GERMANY’S CAUTIOUS TISSUE MANUFACTURERS

Navigating Sluggish Demand

Uncertainties across manufacturing, energy costs, the post-Covid recovery and politics mean Germany is still searching for a stable way forward. Report by Bruce Janda, Senior Consultant, ResourceWise.

German manufacturing is still struggling to establish its “new normal” following the twin shocks of the pandemic and the war in Ukraine. German auto manufacturing garners most of the headlines due to the threat of low-cost Chinese EV imports potentially disrupting a significant source of employment and global exports. However, higher energy costs, inflation-driven labour demands, and an expensive transition to green and renewable energy have also contributed to the industrial anxiety affecting all German manufacturing, including the tissue business.

These same issues impact German tissue consumers, complicating demand forecasts. The consumer tissue interests highlighted in the literature include:

• Increased emphasis on health and hygiene, especially following Covid-19.

• Rising demand for high-quality, soft, and sanitary toilet paper.

• Growing interest in premium products.

• Shift towards private labels and value-driven purchasing due to economic uncertainties.

These consumer interests are somewhat selfcontradictory (higher quality and lower costs), making demand forecasting challenging when the German tissue mills are struggling with an energy transition.

The World Factbook estimates that Germany’s population growth due to immigration will decrease to -0.12% in 2024. The population trend is shown in the yellow bars in Figure 1. Population growth appears to have slowed again, as slower immigration is not quite replacing the effect of very low birth rates. However, GDP per person at PPP (purchasing power parity), shown in the blue line, has continued to rise, indicating growing consumer spending power. The average German consumer probably doesn’t feel enriched in the current environment.

German unemployment has stabilised between 3.0% and 3.5% since 2017, as shown by the yellow bars in Figure 2. Nevertheless, the inflation shock of 2022 (9%) continues to impact consumers as prices remain elevated despite a decline in the inflation rate. The blue line indicates the inflation trend, with the low 2024 rate still being an estimate.

The German tissue trade has remained relatively stable throughout the 17-year trend period. Figure 3 illustrates Germany’s tissue imports. The key supplier countries are all close to Germany’s borders, including Austria, France, Italy, the Netherlands, Poland, and Sweden. Poland has emerged as the largest source of tissue imports. The 2024 data shown may be revised as the trade data is finalised after year end.

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