I read an article recently that described how the toilet paper industry is split into two, largely separate markets: commercial and consumer.
The pandemic has shifted the lion’s share of demand to the latter. People actually do need to buy significantly more toilet paper during the pandemic — not because they’re making more trips to the bathroom, but because they’re making more of them at home. With some 75% of the U.S. population under stay-at-home orders, Americans are no longer using the restrooms at their workplace, in schools, at restaurants, at hotels, or in airports.
Georgia-Pacific, a leading toilet paper manufacturer based in Atlanta, estimates that the average household will use 40% more toilet paper than usual if all of its members are staying home around the clock. That’s a huge leap in demand for a product whose supply chain is predicated on the assumption that demand is essentially constant. It’s one that won’t fully subside even when people stop hoarding or panic-buying.
The industry can’t just flip a switch. Shifting to retail channels will require new relationships and contracts between suppliers, distributors, and stores; different formats for packaging and shipping; new trucking routes — all for a bulky product with lean profit margins.
Toilet paper is a high volume/low value item. The industry runs on extreme efficiency, with mills built to work at full capacity around the clock even in normal times. That works because demand is typically so steady.
There is a concern in the world of toilet paper manufacture and distribution: If toilet paper manufacturers spend money now to refocus on the retail channel, they’ll face the same problem in reverse once people head back to work again.
“The normal distribution system is like a well-orchestrated ballet,” said Willy Shih, a professor at Harvard Business School. “If you make a delivery to a Walmart distribution center, they give you a half-hour window, and your truck has to show up then.” The changes wrought by the coronavirus, he said, “have thrown the whole thing out of balance, and everything has to readjust.”