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Essity (formerly SCA Hygiene)

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Essity was formed in 2017 from the demerger of the hygiene products business of SCA, or Svenska Cellulosa Aktiebolaget. SCA is one of the world's biggest manufacturers of products derived from wood-pulp. Although a sizeable proportion of its revenues still come from paper and solid wood products, it was for years best known for its SCA Hygiene division, now Europe's leading tissue and kitchen towel manufacturer and the main international rival in paper-based products to Procter & Gamble and Kimberly-Clark. Hygiene had grown to become SCA's biggest business by the mid-2010s, generating more than 80% revenues. The group had boosted its global operations through a series of acquisitions, of which the two biggest have been the purchase in 2007 of P&G's tissue business in Europe, comprising the Bounty, Charmin and Tempo brands; and of Georgia-Pacific's local operations in 2012. There have also been numerous smaller purchases in Latin America and Asia. In 2017, SCA Hygiene was spun off as a separate company under the name Essity.

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Competitors

Main competitors are Kimberly-Clark, Procter & Gamble and Sofidel. See Personal Care Sector and Household Care Sector for other companies.

Brands & Activities

SCA Hygiene is structured as two groups. SCA Tissue is Europe's largest supplier of consumer tissue, and the world #3. The group produces a range of products including toilet paper, kitchen rolls and handkerchiefs both for the consumer market and in the trade or Away From Home (AFH) sector. Its biggest brand is Tork, the top-selling hygiene tissue across Europe and now a growing force in North America, with combined sales of over €1bn. Covering a wide range of toilet paper, towels and soap dispensing systems, it is sold primarily in the AFH sector. In 2016, the group acquired US away-from-home manufacturer Wausau Paper for $513m. At the end of the year, it also agrred to acquire BSN Medical, a German manufacturer of bandages for €2.74bn. Brands include Leukoplast, Cutimed, Jobst and Actimove.

Zewa is one of the leading consumer tissue brands in Germany, and the top seller in Russia and other Eastern European markets, also sold in toilet paper and kitchen towel forms. Other important brands include Tempo facial tissues in Europe, and Edet toilet paper and kitchen towels in Scandinavia. Danke is the leading recycled paper tissue brand in Germany.

The group's leading toilet paper brand in the UK is Velvet, supported by Cushelle - the new name for the old Charmin brand acquired from P&G. IRI (in The Grocer) estimated supermarket sales of £113m for Velvet in 2016 (ye Nov 2016) and £57m for Cushelle. Combined market share was 20%, well behind market leader Andrex. P&G's Bounty kitchen towels were relaunched in Europe in 2009 under the name Plenty. This is the branded market leader in the UK, with sales of £95m, equivalent to around 25% share, in 2016.

Sitting behind these brands is an extensive collection of other local brands including Sorbent, Purex and Laddee toilet paper and towels in Australia & New Zealand; Vinda in China (the group acquired majority control of that business in 2013); and a large collection of different brands including Familia, Regio and Nevax in Latin America. The group is also a major producer of own-label tissue products for retailers. Private label accounted for more than half of total revenues.

The business expanded even further with the acquisition in 2012 of Georgia-Pacific's extensive portfolio of European brands for €1.32bn. Combined sales were in excess of €1.2bn. As a result, SCA becomes the leading marketer of paper tissue and towels in France (with Lotus and Moltonel toilet paper and O'kay kitchen towels), in Spain (with Coholgar toilet tissue). Other brands include Tenderly paper towels (in Italy), Embo toilet tissue (in Finland) and Delica paper towels towels (in Greece).

The addition of Georgia-Pacific increased SCA's share of the European consumer tissue market to 35%. Its main rivals are Sofidel of Italy (with 12% share) and Kimberly-Clark (11%). However it was obliged by competition regulators to sell on the acquired operations in the UK & Ireland, including Nouvelle and Kittensoft toilet tissue and Thirst Pockets kitchen towels, and as well as Lotus in Benelux markets. The buyer was Sofidel.

Combined external sales from tissue products were SEK 64.18bn (€6.8bn) in 2015. The group indicated in late 2016 that it is considering a plan to spin off the entire SCA Hygiene as a separately traded public company in 2017.

The tissues business is partnered by SCA Personal Care. The lead brand in this business is Tena, the world's #1 incontinence protection product, with sales in excess of €1.1bn. That business has been expanded through local acquisitions including Pro Descart and San Saglik incontinence products in Brazil and Turkey respectively. The group is also the European #3 in baby diapers behind P&G and Kimberly-Clark, and #4 worldwide. Its lead brand is Libero, the top-selling diaper in Scandinavia, with more than 60% market share across the region (and over 80% in Sweden and Norway). It is also active in other part of Europe (with Up & Go), South Africa (Cuddlers), Asia (Drypers and Sealers), and in parts of South America (with Pequenin and Copamex).

SCA is also the market leader in feminine sanitary protection in the Nordic region, and a major player in other European and Asia Pacific markets with brands including Libresse, Libra, Nana, Nuvenia and Bodyform. The Georgia-Pacific deal added Vania sanitary towels and Nett tampons in France, as well as intimate lubricants under the K-Y brand (licensed from Johnson & Johnson). SCA's sanitary brands are marketed in South America under the name Nosotras. Combined sales from personal care products were SEK 34.34bn (€3.7bn) in 2015, of which just over half was generated by incontinence products.

Other forest products, including paper and solid wood items, accounted for SEK 17.3bn in 2015. The group has been gradually selling off its remaining packaging, paper and pulp operations in order to focus more narrowly on consumer products.

Financials

Net revenues for 2015 were SEK 115.32bn (€12.3bn), up 11% on the year before, or 5% excluding currency inflation. Net profits rose 6% to a record SEK 8.75bn (€933m). The group's single biggest market is Germany, which contributed 12% of total revenues in 2013. It was followed by France, the UK, the US and Sweden. Europe as a whole generated 73% of revenues and North America 11%.

Background

The group was founded in 1929 through the merger of ten separate Swedish forestry companies to form a single business. For the next 45 years it focused its attention on the production of wood pulp and newsprint, before taking its first steps into the personal care sector in 1975 through the acquisition of Swedish marketer Molnlycke, which had first introduced disposable pulp-filled diapers in Sweden in the 1950s, and then controlled the Libero and Libresse brands. In 1980, the group established a presence in Latin America by acquiring an initial stake in Mexico's Sancela, which became the platform for further expansion in that region.

The purchase of Germany's PWA, makers of Zewa, two decades later established SCA as the largest producer of personal care products in Europe, and subsequent deals built a strong position for the group in Australia and New Zealand. Two of its most significant deals to-date came in 2007 with the sale of its packaging operations in North America and the purchase of P&G's Tempo, Charmin and Bounty brands in Europe for $671m. It has continued to widen its presence, especially outside Europe, with strategic regional acquisitions, including in 2009 Algodonera Aconcagua, one of the largest players in feminine care in Argentina.

Last full revision 29th September 2016

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