, the “big
rolls” that look so innovative today are not bigger than the rolls that were sold 40 years ago.
Rolls have shrunk over the years because unit prices in Portugal are computed on a “per roll”
basis (instead of, say, per kilo, linear meter, or square meter), which obviously encourages
firms to reduce the size of the rolls. The same problem has occurred in countries such as the
UK where unit prices are computed per sheet, as the length of toilet paper sheets has
considerably declined over the years.
One of the most significant innovations in the toilet paper category in Europe was the launch
of moist toilet paper. This was prompted by research showing that a significant proportion of
consumers were wetting toilet paper before usage. Moist toilet paper was particularly popular
in Germany and Switzerland, where it accounted for 8% and 10% of revenue generated,
respectively. Renova was the first to introduce moist toilet paper in the Iberian markets. Still,
in Portugal, moist toilet paper accounted for less than 0.1% of the market.
Another successful innovation was the development of toilet paper rolls impregnated with
lotions and balms, again featuring Renova at the forefront of innovation. In September 1998,
Renova was the first manufacturer in the world to introduce such impregnated toiled paper.
Copyright © 2010 INSEAD
This product, Renova Fraîcheur, was very instrumental to Renova’s brand penetration of the
French market in 2002. In the same year, Kimberly-Clark introduced in the UK market
Andrex Aloe Vera with “soft ripples enriched with extracts of Aloe Vera and vitamin E”. The
instant success of this product triggered competitive reactions, and in 2005 Georgia-Pacific
launched Lotus Freshness luxury toilet paper targeted at women. The product claimed to use
new technology to incorporate a cleansing balm into a three-ply tissue and was based on
research findings that women find it inconvenient to use moist wipes and toilet paper together.
Not all functional innovations have been successful. For example, Kimberly-Clark’s
Cottonelle Fresh Rollwipes had a refillable beige plastic dispenser that clipped to the standard
toilet paper spindle and held both a roll of dry toilet paper and the wet Fresh Rollwipes. The
idea was that consumers would use a wet wipe along with their regular tissue. However,
partly because of delayed shipment, but mostly because the marketers failed to communicate
the product benefits effectively, the product was a failure.
Finally, some manufacturers and retailers have tried to improve the aesthetics of toilet paper.
“Limited editions” of decorative toilet paper rolls printed with Christmas or Valentine’s Day
motifs are often available in gift shops but have never had significant sales. A variety of other
gimmicky special editions have been tried, but never with any measurable success (Exhibit 8).
One important exception was colored toilet papers, which had been popular in the 1970s and
were then available in a range of pastel pinks, blues, lilacs, and yellows. However, this trend
was short lived because of environmental concerns (the dye in the colored toilet paper rolls
was perceived to be harmful to the environment) and some health concerns (some people
were afraid that it could lead to skin irritation). Today, colored toilet papers have almost
entirely disappeared from supermarket shelves.
Renova FPA, SA
History and management
The Renova brand was born in 1818 when it was used as a watermark for paper, but the
Renova firm itself was founded in 1939 in Torres Novas, 120km north of Lisbon. The
privately-held company switched its focus from office paper to disposable paper products in
1961 and quickly achieved a leadership position in the Portuguese market. In 2005, Renova
has sales of €104 million (up from €80 million in 1990) and employs about 600 people in two
industrial units in Portugal and in its commercial branches in Portugal, Spain, France,
Belgium, and Luxembourg. Production capacity is about 100,000 tons of paper per year. As
shown in Exhibit 9, toilet paper accounts for half of Renova’s sales, kitchen rolls for 20%,
napkins for 17%, and tissue for 10%.
After Portugal joined the European Union in 1986, Renova started to expand internationally:
first in Spain in 1990 and then in France in 2002. Renova does not emphasize its Portuguese
roots and is seen as Portuguese in Portugal, Spanish in Spain and French in France. If pressed,
most consumers think that Renova is Spanish. Still, the majority of sales come from Portugal.
Paulo Pereira da Silva joined Renova in 1984 directly after earning a degree in Physical
Engineering from École Polytechnique Fédérale de Lausanne in Switzerland. Although his
grandfather was one of the company founders, his parents were not involved with the
Copyright © 2010 INSEAD
company and he is just one of 200 shareholders in the company. After joining Renova as a
production manager in 1984, Paulo Pereira da Silva rose through the ranks, was appointed to
the board in 1991, and became CEO in 1995. A strong believer in the importance of branding
and innovation, he put in place a flat and flexible organisation structure to foster creativity
and r…
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