Times are tough in toilet paper. Volume sales of Britain’s 10 biggest loo roll brands (including own label) are down 5.4% [SymphonyIRI 52 w/e 18 June 2011]. Value sales may have inched up 2.4% but that’s mainly down to rising pulp and energy costs. Perhaps surprisingly, the biggest casualty has been own label, with value dipping 1.9% as volumes crashed 15.7%. Profits are going down the pan.
Not for Accrol Papers, though, which produces both branded and own-label household paper products. Since 2005, sales have boomed from under £7m to a projected 2012 turnover of £85m. Despite rising costs and the dominance of brands such as Kimberly-Clark’s Andrex and SCA’s Velvet, Accrol realised an EBITDA of £8.5m in its latest set of accounts, up from £6m. So how is this family-owned business managing to hold its own against the household giants? And what’s next?
Founded in 1993 by Jawid Hussain, Accrol has only really taken off in the past decade. Its growth is inextricably linked with the rise of the discounters - players like Home Bargains, Wilkinsons and B&M, which the company supplies both own-label and branded lines (such as Sofcell and Softy) to - and the new own-label contracts it has won with larger players like The Co-operative Group, with which Accrol signed a new deal worth “several millions” in December.
“We’re saying to people if they don’t want the most expensive product they don’t have to go to economy”
Majid Hussain, MD
“We started growing at the same time as people like Poundland, 99p Stores and Home Bargains started to open multiple stores,” says MD Majid Hussain, who runs the Blackburn business with brothers Wajid and Mozam (Jawid has stayed on as chairman). “As they’ve grown, we’ve grown. Now we’ve started opening up new routes to market. We’re saying to people if they don’t want to buy the most expensive product they don’t necessarily have to go to economy.”
Soon that philosophy won’t just apply to toilet roll and kitchen towels. Next January, it is opening a £12m new factory as part of a £30m investment in the business aimed at attracting more own-label contracts with the supermarkets. The new factory will not only help Accrol boost sales past the £100m mark by 2014, says Hussain. It will also enable Accrol to enter the Kleenex-dominated facial tissues category, which Hussain sees as ripe for exploitation by value offerings.
Whether toilet rolls, kitchen towels or facial tissues, Hussain is adamant where the opportunities lie. “Growth will come from private label,” he says. “Five years ago our business was 10% private label and 90% brands. Today our split is perhaps 70% private label and 30% brands.”
This is perhaps surprising given the ground the brands have taken from own-label in the past year [SymphonyIRI] after years of own-label growth. But, insists Hussain, by investing in its products Acrrol has bucked this trend. “We can now do more than 10 different types of patterns and inlay different colours into those patterns,” he reasons. “Most of the competition can only do one or two. It doesn’t necessarily give us more income but it opens up new routes to market by offering something different. There are other value-added things we can do. One of the most popular ones is a talcum powder fragrance, and lemon-fragranced kitchen towels can work well too.”
Ambitious maybe, but it looks good on paper.