2017

Scott Griffin, Director of Tissue SalesCentral National Gottesman Inc.

Creating a More Efficient Marketplace

The Parent Roll Merchant Business

Professionals around the world to serve a  range of clients in the forest products and metal industries

2,5001886A leader in pulp, paper packaging, tissue, wood products and metals for more than 131 years

Sales of more than $5.5 billion and more  than 6.7 million tons of pulp and paper  products annually

BILLION

PRIVATELY OWNEDand operated by the fifth generation of our founding family

Focused on our core businesses: pulp, paper,  packaging, tissue wood products and metals 

to the strength and future growth of  our industry

COMMITTED

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Who We AreWe’re a global company with offices in 29 countries and a commercial presence in more than 100 countries worldwide, building on long‐standing relationships with both customers and suppliers

Global ReachRepresented across North America, Latin America,  Asia and Europe with sales into over 100 countries

Local PresenceOffices in 29 global locations and in 48 cities across North America, with agents and affiliates in an additional 75 locations 

Strong Market KnowledgeWe understand what drives your business, no  matter where you are located

Relationship DrivenOur people are at the center of our relationships  with customers and suppliers around the globe

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How We OperateOur three divisions specialize in the global sales of Tissue, Pulp, Paper, Packaging, Wood Products, and Metal, as well as Paper Distribution and Publication Papers

• Pulp• Paper• Packaging• Tissue• Wood Products• Metal 

Central National Division

• Coated and uncoated papers• Packaging• Digital substrates• Board grades• Wide Format 

North American Distribution Division

• Books• Magazines• Catalogs• Retail• Direct Mail

North American Publication Division

Unwinding The Parent Roll Trade

The Fundamentals: What Do Parent Roll Merchants Do?

Transaction Structures: How Are Transactions Made?

Path Forward:Creating Efficiencies in the Supply Chain 

Trends: What’s Going on in the Market? 

How is the Parent Roll Merchant involved in Technical Guidance and Product Development Today?

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1The Fundamentals

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The Parent Roll Merchant C o r e   S e r v i c e  O f f e r i n g s  

CreditProtection

Logistics &Supply Chain

Sales & Marketing

ProductDevelopment

Technical Guidance

Trade & WorkingCapital Finance

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Central National Parent Roll Tissue Business Wh e r e   d o  we   p l a y ?  

Forest

Pulp Mill,Recycled Fiber

Tissue Mill Consumers

Retail & Distribution

Parent Tissue Roll

Converting

We Operate Here

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Retail

Tissue Mill

Parent Tissue Roll

Converting

The Merchant’s CustomersWh o   a r e  we   s e l l i n g   t o ?  

Integrated Converters

IndependentConverters

Away-from-Home

or

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100% Structured Tissue 

Ultra Premium

Blended Recycled/Pulp or 100% Virgin

Premium

for Parent Rolls in North America

Quality Tiers

Merchant insight into the distribution channels and quality tiers is essential when sourcing product for their customers that achieve the correct price/value relationship

Made of Mostly Recycled Fiber 

Economy/Value

Retail Channels

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100% Structured Tissue or High Quality Light Dry Crepe

Best

Blended Recycled/Pulp or 100% Virgin Light Dry Crepe

Better

for Parent Rolls in North America

Quality Tiers

Made of Mostly Recycled Fiber 

Good

Away-from-Home Channels

Companies today are doing more business with fewer resources, and the merchant’s role is to help bridge that gap for their clients  

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Why Source ParentRolls Externally? • Prepare for New Machine

• Expand Market Capabilities

• Protect Market Share

• Reduce Raw Material Costs and Improve Efficiencies

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2Transaction Structures

Spot Transactions

• Immediate and unplanned need to purchase or sell product

• Usually little or no advanced notice

• Supply or demand is typically not recurring

• Immediate confirmation, usually within a day

Medium-Term Transactions• Proactive production and sales

plan outlining upcoming need

• More notice from the supplier or customer regarding requirement

• Fixed supply or demand period: 3, 6 or 12 months

• Business confirmation within 14 days

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• Carefully planned distribution arrangement between mill management and parent roll merchant

Long-Term Agency Agreements

• Long-term planning with 1- to 2-years lead time

• Distribution channels identified and extremely well defined

• Supply is ongoing

• Comprehensive review of sales and marketing plans, capital requirements, forecasting, technical development and workflow process

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3Product Development & Technical Guidance

“There is no such thing as a commodity. All goods and services are differentiable.”

– Theodore Levitt HBR Marketing Success Through Differentiation-of-Anything

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CreditProtection

Logistics &Supply Chain

Sales & Marketing

Trade & WorkingCapital Finance

ProductDevelopment

Technical Guidance

The Parent Roll Merchant Core Services Specializing In

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Technical Guidance

Sample Testing and Variability• Material (primarily pulp variation)

• Process (how the pulp is handled ahead of and on the machine, or other machine settings)

• Sampling (how and where the sample is taken and cut)

• Test Equipment (features and capability)

• Procedure (different test procedures and/or the human factor running the test)

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Price to Value: Bulk + SoftnessProduct Development

Bulk 65 - 90 mils/8 ply

NTTBulk

35 - 45 mils/8 ply

CONVENTIONALTISSUE High Bulk

70 - 105 mils/8 ply

Low Bulk 50 - 60 mils/8 ply

TAD

*Testing based on 100% high quality virgin fiber content base sheets.

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Merchants specialize in identifying opportunities to bring new products to market, helping to communicate the product’s value proposition and pull demand through. The challenge is differentiating their products from the competition.

Where’s the opportunity?

Product Development

Opportunities in Overlap CONVENTIONAL

TISSUE

NTT

TAD

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Parent Tissue Roll Types

Conventional, NTT & TAD

Converting Process

Determines Quality Attributes of Each

Roll Type

Product DevelopmentT i s s u e   Tr i a l s   Y i e l d  N ew  D i r e c t i o n s    

Finished Products/Attributes

Softness/Hand feel, Bulk, MD, CD, Stretch, Converting

Efficiency

Technical Sales/Data

Sound Technical Data Validates Market Feasibility

Communicating Price/Value

What is the Value Proposition Being

Delivered?

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Consolidation & Mergers

Amazon/Whole Foods

Supply ChainP a r e n t   R o l l   P r o d u c t i o n / C o n v e r t i n g

MillennialsBuying Habits

New Market EntrantsLidl

EnvironmentalChain of Custody and Stewardship

Increased Competition

IncreasedChannel Fragmentation

Dollar General, DGX

Non Store SalesOnline Retailers

*Contribution by Patrick Boateng, Retail Store Buyer

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4Trends

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Parent roll sales are often an afterthought or stop gap to keep paper machines running

12

Spot Parent Roll Suppliers

Highly competitive business influenced by regional supply and demand

11

Regular Parent Roll Suppliers

97

Independent Converters

• Freight may account for up to 20% of the overall landed price

• Short lead times common due to market fluidity and changing needs

• Longer Supply Chains require more variables to manage 

Logistics are critical

Independent converters look to their relationships with merchants to help ensure consistency of supply

Parent Roll Trade North America

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Parent Roll Trade

Market Themes in 2017 • 8 of last 9 Machine Announcements have been TAD,

NTT and, or ATMOS Technology (represents 589,000 tons out of 639,000 tons)*

• Limited TAD Parent Roll Supply in North America

• More availability of NTT as new machine start ups have come on line

• Ability of AFH converters to upgrade certain products (multifold and hard wound towels)

• Demand for solution providers from higher cost, older mill assets having challenging machine trims and limited production capabilities

• Parent Roll demand continues to outpace domestic supply for all grades and quality segments

• Ocean Rate increases coupled with higher pulp costs have made Asian and other parent roll imports less competitive

• Increasing need for customization

• Merchants must be well versed in the production capabilities of the mill and the converter

• Mills rely on merchants to help sell full trim of the paper machine

* Volumes based on Risi statistics

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5Path Forward

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Looking Ahead • Merchants will have more product categories to

manage as differentiation continues• More long-term agreements with merchants

offering services beyond Sales and Marketing, including Logistics, Trade Services, Technical Guidance and Finance

• Increased demand for merchant services with new market entrants

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Thank You