Brambles and Paramount Pallet: What Can It Mean?

The Brambles acquisition of Canada’s Paramount Pallet is big news for pallet pooling in Canada. As a $13 million buy it is loose change to the pooling giant, but extremely significant here, and raises some interesting questions and possibilities surrounding the combined enterprise.

Is there basis for an anti-trust argument?  As a Canadian Pallet Council member and its only national pallet services supplier, there will be questions about it reporting to CHEP Canada, which in essence, is the competition to CPC. I can only guess that CPC has already received legal counsel, but you tell me if there is a basis. If one assumes there are 200 million-plus pallets in service in Canada, then even by combining CHEP and CPC we are talking about a relatively small  market share, albeit a much larger presence in specific industries.  Bottom line, can the new Paramount Pallet upwardly influence market pricing for CPC pallet and white pallet services any more than it could before?  There is no reason to suggest that it could.

Is the acquisition a threat to CPC, or a potential benefit? The easy money says it is a huge threat, but I would argue for the latter. For several years, CPC has stated that CHEP rental rates are lower in Canada than elsewhere because of the presence of CPC as an option. Does CHEP Canada being in control of Superior Pallet diminish that level of competition or enhance it? Arguably, through the marriage of Paramount with the resources of  CHEP such as Lean Logistics and quality assurance systems, Paramount may be able to provide better service to CPC members and raise the bar for all service providers. Is it in CHEP’s best interest to do that? Absolutely. It helps diversify their Canadian play into segments of FMCP where CPC remains strongest, such as beverage, most notably liquor and wine distribution as well as Coca Cola, in addition to frozen foods and SME.

Other opportunities? Paramount has the typical white wood pallet services one would expect, and additionally is an active service provider to the Canadian beer industry, which still runs its own sizable block pallet pool. It also provides other services such as tier sheet sorting for rigid packaging manufacturers.

How does it shape up for CHEP’s 3rd party repair depot network? Will it put more pressure on them to compete with IFCO facilities in the face of losing the business, or will it offer them additional opportunities in terms of non-CHEP pallet business? If the name of the game for Brambles is to grow its business, then it should logically be the latter. Otherwise it is just shuffling the deck at a cost of $13 million. But then we’ve seen a lot of deck shuffling in the pooling sector before, so nothing would surprise me.

What do you think? Should CPC be rolling out a blue welcome mat in Cobourg? Post your comments below or give me a call.

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