Despite the government's best efforts to rebalance the economy toward exports and capital investment, our prosperity still overwhelmingly relies on consumer spending. And there are a lot of ways to measure the strength of shoppers: multiple confidence surveys, retail sales reports and various calculations of net worth.
But maybe the most intuitive indicators are the sales trends for simple, everyday products, the basic necessities of life.
Like toilet paper.
It's a surprisingly sensitive economic area. And the success of new premium bath tissue, along with an increase in demand, suggests that people are feeling confident enough to open their wallets and upgrade their bathroom experiences.
A shift from one-ply to two-ply (and now three-ply) may not seem significant. But to ignore it is to miss an important point: Because people are literally flushing the money they spend on these products down the toilet, spending habits in this very personal area can reveal important clues about the financial health of shoppers. And that reflects on the growth potential for the economy and the stock market as a whole. It all depends on how the roll turns, and it's definitely turning.
Off the low and on a roll
According to RISI, an industry research provider, industrywide tissue production is up 13%, thanks to improvements in demand, after plunging in late 2008 and early 2009. Factory-capacity-utilization rates are also moving higher again.Overall, bath tissue has been the fastest-growing paper sector in North America for the past 15 years, a distinction that looks set to continue.
Click graphics to see interactive charts
Procter & Gamble
Kimberly-Clark
But now innovation is moving the other way. Thanks to this bounce-back in consumer interest, companies such as Procter & Gamble and Kimberly-Clark (KMB, news, msgs) are increasing their focus on new products and marketing to win the dollars of consumers moving up to higher-quality items like moist wipe tissues. Such small luxuries are the first steps up for people who are becoming more optimistic as they exit the dark recessionary mindset that has preoccupied so many of us over the past three years.
The trend isn't narrowly focused on toilet paper but includes many other personal-care paper products. You might have seen Kimberly-Clark's TV spots for its new Kleenex hand towels, which are designed as a more sanitary way to dry your hands in the bathroom. Kimberly-Clark's Huggies diapers now come in a denim-look material, while Procter & Gamble's Pampers are thinner and more absorbent with the debut of its Dry Max technology -- which P&G calls its biggest innovation for the Pampers lineup in 25 years.
A brand of toilet paper, though, was the hottest new product of 2009, according to the Symphony IRI Group, a marketing research firm. The honor of best new nonfood consumer launch went to Georgia-Pacific's new Quilted Northern Ultra Plush bath tissue, the first three-ply product in the United States.
Over the past 15 years, less than one-quarter of all new consumer-product brands have exceeded the $7.5 million one-year sales hurdle IRI requires to earn "pacesetter" status. Georgia-Pacific's new toilet paper earned nearly $125 million in its first year, outpacing second-place Tide TotalCare detergent by $56 million. The latter's claim to fame is its ability to help keep clothes looking new for longer; Quilted Northern Ultra Plush is all about comfort.
A Georgia-Pacific vice president, Andrew Towle, acknowledges that "a lot of skeptics, both inside the company and out, question if it was the right to launch this ultrapremium product." But, he says, the traction it has gained indicates the strong desire for affordable indulgences in even the worst of times.
Continued: Loyal to their tissue