As the coronavirus outbreak spreads, households across the country are hunkering down and emptying out store shelves.
Companies that help supply these everyday paper products are stunned and trying to adjust to this rapidly evolving new normal in consumer behavior.
They’re faced with tradeoffs. Many were already operating their manufacturing facilities 24/7 prior to the pandemic. Now, some are limiting their facilities to essential workers and contractors. It’s unclear, however, what they will do in the event that those workers get sick.
“If you ask me why everyone is grabbing toilet paper, I can’t really explain it,” said Tom Sellars, CEO of Sellars Absorbent Materials in Milwaukee, Wisconsin. His company is a processor and converter of paper and related products. “It’s not like we are suddenly using more of it. But the surge in demand could strain the supply chain,” he said.
Georgia Pacific, the maker of Angel Soft and Quilted Northern toilet paper, said that last week, some orders from retailers nearly doubled. The company managed to ship out 20% more than its normal capacity. And the American Forest & Paper Association, an industry group representing paper product makers, noted the industry is working hard to respond to the sudden spike in demand.
“Rest assured, tissue products continue to be produced and shipped — just as they are 52 weeks each year as part of a global market,” AFPA’s CEO Heidi Brock said in a statement.
But that doesn’t mean it will be easy work for the factories.
Toilet paper is made from one of two sources — virgin pulp from trees or recycled pulp obtained from materials like discarded copy paper that’s reprocessed and then turned into pulp.
Virgin pulp comes from Canada and the United States.
The pulp (virgin or recycled) is delivered to paper mills that turn it into large rolls of paper called “parent rolls” that are over 100 inches wide. The rolls then arrive at paper-converting facilities, like the one run by Sellars.
“We purchase large rolls from mills and our equipment cuts and packages them into the designated end product like toilet paper or kitchen towels, depending on the quality of the paper,” he said. Packaging and shipping are the final steps in the chain.
So what happens when there’s an unexpected demand spike?
“Most mills are 24 hours, 7 days a week operations already. They are running on fixed capacity,” said Sellars. “It’s not like there’s an idle machine that can be cranked up to increase production.”
“What I suspect is happening right now is retailers are tapping into toilet paper inventory that’s sitting in their warehouses until they get more shipment from producers,” he said.
For suppliers, rapidly increasing production may not be feasible. So they might instead recalibrate factory production to make more of one type of product and less of another. “For example, less bathroom paper towels and more toilet paper,” said Sellars.
Consumer products company Kimberly-Clark, whose retail toilet paper brands include Scott and Cottonelle, said it is taking steps to accelerate production and reallocating inventory to meet current demand.
“We want to assure consumers that we are doing our best to ensure a steady supply of product to stores, and will continue to make adjustments to our plans as necessary,” the company said in a statement to CNN Business.
Another way suppliers are responding to the toilet paper craze: Some are cutting out distribution centers, sending trucks directly to and from paper factories to get product onto shelves more quickly, said Scott Luton, founder, and CEO of Supply Chain Now Radio, a digital media company focused on supply chain management.
Sahil Tak co-owns ST Paper & Tissue with his father Sharad. The company, in Oconto Falls, Wisconsin, operates its own paper mills and makes both parent rolls and finished products like toilet paper and folded bathroom tissues.
All of its products are made from recycled paper primarily for commercial customers like hotels, hospitals, schools, and offices. Tak calls it the “away-from-home” market, and it’s been less prone to panic buying than the market for toilet paper people use in their homes.
That said, it doesn’t mean his businesses hasn’t been impacted. Tak said he has been getting calls since last week from toilet paper producers for the home market asking if he has the extra supply to share.
“Our supply is tight at the moment. We have over 200 employees running a 24/7 operation. So it’s not a question of more staffing to increase production but how to become even more efficient,” said Tak.
His bigger concern, however, is about the health of his employees.
“What we are dealing with here is uncharted,” said Tak, referring to the fast-spreading pandemic. “What if facilities have to shut down if workers become sick?”
That’s also a pressing concern for Rob Baron, CEO of Marcal Paper. The Elmwood Park, New Jersey company produces and markets its branded paper products, including Marcal toilet paper to both residential and commercial customers.
The company just resumed operations in January, a year after a fire destroyed its 80-year-old manufacturing facility.
“Our first step, before we even look at the demand spike, was to think about how to keep our people safe,” said Baron. “No visitors, no customers, no suppliers to the facility.”
Demand for Marcal toilet paper from retail customers is up over 25%, he said. “Paper machines already run 24/7. There’s only so much we can do with any incremental increase in demand because there is no surplus capacity.”
He’s making sure Marcal doesn’t add on any new customers for now. “We have to take care of our existing long-term customers and ensure supply to them first,” he said.
Another big worry: stockpiling toilet paper now could eventually hurt manufacturers’ sales down the road.
“We’ve all seen photos of people carrying shopping carts filled with toilet paper out of stores. They probably won’t buy more for three to four months,” Baron said.
“There will be a demand shock, and it will again strain the system.”