This virtual webinar was held June 23, 2020.

Moderated by Jonathan Roberts, conference chair and content advisor for Tissue World, the panel included Kim Underhill, group president of Kimberly-Clark North America; Brian Allen director of cyber advisory services for EY, USA; Udaiyan Jatar, founder of Blue Earth Network, USA; and Ivo Kool, senior product development manager, tissue, paper, nonwovens for Sam’s Club, USA.

Roberts began the session by noting the panelists all came from North America. “That’s not a coincidence,” he noted, “As this event was born out of Tissue World Miami, which was postponed from March and is due to take place in November of this year.”

Roberts then posed the larger question, “How is the tissue business responding in this extraordinary time?”

“What an interesting time to be in the tissue business,” commented Kim Underhill. “It certainly has taken the spotlight in the media around the heavy consumption.”

Underhill noted that there are three main areas that have been both challenging and required significant leadership: “One being, first and foremost, the safety and well-being of our people and keeping our mills running, and so we quickly moved into implementing safety protocols — masks, social distancing, temperature checking and the like. A lot of factories had to shut down and our goal was to keep it running. 

“The second challenge was the unprecedented demand,” said Underhill. “There’s lots of theories about why all of this hoarding of bathroom tissue, and why bath tissue and towels versus other categories. I don’t know that there has been a clear explanation other than people feeling like they needed a little sense of control. And all of a sudden something we take for granted in North America became something you could not imagine life without.

“So, the demand escalated very fast and the challenge became we were just out of stock, and it wasn’t just Kimberly-Clark, the industry was challenged because of the increase in demand, and frankly, we still see that, particularly in the U.S.

“The last challenge was how can we work with our retail partners to fix the supply chain. When you have this surge in demand, it really does test the supply chain and opens cracks in the whole supply chain. Whether it was materials coming in to produce or in the early part of the pandemic when we reached an inflection point where the problem was distribution — not enough trucks, not enough slots in the warehouse. It was just about getting product out. And as time went on, we realized there were parts of the supply chain we had to rework because it had never seen such extreme and really quick consumer demand, which opened up a lot of challenges, but also a lot of opportunities in thinking about our supply chain going forward.”

“From the beginning of March to the end of April I’d say the purchases almost doubled and then slowly went down to about half,” said Kool of Sam’s Club. “So, our real issue was we sell a premium tab product for bath tissue and towel. We’re very committed to what our members want. We do a lot of research within the membership and we were not going to change that product.

“So, our vendors who supply us for our private brands worked with us. We managed to hit capacity, but luckily for us, we all got sent home the second week in March. We have a very efficient team of merchants and replenishment. Our merchants scrambled to get brands, our replenishment people were unbelievable. We basically went from delivery into the club to manually ordering and manually saying where product had to go to maintain supply evenly through our whole system. It was quite amazing. A couple of trucks would arrive, we’d unload them and the product would be gone within an hour or two because people would get on the phone and say, ‘Hey, it’s in town!’ And off everyone would go and buy it. 

“I think one of the biggest deals was figuring out when people replenished their supplies. We sell five nine packs in one large pack and I’m sure that people waited until they broke into the last pack. I have a feeling now people are buying when they hit the second pack just to make sure that they’re not out.
“But I really have to say for our private brand business, our vendors supported us unbelievably well. I mean, everyone pulled out all stops. I’m sure people stretched out maintenance downs. They pushed their equipment. We’re leveling out now, but it was unbelievable what we went through.”

Roberts then asked Jatar of Blue Earth Network how industries beyond tissue responded to the pandemic. 

“The big companies did a really good job, the best processes I’ve seen. They’ve done a really good job about keeping communication going, building public trust and managing personal health and business health. They helped their stakeholders navigate through the confusion of what’s safe, what’s not safe, do you wear a mask or don’t you wear a mask. Their trust-building has actually helped those companies bring their customers and consumers back to their stores and their offices because the empathy and trust-building communicated that they were not going to be cavalier about how they opened up and when they opened up. And I saw that their revenues were up higher than that of their compatriots in the same industry. Trust-building and empathy are pretty important.

“The second thing is while I know we are talking about COVID, we have to consider what happened with the Black Lives Matter movement and the big gaps between the haves and the have nots, there’s a big gap between how some Americans are being more exposed to COVID versus other segments of society.

“Words are not enough, and there’s a greater tendency to take action now more than ever before. And what I’m finding is, the best organizations are really taking action, supporting their employees, whether it’s with childcare, flexibility in hours, salaries and developing diverse talent. And there are opportunities for companies to say we want to be the most diverse and have the best talent and extending their support to Black people. There is a combination between COVID and the Black Lives Matter movement.

“And lastly from a classical business standpoint, there’s a push to develop innovation — especially among the smaller companies, they are innovating product and the supply chain. They are looking through the lens of the future, when people are going to expect more transparency in the supply chain, when they are going to expect more justice in the supply chain, they are going to expect new technologies that will address health and sanitation. These companies are innovating from the ground up rather than fixing legacy systems. Because of the crisis, there’s more flexibility from investors in expecting ROI and when they expect ROI to come out. And investors are starting to be a little more long-term oriented.

Roberts then turned to Brian Allen and asked about the kinds of cyber security issues companies and employees are facing during this period of working remotely.

“We’ve definitely seen a ballooning of threats,” said Allen. “Which is fairly typical when criminals see a fresh opportunity. And it’s coming from organized crime and different state actors. We are all working in a different environment and the biggest weaknesses we’re seeing is employees not being aware of threats.

“One, we have to recognize we are working in a different environment. Two, the actors are very complicated. They are getting very good at their game. We’re seeing very complicated phishing scams that are campaigning to exploit different vulnerabilities — they are offering PPE, they are offering advice from WHO and different doctors, they are exploiting e-commerce, whether it’s offering links to track a package or offering legitimate medical advice, but when you click through to access that knowledge, it’s leaving behind malicious software.

“We are clearly seeing different geographies being hit, so as Italy was dealing with the crisis, they were targeted, and now we’re seeing different regions of the U.S. being targeted, and they are definitely targeting certain sectors, like medical advice and pharmaceuticals. 

“But the threats in cyberspace have been trending beyond just information and starting to trend into industrial control systems and manufacturing production systems. And we’ve definitely seen that speed up.

“So, some best practices are acknowledging that we are in a different environment and training out these risks in people differently as specifically and as granularly as possible, based on their practice. One of the things that we are seeing is security firms are keeping executives better informed about these risks so they can find the right balance between risk and reward so we can better maneuver in this new environment. And that information about risks needs to come a little more timely and a little bit more in-depth.”

The discussion moved on to the positive lessons taken from the coronavirus crisis. 

“There has been an awakening,” said Jatar, “of an awareness of the systemic failures of our economy and our society that were inherent even before the COVID crisis. A crisis tends to shine a spotlight on your weakest connection, and some of them have been short-termism in the management of culture and gender across all kinds of organizations, from nonprofits to profits. There’s been an awakening of appreciation for part-time workers that we didn’t see before. And then from a more practical standpoint I find there’s a greater appreciation of the changes that come about by remote working, from improved communications to greater sustainability in work surroundings and a greater appreciation for our human ability to connect online through Zoom and other platforms and collaborate.  

“Now, because of the way we connect, you have to listen to one voice at a time and that allows some voices who might have not been heard to participate in a greater way. Organizations are taking advantage of social distancing and remote working to develop bigger and better ideas and better processes through collaboration.”

Underhill: “This crisis has been a gift that has given us an opportunity to accelerate some changes we have wanted to do for a very long time.  I’ll give you an example internally and externally. 

“Internally, in the tissue business you have high cost of capital, fixed costs absorption is really important, SKU management is very important, so one of the things we have learned that will be a lasting impact is SKU simplification and in some of our businesses we have cut SKUs by over 70% and that has enabled us to get 15 to 20% improvement in capacity and when you have highly expensive assets, that’s unrealized capacity that now sits within our system. And it takes a long time and you have this ongoing debate between the marketing organization and the replenishing organization as to how to handle SKUs. We were forced to because the demand was so high that we had no choice but to make some difficult choices. And we found that those choices weren’t so bad after all. I see that as sort of a mind-set shift going forward. 

“The external example I would give is something we’ve talked about. I don’t think any of us would have said we could hold our business together while working from home for over three months now. But we have. It’s changed the way we connect. I’ve heard people talking about how we’re more engaged, more accessible, and we’ve got the perspective of those who love and those who hate it, depending on your personal situation and your work environment. 

“The positive thing is rethinking the way we work for the next generation. The next generation wants more flexibility, they want to work when they want and where they want and I believe this with its visibility in the office, hours in the office, and that’s completely reframed by this whole experience of that’s not important anymore. And it’s much more focused on the outcomes and how people are working. I’m very excited to see how we carry this forward, and I’m just going to say we’re not going back. We will definitely have much more flexible arrangements for our employee base, particularly our staff operations in the future. We just have to figure out how to do it. We don’t have the answers yet, but we are definitely not going back to where we were on March 12th.” 
Roberts: “Did Sam’s Club reduce the product offer to make sure everyone could get what they needed?”

Kool: “Basically, the club is a pallet-driven business. So, we had probably already reduced SKUs. We carry our private brand and then we carry a few other branded products, but in truth where we changed was we offered different sheet counts. We had a larger roll and a smaller roll, and we reduced that to a single SKU and that was more to enable our suppliers to be more efficient in how they were running. But we’re a limited- SKU business anyway. You know if you talk to Walmart or one of those guys, they really are looking at limiting the number of SKUs. But we were already there.” 

Roberts asked what transformations the future might have in store for us in the wake of COVID-19 in terms of consumer behavior, trends and business operations.

“I think we’ll see a more holistic approach,” said Allen. “Rather than looking at risk management as different silos, such as crisis management, information security or business security, we’re seeing a lot of alignment in risk practice, so aligning ERM, IT risks, security and cyber risks to be more coordinated as we move through digitalization. 

“One, there’s tremendous overlap in these practices. Two, there are great benefits in getting consistent and timely reporting. And three, we’re really starting to see that these risk assessments need to go deeper into the organization, and some of that is being driven by digitalization. And the demand and speed of digitalization is so significant that the risk practice, whether that’s cyber or IT risk or their overlap, needs to be provided to business leaders throughout the organization so they can continuously make risk-based decisions throughout the whole business with knowledge of what comes behind that.”
Roberts: “What changes in consumer behavior are likely to be most impactful and most enduring in the wake of the crisis?” 

Jatar: “We talk a lot about B2C, business-to-consumer, but I think we are lot more C2B, consumer to business, now, with consumers telling us through their online behaviors and research what values matter to them. In this demonetized world, companies have to offer something more than product features and attributes to distinguish themselves. They need to come up with an X-factor that transcends their competitors.

“The areas I’m seeing companies recognizing that consumers and society want a lot more out of business than just business. They expect businesses to be a part of the community. So, organizations that are taking the lead and engaging with Black Lives Matter are also businesses that are creating more equitable feelings for their employees and their customers. There are a couple of value areas where I’m seeing organizations really starting to build a relationship with the B2C and C2B interconnection to really differentiate themselves. But they need to translate those values into action. I think transparency is going to be the big trend going forward because in the digital world there is no place to hide. The companies that take the lead in transparency and build trust will get ahead of their competitors.”

Roberts: “What role does tissue play in a positive human future?”

Underhill: “All of us are going to become more conscientious, aware and concerned about cleaning and germ control, whether that’s on your person, your automobile, your home or your office. So, I think this is a great opportunity for the tissue world to not only think about our products today, but where we can invent and create innovations that can actually protect at a greater level of confidence. 

“I suspect that innovation is going to take a pathway that’s going to allow all of us to really gain confidence in protecting ourselves, our family, our environments more so than ever before. Companies that can invent in this space and create a point of differentiation with real tangible, clinical evidence that you can prevent germs, I think that’s going to be a significant opportunity for the tissue industry.” 

Q&A Session

Roberts: “Kim, can you tell us a little about the relationship between at home and away from home tissue and how businesses have responded to changes during the crisis?”

Underhill: “We definitely have seen some companies that have been able to move between away from and consumer tissue. Typically, you will see different product specs that are quite different depending on whether it’s a towel product or bath tissue or facial tissue. For us at Kimberly-Clark we were able to navigate pretty well in terms of moving product across different assets. Not all assets are completely flexible, but we do certainly have a piece of it. And certainly, as we saw everyone come home and work from home, the demand on the consumer side took off and he demand on the business side actually dove quickly, but we expect that to come back as societies and communities start to reopen. 

“I think the biggest challenge which will be something to think about going forward is that while it’s easy to have assets that can easily move between businesses, you have to be prepared with your finishing supplies. A lot of times that supply chain takes weeks to get ready, so as you think about contingency planning, it is about making sure you have the right finishing supplies in the right spaces and the right locations to be able to take advantage versus an easy switch. Fortunately, we had done quite a bit of that, so we were able to move very quickly. It was another lever in our ability to be able to deliver the demand. If you look at the bath tissue category, it is up 30% year to date. And at its peak, in that March to April time frame we were seeing demand increases of upwards of 50%, so we looked at sorts of levers to really pivot because the demand was far outweighing the supply at that moment in time.” 

Kool: “We do sell away from home products, not as many as we do for branded and private brand products. One of the things we did see is people were willing to pick up, if there was no premium-quality product, they were willing to pick up an away from home product and use it. 

“We’re big in the copy paper business and envelopes and those things, and what we’ve seen in that business is the capacity has dropped about 40%. We’ve seen a lot of machines that were out buying pulp shut down, they’re curtailed, don’t know if they’ll ever come back. What that’s done is a strange thing because you don’t have any more business waste because everyone’s working from home. So now office waste is not available to the recycle mills. They’re never going to use low-quality waste on those machines — it would be full of stickies and they’d be in big trouble. 

“So, what I think happened during this three-month period is you saw the business machines, coated paper, copy paper, forms bond — those guys actually shut a whole lot of machines down. A lot of the away from home machines were switching over to virgin pulp and in a way this thing self-balanced.

Because half the market of virgin pulp is business paper, the other half is tissue. So, you actually had a lot of the players who were virgin pulp purchasers not integrated mills, integrated mills actually shut down, which allowed pulp to be available for the tissue mills. 

So, we didn’t see a huge spike in prices. That was one thing we were worried about at the beginning — if everybody starts buying virgin pulp, were we going to go through one these huge upswings in pulp prices. It’s funny because it’s actually level or a bit lower. I think the issue is going to be all these away from home mills running recycle — are we going to see people going back to the office or are a lot of people going to be staying home? If they’re staying home, we’re not going to see a whole lot of office waste out there and what office waste is there is probably going to go way up in price, so actually you’re better forming virgin pulp. There’s one mill in Mississippi that actually shut down their recycle plant and they’re just buying virgin pulp. 

Roberts: “Do you think it’s going to move more toward the virgin pulp or do you think recycle is going to still play a strong part?”

Underhill: “For the right product former, I think recycle will be an important attribute, as Ivo said. Demand for the recycle side is probably going to be a concern as we all continue to spend a lot of time at home and I think for the foreseeable future in the U.S. that’s going to be the case. In a broader sense, we’re absolutely committed to sustainability and recycle fiber is a big component of that. But at the end of the day, it really comes down to the specs by brand and by category that we’re looking to drive, so I suspect we’ll continue to pursue. 

Roberts: “UJ, can you tell us how industry has reacted to e-commerce?”

Jatar: “I think there’s definitely been a boost, as any industry that can ship anything has been shipping more than ever before. Most companies thought at some point the crisis is going away. So, they did a short-term fix to the problem, thinking that at some point we would return to the old normal. It’s becoming clear, however, that is not the case. And even if it does change, it’s going to look very different than it did before. What organizations are trying to figure out is how do we adapt our online customer experience. Yes, we can make it easier for people to research and shop and buy online, but that whole experience brings a new player in the mix. How can brands take control of that whole experience like they did in the past. So, there’s a lot of work being done to focus on that online customer experience.” 

Roberts: “Attracting talent, is that going to be different and is it going to be a bigger challenge going forward?”

Allen: “With remote working and the skillsets aligned, I don’t think there will be this dependency on being near major metropolitan areas where a lot of the clients are. To me, that has opened up our capability to look at what skillsets do we need without looking at geographical restrictions. Clearly there is opportunity to work remotely and there are times when you just can’t. One thing that is really uncertain is, what stays at the end of this crisis? We may be through one component of it, maybe halfway, but if we listen to the CDC and WHO, we are likely to see another wave and that’s if things go right. So, there’s a lot of learning that’s going to happen moving forward and at the back end of this we’re going to see a different type of economy. The expectations are going to be different. We’ve gone through crisis, sustaining crisis, and everybody’s focused on transformation and the opportunities are just magnificent. It takes a lot of risk and forward-thinking, but I think you’re going to see a lot of geographical distribution among employees.”  

Underhill: “The tissue industry has not been the most visible or glamorous to the next generation of talent, but there’s been something that’s really cool that’s happened and that’s it’s a phenomenal need and there’s an element of being stable and ongoing growth that I think has reinstituted interest in the tissue industry. I think we will be more flexible in the future; we just have to figure that out. A marketing job could be almost anywhere; an R&D job, not so much, where you need to be in and be able to run trials and build prototypes and things like that. So those are all the things that we’ll have to consider going forward. 

“But I think this industry has now become incredibly attractive. The excitement and innovation that can take place around germ control and managing different aspects of this in the future is a huge untapped opportunity for this industry to reinvent and really create value going forward. More so than it has been defined in the past, so I think the scope of how you think about this industry is well beyond just the product, it’s about the benefits we offer to consumers, whether you’re in home or not.”
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