Forty-five years 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. 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.
I was asked recently to provide an in-depth commentary to these shifting sands in a chapter of a forthcoming book. As I worked on my material I found the actual shifts in the past to be startling. In 1993 an internal Biffa evaluation suggested a sector turnover of £2.6bn split by activity area (see pie chart). At that time, the top six, comprising Biffa, Leigh, Shanks, Hales, UK Waste & Cleanaway, had a combined share of £500m or 19%.
In those days life was simple. Business was a linear process where route density for collections drove profits and the ownership of landfill space formed the path to riches. In fact, the top nine owned 50% of the landfill void which had planning and operating consents. By 2008-09 (when the economic crash came) the process had reached a zenith with over 50% of market turnover claimed by the top six.
Thereafter a weakness in that ‘trucks to landfill’ model was exposed as agile entrants to the industry, with new technologies and large warehouses, ravaged that market share under the umbrella protection of £80 a tonne taxes on those who relied on their landfill businesses. Incidentally, much the same happened to grocery hauliers in the 1980s who were supplanted by the supermarkets’ own vehicles which drove a warehousing revolution in food deliveries.
Landfill sites are generally inappropriate for siting the new technologies of the resource revolution on grounds of location and remediation requirements. On top of that, 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.
With the sector gross value added now topping £12bn, depending on where one draws the boundaries, the share of the top six – at £4.8bn – still seems pretty healthy. Until, that is, one strips out £1.8bn of landfill tax on the 20 million tonnes or so still (largely) passing through the hands of these inheritors of the burial exit route.
Taking that figure from the overall total shrinks the amount to 25% – half that of the heady days seven years ago when first recycling, then anaerobic digestion and, latterly, 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 list of those with high compound annual growth rate. Those businesses which are sub-£50m start-ups comprise around 10% of market, gross value added.
The future is likely to prove equally interesting in terms of two linked trends. The first is a growing interest from in-bound supply chain trade bodies. They are coming to fear loss of control over their end-life products as such products acquire value as tomorrow’s raw material feedstocks. Ownership by waste companies or those involved in energy fuel or logistics is a real concern to them.
The second is a fallout 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 two groupings are already long-time partners in terms of the inbound supply chain so we should not expect to wait too long before they compare notes on how to close the loop. The market will be singing a very different tune when that happens.
Peter Jones is director of Ecolateral