45 years in “industry” from the shop floor to the Boardroom teaches you one simple message – companies ebb and flow and have to face their mortality if they do not adapt to changing circumstances. After a career driving changes in industrial gasses , parcels, welding, warehousing, distribution and waste much the same can be said of entire supply chains- nothing is sacred. However the unique attraction of the “waste” sector – that compositions come and go but the music plays forever ( due to the whole economy forming the backdrop to our activities )- can sometimes belie unwarranted complacency.
When asked to provide an in depth commentary to those shifting sands in the form of a chapter in a forthcoming book the actual shifts in the past are startling. In 1993 an internal Biffa evaluation suggested a sector turnover of £2.6 billion split according to the following graphic by activity area. The “Top 6” (comprising Biffa, Leigh, Shanks ,Hales, UK Waste & Cleanaway) showing a combined share of £500m or 19%.
In those days life was simple- a linear process where route density drove profits in collection and landfill void ownership (the Top 9 owned 50% of void with planning and operating consents) formed the path to riches. By 2008/9 (when the crash came ) the process reached a zenith with the Big 6 then occupying over 50% of market turnover. Thereafter the weakness of the “trucks to landfill” model was exposed as a plethora of new agile entrants with new technologies and large warehouses ravaged market share under the umbrella protection of £80 a tonne taxes on the baddies . Much the same happened to “own account” grocery Brand hauliers in the 1980’s when Supermarkets drove the Warehousing revolution in food deliveries.
Not only were Landfill sites inappropriate for siting the new technologies of the resource revolution – on grounds of location and remediation requirements- they are now a growing drag on Balance Sheets for those who continued investing in them after the introduction of the Landfill Tax in 1997 signalled their death knell. With the sector gross value added now topping £12 billion (depending on where one draws the boundaries) the share of the Top 6- at £4.8 billion – still seems pretty healthy. Until ,that is, one strips out £1.8 billion of landfill tax on the 20 million tonnes or so still (largely) passing through the hands of these residuary inheritors of the burial exit route. Netting that out market share thus shrinks to 25% – half that of the heady days 7 years ago when first recycling, then AD and (now) alternative fuels from (often) independently run MRFs began to erode the linear waste model. The scale of the upstarts success can be reflected in the Top 40 high compound annual growth rate tables where (mainly) sub £50 m start ups comprise around 10% of market GVA.
The future is likely to prove equally interesting in terms of 2 linked trends- first a growing interest from in-bound supply chain trade bodies. They are coming to fear loss of control of their end life products as the latter become valuable as raw material feedstocks in a world where prices are firming up. Ownership by waste, energy fuel or logistics companies is a real concern to them.Second is a fall out from the home deliveries market where Amazon ( and other parcels network majors) could become the waste logistics collectors of the future ( to maximise back haul potential ). These latter 2 groupings are long time partners in terms of the inbound supply chain of course so don’t expect to wait too long before they compare notes on how to close the loop.
Heigh ho- and a Merry Christmas to one and all!
Peter T Jones