Industrial and Personal Service Paper

SIC 5113

Companies in this industry

Industry report:

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.

Industry Snapshot

Wholesale distributors of industrial and personal service paper posted more than $9.5 billion in sales in 2009. About 5,507 establishments employed 62,888 people in the industry, according to D&B Sales & Marketing Solutions. Most of these establishments were small, with more than 74 percent employing fewer than 10 workers. California had the most establishments in the industry, with 803, followed by New York with 458 and Texas with 406. These three states together accounted for more than 30 percent of total industry revenues and almost a quarter of all employees.

Organization and Structure

In the late twentieth century, establishments in this industry were concentrated in the most densely populated areas to be close to their customers. About half of all industrial and personal service paper was distributed by paper merchants and the other half was marketed and distributed by the paper manufacturers' own sales representatives and distribution services. Many of the largest manufacturers of industrial and personal service paper distributed 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 highly fragmented. Market share is spread among the thousands of local and regional U.S. distributors, with only a few operations considered national in scope. Larger firms such as International Paper and Unisource Worldwide consolidated the distribution system by buying up smaller competitors to provide single-source purchasing for a range of industry products. These distributors took advantage of a trend in which their major customers established 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.

Background and Development

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 an average annual growth rate of 4.4 percent, which represented moderate growth in real (inflation-adjusted) dollars. The industry also grew in terms of employment in the 1990s, with 69,700 employees in 1990 increasing to 75,300 in 1996.

Judging from the paper production capacity in the United States, however, 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 at 101.3 million tons.

Whereas the production capacity for most grades of industrial and personal service paper ran flat or grew slightly through the late 1990s and early 2000s, one component of the industry represented sustainable growth. The annual rate of using recovered paper to make industrial papers grew from 36.1 percent in 1998 to 37.1 percent in 2002. The production capacity for tissue paper also grew, reaching 7.1 million tons in 1999. Containerboard and boxboard capacities ran fairly flat. Milk carton and food service board capacity grew slightly by 2.5 percent in 1999. The production capacity of Kraft paper, used to line corrugation, fell to 2.1 million tons in 1999.

Trade was a major issue in the industry in the 2000s. According to W. Henson Moore, president and CEO of the AF&PA, unfair trading practices resulted in 72 paper mill closures over a five-year period and the elimination of more than 32,000 jobs in 2002. The industry also continued to lobby for antidumping legislation against China into the second decade of the new millennium.

Current Conditions

Paperboard and paper capacity in the United States declined along with the economy in the late 2000s. The average annual rate of decline from 2000 to 2009 was 0.9 percent, according to the AF&PA. In 2009 alone, overall capacity dropped 2.5 percent to reach 93.9 million tons. Of the nine paper grades classified by AF&PA, seven experienced declines in capacity. Uncoated mechanical paper was one of the few categories that saw an increase in 2009, rising 6.2 percent. The AF&PA attributed the growth to a shift from newsprint and coated mechanical papers. Tissue paper capacity also rose, by 1.4 percent, due to new machines coming online and the restart of one mill that had previously been shut down. In the paperboard sector, capacity rose in two of the six categories: gypsum wallboard and corrugating medium.

Although recycled paperboard capacity was down to 4.9 million tons in 2009, recycling figures continued to rise. A record high of 63.4 percent of all paper consumed in the United States in 2009 was recovered for recycling, according to the AF&PA. Other figures showed that paper packaging accounted for more than 74 percent of all recycled materials in 2007.

Into the early 2010s, participants in the industrial and personal service paper industry tried to recover from the economic recession amid a host of negative factors. As stated in a 2010 article in Graphic Arts Monthly, "This millennium has not been kind to the paper industry. Mill closures, curtailments, raw material price increases and--most devastating--decreased paper demand characterize the era." However, there were some positive events too, according to the article, such as new innovations in paper grades and an increased participation in sustainable practices and products. The focus on the environmental friendliness of paper use was expected to continue to be a major issue into the second decade of the twenty-first century and beyond.

Industry Leaders

International Paper Co. (IP) of Memphis, Tennessee, was the world's largest containerboard supplier as well as a leader in the industrial paper industry in the early 2010s. With 56,100 employees, the firm had sales of $23.3 billion in 2009. Behind IP was Georgia-Pacific LLC, with 45,000 employees and sales of $12.5 billion. A subsidiary of Koch Industries, Georgia-Pacific (GP) was the number-one maker of tissue products such as paper towels and bath tissue and also supplied cardboard packaging, recycled paper fibers, and other paper products. GP owned a 40 percent share in another major player, Unisource Worldwide Inc. of Norcross, Georgia. Unisource specialized in coated and uncoated commercial printing paper as well as packaging paper products. Sales for Unisource in 2009 reached $5.0 billion with 6,000 employees. Other industry leaders included Kimberly-Clark Corp. of Irving, Texas, with $19.1 billin in 2009 sales and 56,000 employees; MeadWestvaco (MWV) Corp. of Richmond, Virginia, with sales of $6.0 billion in 2009 and 20,000 employees; Weyerhauser Co. of Federal Way, Washington, with 14,900 employees and 2009 sales of $5.5 billion; and Smurfit-Stone Corp. of Chicago, with 19,000 employees and revenues of $5.5 billion in 2009.

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