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HOUSTON — In Waste Management Inc. parlance, it's called a business improvement plan and it involves taking a hard look at the profitability of each trash collection customer.
Customers that weren't meeting profit expectations were given price increases or they were allowed to walk away.
Now with the decrease in recycling commodity prices during the past year, as well as an increase in contamination within the different material streams, Waste Management is looking to do the same thing on the recycling side of the business.
"Given where commodity prices have been over the last year, and increasing complexity in contamination levels of materials received, it's time for us to do something similar with our recycling customers," CEO David P. Steiner said on a recent conference call with stock analysts. "As contracts come due, we will likely need to implement double-digit price increases on some customers to return them to profitability."
Waste Management, Steiner said, found that about 20 percent of its customers on the solid waste collection side were not profitable when the company examined that portion of its business.
"I think it's a fundamental premise of pricing that when you've got a customer that's underwater, you can be a little bit more aggressive trying to raise their price, right? Because, if they leave you, you are not overly disappointed when you're losing an unprofitable customer," Steiner said.