This category includes establishments primarily engaged in the wholesale distribution of wrapping and other coarse paper and paperboard, as well as converted paper and related disposable plastics products, such as bags, boxes, dishes, eating utensils, napkins, and shipping supplies. It includes wholesale distribution of corrugated and solid fiber boxes, fiber cans and drums, pressed and molded pulp goods, pressure sensitive tape, sanitary food containers, and paper towels.
422130 (Industrial and Personal Service Paper Wholesalers)
Judging from the paper production capacity in the United States, the late 1990s represented a time of "ultra slow" capacity growth, according to the 40th Annual Capacity Survey conducted in 1999 by the American Forest & Paper Association (AF&PA). The 1998 Capacity Survey was the first to identify a leveling of growth in aggregate paper production capacity in the United States, with an expansion rate of 0.6 percent. Capacity remained to 101.3 million tons. Projections for aggregate production capacity remained very slow, predicting increases of 1.1 percent in 2000, 0.7 percent in 2001, and 0.4 percent in 2002. According to the 42nd Annual Capacity Survey conducted in 2001, AF&PA reported a capacity growth to remain at 0.4 percent through 2004.
Wholesale distributors of industrial and personal service paper posted more than $25 million in sales in 2003. There were about 5,982 establishments, up from 5,089 in 2001, according to D&B Sales & Marketing Solutions figures. Most of these establishments averaged about 13 employees, and average sales per establishment were about $5.5 million. There were about 71,412 employees in 2001 with an annual payroll of about $3.3 million. The employee total had increased to 74,458 in 2003.
Whereas the production capacity for most grades of industrial and personal service paper ran flat or grew slightly, one component of the industry represented sustainable growth. The annual rate of using recovered paper to make industrial papers was projected to rise 1.8 percent from 2000 to 2002, bringing recovered paper's share of total consumption from 36.1 percent in 1998 to 37.1 percent in 2002. The production capacity for tissue paper grew to 7.1 million tons in 1999. However, projections called for slower capacity growth through the next three years, with rates descending from 2.8 percent in 2000 to 1.7 percent in 2001 and 0.2 percent in 2002.
Containerboard and boxboard capacities were slated to run fairly flat, with the former only growing 0.5 percent annually from 2000 to 2002 and growth of the latter falling from 1.2 percent in 2000 to 0.6 percent in 2001 before bottoming out at 0.3 percent in 2002. Milk carton and food service board capacity grew by 2.5 percent in 1999, but was expected to level off during the first three years of the millennium. The production capacity of kraft paper, used to line corrugation, fell to 2.1 million tons in 1999. However, its capacity levels were expected to level as well, dropping only 1.1 percent in 2000 and then leveling off by 2002.
Wholesale distributors of industrial and personal service paper saw a steadily increasing market in the 1990s, with sales growing from $37.0 billion in 1990 to $46.7 billion in 1996. This represented average annual growth of 4.4 percent, keeping the industry growing moderately in real (inflation adjusted) dollars. The industry was also growing in terms of employment in the 1990s, with 69,700 employees in 1990 increasing to 75,300 in 1996. There were 5,668 establishments involved in wholesale distribution of industrial and service paper in 1996, up from 4,667 in 1990, according to U.S. Department of Commerce figures. Most of these were small operations, however, averaging 12 employees per establishment.
Establishments in this industry are concentrated in the most densely populated areas to be close to their customers. About half of all industrial and personal service paper is distributed by paper merchants and the other half is marketed and distributed by the paper manufacturers' own sales representatives and distribution services. Many of the largest manufacturers of industrial and personal service paper distribute their goods from distribution centers near their plants and mills.
Given the small size and large number of distributors in this industry, the market is considered to be highly fragmented. Market share is spread among the thousands of local and regional U.S. distributors, with only a few operations being considered national in scope. However, larger firms such as International Paper and Unisource Worldwide have been consolidating the distribution system in recent years by buying up smaller competitors to provide single-source purchasing for a range of industry products. These distributors are taking advantage of a trend in which their major customers establish company-wide supply contracts, eliminating some of the buying autonomy of their local units.
In addition to single-sourcing, a major strategy for paper distributors has been to offer several services to clients, including: on-call technical expertise; overnight delivery; just-in-time inventory controls; and electronic data interchange (EDI), which allows suppliers, distributors, and customers to write electronic purchase orders, track inventory and sales, and collect other information as part of the distribution process.
According to W. Henson Moore, president and CEO of the American Forest & Paper Association, unfair trading practices have resulted in 72 paper mill closures over a five year period, and the elimination of more than 32,000 jobs in 2002. He further noted, "Unless exchange rates are fixed pretty soon, and equilibrium is restored, the U.S. paper industry will not have the capacity to challenge our competitors and retake these lost markets."
Leading companies included International Paper Co., of Purchase, New York, and Unisource Worldwide, of Berwyn, Pennsylvania. Other major players in the industrial and personal service paper distribution industry included units of the following paper manufacturing firms: Champion International Corp., of Stamford, Connecticut, (through its Nationwide Papers Division); Mead Corp., of Dayton, Ohio, and Georgia-Pacific. Leading independent operations included McCarty-Holman Co., of Jackson, Mississippi, Martin-Brower Co., of Downers Grove, Illinois, Central National-Gottesman, of Purchase, New York, and Bunzl Distribution, of St. Louis, Missouri.
American Forest & Paper Association. "Paper Industry Sees Capacity Growing Modestly in 2002-2004." Available from http://www.afandpa.org/news/PressReleases/Capacity02_rel.html .
D&B Sales & Marketing Solutions, 2003. Available from http://www.zapdata.com .
International Paper Co., 2002. Available from http://www.internationalpaper.com .
Polsky, Barry."Overvalued Dollar Threatens U.S. Paper Industry." 11 March 2002. Available from http://209.246.147.58/news/PressReleases/overvalued_whm_march1102.html .
U.S. Census Bureau. Statistics of U.S. Businesses 2001. Available from http://www.census.gov/epcd/susb/2001/US421420.HTM .
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