In yet another blow to the troubled all-plastic pallet pooler, iGPS lost another marquee client. Following in the footsteps of ConAgra Foods, PepsiCo recently left iGPS to go back to CHEP.
The Australian, a major newspaper in Australia, reported that Brambles, the parent company of CHEP, has signed a three year $45 million per year deal with PepsiCo. The contract covers the Quaker, Tropicana and Gatorade divisions and is expected to start in January 2012 and fully ramp up by March 2012.
iGPS has experienced pallet availability problems ever since financial backers stopped the infusion of more capital and pallets into the pool earlier this year. With retailers holding pallets longer than expected in secondary use and higher damage rates than originally forecasted, iGPS has found itself in a tough spot.
Russell Shaw, analyst with Macquarie Group, estimated that PepsiCo accounted for at least 15% of the total utilization of the iGPS pool. Shaw commented on losing such a big account, “While this could arguably make the company more desperate to find new customers at any price, the reputational risk of losing two major customers in six months would leave other potential customers wary in our view.”
Losing a major customer gives iGPS the pallet volume to supply its remaining customers, particularly Kraft Foods and General Mills. But it also reveals the vulnerability of iGPS. iGPS did not return calls for comment in regards to the PepsiCo situation.
How long will iGPS remain competitive without the successful relaunch of its pool? Nobody knows because that really depends on its existing customers. If it loses more customers, the company could be in trouble. It also needs to improve the usage and allocation of its existing pool.
