The period between now and December 2005 will harbor great change in domestic sheet and shapes businesses. In this petri-dish environment, change is duty-bound to flourish.
Fallout hits all elements of the market, but let's focus on converters and distributors.
In 2001, GE Plastics purchased Commercial Plastics & Supply Corp. and Cadillac Plastics, buying about a third of the $2 billion sold through U.S. sheet, rod and tube distribution.
After the economy recovers, a bold new world awaits.
Additional megacorporations will join GE in the ownership of distribution. Laird Plastics has controlled a large piece (9 percent) for about a decade. Thyssen Krupp Materials & Services AG has 3-4 percent of the market with its 1996 purchase of Ain Plastics, and the resources for a larger platform. Another entrant might be an international player in the polycarbonate business, seeking to protect its markets.
Three or four megas will control 50-60 percent of plastic shapes distribution by 2005, centering their efforts with the traditional long-use markets: point of purchase, signage, architectural, transportation and governmental. They will gravitate toward markets that can be grown and supported through e-commerce.
The megas will stress polycarbonate, acrylic, PVC and engineered materials in sheet and film configurations. They will acquire one or more of the four firms producing acrylic sheet, and backwardly integrate to polymethyl methacrylate monomer production. They will buy significant assets in the engineered material and shapes businesses.
By 2005, cataloging and e-commerce will account for 65-70 percent of sales.
Who will the megas buy?
GE is in a contraction mode, purging acquired personnel, buildings and customers or products from its portfolio. Its share of the market has already fallen to about 25 percent. It does not need distribution infrastructure. If Thyssen expands further, it is a net buyer of buildings and locations, a position that would be the same for another mega.
Is there available distribution? Yes. There are eight multibranch regionals with public ownership or with owners nearing retirement and no apparent or credible succession plans. These firms own 30 percent of U.S. sales.
How about conversion? Beyond acrylics, only six to eight companies produce sheet or shapes and sell more than $50 million annually through distribution. These companies are focused on engineered materials, polyolefins, PVC and other resins. Of the 10-12 firms now producing materials under their own logo, six will be part of consolidations by 2005.
As change happens, the megas will tweak and adjust. Opportunity will rise. Proper perspective and planning will win as the game clock ticks through the coming months.
Wheeler is the principal of H. Wesley Wheeler Inc., a Bridgewater, N.J., consulting firm.