Company debuted in this segment less than six years ago
06/02/2023
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Luis Bueno — Foto: Celso Doni/Valor
Suzano, the world’s largest producer of market pulp, has just achieved another top spot on the segmented podium of the pulp and paper industry. With the acquisition of Kimberly-Clark’s tissue assets in Brazil, completed Thursday, the company has become the leader in the domestic toilet tissue market less than six years after its debut in this segment.
“This development shows the ability of a large company to generate new business internally, which is unusual,” Luis Bueno, the executive in charge of consumer goods and corporate relations at Suzano, told Valor.
The Brazilian company, which arrived in this market in 2018, was already the leader in the North and Northeast regions. Kimberly-Clark was the leader in the Southeast. According to the latest Nielsen reading, from March and April, the combined share of the two companies in the country reached 24.3% by value, two percentage points ahead of the second-placed company, Softys, onwed by the Chilean group CMPC.
The deal, closed for $175 million as initially expected, adds to Suzano’s portfolio the iconic Neve brand and a 130,000-tonnes-per-year plant in Mogi das Cruzes (São Paulo), among other assets.
Prior to the acquisition, the company had five tissue mills (including napkins and towels) located in the North and Northeast States and in the state of Espírito Santo, with a capacity of 150,000 tonnes per year. Now, the consolidated production capacity reaches 280,000 tonnes per year and 1,000 employees are incorporated to its staff.
With the new industrial unit, Suzano is strategically positioned to compete in the Southeast, the largest tissue market in the country, and to expand to the South. “We had not prioritized the South until now, but it is possible to reach that market with a plant in São Paulo. And there is an important growth opportunity there,” said the executive.
A personal care production line located at the KC plant in Camaçari (Bahia) will be dismantled and transferred to one of the plants in Suzano, which has yet to be chosen. The transfer is expected to take place in the first year after the combination of operations.
In addition to geographic complementarity, the acquisition brings portfolio gains. Suzano now has three toilet paper brands – Neve (premium), Mimmo and Max Pure – in the domestic market and with different price positioning. In napkins, there will be three brands: the regional Scala and Scott, which is also used in paper towels, and Grand Hotel.
The deal included the licensing of KC’s global brands, such as Scott, Duramax and Kleenex, which will continue to be sold domestically. According to Mr. Bueno, the synergies generated by the integration of the assets are still being worked out. But it is clear from the outset that production will be closer to the end user.
Suzano was KC’s pulp supplier and the tissue unit will continue to buy raw material from the company at market prices, said the executive.
Last year, the Brazilian industry produced 1.41 million tonnes of tissue, an increase of 6.7% compared to 2021, and 97% of this volume was sold internally – in hygiene papers, profitability also depends on proximity to the consumer.
Installed capacity still exceeds demand, and the industry is more fragmented than in other regions, which has stimulated new rounds of consolidation and increased margin pressure on competitors that do not have integrated pulp production. The growth potential, in particular, has attracted new investors to the market, as it did for Suzano.
According to Mr. Bueno, per capita consumption in Brazil is still around 7 kilos per year, while in Argentina and Chile it is between 12 and 14 kilos per year. In mature markets such as the United States and Europe, per capita consumption is as high as 25 kilos per year. “There is still a significant opportunity for growth, even to reach the levels of our neighbors. This growth is related to the GDP and to the progress of sanitation,” he said.
Another trend in the country is the migration of consumption to two-ply and, more recently, three-ply papers. This is a characteristic of the Brazilian market that is here to stay, Mr. Bueno said.
Suzano unveiled plans to invest R$600 million in a new tissue mill in Espírito Santo, owned by Aracruz, but the project is still subject to approval by the board of directors.
*Por Stella Fontes — São Paulo