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Pallets Across the Pond
Markets in Transition

By Rick LeBlanc
Date Posted: 11/8/2004

Last summer I was warmly welcomed into a few pallet operations in Great Britain. But in case you are thinking of hooking up with a pallet company across the water, there are a few key things I learned that I should share with North American readers.

            First of all, I’m not a big fan of doctors. Fortunately, the initial fear that overwhelmed me when the manager of a large plant insisted that I go in to meet the company M.D. subsided when I discovered it had nothing to do with getting probed in the Southern Hemisphere by the company medical doctor. I found out I was really going in to see the company’s big cheese, its managing director.

            And when the managing director of a smaller Glasgow pallet shop stated in a matter of fact manner that his turnover was 600,000, I thought that this was an awful lot of employees to go through in a year for a 10-man crew -- even by U.S. standards. Like American operations, British plants also have trouble with employee retention and attendance, but in this case, turnover refers to sales -- not the number of employees replaced annually. The annual turnover was 600,000 Pounds Sterling, or a little under $1.1 million (U.S.). Employee replacement was significantly lower although still a real area of attention.

            Then there is the clothing thing. I normally feel underdressed in America. If you feel underdressed over here, you better put on a fresh golf shirt because you’ll feel even more underdressed over there. Business suits are the order of the day, which is rather atypical for many U.S. pallet people. By and large, the British approach to business tends to be more formal, from dress to communication and more. “They tend to dress up more over there,” agreed Gordon Hughes, general manager of the Canadian Wood Pallet and Container Association, when I called to pick his brain about the differences between North America and Great Britain.

            One last thing. When they get a twinkle in their eye and ever so fondly refer to their Lauries, it is not about women at all. That’s just what they call their trucks - lorries, to be precise. Having barely survived driving in two-way traffic on the curbless, single lane roads of Scotland, I am in awe of any truck drivers over there.

            Seriously, aside from the predominance of block pallets, there are a lot of similarities between Britain and the U.S. The dozens of skids of pallet nails stacked up at Scott Timber, which were purchased before another round of price increases, was a reminder that pallet companies there also are battling with rising prices for fasteners and lumber and of the difficulty of passing along the escalating costs to customers.

            One interesting thing that the British have done this year is to send out press releases to alert customers about the urgent need to raise prices in order to ensure pallet availability. TIMCON, the British pallet and wood packaging trade association, as well as Scott Timber have both sent out news releases on this topic, but there continues to be a margin squeeze underway over there as there is here.

            According to Chris Donnelly, managing director of Ferguson Packaging, customers tend to treat recycled pallets the way they treat tea bags -- as a totally generic commodity. Whatever brand they find in the company kitchen, they use. In such an environment, where the customer perceives no difference between one supplier’s product and the next, it is hard to raise prices. And due to the reluctance of customers to sign contracts, he considers investing in automation is too risky. In spite of pallet price cuts by larger companies, however, Chris reported that he is winning back some accounts based on superior service.

            In addition to rising prices for lumber and nails, ISPM 15 is a hot button issue there as it is here, and there are some concerns about adequate dry kiln capacity as implementation dates grow closer.

            Gordon, who is a frequent representative at international meetings on behalf of the Canadian association, is a keen observer of international trends. He has had numerous dealings with the British over the years. He recently returned from the FEFPEB meeting in Belgium, where he had dinner with some people from the British pallet industry.

            CHEP pretty much dominates the pallet market in the British grocery industry, Gordon noted. Generally, business is good for British pallet companies, but margin pressures are forcing them to raise prices. When that happens, they lose some customers and gain others. There are some very good high-volume accounts in the British pallet market, Gordon noted.

            My overall impression from the people I met is that British companies are facing many of the same challenges that we see in North America, and they are rising to meet them. They struck me as being savvy business people, running efficient shops.

            That augers well for the future of the pallet industry internationally as pallet companies continue to educate customers on the need for price increases to ensure supply.

            And as my mother often used to say to me, at least before she gave up, it is better to be overdressed than underdressed.

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