Who would want the used cardboard boxes that carried plastic bottles to spice company McCormick & Co. Inc.? How about the company that sent all the boxes in the first place?
That’s the latest idea from Marty Metro, founder and chief executive of L.A. box broker Used Cardboard Boxes Inc. And his idea boosted the company to profitability this year for the first time.
UCB started out selling used boxes directly to consumers who needed a few dozen at a time for moving. But now it sells used boxes to retailers and manufacturers who need them by the thousands. The company has 30 employees, up from six in 2007, and annual revenue approaching $10 million, up from about $1 million back then.
“Our average order was $100 for our first few years,” Metro said. “Now it’s $10,000. When we do a contract to buy boxes, it can be a $1 million contract.”
UCB has such a contract with McCormick, based in Sparks, Md. When a supplier sends a box of empty bottles to McCormick’s packaging plant outside of Baltimore, the bottles are filled with spices. In the past, McCormick sold the used boxes to cardboard recyclers, who paid between $80 and $100 per ton. But now, the company sells the boxes to UCB, which pays a premium over the rate recyclers pay. UCB then sorts the boxes, recycling damaged ones but selling sturdy ones back to McCormick’s bottle supplier or other companies.
Even paying a 20 percent or 30 percent premium for boxes from McCormick, an individual box might cost less than a dime. And that same box can be sold to McCormick’s supplier for 80 cents or 90 cents – a big markup, but still a discount from the $1 or more a new box might cost.
Sellers, such as McCormick, get more money for their cardboard. Buyers, such as McCormick’s bottle supplier, pay less for boxes and UCB takes a cut in the middle.
UCB also provides detailed reports on the number of boxes that are reused and the amount of cardboard sent to recyclers.
“It’s a win all the way around,” said Jeff Blankman, sustainable manufacturing manager for McCormick. “And it seems so simple. But the clever ideas don’t have to be complicated.”
Still, it’s not as easy as it sounds. To sell cardboard to UCB or other companies that deal in reused cardboard boxes, companies often have to change operations in their plants and store the boxes until UCB picks them up. Manufactures in particular are often hesitant to make any changes that might slow production, said Mark Young, president of Montreal box broker ReBox Corp., which has a business model similar to UCB’s.
After all, selling boxes isn’t the primary concern for big companies and the gains from a deal with UCB might have little impact on their earnings reports.
“They don’t want to have their people save the boxes in a certain way or have them take up space,” he said. “If you’re talking about a big company that has $2 billion in sales, and you say they’re going to make an extra $200,000 on cardboard, it’s insignificant.”
First failure
Metro founded UCB’s predecessor, Boomerang Boxes, in 2002 to buy and sell used moving boxes.
The company had three local retail locations, but none had the space to store enough boxes: Customers would try to sell boxes to Boomerang, but Metro had nowhere to put them; at other times, people came to buy but he didn’t have enough boxes to meet their demand.
By 2005, Boomerang had lost about $1 million. Metro looked for investors, and found the now-inactive venture capital firm Funk Ventures in Pacific Palisades. The company invested, but insisted on a new business model that would have a wider reach and wouldn’t depend on retail stores.
Relaunched as UCB, the company leased a warehouse in Montebello, bought boxes from businesses, broke them down and packaged them into moving kits – 22 boxes of different sizes, along with tape, packing paper and scissors. The kits, purchased online, were shipped overnight to customers in California, Nevada and Arizona.
UCB continued to expand, opening a handful of distribution centers in 2007 and 2008, but its big break came in 2009, when Metro got a call from a Wal-Mart Stores Inc. distribution center that was looking for more than 100,000 used boxes. The company wanted cheap boxes to send defective merchandise back to vendors and to pack goods bound for charities.
Before that call, the vast majority of UCB’s business was selling moving boxes to individuals. Today, moving boxes represent about 30 percent of sales.
For its new business-to-business model, UCB still buys used boxes. But it now sorts them by size, inventories them and then distributes most of them to corporate customers. The company has its own in-house software that matches boxes with customers and tracks where boxes come from, how often they are reused and when they’re ultimately recycled.
McCormick’s Blankman said the data UCB provides is a vital part of the service. Before working with UCB, McCormick’s boxes were recycled or reused by a local box broker that didn’t provide any information about what happened to the boxes.
“Now, we can log in to a website, see how many boxes got reused and how many got recycled,” he said. “We like to report on this, and they gather all the information about what we’re doing with that waste.”
As a result, Blankman can quantify the company’s environmental efforts and market them. He can promote the fact that in its first 18 months working with UCB, McCormick reused 1.2 million boxes – enough to save 48,000 trees.
Expansion plans
Metro said 2012 will be UCB’s first profitable year, and now he’s hoping to expand. The company over the years has raised money from Funk and a handful of angel investors, but now Metro is seeking a multimillion-dollar funding round to help expand its network of distribution centers.
UCB now has two centers of its own – in Baltimore and Evansville, Ind. – with seven more operated by third-party logistics companies. Metro said having more company-operated centers would give UCB the ability to store slightly larger inventories and provide more stability.
“We do a lot of shipments just in time,” he said. “So if I get four truckloads of boxes I wasn’t expecting, I have to sell all four truckloads right away. More physical presence will give us more control.”
He’s also looking for more customers. Metro said that he recently closed a deal to buy boxes from a major food company and is working on deals with others.
Getting more deals could be difficult. Blankman said his company had to change some operations at its massive packaging plant in Hunt Valley, Md., to sell its boxes to UCB. Instead of being baled for recycling, boxes are broken down and stacked in trailers for UCB to haul away.
Those might sound like small changes, but manufacturing managers are often hesitant to make any change that could slow operations. That will likely make it difficult for UCB to sign up other companies, especially ones that don’t use as much cardboard.
“We have enough volume of boxes going out the door that it made a lot of sense,” Blankman said. “But if it’s a small facility where they don’t have a nice volume, is it really worth doing?”
Even so, UCB will likely benefit from the increasing popularity of corporate goals to increase recycling and reduce waste. Seri McClendon, chief executive of South Pasadena environmental consulting firm Clean Agency, said the services that UCB offers should be an easy sell to companies looking to improve their green credentials because they promise to reduce costs and bring in more revenue.
That means contracting with UCB is a better option for a company looking to improve its environmental practices than, say, investing in a wind turbine to power its plant.
“It’s very difficult, from our experience, to say, ‘Here’s a sustainable solution and it’s going to cost you more,’” McClendon said. “That rarely flies, especially in this economy.”
