Renova Case - Portugal

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The Renova Case
Team 5, Section C
Bernardino Colonna, Rishi Shroff, Gianfranco Capobianco, Melissa Barnett &ShuLiYeh

1) Which are the key factors that consumers consider when purchasing toilet paper? The key factors considered by consumers when purchasing toilet paper are quality and price. In fact, the toilet paper industry in Western Europe is segmented based on these two key factors. In the Portuguese toilet paper market, 60% of customers find price the most important attribute when buying toilet paper, 30% find quality the most important determinant, while 8% mentioned the brand and 2% the format. For those who viewed quality as the most important characteristic; the three most important attributes of the product are softness, strength and absorbency. 55% of Portuguese customers mentionedchecking the price of the toilet paper on the shelves before purchasing, while 35% said they do not check the price beforehand.

2) Analyze key competitors in this industry.
Renova operates in the disposable paper products industry of which it occupies 1% share of the Western European market and a 17% share of the Portuguese market. This industry is broken into the disposable tissue and hygiene products categories. Renova is a player only in the $13b disposable tissue sector, which includes toilet paper, kitchen towel rolls, facial and pocket tissues and napkins. The tissue market has been suffering from anemic growth of 2.4% per year for the last three years in Western Europe and even slower in Renova’s home market of Portugal. The sluggish sales across Western Europe and Portugal are directly related to stagnant customer population growth and market saturation. The toilet paper market in Western Europe is highly commoditized, has sluggish growth and generally lacks innovation. Renova is in direct competition with large consumer goods companies, multi-national paper companies and major retailers both across Western Europe and within Portugal. Its major competitors in Western Europe are behemoths P&G and Kimberley Clark who constantly pose a major threat due to their size, global reach and ability to invest money in marketing their international brands. Also present are giant paper companies Georgia Pacific and SCA. The third major competitors are major retailers such as Carrefour, Lidl and Tesco, who were once just customers of Renova are now also competition due to the growth in the private label portion of the disposable tissue market; this ads a further twist to the structure of Renova’s market as retailers are virtually their sole customers.

In Portugal,where toilet paper growth has been 1.5% per year over the past three years and is expected to grow at the same pace for the foreseeable future. Renova, who hold a 35% share of the disposable tissue market and a 34% share of the toilet paper market,faces a different set of retail competitors than it does in

the rest of the European market. SonaeDistribucao and GrupoJeronimo Martins are two of the biggest retailers in Portugal. Another relatively new competitive threat comes from hard discounters whom are present and gaining share in the Portuguese disposable tissue paper market as well. Retailers and their private label make up 33% of the Portuguese toilet paper market while Renova maintains a similar market share. Retailers that sell private label tissue products pose a significant risk to Renova. Not only due to the fact that they are a customer of Renova but they maintain complete control of how they sell their own products to retail customers. This could put Renova at a big disadvantage when trying to sell their product through these channels. Private labels are the fastest growing segment in this market thanks to their superior quality/price ratio. The threat of new entrants in the Portuguese market are looming with companies such as Sofidel and Tronchettti, two medium sized European paper producers who are rapidly expanding in Spain and other neighboring countries....
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