Box market share showdown: the clout of integrateds and national accounts is slowly squeezing independent converters out

Paperboard Packaging, Oct, 2004 by Mark Arzoumanian

While FirstPak has helped many members, inherent weaknesses exist. One of the toughest to overcome is obtaining valid information from multiple locations. FirstPak isn't going to help independents win national account business, most of which is for brown boxes anyway. Any independent will tell you that today's brown box business is best left to the integrateds.

For independent box converters the mantra remains service, service, service. That includes everything from consistent on-time deliveries to thinking like Kell Containers' John Kell, who asks himself every day: How do I make my customers happier?

Many box buyers recognize the importance of keeping independent box converters in business.

"I have an account that I do a million dollars with," says Packaging Logic's Parrette. "I don't want you to use the name because then I'll have everyone coming after me. I'll run whatever they want printed today, deliver it tomorrow. They spend almost $4 million annually on corrugated and picked [two integrated companies]. They gave me a third of the business and told me to be 5 percent ahead of [the integrated's] numbers. The buyer only wants it this way because I'm dependable and he wants that security. Now that's pretty different. That strategy blew me away."

Market Share Loss
Survey of Independents

Since 2001 have
you lost any finished
box business?

Yes   96%
No     4%

Note: Table made from pie chart.

If yes, who did you lose it to?
(Note: Respondents could check more than one answer)

Integrateds    88%
Independents   67%
Overseas        8%

Note: Table made from pie chart.

If you have lost market share, what total
percentage have you lost since 2001?

Less than 10%   45%
10% to 20%      40%
20% to 30%       5%
More than 30%   10%

Note: Table made from pie chart.

Source: Packaging-Online.com

Shipments by Company Type

                % Total

       Integrated   Independents

1996      75.1         24.9
1997      74.8         25.2
1998      75           25
1999      76           24
2000      75.5         24.5
2001      76.5         23.5
2002      76.4         23.6
2003      76.8         23.2

Source: Fibre Box Association

Note: Table made from line graph.

Games Distributors Play

Box distributors and brokers are located throughout the country. But an inordinate number of them are in California (approximately 800), and they're competing directly with independent box makers.

"The distributors are being directly supported by the vertically integrated companies," says Louis Eagle, president, Empire Container Corp., Carson, Calif. "The integrateds aren't able to gain more market share by doing this because the distributors play them off each other. So they may cut the box price or not give any increase, but they're not getting any greater percentage of business; they're just getting less margin. The distributors are outmaneuvering the vertically integrated companies."

But Steve Young, Association of Independent Corrugated Converters president, says this issue is far from black and white.