Business Valuation

WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 1

IBISWorld Industry Report 42461 Plastics Wholesaling in the US August 2018 Heidi Diehl

Plastic paradise: Strong demand will ensure growth despite volatity in the price of inputs

2 About this Industry 2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance 4 Executive Summary

4 Key External Drivers

6 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products & Markets 13 Supply Chain

13 Products & Services

16 Demand Determinants

16 Major Markets

18 International Trade

19 Business Locations

21 Competitive Landscape 21 Market Share Concentration

21 Key Success Factors

21 Cost Structure Benchmarks

23 Basis of Competition

24 Barriers to Entry

24 Industry Globalization

26 Major Companies 26 PolyOne Corporation

26 Nexeo Solutions Holdings LLC

26 H. Muehlstein & Co. Inc

28 Operating Conditions 28 Capital Intensity

29 Technology & Systems

29 Revenue Volatility

30 Regulation & Policy

30 Industry Assistance

32 Key Statistics 32 Industry Data

32 Annual Change

32 Key Ratios

33 Industry Financial Ratios

34 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]

This report was provided to University of Baltimore (2132433030) by IBISWorld on 13 April 2019 in accordance with their license agreement with IBISWorld

WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 2

This industry wholesales plastics materials and resins, as well as unsupported plastic film, sheet, sheeting, rod, tube and other basic forms and shapes. Products sold

within the Plastics Wholesaling industry are sold to industrial manufacturers. Manufacturers use plastic products to manufacture durable goods.

The primary activities of this industry are

Plastic foam wholesaling

Plasticizers wholesaling

Plastics basic shapes wholesaling

Plastic materials wholesaling

Plastic resins wholesaling

32521 Plastic & Resin Manufacturing in the US This industry comprises establishments engaged in manufacturing resins, plastics, nonvulcanizable thermoplastic elastomers and noncustomized synthetic resins.

42331 Lumber Wholesaling in the US Operators in this industry sell and distribute lumber and other wood products at the wholesale level. Lumber is a major input in construction, especially residential construction.

42351 Metal Wholesaling in the US Operators in this industry sell and distribute metal products at the wholesale level for use in a variety of industrial and construction ends.

42469 Chemical Wholesaling in the US Operators in this industry sell and distribute chemicals at the wholesale level for use in a variety of industrial processes.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

https://www.iapd.org/ International Association of Plastics Distribution

http://www.thisisplastics.com/ Plastics Industry Association

www.plasticsnews.com Plastics News

The major products and services in this industry are

Plastics Raw Material

Polystyrene and Polyurethane Foam

Other Plastics Film, Sheet and Foam

Other Plastics Materials and Basic Shapes

Other Plastics

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Revenue vs. employment growth

Products and services segmentation (2018)

33.8% Plastics Raw Material

19.5% Polystyrene and Polyurethane Foam

18.9% Other Plastics

17.0% Other Plastics Film,

Sheet and Foam

10.8% Other Plastics Materials and Basic Shapes

SOURCE: WWW.IBISWORLD.COM

Key Statistics Snapshot

Industry at a Glance Plastics Wholesaling in 2018

Industry Structure Life Cycle Stage Mature Revenue Volatility Medium

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Light

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Medium

Competition Level Medium

Revenue

$56.9bn Profit

$2.3bn Wages

$2.5bn Businesses

3,006

Annual Growth 18–23

1.4% Annual Growth 13–18

0.6%

Key External Drivers Industrial production index Value of construction Consumer spending Demand from plastics and rubber products manufacturing Price of plastic materials and resin

Market Share There are no major players in this industry

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FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32

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Key External Drivers Industrial production index The industrial production index measures the output from mining, manufacturing, electric and gas industries. These industries require components and other plastic materials for their processes. Thus, an increase in demand for products and services in these industries will boost demand for the distribution of plastic materials. The

industrial production index is expected to increase in 2018, generating more potential revenue for the plastic distribution industry.

Value of construction Downstream industries in the construction sector are major markets for plastics wholesalers. When the construction sector is thriving, more

Executive Summary

As a key supply chain intermediary, the Plastics Wholesaling industry is integral to the US manufacturing sector. Plastics wholesalers distribute resin and plastic materials to plastic product manufacturers. These wholesalers also distribute finished plastic products to other downstream industries, including car manufacturers and construction industries. Accordingly, increased activity in the construction and auto manufacturing industries raises demand for industry products. Over the five years to 2018, robust growth in these key

downstream markets helped bolster industry demand. During the five-year period, IBISWorld estimates that revenue for the Plastics Wholesaling industry will grow at an annualized rate of 0.6% to reach $56.9 billion, including a 3.2% increase in 2018.

As industry wholesalers buy and resell plastics products, fluctuations in revenue depend largely on the market price of plastic. When plastic prices are higher, industry revenue generally increases, and vice versa when prices fall. The price of plastic materials and resin fluctuated during the five-year

period, creating revenue volatility. A drop in the world price of oil in 2014 caused the price of plastic to fall 11.3% in 2015. As crude oil and natural gas are the primary raw materials used in plastic production, wholesalers were forced to reduce their selling prices, which placed downward pressure on revenue. However, the precipitous drop in the price of plastic has been somewhat offset by the rise in domestic economic activity in recent years.

Over the five years to 2023, the industry is projected to experience increasing demand from downstream plastic product manufacturers and construction industries, and the price of plastic and resin is expected to increase at an annualized rate of 1.9%. Consequently, industry revenue is forecast to increase at an annualized 1.4% to $60.9 billion during the five-year period. To spur growth, some industry operators have formed sole-distributer contracts with large downstream manufacturers to be the exclusive provider of plastic materials, creating greater competition among larger wholesalers. Companies are also increasing wages as they focus on hiring high-skill labor. Increased competition, combined with increasing wages, is expected to result in a drop in the number of industry operators at an annualized rate of 0.2% to 2,976 wholesalers in 2023.

Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

The price of plastic materials and resin fluctuated over the five-year period, creating revenue volatility

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Industry Performance

Key External Drivers continued

purchases of plastic products are made; consequently, plastic product manufacturers buy more plastic materials from plastics wholesalers. The value of construction is expected to increase in 2018, presenting a potential opportunity for the industry.

Consumer spending Consumers purchase many goods made of plastic or packaged in plastic. When consumer spending declines, demand for plastic materials and products falls. Since plastic materials and products are distributed by this industry, demand for plastic-wholesaling services also declines when consumer spending shrinks. Consumer spending is expected to increase in 2018.

Demand from plastics and rubber products manufacturing A wide variety of manufacturing industries, including the automotive,

electronics and packaging industries, use plastics in the manufacturing process. Therefore, increased demand for finished plastic products boosts demand for the distribution of plastic materials. Demand from plastics and rubber products manufacturing is expected to increase slightly in 2018.

Price of plastic materials and resin Plastic materials and resin are petroleum products, made from crude oil, a global commodity whose price fluctuates constantly. As a result, the price of plastic materials and resin, the industry’s primary inputs, fluctuates as well. When wholesalers buy these inputs for higher prices, they generally are able to increase their selling prices. Higher prices therefore lead to higher revenue. The price of plastic materials and resin is expected to decrease over the five years to 2018, posing a potential threat to the industry.

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Provided to: University of Baltimore (2132433030) | 13 April 2019

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Industry Performance

Current Performance

The Plastics Wholesaling industry distributes and sells a variety of primary form plastics, resins and foam to a wide array of customers, mostly in manufacturing industries. Industry clients use the raw plastic and resin inputs to manufacture an assortment of plastics products including soft drink bottles, furniture, electronics, pipes and fittings. Operators in this industry also distribute finished plastic products to other downstream markets, such as construction material manufacturers and car manufacturers. Over the five years to 2018, the industry benefitted overall from growing demand from downstream customers, including the construction sector and certain manufacturing industries. However, growth in downstream demand was not steady throughout the period; it fluctuated alongside commodity prices, which produced uneven industry performance. Volatility in the price of plastic and the value of construction especially affected revenue. For example, in 2013, the industry experienced a 13.1% increase in revenue as result of a surge in the value of construction in 2012 and 2013, which bolstered downstream demand for industry products. However, in 2014, industry revenue decreased 1.2% as the

value of construction started to dip. Revenue grew the following year as industry operators adjusted to lower commodity prices and demand, but fell further in 2016 with a drop in the price of plastic. Revenue continued to decline in 2017 but increased in 2018 as commodity prices and downstream demand stabilized. Throughout the period, consumer spending helped to mitigate the volatility in downstream demand and commodity prices. Over the five years to 2018, industry revenue is estimated to have grown at an annualized rate of 0.6% to $56.9 billion, including a 3.2% increase in 2018 alone.

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Growth in downstream demand

During the five-year period, robust growth in several key downstream markets bolstered industry demand. The construction sector saw particularly strong growth, as housing starts, a primary indicator of the economy’s overall health, increased at an estimated annualized rate of 7.2% over the five years to 2018. More broadly, the value of overall construction is expected to have increased at an

annualized rate of 3.8% during the five-year period, boosting purchases of plastic products including pipes and other fixtures from industry operators. Furthermore, the automotive industry has experienced an increase in demand for its products. New car sales are expected to grow at an annualized rate of 2.4% over the five years to 2018, increasing demand for plastics products for car components.

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Industry Performance

Profit fluctuations Industry profit, defined as earnings before interest and taxes, has fluctuated moderately over the past five years. The volatility of plastic prices hindered revenue growth while rising wages increased costs and restricted profit. However, increased consumer spending and high volumes of activity in construction and car manufacturing industries, coupled with an increase in industrial productivity, placed upward pressure on margins.

Additionally, as employers hired more-skilled employees to manage wholesaling facilities, total wage payments

are expected to increase at an annualized rate of 1.0% over the five years to 2018. Consequently, profit margins are expected to decrease relative to their early-period high; IBISWorld expects industry profit to account for 4.0% of total revenue in 2018, compared to 4.4% in 2013.

Higher plastic costs helped increase revenue growth, but have threatened margins

Changes in corporate strategy

Shifts in cost structure and revenue have caused many plastic manufacturers and distributors to change their business strategies. Most notably, manufacturers have begun to streamline their relationships with distributors, with each relying on a single company to sell their goods to downstream consumers. By entering into such arrangements with manufacturers, distributors can have guaranteed suppliers with multi-year contracts and gain a competitive advantage by being the only distributor that carries a certain product line. Wholesalers can also provide more customer service and flexibility in order sizes when compared to manufacturers that sell directly to customers. This trend negatively affects distributors that cannot secure contract deals, resulting in consolidation within the industry.

In addition to securing demand from a small number of large buyers, some industry operators have expanded by focusing on international markets. During the five-year period, larger operators pursued acquisitions or joint

partnerships in developing parts of the world, including Eastern Europe and China. For example, Nexeo Solutions completed an acquisition of the distribution business of Ultra Chem in Mexico City in 2017, while PolyOne Corporation opened their Asia Innovation Center in Shanghai in 2015. Furthermore, global petroleum product powerhouse SABIC, a Saudi Arabian company entered the US industry with its purchase of GE Plastics in 2007 and has since expanded its reach to become one of the largest semi-finished plastics products distributors in North America, according to Modern Distribution Management’s 2016 Top Plastics Distributors ranking.

As consumer preferences shift toward environmentally friendly products, operators have responded by rebranding to focus on recycling, sustainability and combatting climate change. The Society of the Plastics Industry has renamed itself as the Plastics Industry Association with the purpose of reshaping how people understand plastics.

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Industry Performance

Increasing consolidation propels employment growth

Despite industry revenue increasing for most of the period, the number of industry operators has continued its historic downward trend. IBISWorld estimates the number of industry enterprises to fall at an annualized 1.9% over the five years to 2018 to 3,006 enterprises. This trend is partially a consequence of increasing consolidation at the regional level, with mid-sized operators out-pricing smaller competitors and capturing a greater portion of lucrative direct-distribution contracts.

As operators continue to grow larger, total industry employment is expected to increase throughout the period as larger distributers require more employees to perform warehousing functions. Accordingly, IBISWorld estimates the number of employees in the Plastics Wholesaling industry to increase at an

annualized rate of 0.4% over the five years to 2018 to 33,999 workers. Meanwhile, total wage payments are expected to increase an annualized 1.0% in the same five-year period to reach $2.5 billion, outpacing growth in labor. While growth in employment is primarily a result of increased demand for industry products, the wage increase is the product of an effort by businesses shift its labor force to highly skilled workers. In the long run, this is expected to increase company productivity.

Total wage payments are expected to grow as enterprises shift to a highly skilled workforce

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Industry Performance

Industry Outlook

IBISWorld expects the Plastics Wholesaling industry to continue to grow over the five years to 2023 as increased demand from key downstream customers and an expected increase in

the price of plastic will bolster revenue. Accordingly, industry revenue is projected to grow at an annualized rate of 1.4% over the five years to 2023 to reach $60.9 billion.

Continued growth in downstream demand

Demand from downstream markets will continue to strengthen revenue in this industry. IBISWorld forecasts that housing starts and the value of private nonresidential construction will grow strongly over the five years to 2023 at annualized rates of 4.3% and 1.4%, respectively. Robust expansion in the construction sector will lead to increased demand for plastics products; in turn, this will cause plastic pipe and parts manufacturers to demand more plastic materials from industry wholesalers. While demand is expected to grow, an expected increase in the price of crude oil over the next five years will create a degree of volatility in revenue, as higher plastic prices are closely linked with upward movements in the prices of oil and gas.

Consumer spending is also expected to increase during the five-year period at an annualized rate of 2.0%. As Americans continue to spend and make more purchases, demand for plastic

packaging will increase, translating to greater demand from plastic film, sheet and bag manufacturers. Furthermore, increased consumer spending will bolster revenue for the automotive industry, spurring more sales of plastic automotive parts. According to analysts at the information services company IS Markit, plastics use in vehicles is expected to grow 75% by 2020, presenting a growth opportunity for industry operators as automotive manufacturers demand more plastics and polymer composites from plastics wholesalers. Volvo, the Swedish vehicle manufacturer, plans to have all its vehicles made from 25% recycled plastic by 2025.

Manufacturers will likely seek out more wholesalers to be their sole distributor

Profit margins fall flat Purchasing costs for this industry will likely increase over the next five years. Chemical wholesalers purchase goods from manufacturers, which set the cost of goods mainly according to raw material prices. As IBISWorld forecasts the world price of crude oil to increase at an annualized 4.4% over the five years to 2023, plastics wholesalers may increase their prices to offset some of these higher input costs. However, out of fear of losing crucial customer contracts, most companies will not raise prices enough to fully offset the increase in purchasing

costs, instead choosing to absorb some of the loss. This will hinder growth in industry-wide profit margins (measured as earnings before interest and taxes), which are accordingly projected to remain steady during the five-year period.

However, given that plastic materials may also be derived from natural gas, the projected increase in the world price of oil is likely to have a more muted effect on price than in the past. This is due primarily to the recent fracking boom in the United States, which has partially reduced industry

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Industry Performance

operators’ reliance on imported oil. Consequently, it is possible to see a slight decoupling of the world price of crude oil and industry revenue moving forward. Projected rising oil prices will also increase transportation costs. The

majority of plastics wholesalers use trucking fleets to transport their goods. As the price of oil rises, gasoline prices will follow suit, which will increase shipping costs and further inhibit profit margin growth.

Profit margins fall flat continued

Following the trend of the past few years, distributers are expected to expand their dealings with large manufacturers, who will likely seek out more wholesalers to be their sole distributor. Many larger wholesalers have strong relationships with several customers, and manufacturers will seek to gain access to certain customers through their distribution network. By using the sole-distributer model, large manufacturing companies will be able to essentially outsource their customer service relations to an independent third party and focus the majority of their attention on product design. In turn, wholesalers will benefit from steadier streams of demand.

Relatively low revenue growth, increasing purchasing costs and growing industry concentration are expected to further diminish participation in the

Plastics Wholesaling industry over the five years to 2023. For instance, as larger regional operators solidify their dominance in the industry by maintaining sole-distributor contracts, there will be fewer opportunities for potential operators to enter the market. Accordingly, over the five years to 2023, IBISWorld anticipates the number of industry enterprises to fall an annualized 0.2% to 2,976 enterprises. Additionally, total industry employment is expected to continue to increase over the period, growing at an annualized rate of 0.7% to 35,217 employees.

Coping with change The expected increase in the price of crude oil will create slight volatility in revenue

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Industry Performance The industry’s products are necessary inputs for a variety of manufacturing processes

Industry value added is increasing at a slower rate than GDP

The industry is consolidating

Life Cycle Stage

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Industry Performance

Industry Life Cycle The Plastics Wholesaling industry is in the mature phase of its life cycle. IBISWorld expects industry value added, a measure of the industry’s contribution to the economy, to increase at an annualized rate of 0.6% over the 10 years to 2023. In comparison, national GDP is expected to grow at an annualized rate of 2.2% during the same period. Industry products are a necessary input in a variety of manufacturing processes and consumers use plastic products for a variety of everyday needs.

The existence of clearly defined product groups and user industries, along with the fairly stable nature of industry products,

also demonstrate that the industry is in its mature phase. No significant new products have been introduced in the industry, but the industry will continue to experience steady demand from manufacturing and construction sectors over the 10 years to 2023.

Operators in this industry are consolidating as larger operators replace smaller ones. Despite overall revenue growth throughout the period, total industry participation is expected to decline. In particular, the number of enterprises is projected to fall at an annualized rate of 1.0% over the 10 years to 2023 to 2,976 operators.

This industry is Mature

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Products & Services Products sold in this industry include plastic materials and resins, plastic raw materials, plastics film, sheet, sheeting, rods, tubes, and other basic plastic forms and shapes. While some of the industry’s product portfolio appeals to a broad range of downstream markets, others are used in only highly specialized industries. Over the past five years, the industry’s product lines that appeal to the broadest range of customers have fared best.

Plastics raw materials Sales of plastic raw materials account for an estimated 33.8% of industry revenue in 2018. Raw plastics and other plastic materials include polyethylene terephthalate, which is used for soft drink bottles, containers and vegetable oil bottles and high-density polyethylene, which is common for film containers, vitamin bottles, milk jugs and butter tubs. This category also includes vinyl and polyvinyl chloride, which are used in

Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

32611 Plastic Film, Sheet & Bag Manufacturing in the US Operators in this industry buy resin and formed plastics from the Plastics Wholesaling industry to manufacture their products.

32612 Plastic Pipe & Parts Manufacturing in the US Operators in this industry buy resin and formed plastics from the Plastics Wholesaling industry to manufacture their products.

32613 Laminated Plastics Manufacturing in the US Operators in this industry buy resin and formed plastics from the Plastics Wholesaling industry to manufacture their products.

32614 Polystyrene Foam Manufacturing in the US Operators in this industry buy resin and foam from the Plastics Wholesaling industry to manufacture their products.

32616 Plastic Bottle Manufacturing in the US Operators in this industry buy resin and formed plastics from the Plastics Wholesaling industry to manufacture their products.

KEY SELLING INDUSTRIES

32521 Plastic & Resin Manufacturing in the US Plastic material and resin manufacturers supply plastics wholesalers with resins, plastic materials and nonvulcanizable thermoplastic elastomers for resale to plastics products manufacturers.

32611 Plastic Film, Sheet & Bag Manufacturing in the US Plastic film, sheet and bag manufacturers supply plastics wholesalers with plastic film and unlaminated sheets (except packaging).

32612 Plastic Pipe & Parts Manufacturing in the US Plastic pipe and parts manufacturers supply plastics wholesalers with pipes, fittings and profile shapes such as rod, tube and sausage casings, often made from polyvinyl chloride (PVC).

32614 Polystyrene Foam Manufacturing in the US Polystyrene foam manufacturers supply plastics wholesalers with foam in primary form for resale to mattress and other foam product manufacturers.

33621 Truck, Trailer & Motor Home Manufacturing in the US Companies in this industry that own their own truck fleets purchase vehicles from semi-truck manufacturers.

Supply Chain

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Products & Markets

Products & Services continued

food wraps, vegetable oil bottles, health and beauty bottles and low-density polyethylene, which is used to make caps, netting, shrink wraps, garment bags and plastic bags. Polypropylene, another product in this category, is used to make butter tubs, containers, bottle tops, food wraps and carpets. Plastic raw materials as a share of revenue has increased over the past five years. This is due to increased use of plastic products as a substitute for more expensive packaging options like glass or metal. As this trend is expected to continue going forward, this product segment’s share of industry revenue is anticipated to increase over the next five years. For example, in 2018, Starbucks officially gave up plastic straws for polypropylene plastic lids for cold drinks which will increase demand for polypropylene in the future as more companies replace straws with other plastics in response to the increasing amount of consumers who do not use straws for environmental reasons.

Polystyrene and polyurethane foam Sales of polystyrene and polyurethane foam materials account for an estimated 19.5% of industry revenue in 2018. Producers create these polymers to create many common items computer

encasings. Polyurethane is becoming increasingly more popular and is replacing polystyrene as it a more flexible material, resistant to physical wear and tear and resistant to chemicals such as gasoline and insect sprays. Polyurethane is one of the most efficient manmade insulators. It is found it most refrigerators and freezers. Polystyrene is less expensive than polyurethane but it can be harder to form. Polystyrene and polyurethane foam’s share of revenue has increased over the past five years due to the increased use of products that need to be insulated and covered such as refrigerators and laptops. As this trend continues, it will be increasingly likely that polystyrene and polyurethane foam will capture more of the plastic wholesaling industry revenue, in particular polyurethane due to its versatility of applications.

Other Plastics Film, Sheet and Foam Other plastics film, sheet, and foam make up an estimated 16.9% of industry revenue in 2018. These categories have countless applications. Plastic film is typically used to separate areas or volumes, to hold items together, to act as a barriers or as a printable surface. With regard to products, film is used in

Products and services segmentation (2018)

Total $56.9bn

33.8% Plastics Raw

Material

19.5% Polystyrene and

Polyurethane Foam

18.9% Other Plastics

17.0% Other Plastics Film,

Sheet and Foam

10.8% Other Plastics Materials

and Basic Shapes

SOURCE: WWW.IBISWORLD.COM

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Products & Markets

Products & Services continued

packaging, plastic bags, building construction and many others. Plastic sheets are used for waterproofing, coverings, closing off rooms and more. Sheeting comes in all different grades and thickness depending on the end use. Plastic foams can be used for cushioning material, air filters, furniture, toys insulation, sponges and more applications. Film, sheet, and foam plastics have different practical applications ranging from basic coverings and insulation to being a printable surface. With a multitude of product applications, film, sheet and foam is projected to increase as a percentage of industry revenue.

Other plastics materials and basic shapes This industry is expected to generate 10.8% of revenue from the sale of other plastic materials and basic shapes in 2018. Some wholesalers in this industry engage in processing various plastic forms in addition to selling raw plastic. Plastics processing is a manufacturing or conversion process whereby plastic materials are made into products. Primary plastics processing consists of four major categories: injection molding, blow molding, extrusion and thermoforming. Secondary plastics processing refers to changes in the appearance or usefulness of the final products. These methods include cutting, forming, bonding and assembling the semi-finished products, as well as coating, polishing, plating and hot- stamping the finished products. An increasing number of manufacturers are expected to sell plastics products directly to end markets. Because the processing of plastics naturally lends itself to

manufacturing operators, IBISWorld forecasts a decrease in demand from wholesalers. Consequently, this product segment is projected to decrease as a percentage of industry revenue over the next five years.

Other Plastics Other plastics includes high pressure laminates, plastic pipes and tubing, plastic materials and basic shapes for electrical use, plastics for medical devices and plastic foam products for packaging. This segment is expected to generate 18.9% of industry revenue in 2018. High pressure laminates are used to create durable decorative surfaces and are resistant to chemicals, fire and general wear. There are three main types of plastic pipes: solid wall pipes, structured wall pipes and barrier pipes. They are generally made from cross-linked polyethylene (PEX) pipes or polyvinyl chloride (PVC) pipes depending on the desired level of flexibility and longevity. Plastic materials for electric use include thermoplastics that can be re-melted and remolded, and thermosets which cannot be re-melted. The use of plastics in electric goods makes for more lightweight and durable products. Plastic foam products for packaging protect goods from damage while being transported. As new packaging methods emerge, the use of foam products for packaging will get replaced. For example, consumers are becoming more environmentally conscious and prefer minimalistic packaging that uses fewer materials. As this segment is composed of a variety of niche products, it is expected to remain stable as a percentage of industry revenue over the next five years.

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Products & Markets

Major Markets This industry serves as a major upstream supplier of various plastic materials to a broad range of manufacturing and construction industries. Additionally, operators in this industry may sell products to other wholesalers or directly to end-users.

Manufacturing Users in manufacturing industries account for an estimated 47.5% of the total market in 2018. Industrial manufacturing operators use resins and other primary form plastics to make

Demand Determinants

Products within the Plastics Wholesaling industry are sold to product manufacturers, other wholesalers, retailers and builders. Plastic product manufacturers use raw plastic materials to manufacture durable goods. Demand is derived from the plastics and rubber products manufacturing subsector. The majority of downstream demand comes from the following industries: plastic product manufacturing; unsupported plastic film, sheet and bag manufacturing; plastic pipe, pipe fitting and unsupported profile shape manufacturing; laminated plastic plate, sheet and shape manufacturing and plastic bottle manufacturing. When these industries are performing well, high demand for raw plastic inputs will raise demand for plastics wholesalers.

Moving further downstream to end- users, consumption of plastics products across the economy is largely dependent on national consumer trends that include the volume of overall consumer spending and disposable income levels. For example, demand for plastic pipes and fittings is high when the construction sector is performing well, i.e. when consumers and businesses are spending money on new properties or making improvements to existing properties. Similarly, demand for plastic bottles is greater when consumers are buying more soft drinks, bottled water and bottled cosmetic and cleaning products. These purchases tend to be partially discretionary in nature, indicating they increase when consumers have more disposable income to spend.

Consequently, demand for plastics products overall is in part a function of consumer expenditure.

The prices of primary form plastics and resins also determine demand, though to a lesser extent. From industry wholesalers through plastic product manufacturers to retailers, every industry along the supply chain absorbs a portion of the price fluctuations in plastic products. Therefore, prices that consumers pay for plastic products only change minimally, as to not deter consumption of such products in the short term. Nevertheless, continual year-on-year price hikes can eventually take their toll in the long term, leading product manufacturers to substitute plastic for other material inputs like wood, metal or glass.

The perceived negative environmental impact of petroleum products also affects demand for plastics products in the long term. Plastic products that are designed for one-time use, like disposable shopping bags, and do not break down easily lead to many post-consumption costs for recycling and environmental cleanup. Consequently, several municipalities across the United States have begun either charging fees on plastic grocery bags or banning them altogether. Furthermore, other petroleum-based plastics like disposable dishware and silverware are being replaced by more sustainable products that include glass and plant- based plastics. In the long term, phasing out petroleum-based plastics for substitutes due to environmental concerns may reduce demand for industry products.

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Products & Markets

Major Markets continued

several products, including plastic bottles, plastic shopping bags, household kitchen items, furniture and piping. In addition to being a key input for a plethora of manufactured goods, plastic is also a key input in the packaging material that is used to ship and display those goods, including plastic wrap and foam. IBISWorld anticipates industrial production in the United States will increase over the next five years to 2023 at an annualized rate of 1.4%. Consequently, this market is expected to increase demand for industry products and grow its share of industry revenue over the next five years.

Other wholesalers Sales to other wholesalers account for the second-largest share of revenue at an estimated 23.9% in 2018. Plastics wholesaling is a highly fragmented industry, and individual distributers do not always have the reach to serve all available markets. Consequently, several wholesalers sell plastics products to other wholesalers with an established distribution network in a different market. This market’s share of industry revenue is expected to decrease over the next five years as the trend of wholesale bypass continues and more wholesalers exit the industry.

Retailers and repair shops Retailers and repair shops for resale or repair account for an estimated 5.8% of the total market in 2018. Retailers and repair shops demand various plastic products to sell to consumers as part of a finished product or as a replacement piece for a previously purchased item. Industry wholesalers distribute a wide range of products; however, very few industry products are finished goods and are actually component goods that are not ready to be sold directly to end-users. IBISWorld does not expect this market’s share of industry revenue to change significantly over the next five years.

Exports Export sales account for an expected 4.6% of the total market in 2018. By convention, international plastics trade is accounted for at the manufacturing level rather than the corresponding wholesale level. Nevertheless, plastics wholesalers in this industry sell raw material inputs for several industrial and consumer uses, and some of their customers reside in foreign markets. The portion of sales destined for exports may increase over the next five years as the US dollar weakens, making domestic products more expensive overseas.

Major market segmentation (2018)

Total $56.9bn

47.5% Manufacturing

4.6% Export Sales

23.9% Other Wholesalers

3.8% Other customers

9.5% Business Users

5.8% Retailers and Repair Shops

4.9% Construction

SOURCE: WWW.IBISWORLD.COM

Provided to: University of Baltimore (2132433030) | 13 April 2019

WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 18

Products & Markets

International Trade The Plastics Wholesaling industry does not engage in international trade; IBISWorld accounts for import and export activity at the manufacturing level. However, the Plastics Wholesaling industry is still affected by international trade. Domestic manufacturers that source raw plastic

materials from this industry as well as abroad are importing fewer products each year as shipping costs go up and emerging nations begin to charge more for their labor. Fewer imports lead operators to source more plastic raw material from the United States, benefiting the industry.

Major Markets continued

Contrarily, uncertainty around tariffs and trade policy may reduce exports in this industry.

Construction Construction sales account for an estimated 4.9% of the total market in 2018. Plastics used in construction primarily include thermoplastic resins, plastic piping and plastic laminates. Demand from this market is largely driven by the level of activity in construction of new homes and infrastructure. IBISWorld projects both residential building activity and private nonresidential construction to increase over the next five years. Consequently, this market is expected to increase its share of industry revenue over the same time period.

Other The largest remaining markets for this industry include business users and consumer users, which account for an estimated 9.5% and 3.8% of the total market, respectively, in 2018. These markets include purchases that are used directly by the purchaser and are not part of a product that will eventually be sold. Businesses buy plastic products like plastic wrap and foam products for packaging and storage. Additionally, consumer users of industry products include household consumers and individual users, farmers for use in farm production, governmental bodies and restaurants and hotels. These users are expected to maintain a steady percentage of the total market over the next five years.

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 19

Products & Markets

Business Locations 2018

MO 1.9

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT 0.1

MA 2.5

RI 0.5

NJ 4.3

DE 0.4

NH 0.5

CT 1.9

MD 0.8

DC 0.0

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ 1.5

CA 13.5

NV 0.8

OR 1.1

WA 1.8

MT 0.1

NE 0.3

MN 2.2

IA 0.7

OH 5.2

VA 1.3

FL 6.3

KS 0.8

CO 1.4

UT 0.8

ID 0.2

TX 9.5

OK 1.0

NC 2.8

AK 0.1

WY 0.2

TN 1.6

KY 1.0

GA 3.4

IL 6.0

ME 0.3

ND 0.3

WI 1.9 MI

4.5 PA 3.6

WV 0.2

SD 0.1

NM 0.3

AR 0.5

MS 0.4

AL 1.1

SC 1.7

LA 0.9

HI 0.2

IN 2.0

NY 5.7 5

6 7

8

3 21

4

9

SOURCE: WWW.IBISWORLD.COM

Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 20

Products & Markets

Business Locations Given that plastic is such a necessary input for the vast array of industries, the distribution of establishments generally falls in line with the overall distribution of the US population. However, some regions have a larger share of establishments than their share of population due to the high concentration of businesses that require large quantities of plastic. For example, regions with a higher concentration of manufacturing plants also have a higher concentration of wholesalers due to the importance of having a good proximity for efficiency purposes.

At 21.2% of industry establishments, the Southeast is home to the largest concentration of establishments in this industry. Similarly, it is the most populous region of the United States, claiming more than a quarter of the total national population. Florida is home to the largest percentage of total establishments within the region, accounting for 6.3% of industry establishments in 2018.

Unlike the rest of the country, the Great Lakes region’s concentration of industry establishments is well above its respective share of the US population. While this region is only home to 14.5% of the national population, it contains 19.6% of establishments in this industry

in 2018. Due to their proximity, states in the Great Lakes region, like Illinois and Michigan, supply plastic to several major manufacturers in the automotive sector.

The Western US is home to the third- highest concentration of industry business, with 17.4% in 2018, as well as the second-largest population distribution in the country. Due to its large population and role as a large industrial and trade hub, California claims the highest portion of industry establishments in the country, at 13.5% in 2018.

%

30

0

10

20

So ut

hw es

t

W es

t

G re

at L

ak es

M id

-A tl

an ti

c

N ew

E ng

la nd

Pl ai

ns

R oc

ky M

ou nt

ai ns

So ut

he as

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Establishments Population

Distribution of establishments vs. population

SOURCE: WWW.IBISWORLD.COM

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 21

Cost Structure Benchmarks

The cost structure of industry operators varies based on each business’ size and product mix. Larger companies that operate nationally and have diversified distribution channels command large economies of scale, which can lead to improved efficiencies and increased

profitability. However, these large operators are highly dependent on general macroeconomic trends that influence the manufacturing sector, and may suffer amid rising manufacturing input costs or in an economic downturn. Smaller businesses

Key Success Factors Development of new products The ability to respond to specific market needs and expand products into new markets facilitates revenue growth.

Having links with suppliers Having links with a diverse range of suppliers allows operators to provide a variety of product types while having strong relationships with suppliers enables wholesalers to negotiate consistent contracts.

Having a loyal customer base Repeat customer sales provide a stable source of revenue for industry

operators and help increase brand reputation and recognition.

Having an extensive distribution/ collection network Strong distribution networks minimize distribution costs and maximize market penetration.

Ability to control stock on hand Wholesalers carry inventory in anticipation of future orders. Efficient warehousing and distribution systems are essential to minimizing inventory to reduce operational costs.

Market Share Concentration

The Plastics Wholesaling industry has a low level of market share concentration. IBISWorld estimates that the top four companies operating in the industry account for less than 5.0% of total industry revenue. This industry is highly fragmented due to the localized nature of most businesses. According to the latest available data from the US Census Bureau, 65.3% of all industry operators employ fewer than 10 people. Aside from the localized nature of most operators, the industry’s widely diversified product mix also leads the industry to be highly fragmented. The extensive range of end-user product needs and the many different kinds of plastics available (e.g. specialty polymer formulations, thermoplastic resins, compostable resins, biohybrid resins) enable smaller

operators to compete within very specific niche markets. In particular, the niche market for plastics that have less of an impact on the environment has seen a steady increase in demand over the past five years due to the increasing presence of environmentally conscious consumers. Despite the general localized, fragmented nature of the industry, there are some signs that larger regional operators are pushing out smaller businesses. There have been several mergers and acquisitions that have taken place over the past five years among the larger industry operators, in particular within the blow molding segment. Consequently, IBISWorld estimates the total number of industry enterprises fell at an annualized rate of 1.9% over the five years to 2018 to reach 3,006 industry operators.

Competitive Landscape Market Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 22

Competitive Landscape

Cost Structure Benchmarks continued

operating in more specialized niche markets may lack scale but still generate healthy profit margins through the sale of specialized, high- margin plastics to a specific downstream market.

Profit IBISWorld estimates average industry profit, defined as earnings before interest in taxes, to account for 4.0% of total revenue in 2018. Profit has fluctuated moderately over the five years to 2018 as result of wage fluctuations and the volatility of the price of plastic materials and resin which increase costs. The price of plastic materials and resin is expected to decrease sharply in the middle of the period, causing a corresponding drop in revenue. However, consumer spending is expected to increase steadily, buffering the volatility of changing costs.

Purchases IBISWorld estimates that, in line with a typical wholesaling industry, purchases are the largest expense for the Plastics Wholesaling industry, accounting for 76.2% of revenue in 2018. A major determinant of this industry’s cost structure is the price of plastic foam, plastic shapes, plastic materials (film, rod, sheet, and tubing) and plastic resins. The costs of these products have fallen overall over the past five years, decreasing purchasing costs for industry operators. However, given the tepid increase in revenue in the same five-year period, purchases’ share of industry revenue is expected to have remained nearly unchanged in the period. Larger, vertically integrated operators in this industry experience lower purchasing costs and are able to better move their inventory from weak markets to areas with higher levels of demand. Generally,

Sector vs. Industry Costs

n Profi t n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other

Average Costs of all Industries in sector (2018)

Industry Costs (2018)

0

20

40

60

Pe rc

en ta

ge o

f re

ve nu

e

80

100

SOURCE: WWW.IBISWORLD.COM

4.2 4.0

8.3 5.71.1

0.4

76.2

4.3

9.1 1.8 1.00.6

78.0

5.3

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 23

Competitive Landscape

Basis of Competition Operators in this industry compete primarily based on price, customer service, reliability of supply, the quality and diversity of the product collection, and delivery capabilities. Plastics wholesalers generally emphasize the first two areas, price and customer service, to attract repeat customers and build brand loyalty. Large operators in this industry are generally at a competitive advantage over their smaller competitors in terms of price, as these operators maintain extensive economics of scale that enable them to offer products at the most competitive price. However, small and large businesses compete on more even ground in their customer service departments. While larger companies employ vast amounts of sales support, customer service personnel and generally offer online inventory catalogues, they

may be unable to match the intimate, customized customer service offered by smaller companies that only sell to few downstream businesses. Additionally, the relative ease of creating a website coupled with a rapid increase in the number of services conducted online over the past five years has enabled smaller industry operators to provide their customers with many of the same internet-based value-added services as their larger competitors.

Products for certain downstream markets, such as construction and manufacturing, require parts on a just-in-time basis. By ordering and receiving inventory only as required by demand and avoiding carrying excess stock, wholesalers who provide just-in- time services gain a competitive advantage and keep inventory and

Cost Structure Benchmarks continued

upstream suppliers operate in a more concentrated industry environment, giving them greater bargaining power when negotiating industry businesses. These suppliers are able to achieve cooperative prices, which put plastics wholesalers at a competitive disadvantage. Wholesalers can reduce other costs like wages, capital expenditure and rent with more efficient processes, but purchase costs depend on the price of product inputs, which keeps this segment of revenue high.

Wages IBISWorld estimates that over the five years to 2018 wages for the Plastics and Wholesaling industry have increased at an annualized rate of 1.0% to account for 4.3% of industry revenue. This increase is a product of both increasing demand for industry goods and companies opting to hire a few highly-skilled workers in lieu of many lesser-skilled laborers. Some factors of production, such as managerial

expertise and skilled labor, are relatively expensive in this industry. However, an increase in workers’ wages, if those workers are highly skilled, can lead to a decrease in the average cost of production and selling. Wages and salary fluctuate with sales revenue and employment levels. The majority of wage and salary costs are incurred in the sales and sales support areas; 63.8% of employees are engaged in sales support and selling.

Other Other expenses for this industry include rent, utilities, depreciation and other miscellaneous expenses, including administrative costs, interest payments and insurance. These expenses have all remained relatively stable over the past five years. Marketing expenses in the industry are centered on providing quality customer service and sales personnel and are primarily counted as a wage expense.

Level & Trend Competition in this industry is Medium and the trend is Steady

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 24

Competitive Landscape

Industry Globalization

Globalization in the industry has increased over the past five years. The entire petroleum products and plastics products supply chain globally integrated. While the industry itself does not participate in international trade (recorded at the manufacturing level, by convention), nor does it operate internationally (outside the scope of the domestic nature of the industry), in reality it is a global network of plastics products companies that communicate and compete with one another.

Many wholesalers have operations based overseas and import plastic products for sale domestically from countries such as Canada, Mexico, China, Japan and Korea. There is also a high level of globalization within the plastics manufacturing industry. Large plastic manufacturers such as GE and 3M are moving production outside the United States to reduce labor costs. In additional to plastic manufacturers, companies that create the raw materials play a large role in the industry; large

Barriers to Entry The Plastics Wholesaling industry has a moderate level of barriers to entry. Although there are no direct regulatory barriers to entry, there are aspects of the Plastics Wholesaling industry that may make it difficult for new entrants. While established wholesalers have relatively low levels of capital expenditure, new ventures are required to invest large amounts of money upfront in equipment, facilities and initial merchandise, which can prevent less-capitalized operators from entering the industry. New entrants may also struggle to gain market share and customers in such a mature industry that relies heavily on relationships and reputation. Many potential clients already have well-established relationships with existing wholesalers, and it would take considerable amounts of time and effort to lure them away.

Moving forward, as manufacturers continue bypass wholesalers by selling their products directly to end users, industry operators that only perform

wholesaling functions are expected to be forced out of business as they cannot compete on price with original product manufacturers. This trend will negatively affect new entrants to the industry. Nevertheless, the highly fragmented nature of the industry indicates that there is still opportunity for operators with a technical knowledge of various plastics to enter the industry and prosper by catering to either niche downstream markets or targeted geographical areas.

Basis of Competition continued

related carrying costs low. To ensure they meet appropriate delivery times, successful businesses must invest in computerized inventory management, supply chain management and demand

forecasting software. This automation is particularly important for industry operators that maintain large fleets of transportation vehicles and operate a national distribution network.

Barriers to Entry checklist

Competition Medium Concentration Low Life Cycle Stage Mature Capital Intensity Low Technology Change Medium Regulation & Policy Light Industry Assistance Low

SOURCE: WWW.IBISWORLD.COM

Level & Trend Barriers to Entry in this industry are Medium and Steady

Level & Trend Globalization in this industry is Medium and the trend is Increasing

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Competitive Landscape

Industry Globalization continued

international petroleum products companies, such as Saudi Basic Industries Corporation provide the raw materials to the manufacturers.

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Headquartered in Avon Lake, OH, PolyOne Corporation (PolyOne) is a manufacturer and distributer of specialized polymer materials with operations in thermoplastic compounds, specialty polymer formulations, colors and additive systems, thermoplastic resin distribution and specialty polyvinyl chloride (PVC) resins. The company operates five business segments: global specialty engineered materials; global

color, additives and inks; designed structures and solutions; performance products and solutions; and PolyOne distribution. Only the PolyOne distribution segment is relevant to this industry. This segment distributes over 4,000 grades of engineering and commodity-grade resins, including PolyOne-produced compounds, to more than 6,500 custom injection molders and extruders in the North American market via its seven distribution facilities in the

Texas-based Nexeo Solutions Holdings LLC (Nexeo) is an independent global chemicals, plastics, composites and environmental services distribution company. The company began operations on April 1, 2011, after its parent company, TPG Capital (a global private investment company), purchased the global distribution business of Ashland Inc. Nexeo provides specialty and industrial chemicals, additives and solvents to industrial users through distribution centers in the United States, Canada, Mexico and Puerto Rico. The company generated an estimated 52.9% of its revenue from plastics in 2018, representing a broad product line of plastics consisting of commodity polymer products and engineering resins to plastic

processors engaged in blow molding, extrusion, injection molding, and rotation molding. Key suppliers include SABIC Innovative Plastics, BASF, LyondellBasell Industries, ExxonMobil Chemical Co. and Borealis. In March 2016, Nexeo Solutions announced a merger with WL Ross Holding Corp, an acquisition company sponsored under WL Ross Sponsor LLC. As a result of the $1.6 million deal, Nexeo Solutions has become a wholly owned subsidiary of WL Ross Holding Corp. According to the company’s website, Nexeo is expected to continue operating with a greater access to capital used to fund aggressive growth in the long-run. IBISWorld estimates that industry-relevant revenue for Nexeo totals $986.9 million in 2018.

Other Company Performance

FFounded in 1911 and headquartered in Wilton, CT, H. Muehlstein & Co. Inc. is one of the largest plastics distributers in the United States. Through its subsidiaries, the company supplies plastic, rubber, elastomeric, polyethylene, polypropylene, polystyrene, styrenic polymer and polyolefin compound products to manufacturers in the United States and internationally. The company also offers post-consumer and industrial recycled resins, compostable resins,

biohybrid resins and degradable additives. Its suppliers include Dow Chemical, ExxonMobil and BP. Muehlstein reports that it has four compounding and distribution centers and 50 facilities that serve as bulk terminals, warehouses or packaging facilities. It also owns more than 400 railcars that it uses to distribute its products. IBISWorld estimates that industry-specific revenue for the company will total $837.3 million in 2018.

Major Companies There are no Major Players in this industry | Other Companies

H. Muehlstein & Co. Inc Market share: 1.0%- 2.0%

Nexeo Solutions Holdings LLC Market share: 1.0%- 2.0%

PolyOne Corporation Market share: 1.0%- 2.0%

Other Company Performance

Other Company Performance

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 27

Major Companies

United States and one in Canada. In 2018, IBISWorld anticipates the company’s industry-specific revenue to total $699.9 million.

Other Company Performance continued

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Capital Intensity The Plastics Wholesaling industry exhibits a low to moderate level of capital intensity. Using wages to represent labor and depreciation to represent capital, IBISWorld estimates that for every dollar spent on wages in 2018, $0.10 is spent on capital. The primary function of this industry is to move stock from the manufacturer to the end user as efficiently as possible. This function involves labor-intensive activities that include the transportation, storage, and marketing of inventory products. The major capital expenses for this industry are computerized inventory controls, forklifts and pellet trucks.

Over the five years to 2023, capital expenditures in this industry are expected to increase as more operators

implement automated inventory management and tracking systems. However, average wages for this industry

Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance

Capital intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COM Dotted line shows a high level of capital intensity

Capital units per labor unit

Plastics Wholesaling

Wholesale Trade

Economy

Level The level of capital intensity is Low

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Operating Conditions

Revenue Volatility This industry exhibits a moderate level of revenue volatility. Over the five years to 2018, revenue has grown as much as 13.1% in 2013 and declined as much as 3.4% in 2017. The volume of activity in upstream manufacturing industries typically encourages additional spending and investment on products in this industry. Industry revenue is also susceptible to changes in the price of plastic materials and resin as this affects the selling price for wholesalers. Additionally, revenue is subject environmental legislation that regulate

the handling, storage, transportation, treatment or disposal of materials. Industry output is further influenced by inventory management in customer industries: the higher levels of stock held by customers, the lower level of initial product demand. Fluctuations in downstream demand and manufacturing input prices are expected to stabilize as consumer spending steadily increases. Consequently, IBISWorld expects revenue volatility to decrease over the next five years.

Technology & Systems Technological developments related to plastic and resin manufacturing processes are accounted for at the manufacturing level. Within the Plastics Wholesaling industry, advancements in communications and logistics technologies have brought improvements in distribution efficiency. Some of this technology includes online services which let customers search product inventory lists, check pricing, place and print orders and be billed electronically via an e-mail address.

Additionally, developments within the past 10 years in information technology have offered operators the possibility to revolutionize procurement by changing order procedures and facilitating better supply chain management practices. Automated inventory management and tracking systems now provide real time tracking of order statuses and just-in-time

product delivery to end markets. Real- time tracking technologies such as radio frequency identification (RFID) also facilitate better supply-chain management practices and help verify product authenticity.

Vertically or horizontally integrated businesses with extensive computerized systems are able to leverage the use of shared services across their business segments, including improved use of information technology, for productivity gains and cost savings. In light of recent pressures on revenue and profit growth, more operators in the industry are implementing such systems to remain cost-competitive. This has increased the level of technological change in the industry over the past five years including the integration of centralized enterprise resource planning (ERP) systems.

Capital Intensity continued

are also anticipated to increase through the same period, as operators place highly skilled employees in charge of complex automated systems. These two

trends are expected to balance each other out, causing capital intensity for this industry to remain steady over the next five years.

Level The level of Technology Change is Medium

Level The level of Volatility is Medium

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 30

Operating Conditions

Industry Assistance While no direct assistance is given to wholesalers, there are several tariffs placed on plastic products that provide indirect assistance to the Plastics Wholesaling industry. In fact, several businesses that operate in this industry are also plastics manufacturers, to whom import tariffs are particularly helpful. As plastics are manufactured by refined petroleum, they can take a few different forms including polyvinyl chloride (PVC) pipes, polyethylene terephthalate (PET) beverage bottles and polystyrene foam. Nevertheless, imported plastics products or resins in primary form

are generally subject to a variety of ad valorem tariffs of 3.0% to 6.5% as established by the Harmonized Tariff Schedule of the United States. The proposed tariffs on imports of steel and aluminum would negatively affect the plastics industry as a whole as plastic manufacturers rely on machinery made of steel and aluminum. If plastics manufacturers experience increased capital costs, their productivity would decline and decrease their demand for plastics wholesaling.

Assistance in this industry is also provided by trade associations operating

Regulation & Policy The majority of regulations on plastics are placed at the manufacturing level. However, plastics wholesalers are subject to standard wholesaling regulations, and are required to obtain reseller licenses to sell goods without sales tax. Wholesaler license requirements typically differ within states. Industry operators must also comply with environmental safety laws concerning the handling, storage, transportation, treatment and disposal of different waste materials. Examples of regulations are the Federal Hazardous

Materials Transportation Law (FHMTL) and the Hazardous Materials Regulations (HMR). Environmental regulations, particularly those concerning plastics, may also differ from state to state. Plastics wholesalers must take care to ensure they cannot be held liable as a potentially responsible party (PRP) in connection with improper plastics disposal at waste disposal sites. Businesses that operate internationally must comply with all foreign regulations in their country or countries of operation as well.

Revenue Volatility continued

Level & Trend The level of Regulation is Light and the trend is Steady

Level & Trend The level of Industry Assistance is Low and the trend is Steady

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Operating Conditions

Industry Assistance continued

throughout the United States. Some of the more prominent associations include the Society of the Plastics Industry and the American Plastics Council. The Society of the Plastics Industry (SPI) was established in 1937 and is the largest trade association representing plastic product industry in the United States. It has rebranded itself as the Plastics Industry Association (PLASTICS) to reframe how people understand plastics in an environmentally-conscious society. It represents 965,000 workers across the entire plastics industry, including processors, machinery and equipment manufacturers, and raw materials

suppliers. Assistance provided by PLASTICS to members includes the provision of workplace development programs, compliance assistance, trade shows, industry information and statistics, safety and environmental programs and sales leads. It recently focused more on keeping members updated on tariff news and advocating for free trade. Similarly, the American Plastics Council is an organization that provides information on environmental issues through partnerships and strategic alliances. This association represents the industry at the federal, state and local level.

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Key Statistics Revenue

($m)

Industry Value Added

($m) Establish-

ments Enterprises Employment Exports Imports Wages ($m)

Domestic Demand

Price of plastic materials and resin

(Index) 2009 48,007.1 4,133.9 3,916 3,199 32,547 -- -- 2,165.5 N/A 190.8 2010 46,577.1 4,248.1 3,895 3,126 30,654 -- -- 2,152.2 N/A 210.1 2011 47,170.7 4,261.0 3,769 3,009 30,784 -- -- 2,232.6 N/A 229.7 2012 48,925.8 4,720.6 4,323 3,509 33,664 -- -- 2,372.1 N/A 235.2 2013 55,359.6 5,013.6 4,093 3,304 33,371 -- -- 2,356.3 N/A 245.3 2014 54,684.1 5,020.2 3,978 3,238 33,700 -- -- 2,340.6 N/A 257.0 2015 57,754.5 5,092.3 3,835 3,118 34,561 -- -- 2,493.3 N/A 228.0 2016 57,135.8 5,059.5 3,735 3,049 34,243 -- -- 2,488.5 N/A 218.5 2017 55,192.8 4,884.9 3,596 2,933 33,179 -- -- 2,401.2 N/A 232.7 2018 56,935.3 5,026.9 3,686 3,006 33,999 -- -- 2,471.4 N/A 234.9 2019 58,175.6 5,139.8 3,633 2,955 34,163 -- -- 2,497.1 N/A 237.4 2020 58,757.2 5,203.4 3,715 3,024 34,591 -- -- 2,529.6 N/A 241.5 2021 59,407.6 5,235.4 3,654 2,968 34,577 -- -- 2,537.2 N/A 246.7 2022 60,127.1 5,285.4 3,721 3,024 35,040 -- -- 2,573.6 N/A 252.3 2023 60,924.3 5,331.7 3,670 2,976 35,217 -- -- 2,594.2 N/A 258.2 Sector Rank 35/67 43/67 50/67 50/67 53/67 N/A N/A 47/67 N/A N/A Economy Rank 171/696 398/696 422/696 409/696 505/696 N/A N/A 431/696 N/A N/A

IVA/Revenue (%)

Imports/ Demand

(%)

Exports/ Revenue

(%)

Revenue per Employee

($’000) Wages/Revenue

(%) Employees

per Est. Average Wage

($)

Share of the Economy

(%) 2009 8.61 N/A N/A 1,475.01 4.51 8.31 66,534.55 0.03 2010 9.12 N/A N/A 1,519.45 4.62 7.87 70,209.43 0.03 2011 9.03 N/A N/A 1,532.31 4.73 8.17 72,524.69 0.03 2012 9.65 N/A N/A 1,453.36 4.85 7.79 70,464.00 0.03 2013 9.06 N/A N/A 1,658.91 4.26 8.15 70,609.21 0.03 2014 9.18 N/A N/A 1,622.67 4.28 8.47 69,454.01 0.03 2015 8.82 N/A N/A 1,671.09 4.32 9.01 72,142.01 0.03 2016 8.86 N/A N/A 1,668.54 4.36 9.17 72,671.79 0.03 2017 8.85 N/A N/A 1,663.49 4.35 9.23 72,371.08 0.03 2018 8.83 N/A N/A 1,674.62 4.34 9.22 72,690.37 0.03 2019 8.83 N/A N/A 1,702.88 4.29 9.40 73,093.70 0.03 2020 8.86 N/A N/A 1,698.63 4.31 9.31 73,128.85 0.03 2021 8.81 N/A N/A 1,718.12 4.27 9.46 73,378.26 0.03 2022 8.79 N/A N/A 1,715.96 4.28 9.42 73,447.49 0.03 2023 8.75 N/A N/A 1,729.97 4.26 9.60 73,663.29 0.03 Sector Rank 46/67 N/A N/A 13/67 52/67 44/67 16/67 43/67 Economy Rank 670/696 N/A N/A 31/696 665/696 374/696 146/696 398/696

Figures are in inflation-adjusted 2018 dollars. Rank refers to 2018 data.

Revenue (%)

Industry Value Added

(%)

Establish- ments

(%) Enterprises

(%) Employment

(%) Exports

(%) Imports

(%) Wages

(%)

Domestic Demand

(%)

Price of plastic materials and resin

(%) 2010 -3.0 2.8 -0.5 -2.3 -5.8 N/A N/A -0.6 N/A 10.1 2011 1.3 0.3 -3.2 -3.7 0.4 N/A N/A 3.7 N/A 9.3 2012 3.7 10.8 14.7 16.6 9.4 N/A N/A 6.2 N/A 2.4 2013 13.2 6.2 -5.3 -5.8 -0.9 N/A N/A -0.7 N/A 4.3 2014 -1.2 0.1 -2.8 -2.0 1.0 N/A N/A -0.7 N/A 4.8 2015 5.6 1.4 -3.6 -3.7 2.6 N/A N/A 6.5 N/A -11.3 2016 -1.1 -0.6 -2.6 -2.2 -0.9 N/A N/A -0.2 N/A -4.2 2017 -3.4 -3.5 -3.7 -3.8 -3.1 N/A N/A -3.5 N/A 6.5 2018 3.2 2.9 2.5 2.5 2.5 N/A N/A 2.9 N/A 0.9 2019 2.2 2.2 -1.4 -1.7 0.5 N/A N/A 1.0 N/A 1.1 2020 1.0 1.2 2.3 2.3 1.3 N/A N/A 1.3 N/A 1.7 2021 1.1 0.6 -1.6 -1.9 0.0 N/A N/A 0.3 N/A 2.2 2022 1.2 1.0 1.8 1.9 1.3 N/A N/A 1.4 N/A 2.3 2023 1.3 0.9 -1.4 -1.6 0.5 N/A N/A 0.8 N/A 2.3 Sector Rank 15/67 18/67 6/67 6/67 15/67 N/A N/A 14/67 N/A N/A Economy Rank 197/696 245/696 155/696 151/696 210/696 N/A N/A 198/696 N/A N/A

Annual Change

Key Ratios

Industry Data

SOURCE: WWW.IBISWORLD.COM

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 33

Apr 2016 - Mar 2017 by company revenue Apr 2013 - Apr 2014 - Apr 2015 - Apr 2016 - Small Medium Large Mar 2014 Mar 2015 Mar 2016 Mar 2017 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios

Current Ratio 1.6 1.5 1.6 1.6 2.1 1.6 1.5 Quick Ratio 0.9 0.9 0.9 1.0 1.1 0.8 1.0 Sales / Receivables (Trade Receivables Turnover) 8.8 9.2 9.0 8.9 10.0 8.4 8.3

Days’ Receivables 41.5 39.7 40.6 41.0 36.5 43.5 44.0 Cost of Sales / Inventory (Inventory Turnover) 7.8 9.5 7.2 7.1 6.2 6.6 8.3

Days’ Inventory 46.8 38.4 50.7 51.4 58.9 55.3 44.0 Cost of Sales / Payables (Payables Turnover) 10.8 12.7 11.2 11.7 12.3 9.7 13.1

Days’ Payables 33.8 28.7 32.6 31.2 29.7 37.6 27.9 Sales / Working Capital 11.2 12.1 9.9 9.3 8.3 9.6 9.9

Coverage Ratios

Earnings Before Interest & Taxes (EBIT) / Interest 6.3 6.5 7.7 7.6 3.3 10.2 9.2

Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 3.2 2.9 4.8 11.0 n/a n/a 12.1

Leverage Ratios

Fixed Assets / Net Worth 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Debt / Net Worth 1.9 2.0 2.1 1.8 1.3 2.1 1.7 Tangible Net Worth 34.1 33.0 31.9 35.1 39.7 30.0 36.6

Operating Ratios

Profit before Taxes / Net Worth, % 25.3 25.4 28.5 23.6 10.5 36.2 26.3 Profit before Taxes / Total Assets, % 7.6 8.2 8.4 8.0 4.8 9.5 8.4 Sales / Net Fixed Assets 126.8 85.3 80.8 93.1 150.8 100.6 63.8 Sales / Total Assets (Asset Turnover) 3.2 3.2 2.8 3.0 2.8 2.9 3.0

Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 20.0 17.5 20.4 21.3 30.7 17.6 17.6 Cash after Operations 2.8 4.5 4.7 3.1 2.7 2.6 4.7 Net Cash after Operations 2.4 4.5 4.6 3.0 2.7 3.3 3.7 Cash after Debt Amortization 0.5 1.1 1.3 0.9 0.5 0.5 1.2 Debt Service P&I Coverage 1.8 3.3 6.5 3.8 3.3 4.3 3.4 Interest Coverage (Operating Cash) 5.1 6.2 12.1 5.9 4.9 10.1 11.9

Assets, %

Cash & Equivalents 8.8 9.7 9.3 9.1 12.7 8.7 5.8 Trade Receivables (net) 40.3 38.4 36.7 37.8 32.6 40.2 40.0 Inventory 32.1 30.3 33.1 34.0 33.1 36.4 31.9 All Other Current Assets 2.3 2.3 1.7 1.6 1.0 1.8 2.1 Total Current Assets 83.6 80.7 80.8 82.5 79.5 86.9 79.9 Fixed Assets (net) 10.2 11.0 9.9 9.6 13.1 6.5 9.8 Intangibles (net) 2.1 2.9 4.0 4.1 2.2 3.6 6.7 All Other Non-Current Assets 4.2 5.4 5.3 3.9 5.2 2.9 3.6 Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Assets ($m) 2,617.8 3,009.7 3,124.1 2,686.6 57.9 369.8 2,258.9

Liabilities, %

Notes Payable-Short Term 18.6 18.5 16.6 16.6 12.3 18.7 18.5 Current Maturities L/T/D 1.9 2.2 1.7 2.2 2.5 1.6 2.6 Trade Payables 26.1 23.8 26.9 21.9 18.2 26.3 20.0 Income Taxes Payable 0.4 0.1 0.2 0.1 0.2 0.1 n/a All Other Current Liabilities 7.1 7.4 5.9 7.3 8.4 6.6 7.1 Total Current Liabilities 54.1 51.9 51.2 48.1 41.7 53.3 48.2 Long Term Debt 6.0 6.7 6.4 6.8 9.7 5.3 5.7 Deferred Taxes 0.2 0.2 0.2 0.2 n/a 0.3 0.3 All Other Non-Current Liabilities 3.5 5.3 6.3 5.7 6.7 7.5 2.5 Net Worth 36.2 35.9 35.9 39.2 41.9 33.6 43.3 Total Liabilities & Net Worth ($m) 2,617.8 3,009.7 3,124.1 2,686.6 57.9 369.8 2,258.9

Maximum Number of Statements Used 137 143 138 115 36 44 35

Industry Financial Ratios

Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online.

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WWW.IBISWORLD.COM Plastics Wholesaling in the US August 2018 34

Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

HIGH-DENSITY POLYETHYLENE A plastic material commonly used for film containers, vitamin bottles, milk jugs and butter tubs.

LOW-DENSITY POLYETHYLENE A plastic material used for caps, netting, shrink wraps, garment bags and plastic bags.

POLYETHYLENE TEREPHTHALATE A plastic material used for soft drink bottles, containers and vegetable oil bottles.

POLYPROPYLENE A plastic material commonly used for butter tubs, containers, bottle tops, carpets and food wraps.

VINYL AND POLYVINYL CHLORIDE A plastic material used to make food wraps, vegetable oil bottles, health and beauty bottles.

WHOLESALE BYPASS A popular trend within retail and manufacturing industries where producers supply goods directly to stores.

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Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossary continued

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