The Parent Roll Merchant Business

Transcription

1 2017 The Parent Roll Merchant Business Creating a More Efficient Marketplace Scott Griffin, Director of Tissue Sales Central National Gottesman Inc.

2 1886 A leader in pulp, paper packaging, tissue, wood products and metals for more than 131 years PRIVATELY OWNED and operated by the fifth generation of our founding family BILLION Sales of more than $5.5 billion and more than 6.7 million tons of pulp and paper products annually 2,500 Professionals around the world to serve a range of clients in the forest products and metal industries COMMITTED Focused on our core businesses: pulp, paper, packaging, tissue wood products and metals to the strength and future growth of our industry

3 Global Reach Represented across North America, Latin America, Asia and Europe with sales into over 100 countries Local Presence Offices in 29 global locations and in 48 cities across North America, with agents and affiliates in an additional 75 locations Who We Are Strong Market Knowledge We understand what drives your business, no matter where you are located We re a global company with offices in 29 countries and a commercial presence in more than 100 countries worldwide, building on long standing relationships with both customers and suppliers Relationship Driven Our people are at the center of our relationships with customers and suppliers around the globe

4 How We Operate Our three divisions specialize in the global sales of Tissue, Pulp, Paper, Packaging, Wood Products, and Metal, as well as Paper Distribution and Publication Papers Central National Division Pulp Paper Packaging Tissue Wood Products Metal North American Distribution Division Coated and uncoated papers Packaging Digital substrates Board grades Wide Format North American Publication Division Books Magazines Catalogs Retail Direct Mail

5 Unwinding The Parent Roll Trade The Fundamentals: What Do Parent Roll Merchants Do? Transaction Structures: How Are Transactions Made? How is the Parent Roll Merchant involved in Technical Guidance and Product Development Today? Trends: What s Going on in the Market? Path Forward: Creating Efficiencies in the Supply Chain

6 1 The Fundamentals

7 The Parent Roll Merchant Core Service Offerings Sales & Marketing Product Development Logistics & Supply Chain Technical Guidance Credit Protection Trade & Working Capital Finance

8 Central National Parent Roll Tissue Business Where do we play? Forest Tissue Mill Converting Consumers We Operate Here Pulp Mill, Recycled Fiber Parent Tissue Roll Retail & Distribution

9 The Merchant s Customers Who are we selling to? Tissue Mill Converting Integrated Converters Retail or Away-from-Home Parent Tissue Roll Independent Converters

10 Retail Channels Economy/Value Made of Mostly Recycled Fiber Quality Tiers for Parent Rolls in North America Premium Blended Recycled/Pulp or 100% Virgin Merchant insight into the distribution channels and quality tiers is essential when sourcing product for their customers that achieve the correct price/value relationship Ultra Premium 100% Structured Tissue

11 Away-from-Home Channels Good Made of Mostly Recycled Fiber Quality Tiers for Parent Rolls in North America Better Blended Recycled/Pulp or 100% Virgin Light Dry Crepe Companies today are doing more business with fewer resources, and the merchant s role is to help bridge that gap for their clients Best 100% Structured Tissue or High Quality Light Dry Crepe

12 Expand Market Capabilities Protect Market Share Why Source Parent Rolls Externally? Prepare for New Machine Reduce Raw Material Costs and Improve Efficiencies

13 2 Transaction Structures

14 Spot Transactions Immediate and unplanned need to purchase or sell product Usually little or no advanced notice Supply or demand is typically not recurring Immediate confirmation, usually within a day

15 Medium-Term Transactions Proactive production and sales plan outlining upcoming need More notice from the supplier or customer regarding requirement Fixed supply or demand period: 3, 6 or 12 months Business confirmation within 14 days

16 Long-Term Agency Agreements Comprehensive review of sales and marketing plans, capital requirements, forecasting, technical development and workflow process Carefully planned distribution arrangement between mill management and parent roll merchant Long-term planning with 1- to 2-years lead time Distribution channels identified and extremely well defined Supply is ongoing

17 3 Product Development & Technical Theodore Guidance Levitt There is no such thing as a commodity. All goods and services are differentiable. HBR Marketing Success Through Differentiation-of-Anything

18 The Parent Roll Merchant Core Services Specializing In Sales & Marketing Product Development Logistics & Supply Chain Technical Guidance Credit Protection Trade & Working Capital Finance

19 Technical Guidance Sample Testing and Variability Material (primarily pulp variation) Process (how the pulp is handled ahead of and on the machine, or other machine settings) Sampling (how and where the sample is taken and cut) Test Equipment (features and capability) Procedure (different test procedures and/or the human factor running the test)

20 Product Development Price to Value: Bulk + Softness CONVENTIONAL TISSUE Bulk mils/8 ply NTT Bulk mils/8 ply TAD High Bulk mils/8 ply Low Bulk mils/8 ply *Testing based on 100% high quality virgin fiber content base sheets.

21 Product Development Opportunities in Overlap Merchants specialize in identifying opportunities to bring new products to market, helping to communicate the product s value proposition and pull demand through. The challenge is differentiating their products from the competition. CONVENTIONAL TISSUE TAD Where s the opportunity? NTT

22 Product Development Tissue Trials Yield New Directions Parent Tissue Roll Types Converting Process Finished Products/Attributes Technical Sales/Data Communicating Price/Value Conventional, NTT & TAD Determines Quality Attributes of Each Roll Type Softness/Hand feel, Sound Technical Data Bulk, MD, CD, Stretch, Converting Validates Market Feasibility Efficiency What is the Value Proposition Being Delivered?

23 Millennials Buying Habits New Market Entrants Lidl Consolidation & Mergers Amazon/Whole Foods Increased Channel Fragmentation Dollar General, DGX Supply Chain Parent Roll Production/Converting Increased Competition Environmental Chain of Custody and Stewardship Non Store Sales Online Retailers *Contribution by Patrick Boateng, Retail Store Buyer

24 4 Trends

25 Parent roll sales are often an afterthought or stop gap to keep paper machines running Parent Roll Trade North America Highly competitive business influenced by regional supply and demand Independent converters look to their relationships with merchants to help ensure consistency of supply Logistics are critical Freight may account for up to 20% of the overall landed price Short lead times common due to market fluidity and changing needs Longer Supply Chains require more variables to manage Spot Parent Roll Suppliers Regular Parent Roll Suppliers Independent Converters

26 Parent Roll Trade Market Themes in of last 9 Machine Announcements have been TAD, NTT and, or ATMOS Technology (represents 589,000 tons out of 639,000 tons)* Limited TAD Parent Roll Supply in North America More availability of NTT as new machine start ups have come on line Ability of AFH converters to upgrade certain products (multifold and hard wound towels) Demand for solution providers from higher cost, older mill assets having challenging machine trims and limited production capabilities Parent Roll demand continues to outpace domestic supply for all grades and quality segments Ocean Rate increases coupled with higher pulp costs have made Asian and other parent roll imports less competitive Increasing need for customization Merchants must be well versed in the production capabilities of the mill and the converter Mills rely on merchants to help sell full trim of the paper machine * Volumes based on Risi statistics

27 5 Path Forward

28 Looking Ahead Merchants will have more product categories to manage as differentiation continues Increased demand for merchant services with new market entrants More long-term agreements with merchants offering services beyond Sales and Marketing, including Logistics, Trade Services, Technical Guidance and Finance

29 Thank You