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: converters, distributors, resin suppliers, independent rep agencies and customers. Let's focus on converters and distributors.
Since the call to plastics of the 1950s and '60s, conduct of the business has changed. It's less pushcart/storefront, more strategic/electronic. It's less provincial, more global.
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. The next four or five leaders held the middle third. A conglomeration of regional and individual firms retained the final third.
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. An additional entrant might be another international player in the polycarbonate business, seeking to protect its markets, as GE is doing with Lexan.
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.
Eliminating personnel, bricks and mortar, and less-desirable customers and product lines, the megas will stress polycarbonate, acrylic, foamed PVC, PVC and engineered materials in sheet and film configurations.
The megas 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 marginal 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 in their late 50s to late 60s, 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 firms produce sheet or shapes and sell more than $50 million annually through distribution. These firms 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. The sky will not fall. Opportunity will rise. Proper perspective and planning will win out as the game clock ticks on through the coming months.
Wheeler is the principal of H. Wesley Wheeler Inc., a Bridgewater, N.J., consulting firm.
