The last year has seen the creation of a mega recycler in 48forty Solutions (48forty) as it was acquired by Audax Private Equity (Audax), a major investment fund with plans to grow the enterprise. Then 48forty acquired Relogistics Services, LLC (Relogistics) and brought its CEO, Mike Hachtman, on to run the entire company. Since this move, 48forty has acquired Prime360, one of the largest brokers in the country, and Oregon Pallet, a major supplier in the Northwest.
Maybe one of the best decisions in the process has been tapping Hachtman to run 48forty. He is widely known in the industry and credited for building Relogistics up from nothing to become a leading supplier of pallet and container management services. Hachtman brings a strong management team with him, and the combination of these companies will bolster the geographical footprint and logistics expertise of 48forty.
Pallet Enterprise recently sat down with Hachtman to discuss 48forty’s recent moves and the future of the white-wood pallet market.
Pallet Enterprise: This is a huge deal. Many small to mid-sized recyclers and even customers are wondering what it means for them. Some people are like, ‘Well, if I’m a small guy, am I screwed? Do I just get out?’
Mike Hachtman: It’s a giant industry, and we will continue to grow both organically and through acquisitions. Pallet customers are served by thousands of companies that we compete against every day. I don’t foresee a day in the future where we’re not competing with those companies, which is good for the industry and customers. Smaller operators will continue to find opportunities in the market. They will also continue to be an important collaboration partner for us moving forward.
Pallet Enterprise: While it is true 48forty can’t be everywhere, it does control a lot of cores now with its recent acquisitions. I was guessing somewhere around 300 million cores. Is that a fair assumption?
Mike Hachtman: It’s a lot of cores, but not quite that many. However, we do handle over 300 million pallets, whether it is processing, sorting, repairing or brokering. This includes the pallets we sort and return to customers for reuse.
Pallet Enterprise: It sounds like you’re keeping all the locations. You’re not shutting locations. What changes will customers see? What’s going to be different?
Mike Hachtman: In the short term, each business will continue to serve its customers. Not much is going to change from a customer standpoint. Longer-term, obviously, we will look for synergies among the companies. And now, with a larger size, we will have an opportunity to better serve those customers because we will have facilities closer to their facilities and more resources to better serve customers. We will also integrate management and may share some personnel as we go forward.
In time, we will have two distinct divisions to service two distinct groups of customers – manufacturers and retailers. 48forty will provide finished goods to manufacturers while Relogistics will provide pallet management services to retailers and distributors.
Pallet Enterprise: Relogistics is probably one of the biggest brokers in the country. So, they know where to find the deals. Well, there are no deals to be had anymore. So, what do they bring?
Mike Hachtman: All three companies bring synergies to each other as far as retail services, whether it be technology, personnel, or best practices that we think we can leverage to add value to our existing retail customers and new customers.
There’s clearly a large number of cores that come out of these retailer programs., There is now an opportunity for us to source some of those cores through our company-owned facilities as we move forward. However, we will continue to need and rely on our recycling partners in those markets where we do not have recycling plants or where existing plants are unable to handle the volume. We’ll be able to improve service to our customers and maximize the value of the services that we offer them as well.
Pallet Enterprise: What do you think are the major drivers of consolidation in the pallet industry? Is it going to change? Is this a short window of time where the industry morphs and things stabilize, or is this a pattern we’re probably going to see moving forward? How does 48forty fit in?
Mike Hachtman: Consolidation in the pallet industry is nothing new. When I started with PalEx in 1997, obviously there was an opportunity to acquire companies and build a larger entity and that continued under the IFCO banner. While larger acquisitions have been dormant for several years, there’s clearly interest again for the synergies that scale brings. Consolidation is not a new phenomenon. But the pace has clearly picked up.
Pallet Enterprise: It sounds like you are focused on continuing to grow by acquisitions. What kind of companies are you looking to acquire?
Mike Hachtman: We will continue to grow both organically and through acquisitions. We’re looking at continuing to build the national network we have, primarily of pallet recycling facilities. There are a lot of recyclers out there. There’s an opportunity for us to fill geographically and from a service standpoint for our customers. In places where we service large national customers but don’t have a facility in close proximity, an acquisition gives us the ability to provide that service directly going forward.
Pallet Enterprise: Do you think this is an opportunity for total pallet management services and more active pallet management at the docks, greater coordination between pallet users and pallet providers?
Mike Hachtman: There is an ongoing trend at a macro level to try to improve the overall efficiency of supply chains, and pallets are an essential part of that equation. Better supply chain management has been a key reason for total pallet management programs at customer locations. Increasingly pallet users recognize the importance of pallets and managing pallets upstream to keep goods flowing more efficiently through the system.
Pallet Enterprise: Do you think the pallet shortage is going to impact users going forward? Will it change how they spec pallets, how they procure them, who they partner with?
Mike Hachtman: Demand for pallets will always remain strong. I think the white-wood pallet industry needs a strong number one player. I think we missed that when CHEP acquired IFCO, and the white-wood pallet lost market share over the ensuing years. A strong number one player allows the white-wood pallet to be better presented in the marketplace. That rising tide lifts all ships, whether it’s 48forty, poolers or the thousands of other companies that we compete with every day.
Pallet Enterprise: Do you see the supply of pallets getting any better, particularly in the recycled pallet market? What do you think the future holds for the white-wood pallet? What do you think the recycled pallet market will look like in 10 years?
Mike Hachtman: In the short term, we continue to see some customers buy pallets instead of renting. In some instances this includes new pallets. Regardless of the added cost, it is helpful that new pallets are being injected into the pool.
The white-wood pallet still remains the largest – and I would argue most efficient – pallet pool in the world. Tens of millions of pallets are being handled by thousands of white-wood pallet companies. There is room in the marketplace for pooled pallets and white-wood pallets because they meet different needs.
Pallet Enterprise: How do you think data is going to be important for somebody who is a pallet supplier actively managing their assets, better understanding and forecasting customer demand, getting pallets in the right place, repairing the right ratios, and so on.
Mike Hachtman: Our desire and intent is to serve our large national customers like they’re served by their other large national vendors. Data is a key part of our service offerings. All three companies, including Prime360, have become very good at collecting the data and analyzing it to know more about their customers’ pallet needs than the customers understand themselves.
I think there are many small pallet companies that are equally successful in doing this with their customers, whether it be with an accounting system or an Enterprise Resource Planning system or a spreadsheet. Prime360, Relogistics, and 48forty have been successful in part by relying on networks of pallet recyclers to help them service their large customers. And that will continue to be a cornerstone of our business going forward. Collectively we’re able to service these national accounts.
