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Pallet Manufacturer Business Plan

Advanced Technology Pallets

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Market Analysis Summary

U.S. yearly consumption of pallets is 800 million a year, costing over £10 billion (according to National Wooden Pallet and Container Association). Our first market will be a 200 miles radius area around Dallas/Fort Worth in which the yearly consumption is 60 million pallets. Our markets for the RST-PAL pallets are all industries and users of pallets. About 300 interested users for our RST-PAL pallets (each of them buying over 100,000 pallets/yr) were contacted.

  • RST-PAL pallets have the lowest life cycle cost compared to hard wood and plastic.
  • Global Pallets leasing.
  • Closed and open loop systems.
  • Worldwide markets and licensing opportunities (Internationally patent protection filed).
  • U.S. Defense and Transportation Departments market. U.S. government has mandated product replacement with recycled products.

ATP's target in the first year is to produce 1.14 million pallets with two lines of production (constitutes 0.15% of the market), reach sales of £22 million, and ATP projects to earn profits of over £8 million (before tax).

The growth projection for the next five years is to add a new plant with two lines each year, reaching production in excess of six million pallets by the fifth year, (0.75% of the market), with sales projected at £143 million and profits before taxes of over £66 million.

4.1 Market Segmentation

Due to the fact that ATP's projected plan is to open a new plant each year over the next five years, and to capture 0.15% to 0.75% of the U.S. pallet market, our main growth problem will be the limited abilities to supply the potential demand. Although we segmented the market into six groups we cannot indicate the percentage of growth for each segment, as the growth is not linear. The percentage represents our relative emphasis of this segment.

Yearly Pallet Users - Potential Customers

Total Yearly Production

1,137,024

2,467,584

3,701,376

4,935,168

6,168960

% of the Pallet Market

0.143

0.308

0.463

0.617

0.771

Total: Five year production =18,410,112. % of the pallet market =0.46

Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Up to 10,000 pallets yearly 5% 50,000 150,000 250,000 400,000 500,000 77.83%
10,000 - 50,000 pallets yearly 5% 100,000 200,000 450,000 450,000 500,000 49.53%
50,000 - 100,000 pallets yearly 10% 200,000 220,000 700,000 800,000 900,000 45.65%
100,000 - 250,000 pallets yearly 20% 250,000 500,000 700,000 1,000,000 1,250,000 49.53%
250,000 - 500,000 pallets yearly 25% 250,000 650,000 750,000 1,100,000 1,250,000 49.53%
Over 500,000 pallets yearly 35% 287,024 747,584 851,376 1,185,168 1,768,960 57.56%
Total 52.62% 1,137,024 2,467,584 3,701,376 4,935,168 6,168,960 52.62%

4.2 Target Market Segment Strategy

The following table demonstrates the cost savings that will be realized when a company converts its wooden pallet inventory to RST-PAL pallets.

Currently new hardwood pallets, (example: 40"x48", four-way entry, 80% top deck coverage) are sold from £12 to £24 per pallet depending on the geographical area where you are purchasing your pallets, and the always fluctuating cost of hardwood. For the purpose of this chart we show the lowest price for large quantities of hardwood pallets at £10.

CHEP Pallet, Inc., the largest pallet leasing company in the world currently pays £23.50 to construct its pallets. 

A pallet user of 100,000 new pallets per year will be saving over £3 million within 5 years using our RST-PAL pallets.

Year 1Year 2Year 3Year 4Year 5Total 5 year
Company A buys 100,000 pallets/year @£10.00£1,000,000£1,000,000£1,000,000£1,000,000£1,000,000£5,000,000
Company B buys 100,000 RST-PAL pallets @£18.50 (One time purchase)£1,850,000£0£0£0£0£1,850,000
TOTAL SAVINGS£3,150,000

The table demonstrates that big users will realize huge savings. For example, one poultry processing plant that purchases one million pallets per year (about the production of one ATP plant) will realize savings of over £31 million within five years which will encourage them to convert their wooden pallet inventory to RST-PAL pallets.

Big users, as mentioned above, might accelerate our growth plan even quicker. This is the reason that strategically, our marketing efforts will concentrate towards the big users. Our marketing effort will be directed also to all government agencies including the U.S. military. Contractors doing business with the government should be using "environmentally preferable" products, (President Clinton Executive order).

4.2.1 Sample of Advertisment Content

RST-PAL PALLETS

COMING SOON

THE NEW SOLUTION TO COSTLY

REPAIRS AND REPLACEMENT OF

WOODEN PALLETS

RST-PAL pallets are not affected by heat or cold. Won't rot, split or mildew
STRONG & IMPACT RESISTANT, No more rusty nails, splinters, broken boards and runners
RST-PAL PALLETS are 100% Recyclable, made from post consumer waste. No disposal costs

RST-PAL pallets, offering a new solution to an old problem

  • RST-PAL pallets made from new tough materials = virtually indestructible.
  • RST-PAL pallets are tougher, longer lasting pallets.
  • Many years of repeated usage make RST-PAL pallets the best buy.
  • Close your pallet repair facilities, our pallets don't break.
  • Stronger and more durable than wood or plastic.
  • Easily trackable with bar coding or electronic chip.

RECYCLE / RE-USE of RST-PAL pallets represents a great innovation to the pallet industry with a major cost savings.

RST-PAL pallets address important environmental issues; help clean up America's growing scrap tire problem and conserve valuable timber resources by using old tires to transport America's commodities to consumers.

4.3 Industry Analysis

The pallet industry's computation of the cost of a pallet includes the costs of production, maintenance and repairs, and discarding of the broken pallet. In the last decade, materials other than wood were introduced to the pallet industry like plastic, metal and corrugated cardboard, but still over 90% remain wood.

More than eight hundred million wooden pallets are constructed each year in the U.S., according to the National Wooden Pallet and Container Association (NWPCA). Most wooden pallets must be replaced or repaired after only one to two trips. It is estimated that over 3.5 million trees are used each year for pallet production, and most of these pallets end up in landfills, burned, or composted.

For years pallet users have been asking NWPCA members to build stronger and more durable pallets that would last longer, but nothing has changed. Pallet manufacturers favor the ongoing replacement prevalent in the industry.  

The Recycled Scrap Tire industry generates more than two hundred fifty million scrap tires annually in the United States, one scrap tire for every American. These scrap tires are piling up, adding to the existing stockpile of an estimated two to three billion scrap tires located across the nation causing dangerous environmental hazards. Most states have adopted emergency scrap tire programs to help solve the growing problem of accumulations of scrap tires. The state of Texas has a scrap tire program; collecting and processing more than two hundred thousand tons of scrap tire rubber annually. Currently Texas has more than three million tons of shredded scrap tire rubber on the ground, available to end-users.

ATP with its RST-PAL pallet product will utilize Texas' scrap tires to manufacture pallets at its first plant in Stamford, TX. The RST-PAL pallets will provide tough and durable pallets to pallet users while helping clean up the scrap tire problem.

ATP's patented material and the manufacturing process to make pallets from scrap tires is the ultimate solution to the problems presented above:  a) stronger and more durable pallets;  b) reducing scrap tire stockpiles;  c) saving trees. The use of  RST-PAL pallets provides an excellent cost effective price, competitive to hardwood pallet prices.

The table in Topic 4.2 demonstrates the savings for a pallet user that purchases 100,000 pallets annually, when converting from wood to RST-PAL pallets. It shows savings over a five year period of more than £3 million. This saving comes on top of other benefits of using the RST-PAL pallets including: more durable and indestructible, carries 15 times the load of wooden pallets, rackable and stackable, will not absorb liquids (can be stored outside), and guaranteed for years. ATP's first plant is located in Stamford, Texas, a rural community that is badly in need of economic development and new jobs. Stamford is approximately 150 miles from our first targeted marketing area the Dallas/Ft.Worth Metroplex.

4.3.1 Competition and Buying Patterns

There is NO direct competition to RST-PAL pallets and no similar pallets exist today. The inventor, Dan Radke, has granted, in perpetuity, to ATP Corp the sole rights of utilizing the patent worldwide. This patent (USPTO # 08/680,476) gives very wide protection to the revolutionary invention of special material and to the process of making pallets.

The "competition" comes from pallets made of other materials like wood and plastic. Pallet users that use hardwood pallets do not use pallets made of corrugated cardboard. The table below demonstrates the cost comparison among the different pallets:

PALLET COST COMPARISONS - OVER 5 YEARS (in USD)

Pallet: Made ofUnit PriceRepair Cost/yr*Replace. u/p x 4Recycle £1/yrTotal CostAverage Cost
Hardwood12 - 24120*48 - 965185 - 245215
Plastic39 - 890156 - 3565200 - 450325
RST-PAL19 - 2500019 - 2522

(*) Six repairs per year costing £4 each x 5 years.

The table clearly shows that costs over five years of the hardwood pallet is almost ten times that of RST-PAL pallets. In addition to the savings, there are other advantages such as the guarantee, no need to repair, can be stored outside (no liquids are absorbed), washable (important in the food industry), rackable and stackable, strong and indestructible. Bar-coding and electronic chips can be molded into the pallet to allow for specific inventory information regarding what is loaded on the pallet and for tracking.

There is no competition to RST-PAL pallets. There is no competitor making pallets from recycled rubber. ATP anticipates that our limited production will cause our five years expansion plan to be revised in order to meet the demand. Our first plant is expected to produce approximately 1.14 million pallets in the first year and 1.23 million from the second year forward. While the market for pallets is in excess of 800 million annually, ATP expects to capture about 0.15% of the market in the first year, and 0.75% after five years to meet our projections. This takes a great part of the risk out of the project.

ATP has already explored opening a subsidiary company that will lease or lease to own pallets to companies. This will enable ATP to compete with CHEP Pallet Corporation, which leases wooden pallets. CHEP has about 300 branches in the U.S. and also operates in foreign countries. Leasing RST-PAL pallets would be very profitable, as our pallets do not require repairs.

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Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Up to 10,000 pallets yearly 5% 50,000 150,000 250,000 400,000 500,000 77.83%
10,000 - 50,000 pallets yearly 5% 100,000 200,000 450,000 450,000 500,000 49.53%
50,000 - 100,000 pallets yearly 10% 200,000 220,000 700,000 800,000 900,000 45.65%
100,000 - 250,000 pallets yearly 20% 250,000 500,000 700,000 1,000,000 1,250,000 49.53%
250,000 - 500,000 pallets yearly 25% 250,000 650,000 750,000 1,100,000 1,250,000 49.53%
Over 500,000 pallets yearly 35% 287,024 747,584 851,376 1,185,168 1,768,960 57.56%
Total 52.62% 1,137,024 2,467,584 3,701,376 4,935,168 6,168,960 52.62%