CHEP Eyes $12 Billion Reusables Pooling Opportunity in U.S.

Even as competition from iGPS has intensified over the last few years, CHEP is looking to expand its business in the U.S., within a reusables pooling market that it assesses at over $12 billion per year. With sales of $1.1 billion, it still sees itself with plenty of room to grow.

In its recent annual report (click here), Brambles indicated that CHEP would continue to seek U.S. growth by targeting small and mid-sized companies, as well as other pooling opportunities that it indicates are under-served.

For example, CHEP sees the total U.S. pallet pooling opportunity as $9.5 billion per year, with the attainable 48×40” market at $2.3 billion. CHEP currently does about $1.1 billion of this amount, and indicates that competitors total about $230 million. See Slide 39 of their Investors Report which is linked near the bottom of our previous coverage. In other words, CHEP is indicating a huge market that is under-served by pallet rental.

Overall, it sees the U.S. reusable transport packaging pooling opportunity to be in excess of $12 billion annually – with pallets being accounting for only 20% of that total. It sees RPCs as being 23%, IBCs as 19%, automotive as 11%, and others at 16%.

Outside of full footprint pallets, CHEP believes it is under-represented globally in terms of:

• Alternative pallet sizes
• Reusable plastic containers
• Intermediate bulk containers
• Automotive
• Other services

In the U.S., CHEP was an early entrant into the RPC and automotive reusable container pooling, but later sold its RPC interests to IFCO. Within the context of highly customized packaging and mainly regional supply chains, CHEP’s automotive initiative never really gained much traction.

In the current tough economy, however, reusable transport packaging challenges have resulted in action over the last year by AIAG. (To read more about the automotive industry initiative, click here.)

The dynamics of the automotive market are changing, and increased cost pressures and more complex supply chains may work to the advantage of reusable container pool operators.

Bottom line, CHEP sees a lot of potential for growth of reusable packaging pooling. But certainly some niches are more amenable to a major pooler than are others. One of the challenges of reusables is the issue of scale. This is one of the key issues the RPA is addressing in its LTL (less than full load) retrieval initiative. More on that soon.

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