Shifting Supply

Last month the news about Myers Industries acquiring Canadian container manufacturer ITML for $110 million really caught my attention. I was thinking about how dramatically container manufacturing has consolidated in the last five years.

So I went back and looked through our news items from 2000 forward to trace how that happened and who bought whom. Similar strings of acquisitions could be seen in other manufacturers who supply growers and distributors, including crop protection chemicals, growing media and varieties.

Based in Akron, Ohio, Myers Industries is an international manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets. Its lawn and garden division includes Dillen Products, Pro Cal, Listo Products and now ITML.

Also in the Akron area, Summit Plastic is achieving a more strategic position after being purchased by an outside investor, Lincolnshire Management Inc. This family of container companies includes: Summit Plastic, Nursery Supplies (which purchased Lerio Corp.), Desch Plantpak and Janor Pot. This company spans the Atlantic Ocean with six facilities in North America and five in Europe.

Taking on investors has allowed the owners to have a retirement/exit strategy in the future and provided the resources for aggressive growth through acquisitions. Buying up the competition also expands product lines, manufacturing capabilities, sales channels and geographic penetration, increasing market share with growers and distributors.

This strategy has also allowed horticultural distributor BFG Supply in Burton, Ohio, to expand its regional footprint beyond the Great Lakes. Cardinal Ventures LLC came on board in 2000 as principal owner. Then acquisitions began with J.G. Smith & Co. in Batavia, Ill., in 2002 and Brighton By-Products in Brighton, Pa., in 2003. The next year, BFG opened a new service center in Wisconsin. Strides made in 2006 include taking over the supply division for Kalamazoo Valley Plant Growers Cooperative in Michigan, opening a branch in Minnesota and then acquiring Minnesota Distribution & Manufacturing. BFG now serves growers in 16 states from 13 locations.

Watching these consolidations reminds me of the children’s song about the old woman who swallowed a fly. “She swallowed the cat to catch the bird. She swallowed the bird to catch the spider. She swallowed the spider to catch the fly. ” The animals she swallowed got progressively larger until the horse was just too much, and did her in, of course. Size will kill you if you can’t manage it or be flexible enough to respond to market needs or capitalize on emerging trends.

I haven’t heard anything negative related to the consolidation of grower suppliers or regional distributors. When we posed the question in our Benchrunner e-newsletter, one grower asked, “Won’t this reduce competition, create a monopoly and raise prices?”

I believe it will reduce competition but also bring more standardization to categories that have really needed it, like containers. As far as raising prices, that remains to be seen. I haven’t seen large companies succeed in raising prices, largely due to price pressures rippling back from the box stores and the competition to serve high-volume growers. Many are trying to figure out how to meet Wal-Mart’s demands for green, sustainable product offerings at a low price. Some are outsourcing a portion of manufacturing to China, when there is enough lead time.

It will be interesting to see if supply-side consolidation turns out to be more successful than grower consolidation. So far, it appears that it will be.

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