July 26, 2013 How is Carta Fabril on a Roll?

Volume 16 | Issue 6

This leading manufacturer of toilet paper reports record growth and annual revenue predictions. Reuben Ford describes a seemingly unstoppabl

With steady growth in excess of 20 percent a year, the company is gathering momentum and projects revenue of $500 million in 2016 (one billion Brazilian reais).

As more and more Brazilian shoppers are choosing Carta Fabril’s leading toilet paper ‘Cotton’, the company is working relentlessly to meet demand.

“We don’t rest – we are passionate about what we do and what we can achieve. We have a hands-on approach to the market and aim to be the best in Brazil,” affirms President of Carta Fabril, José Carlos Coutinho.

Rock, Paper, Success!
Grupo Carta Fabril is a family business – under the direction of the president, his wife and children. The decision to operate in the personal hygiene sector came in 1990, when the opportunity arose to acquire a paper company in Rio de Janeiro.

“The factory had hit rock bottom in 1976 and was completely abandoned. However, we saw potential,” Coutinho recalls.

Despite being inoperative for 14 years the old factory did possess Voith production machinery, which was an important instrument in Carta Fabril’s recovery of production.

The move was a brave step into a new sector; the group is also the second largest producer of ceramic bricks in Rio de Janeiro state. Coutinho explains: “I left the brick manufacturer in the capable hands of two of my sons and a third son and I took on the challenge of building a new business around the ruins of the acquisition.”

A lot of hard work ensued. Carta Fabril consulted experts in the industry, observed trends and tendencies and applied time, resources and energy to the new venture.

“We discovered that Rio de Janeiro is the second biggest market in Brazil for toilet paper and hygiene products with enormous and unsatisfied demand. Very quickly we had increased production of the original factory by 300 percent,” Coutinho continues.

In 1994, Carta Fabril established its first business strategy. Noticing its demographic, the company perceived its overriding popularity with Brazil’s middle class, labeled locally the ‘C’ class.

This market in mind, Carta Fabril expanded logistics and, with a firm focus on quality, increased its supplier and client base.

By 1999, with production in full swing, the company bought another bankrupt paper mill – this time in Goiás state: “This one was an even bigger challenge: The factory had gone into liquidation in 1993 and we needed to meet growing demand from our customers,” Coutinho says.

Thinking Ahead
In just one year, Carta Fabril had doubled production capacity from 100,000 to 200,000 volumes. Growing its middle class market, the company was producing quality, simple-ply toilet paper.

A clear characteristic of Carta Fabril is the company’s foresight. A new strategic plan in 1997 included investment in costly high-quality paper technology – not only increasing production volume but the range and quality of toilet paper manufactured.

The plan proved more than effective, when in 2002/2003 Brazil’s economy shifted. The government launched programs to combat poverty and, with increased income, the growing ‘C’ class looked for higher quality products.

Carta Fabril launched ‘Cotton’ its leading two-ply toilet roll and went head-to-head with existing industry leaders. “Kimberly Clark had a 70 percent market share, but following its introduction, ‘Cotton’ took off,” Coutinho says.

The sudden success of the brand was helped by Carta Fabril’s innovations. Following the examples in the United States, packets of eight, twelve and 16 rolls were produced, in addition to the traditional four-roll pack.

A more recent example of this innovative approach is the space-saving squeezed toilet rolls, launched recently, and an instant success. Competitors have followed suit, but Carta Fabril is behind a strong brand and has invested in two packaging machines for the ‘squeeze’ system.

With production of paper and cellulose booming in Brazil, many new companies are starting up in the market, but few have the vision of Carta Fabril.

“Brazil has water, energy and is the world’s largest exporters of cellulose – we are ideally located,” Coutinho adds.

Carta Fabril has intensified this advantage by initiating construction of a new plant in Aracruz, Espírito Santo state, due for inauguration in 2015. Strategically located right beside and allied to one of Brazil’s biggest paper and cellulose producers Aracruz Celulose, Carta Fabril again shows its vanguard approach. The site is also just one kilometer from Espírito Santo s port.

Non-Stop – In Demand
Brazil produces approximately 1.1 million tons of tissue a month, of which Carta Fabril consumes a sizeable portion. Despite such quantities, Coutinho explains that demand outweighs supply: “More than 50 percent of the market is not served by national production.” The current solution is to import.

Carta Fabril is rated fifth in the domestic market, and leads the Rio de Janeiro market with a 40 percent market share.

The company is constantly investing in equipment to increase productivity. Recently acquired technology includes new machinery with a capacity of 25,000 tons.

“The problem is having enough tissue paper to meet demand. Even with the latest generation equipment and the best tissue paper processing plant in Brazil, we still need to manufacture more,” Coutinho explains.

Following almost immediate success, Carta Fabril has been investing heavily in meeting this demand. The second acquisition in Goiás cost in the region of $30 million and the new plant in Espírito Santo has a preliminary budget of $125 million. Coutinho estimates that with yearly investment in technology the final cost of the facility will reach $500 million.

The dynamic nature of the industry in undoubtedly reflected in Carta Fabril’s company culture. “We have developed our own know-how and have a dedicated staff. By coupling quality with hard work we have seen excellent results,” Coutinho says.

Investment in logistics has also helped Carta Fabril meet demand. A self-owned fleet of 80 trucks is complemented by more than 800 outsourced vehicles, to cover deliveries throughout Brazil.

Concentrated Growth
The results are excellent: Annual growth has averaged 20 percent over the last five years and revenue has risen from $85 million in 2010 to $150 million in 2012. Coutinho estimates $180 million in 2013 and with the opening of the new plant aims to hit $500 million by 2016.

His projections are supported by the growth of the paper industry regardless of international crisis, or slowed local economy growth; the toilet paper and hygiene product industry is increasing above Brazilian inflation.

“The key in our market is revenue – continued revenue equals continued investment and security. Our segment is 100 percent a national economy, so international problems have little effect,” Coutinho explains.

The market has been favorable to the constant expansion of the company and strategic plans have been successful, with proven targets and predictions: Luxury two-ply toilet paper is still growing in sales by 10 percent a year.

“We have a genuine interest in our product. We look to providing for its future. At present, with water shortages posing a potential threat to production, we are working on securing our own unlimited supply,” Coutinho exemplifies.

As some toilet paper producers in the United States close their doors for business in favor of moving production to Mexico, in Brazil, Carta Fabril is moving full-steam ahead.

Coutinho concludes: “Carta Fabril is keeping up round-the-clock production and concentrating on continuity – the future is looking is extremely promising.”

Subscribe to Industry Today