39-Consolidation in the Waste Industry
The leading waste management company, Waste Management Inc., has just offered to buy the number three ranked competitor, Republic Services. This offer preempts Republic’s offer to purchase the number two competitor in the industry, Allied Waste Industries.
Before these acquisitions, the waste industry was about average in its degree of consolidation. The three largest U.S. waste companies control about two-thirds of the nation’s permitted landfill capacity. In the average large industry, the top three competitors have about 68% of total industry sales.
If Waste Management’s offer is successful, it will then control 50% of the country’s permitted landfill capacity. This 50% compares with the median industry leader among large industries with a market share of 38% of sales. This is a very strong position.
The Waste Management proposal did not succeed. Instead, Republic Services did take over Allied. Waste Management remains the largest competitor in the industry followed by Republic. The top 3 companies in the industry control about 70% of the industry’s market share. In 2020 Waste Management had revenues of $15.2 billion, Republic Services brought in $10.2 billion and Waste Connections brought in $5.5 billion.
These three competitors, especially the top two, will dominate the Heart of the Market in their industry. The Heart of the Market includes the Primary and Secondary role relationships with the Very Large and Large customers. (See Symptom: “Large customers are getting higher discounts.”) These segments dominate the industry’s volume.
Acquisitions, especially in mature industries, are an important source of potential cost reduction. In these mature industries is often cheaper to buy a competitor than to try and take the competitors’ customers from it. HERE is some refinement on that thought
THE SOURCES FOR STRATEGYSTREET.COM: For over 30 years we observed the evolution of more than 100 industries, many hostile. We put their facts into frameworks applicable to all industries and found patterns. Strategystreet.com describes the inductive results of these thousands of observations and their patterns.