Low-Priced Paper Products Prevail — But At What Cost?
The recession has affected the earning, spending and savings habits of American consumers. So it should come as no surprise to anyone in the cleaning industry that the economic downturn has also changed the purchasing habits of businesses, institutions and facilities as well; all have become much more bottom-line oriented.
When it comes to tissue and towel paper product purchasing, building service contractors are finding that their customers don’t care as much about quality as they used to. As long as the products can be purchased for a low price, that’s what truly matters in a time of recession.
“We’ve seen it go from people wanting the most expensive, nicest towel they can find, to, today, people are turning around and saying that they don’t care; they’re looking at costs and whether it’s green,” says Neil Matthews, vice president of operations for PMM Companies, Rockville, Md.
Green products may be providing the only financial silver lining right now, as they seem to be the only place customers are sacrificing dollars, in order to meet environmental mandates or preferences.
Matthews compares the demand for green with a bell curve: it started off slowly, then got really big, piquing the interest of the industry and the public and providing an informational platform for BSCs. Now it’s required in some buildings, and customers have accepted green as mainstream and the buzz has subsided.
“I would say a majority of our business is now green as far as paper is concerned, because that’s what they’ve been asking for,” he says.
Customers Want Cheap
In 2009, building service contractors experienced customer cuts across the board, from reined-in specs to reduced frequencies, which largely affected labor costs first. It was a tumultuous year for many BSCs, who struggled to provide adequate services in an environment in which facility managers were demanding more for much less.
This year, with budgets still tight, customers have become more open to working with their contractors on calculated budget-friendly solutions rather than knee-jerk reactions, says Rafael Perez, owner, Mexfil Hotel and Building Services Inc. in Houston. The emphasis this year is on further cuts, he says.
“We’ve already made all the labor cuts we can make,” Perez says. “Paper, plastic and chemicals are the last on the list, and we’re there now, everywhere.”
The recession has undoubtedly driven the purchasing criteria to the least denominator of cost, says George Abiaad, president of Royal Paper Corp., a jan/san distributor based in Santa Fe Springs, Calif.
Spending cutbacks on paper products are happening at many levels, he says, whether it’s switching from white to kraft or reducing paper density.
“Some companies still look at value and the overall impact of a product that can bring better results or cut their label but most cleaning contractors are pressured to lower their overall charges, including supply cost of goods,” Abiaad says.
Even Perez’s highest-end customers are cutting back on amenities while trying not to sacrifice quality. Rather than switching to less expensive alternatives, one four-star hotel is shrinking the size of its luxurious towels as well as removing its insignia, which has graced the towels for years.
While some end-users’ purchasing decisions are extremely price-driven, even more have become focused on value, says Jeff Heeren, vice president of marketing for RJ Schinner Co., a redistribution wholesaler in New Berlin, Wis.
“They are still looking for quality, and they’re looking for that at a reasonable prices,” Heeren says. “What the supply chain is being forced to do is squeeze out inefficiencies.”
Rather than looking for the lowest quality at the lowest price, many customers have switched to private-label brands, he says, which are less expensive than brand name products because they have less marketing overhead.
“Brand recognition and the costs equated with brand recognition aren’t nearly as important as what’s inside of that box and how it performs,” Heeren says.
Get What You Pay For
Everyone’s looking to save money, says Matthews, but customers need to make sure they are balancing value with quality. It’s a shock to building tenants and occupants to switch from a high-end product.
“You can go with the lowest priced product in the marketplace, but if it isn’t a good product, you end up using more,” he says. “The perception is that occupants use more of it, therefore it isn’t considered as green as a better product.”
The intention to save money can backfire on a customer assuming that the only important difference in product choice is price. Cheaper paper is generally of a lesser quality, Abiaad says, which can translate to occupants using more, and increases overall cost for BSCs and customers.
That methodology can also backfire on a BSC, when it is charged with the responsibility of purchasing paper for its customers. In certain regions, such as the D.C. area, customers have included paper products in bids for years, making BSCs responsible for purchasing products that the customers find satisfactory. In the Houston area, this is a very recent trend, Perez says.
“In today’s bidding world, they want you to be all-inclusive,” he says. “They want you to commit and throw in the price (of paper products), then they specify the brand they want.”
Unless a BSC has locked in a price with its vendors, the price of products and fuel is likely to go up, and those increases don’t get passed on to the facility manager, Perez says. In a world where profits seem to keep shrinking, that is the last scenario a contractor wants.
“In the accounts where we have to provide it, I’m trying to save money and give them something comparable to what they ask for,” Perez says. “They’re not paying for a Mercedes, but they want a Mercedes, and I’m going to try to give them a Volvo.”
Vendors are responding to these market trends by providing ways for BSCs to pick and choose the best products for the needs of their clientele, mixing and matching products such as dispensers and towel and tissue types.
“Both manufacturers and distributors are developing comprehensive programs with interchangeable components that create enough freedom for the end user to retain the choices, cafeteria-style,” Abiaad says. “These programs are designed to be budget- and green-sensitive.”
Demand for green
With the preponderance of green cleaning legislation on municipal, state and federal levels, a good portion of customers will need to use green tissue and towels to comply with mandates. The traction of the green movement, however, is limited by economic realities, Heeren says. For example, most mandates allow an opt-out if green products are financially prohibitive.
Some private sector customers have a desire to use green products, which is in line with a value system or stance that is intentionally environmentally friendly.
To be considered green, towels have various standards to meet: whether it’s 40 percent recycled content or post-consumer fiber for the U.S. Environmental Protection Agency or 100 percent recovered materials and at least 40 percent post-consumer material for Green Seal.
It’s also important that green towels and tissues are made using a chlorine-free bleaching process.
Other green practices include reducing waste — through coreless towel and tissue rolls, reduction in packaging and use of touchless dispensers that control user amounts.
One thing is certain: the marketplace and subsequent purchasing habits will continue to evolve as green products become mainstream and competitively priced.
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