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

Paperboard Packaging, Oct, 2004 by Mark Arzoumanian

Most independents will tell you that by late spring they were able to implement a finished box increase of 8 to 10 percent. But many of them are getting significantly less than an 8 percent price increase, especially when they go head to head with integrated competitors just to keep the business.

Some end users have their box price increases (and decreases) tied directly into containerboard prices as published by the aforementioned OBM and Pulp & Paper Week. While independents often say that integrateds play games with box price increases by either holding or dropping prices in a rising market, the truth is more complicated. Box buyers only spoke about this issue on the condition that their names were not used. The following two examples shed light on how the business dealings of box buyers and integrated box makers can be misconstrued.

* Over the past two years one Midwest box buyer's company acquired three companies. When the purchases were complete, the buyer found himself with 17 corrugated suppliers. So he consolidated them and formed a strategic alliance partnership with a major integrated.

"Centralizing and volume leveraging is done every day at Nestle, Coke, Anheuser-Busch," he says, adding that he went with the integrated company (a supplier before the acquisitions) because of its resources not only in the United States but overseas, where his company is making a big push right now. He also says that as part of this partnership the integrated did not reduce its price or guarantee prices wouldn't rise for a certain time period.

* Some Canadian box makers have dropped their prices ostensibly due to exchange rate improvement but have tried to gain market share on this basis. What's involved here? A year ago it took $1.55 Canadian to buy $1 U.S. Today it takes $1.31 Canadian to buy that same dollar. So as the Canadian dollar strengthens, Canadian box buyers want currency relief.

"A couple of [box suppliers] came back to us and said, 'We won't give you currency relief per se but we understand what you're saying and we will drop your prices five, six, eight, 10 percent, provided we get some more business,'" states one Canadian-based buyer.

Transacted Linerboard Prices/Northeast

September 2003: $345/short ton
April 2004: $385/short ton
June 2004: $435/short ton

Source: Official Board Markets