September 15, 2025 • 43 mins
Almost everything we buy nowadays has been in a box at some point. Goods are shipped in boxes. Products ordered online arrive at our doorstep in boxes. Boxes are so ubiquitous that some strategists use them as an unconventional macroeconomic indicator to gauge retail spending. Now, shipments of boxes are falling dramatically. At the same time, prices for boxes have actually been going up. So, what's going on? And what does it suggest about the health of the US consumer and the broader economy? In this episode, we speak with Ryan Fox, containers and packaging analyst for Bloomberg Intelligence. We talk about the box industry overall, how companies choose their packaging, and what makes the perfect box.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Wasn'tal Joe.
Speaker 2 (00:24):
I Am going to put something on the table and
you tell me what it is, Okay, go on, all right,
here I go.
Speaker 3 (00:35):
It is a this is so, this is incorrugated. I
believe cardboard box and has taped it, says fragile and
I would I guess it's about I don't know. I'm
not good at measurements. It'd be eighteen inches by thirty
six inches something like that.
Speaker 2 (00:52):
That is a very good physical description of a cardboard box. However,
I'm going to say you're wrong. It is in fact
a macroeconomic indicator. The other acceptable answer is it's part
of the odd Loocks logo.
Speaker 3 (01:06):
That's right, that's right. It's a box, and that is
core to odd lats. But you know, now we're going
to talk about literally, when you think box, you don't
often first think magic, money, box, pozes. And when you
think box, you often don't necessarily think of the container ship,
which is often called a box. Is in the book
The Box. But I think when people think about a box.
(01:27):
They think about a cardboard box, corrugated or not.
Speaker 2 (01:30):
Now is a very good time to be thinking about boxes,
by the way, because there's been some commentary about this,
but we've basically had a sort of box apocalypse.
Speaker 3 (01:38):
Yeah in the States, we still having one.
Speaker 2 (01:41):
Uh, jury's kind of out and we'll get into that
in the discussion. But US box shipments, so boxes of boxes,
which I find funny box reception anyway, US box shipments
have fallen to the lowest second quarter reading since twenty fifteen.
That's according to the Fiber Box They.
Speaker 3 (02:00):
Are probably like they're like folded up, yeah, yeah, so
you a bunch of them. They're maybe wrapped in plastic
or something like that. So shipments of those lowest it's
like twenty fifteen.
Speaker 2 (02:10):
Yeah, And I think there are some other numbers we
can get into that are like the worst since the
financial crisis and things like that. And obviously the concern
is boxes tend to contain products that people are buying, right,
So if no one's buying boxes, what does that say
about retail spending, the health of the consumer, and the
direction of the broader economy. That's when you get into
(02:32):
the macro indicator.
Speaker 4 (02:33):
Stuff.
Speaker 3 (02:33):
You know, I love e commerce, but I hate breaking
down boxing. I know so much and then you like
rip it up. There's no it's never quick. I would
like to see some innovation on the ease of collapse ability.
Speaker 2 (02:46):
You know what I did, because I buy a lot.
I trained my dog to rip apart Amazon boxing.
Speaker 3 (02:51):
Oh that's amazing, but.
Speaker 2 (02:52):
Then he kind of went on strike and stopped doing it.
Speaker 3 (02:54):
Well, that would be cool for your kids to do it. Yeah,
put them to work.
Speaker 2 (02:58):
Okay, Well, I am happy to say we do, in
fact have the perfect guest. We're going to be speaking
with Ryan Fox. He is a containers and packaging analyst
for Bloomberg Intelligence. So Ryan, thanks so much for coming
on all thoughts.
Speaker 4 (03:10):
Thanks for having me.
Speaker 2 (03:12):
It's so nice to actually meet you in person, because
we've been ibing for a while talking about boxes. I
don't know how this became so interesting to me, but
probably because of the decline that we've been seeing. Walk
us through the numbers, like, how bad is the actual
fall in boxes of boxes? Shipments of boxes?
Speaker 4 (03:30):
Yes, so when we think about box shipments, they are
shipped like you said, knockdown flat or KDF for sure.
Speaker 3 (03:37):
KTF stands for oh, knocked down down, flazing. I already
learned something.
Speaker 4 (03:41):
And so they're shipped sometimes on pallettes, but they're going
to in the US and markets like food manufacturers, beverage manufacturers,
people who make industrial products. About fifty percent of the
boxes that we consume in the US are going to
go through a grocery store. So that's a really good
way to think about it.
Speaker 2 (04:00):
Huh.
Speaker 4 (04:00):
What we've seen box shipments have fallen in the first
half about two point three percent, and this is largely
due to uncertainties that are stemming from tariffs. We saw
a big ramp up during the pandemic where box shipments
grew the first year of the pandemic by about three
and a half percent, actually two point four percent, then
three and a half percent the following year. When we
think about it in concrete terms, we talk about box
(04:24):
shipments in terms of billions of square feet. And when
we talk about billions of square feet, like four hundred
billion square feet would wrap around the earth like thirty
times or something like that, it's a very.
Speaker 3 (04:34):
Big what exactly is being measured here?
Speaker 4 (04:37):
Right, So if you were to take this box here
and we were to tear it all apart. And so
by the way, this is a this is a regular
slotted carton. Okay, this is a double wall box.
Speaker 3 (04:48):
Is not corrugated.
Speaker 4 (04:49):
No, this is corrugated. So let's let's take a little
quick parenthetical thought. So cardboard is actually not this. This
is a corrugated fiberboard box. For all you box nerds
out there, this box has this particular one is a
double walls. There's five layers. The flat sheet is called liner,
the wavy part in the middle is called medium. I
am so much in heaven right now. You don't even
(05:10):
know if we were to unfold this thing, separate the
glue seam and lay it out flat and you just
do basic maths, or you take your tape measure and
you go with and lengths, So that would measure it
in terms of square footage. And this box right here,
it's been cut down so it doesn't look as big
as it really is, but it's probably somewhere around twenty
(05:30):
square feet. We could measure it if we wanted to,
but we won't. But if you were to do that
for every single box, that's how they will measure it.
What's really kind of important is these boxes are made
on a variety of different machines. And one of the
reasons why it's called a corrugated box is it's made
on a corrugator and that's a machine that takes different
kinds of paper and it laminates together. They stick together
(05:53):
with typically cornstarch or some other starch product. So one
of the mechanisms is called the corugator roll and it's
a role with these little wrinkles in it. They steam
the paper and it forms those little arches and that's
what gives the board its strength. There are different sizes
of these little things like then they're called flutes, but
(06:14):
you can't play them. They don't make any music.
Speaker 3 (06:16):
So interesting, it's super interesting. Let's just keep talking about
this box. What is it about the corrugation process that
makes it stronger?
Speaker 4 (06:21):
So from a physics standpoint, it's what gives the box
its shape and substance, and there is a lot of
science that goes behind this. In fact, we now have
ways to predict how the box will perform in real
world situations just mathematics.
Speaker 2 (06:36):
Do we do box testing where we beat up a box?
Speaker 4 (06:38):
Absolutely? Yeah. And so for a lot of companies they
have to go through the ISTI International Safe transit authority.
They actually test the box to make sure it will
hold up against ups or FedEx or in some instances
they go so far as to make sure that no
matter what happens, it's going to survive. And those tests
(07:00):
and costs thousands of dollars, So it's a very robust process.
Speaker 2 (07:05):
What's the best box before.
Speaker 4 (07:07):
We go, Before we go into what everyone has their
favorite box. I mean as adults, you've you've really gotten
into adulthood when you get that box and you're like,
that's a really good box.
Speaker 3 (07:21):
Anything that's easy to collapse.
Speaker 4 (07:22):
Anything that's easy to collapse is one way.
Speaker 2 (07:24):
No, anything that's easy to open. I like the zippers.
Speaker 4 (07:27):
The zippers seeah, a lot of people like the zipper polls.
There are some boxes that are very elaborate and they
don't require much at all to set them up. They
kind of fold and lock in on themselves. Yeah, we
call those die cut boxes. They are made from a
cutting die that looks like a big cookie cutter, and
they will make any shape that you want to make.
(07:49):
The most popular style is what we call a roll
end box, and they can tuck on the inside, they
can tuck on the outside, but this is really a
nice box. It's it's a box that you might see
if you were to buy something online, and they're really
trying to go for that wow factor because they're going
to get for that tadaka, open the box and show
off the product.
Speaker 3 (08:10):
Let's talk more about this box on the table here, Like,
are you learned enough in the space you could say like, oh,
I think this came from x mil or X year,
or like you have any other insights there?
Speaker 4 (08:20):
Okay, yeah, so this box doesn't have it, okay that
I can see. But on most boxes there me in
the USA, there is a small little stamp on the
bottom of the box. It's round, and it's called a
box maker's certificate. Okay, there are around eleven hundred facilities
in the US that make corgated boxes, and that little
stamp on the bottom will tell you what company made
(08:42):
the box and where it's located, and more specifically, it
will tell you what the stuff is made of. You
might go, that's kind of a stupid detail, but it
goes back over sixty years, actually goes back over one
hundred years to when boxes were first starting to come around.
Most people don't know that corgated boxes are only one
hundred and thirty one hundred and forty years old, only
(09:04):
implemented in the late eighteen nineties.
Speaker 3 (09:06):
I'm trying to think of before this was a joe.
What do you think the first corrugated as if I
would even begin to have a guess anyway, keep going.
Speaker 4 (09:13):
So, right after the turn of the century, in the
early nineteen hundreds, companies were looking for ways to ship
their product. The only mechanism they had. In that time,
we didn't really have eighteen wheelers, we had trains, and
so the rail companies, as they were making new rails,
they're cutting down forests. They had lots of wood to
do something with. So what did they do? They made crates.
(09:36):
But crates were very expensive and they were very heavy,
and so people were looking for alternatives, and they came
up with a correated box. Actually goes back funding New
York story. The Dumbo area is home to the Gear
Building and Gear was one of the early pioneers of
paper packaging, and he kind of discovered by accident that
(09:58):
you could score pay paper and create these nice little boxes.
Speaker 2 (10:02):
I will never look at Dumbo the same way again. Okay,
Actually that reminds me, so who are the actual big
players in the paper industry, because I don't think I
could name a single one off the top of my head.
Speaker 3 (10:15):
I can, oh who International Paper and what used to
be smurfet Stone.
Speaker 2 (10:19):
Oh yeah, Smurfit Okay, that's good, So.
Speaker 4 (10:22):
You're exactly right. International Paper recently got even bigger. They
acquired D. S. Smith.
Speaker 3 (10:27):
Out of four, there was one named Crown.
Speaker 4 (10:30):
Crown was also know.
Speaker 3 (10:32):
That I actually in the brief time when I was
an equity ana list over about twenty years ago. I
think I did a little research into.
Speaker 2 (10:40):
This space box analyst a fellow box.
Speaker 3 (10:43):
All right, very brief, devil in box anyway, keep going.
Speaker 4 (10:46):
Yeah, So International Paper recently bought D. S. Smith. They
got even bigger. They were keeping pace with Smurfit Kappa
based out of Dublin, Ireland, who bought west Rock, who's
here in the US. They became kind of the first
global mega company. IP followed suit. So they're the two
biggest in the US and the biggest in the world.
Packaging Corporation of America is number three in the US,
(11:09):
followed by Georgia, Pacific prad Industries, and a variety of
smaller independents.
Speaker 3 (11:14):
Now, the other thing one of the other boxes come
from trees, right or lumber comes from trees. You know, Well,
you've talked about lumber a lot on the show, and
one of the things that we learned, you know, there's
been consolidation in the lumber space. But also particularly after
the Great Financial Crisis, there was a lot of reduction
in mill capacity. Now that's related to housing specifically, which
was ground zero. But what is the story of American
(11:36):
mill capacity over the last twenty years, From prior to
the Great Financial Crisis to the twenty tens to now.
Speaker 4 (11:42):
We really didn't see a whole lot of new mill
capacity come along, like twenty years ago. There was some investment,
there was there were some new mills that would come along.
I actually spent ten years working in the cordgated packaging
industry before coming to Bloomberg and worked for one of
those integrated companies who has their own paper mills. The
mills that I worked for were one hundred percent recycled,
(12:05):
and so some of their investment would have shown up
in that last twenty years. They've built many of the
most recent mills over the last twenty years. But we
really saw an explosion of growth right around the time
of the pandemic. So in twenty twenty three, two and
a half million tons of new one hundred percent recycled
container board making capacity came online. And now container board
(12:27):
is a technical term. It's the big term for the
paper that goes in these boxes. So container board means
lineerboard and were the medium, so it's just speak term.
Speaker 2 (12:37):
So everyone's shipping flour for their like sour dough or
something during the pandemic, or buying new ovens to remodel
their houses while they can. Just going back to the
idea of the box as a macroeconomic indicator, I mean
I do see people talking about like this idea of
boxes as a leading indicator every once in a while.
(12:57):
It is unconventional, but some people do it. How valuable
our box shipments are tracking the box industry in terms
of trying to figure out what's going on with the consumer.
Speaker 4 (13:08):
Very important for the consumer. Like I said, about fifty
percent of box consumption is going to go through a
grocery store. So when you start to see box shipments slip,
we probably need to be looking at grocery stores and
CpG companies to see what's going on there. And we
have seen a very challenged consumer environment over the last
(13:30):
two years. My personal opinion, I would say we're in
a consumer goods recession because of what we've seen. First
half of twenty twenty five, box shipments were down twelve
percent from the height of the pandemic. That's a massive
fallof So earlier we talked about how we would measure
these things in billions of square feet. Well, in twenty
twenty one we hit four hundred and sixteen billion square feet.
(13:54):
The first half was right around half of that, so
like about two oh eight, it was really add quick
math with one hundred and ninety billion square feet for
the first half of twenty twenty five, So pretty big fall.
Speaker 3 (14:07):
Yeah, what's happening with prices? And so obviously right, so
measuring square feet is one thing. What is happening with prices?
Speaker 4 (14:32):
Well, the pricing discussion is one that is sure full
of controversy. So what drives pricing is is it truly
supply and demand? Is it something that's more cost based?
For many, many years in the US it was supply
demand based, where mill operating rates would hit ninety six percent,
inventories would get real low, and they would raise prices
(14:52):
or the opposite, mill opera rates would go below ninety percent,
inventories would rise, and prices would fall. But over the
last year and a half we've actually seen none of
those fundamentals hold up. So mill operating race have barely
been ninety percent. Inventories hit five weeks at the end
of the first quarter, and yet price is still went
up five weeks. Five weeks is a lot of inventory.
Historical averages are around four weeks to kind of set
(15:15):
the floor there. Three and a half weeks gets a
little dangerous. When it's a little lighter than that, we
start worrying about supply chain issues. About half of the
container board is made at a paper mill and shipped
by rail to a box plant, and rail isn't quite
as fast and efficient as an LTL or will actually
be a full truckload. But you can carry more rolls
(15:38):
by rail than you can buy a truck, so you
kind of have to have a little bit more of
that time to allow for the transit for those roles.
Speaker 2 (15:45):
What's your take on why paper companies are actually increasing
prices even you know, when inventory seems to be high
and demand is going down.
Speaker 4 (15:53):
Well, it's funny you asked that so four years ago
I started trying to figure out if we could read
the tea leaves, so to say, and we put together
a mix of inputs, and having worked in the industry,
we kind of know how the sausage is made. And
what we did was we put together this series of
inputs and we correlated it back to historic movements, and
(16:13):
our algorithm explains ninety three percent of the reasons why
prices have moved for Bloomberg terminal.
Speaker 2 (16:20):
Cost up box pricing algo.
Speaker 4 (16:23):
Yeah, so bc BCI index for people who are on
the terminal Ye.
Speaker 3 (16:29):
See, keep going well bcb bloom Wait what is it BCI?
BCBCI says for Bloomberg cordated box cost Index. And up
until this year when we did our the last multiple
ration analysis, it had a ninety three percent our square
so it was really good, right, Well, pricing in the
(16:51):
industry diverted from our index this year where prices went
up even though costs are going down. And that's actually
not a complete anomaly. We did see this in our
index a few years back in twenty seventeen, twenty eighteen,
but it wasn't quite as pronounced. Oh so sorry, just
to be clear, because I want to get this right.
The index that I'm looking at is the box cost index,
(17:14):
so it's not so much that it's measuring the cost
of box like so that box prices can go up
even though this line on a chart is rolling over correct.
This is important though.
Speaker 4 (17:24):
Yeah, and some might call this kind of organic margin expansion,
others have more colorful words for it. But in the
US ninety percent of the industry is vertically integrated. And
what that means is they have their own paper mills,
they move that paper to their own box plants, and
sell it to their own customers, and so there really
(17:46):
isn't much of an open market the way there is
in other regions, and other regions like in Europe, they
don't have that vertical integration level. So there is a
much more robust open market, and it drives prices down
because of normal supply demand fundamentals. If you do have
just an absolute blood of inventory, prices are gonna fall.
Our best data says globally we have around fifty million
(18:10):
tons of oversupply of container board. Now we don't have
that just in the US. That's that's a global number,
but that does kind of alter your frame of consciousness Tracy.
Speaker 3 (18:23):
By the way, this is just so fantastic everyone she
got a Bloomberg terminal because now I'm reading the PDF
that describes how the methodology. The weights, by the way,
are the cost of diesel, the cost of caustic soda,
natural gas price, US recycled fiber price, corn price index,
repair and maintenance, average truck rate, US average jar rely earnings.
And this is how they derive the cost of a box.
(18:45):
And it walks through all the methodology. It's really fantastic.
Speaker 2 (18:47):
It's so funny to think that corn is an input.
Speaker 3 (18:51):
Seven percent weight. According to the Bloomberg methodology, the biggest
weight is the US recycled fiber price of thirty seven percent.
Speaker 2 (18:58):
Makes sense just on the how much of the decline
this year in terms of box shipments is just an
inventory clut. Do we have like a good read on
that versus demand.
Speaker 4 (19:08):
From a box standpoint, We don't have a good read
on that. Okay, if we're thinking about the grocery store,
those boxes turn over very quickly. Having worked in the industry,
the box is going to get made at the box plant,
it's going to go to a customer. We're going to
think like general mills, and Kellogg's and Hershey's and all
of the big brand names that we know. It's not
(19:30):
going to necessarily sit in their facility for very long.
It will maybe get back into the system within thirty days.
In fact, I've been to the grocery store, and my
kids hate it when we go to the grocery store
because I'm always turning over boxes to see who made them.
But sometimes they will date stamp the boxes as to
when they were produced, and I've seen as quick as
(19:52):
thirty days in the store, and oftentimes when Smurfitt Kappa
bought west Rock, I was able to see a brand
new Smurfet west Roc BMC within ninety days of that transaction.
So it's just an interesting, little like tidbit. And if
you find yourself turning boxes over from now on.
Speaker 2 (20:09):
You can start doing that.
Speaker 3 (20:10):
How stable is the relationship between square footage of boxes
and the actual goods sold in boxes? And the reason
I asked this is that you know, I remember the
first several times that I ordered groceries, for example, online,
and I would get these deliveries as like this seems
really inefficiently packed, Like you get a box and there's
(20:31):
two tomatoes in there and it's like, was this really
did they really need to just have this?
Speaker 4 (20:35):
Or Amazon?
Speaker 3 (20:36):
So, but I imagined Amazon doesn't love this either. I
imagine they're always trying to optimize for box capacity such
that you know, you buy a new remote control for
your candle fire or whatever, it doesn't come into a
big box, do they. Is their progress always being made
on the efficient use of the cubic footage space within
these boxes?
Speaker 4 (20:54):
Yes? All right, So let's talk about two things first. First,
we're going to talk about who the consumer is. Scond
we'll talk about right sizing. So first, when we think
about consumers, Walmarts, Targets, Amazon Home Depot, they are consumers,
and the majority of boxes that are made are intended
for them, not for us.
Speaker 2 (21:16):
In fact, that's why they call them big box stores.
Speaker 4 (21:18):
Right right, So we can get into this later. But
this old box actually has its own aftermarket in which
probably eighty percent of the stuff that we recover comes
from those stores, not from our doorsteps. So when we
think about consumers, we really need to think about the
big stores first because that's who the main consumers of
these boxes are. And so when you think about the
(21:41):
changes that we're seeing, if we're seeing significant changes at
those stores. We may be thinking about things like shrinkflation
or companies altering the size of their products and then
having to alter the size of the boxes that hold them.
So I think while it's an important idea, it's probably
less significant than what we get at homes and Amazon,
(22:02):
for instance. Let's talk about traditional e commerce, or I
think I may start referring to this as cart to
carton commerce. Oh good, because e commerce today, or digital
sales as some people talk about it, can also include
things like Uber Eats or instacart. It could also include
a buy online pick up at the store, So a
(22:22):
cart to carton commerce might be a better way to
think about it, or like a I don't know, maybe
you can come up with a new term.
Speaker 2 (22:30):
I'll think about it.
Speaker 4 (22:31):
So, Amazon, from our best guesses, represents about eight percent
of all of the boxes made in the US at
least in twenty twenty four. And what we're seeing from
a lot of these companies who do that kind of
traditional e commerce or the cart to carton, we're seeing
the right sizing. So you may have gotten an Amazon
(22:51):
box that looks a little bit weird, right, it's lightweight,
real paper, it's folded in on itself, it's got that
zipper pull on it, and it just doesn't quite look
like this box on the table that's been taped up
and it's a regular slided card. You may have seen that,
or you may have gotten a paper mailer, and Amazon
has really been forging the way and mailers in packging technology.
Speaker 2 (23:16):
Wait, what's a paper mailer?
Speaker 4 (23:17):
A paper mailer is a bag. Oh, it's made from paper.
Speaker 2 (23:22):
Oh, I've only evergotten the plastic ones of those from Amazon.
I don't think i've gotten a Oh wait, no, I
probably have with the bubble wrap inside.
Speaker 4 (23:29):
Some of them don't even have bubble wrap anymore.
Speaker 2 (23:32):
I haven't gotten one of those. Okay, but this reminds
me if I am working in the procurement department of
an Amazon or I don't know, a Walmart or someone
like that, what are the factors that go into me
deciding what boxes I actually want for the business?
Speaker 4 (23:49):
That's going to be a reflection of what your product is.
And every product has its own specification or what kind
of box it needs. So if you're making a widget,
you will determine how many of those widgets are going
to go into a box and that's going to be
a function of its weight and fragility, and what kind
of other internal packaging you might need.
Speaker 2 (24:11):
Let me ask this question in a different way. Why
does Amazon at least historically seem to like big boxes.
Speaker 4 (24:19):
Well, I don't know that I can answer for Amazon
on that one, but it does seem to be maybe
at the discretion of people who are packaging at their
packing stations and what their available inventory of boxes might be.
Like I've seen some of these things in action. It's
a package. It's just a small packaging desk of sorts
with some overhead bins that have knockdown flat boxes in them.
Speaker 3 (24:42):
This must be an interesting sort of engineering problem because
I might, at the end consumer levels a look at
this inefficient use of box space. I got a box
and all has a little remote control. On the other hand,
maybe the optimization occurred because the packer has for boxes
to choose from and they had more choices. Maybe they
could have had a more efficient space to good ratio.
(25:05):
But then that would have taken up more warehouse space
and made that whole process less efficient. So there's probably
all kinds of algorithms that I'm not even thinking about.
As the end consumer here.
Speaker 4 (25:13):
There are lots of algorithms, and when you think about
boxes and pacging in traditional e commerce, they are looking
to optimize not just from a packaging standpoint, from a
pricing position, but really from a cube in the shipments.
So we have to think that Amazon's going to process
all these orders, or Chewy or whatever the e commerce
(25:36):
platform is. They process the orders, They're going to go
through their distribution centers. And if you're Amazon, you have
your own trucks. You want to make sure that you
can put many of those things on a truck as possible.
Speaker 3 (26:02):
You know, when we're talking about broader macroeconomic data these days,
in particular, there are a lot of questions about the
degree to which the aggregates are missing part of the story,
and specifically in a lot of commerce these days. Anytime
there's some retail CEO that like things are holding up well,
but it's really being driven by the high end. The
high end is keeping it afloat the middle consumers getting squeized,
(26:24):
lower incomes getting exqueized, you know, all kinds of things.
You know, we're talking in aggregates when you talk about
box square footage having been shipped, But is there more
granular data that one could look at in terms of
the quality of cardboard, et cetera. That could tell us
different things about what's strong within the economy. Even if
the big numbers are declining.
Speaker 2 (26:43):
The fancy boxes, Uh, the fancy box is not really.
Speaker 4 (26:48):
So one of the problems that our industry faces is
that we don't have great data. Having worked in the
industry and having provided that data, it's the chore that
no one really double checks. So you've you've brought on
a new customer, right, and you're submitting all your paperwork
for the new customer. One of those things is a
classification of their NAICS code, the North American Industry code. Well,
(27:12):
no one ever checks to make sure that's proper, right.
You just kind of wing it. You look it up
and see if they've maybe followed it with the Secretary
of Commerce or something like that, and that's it. So
the granular data is murky at best, but it is
insightful and it is consistent because there is a cost
to changing your supplier, like we do see it happen,
(27:36):
and for very big box customers, they don't like changing.
You have a long standing relationship, typically many many years.
You have lots of skews, and if you're a really
big company and you have operating facilities all over the place,
you don't want to go through that. So the data,
while murky, might be consistent, and we do see some
of those things. Like in twenty twenty four, for instance,
(27:57):
we saw that manufactured food felt like by three point
seven percent, So if you combine that with beverage, it
was a little over of a four percent decline in
box usage. Now, how do we describe that. Did those
companies see similar falls in their volume? I think I
think the data would suggest that that's probably very close.
(28:18):
Corregated packaging does have some known trade offs. One of
those things is a returnable plastic container that is mainly
being pushed right now towards produce. Walmart specifically Sprouts Market
have been pushing some of their people to adopt returnable
plastic containers as a viable option. It reduces waste. They're
(28:38):
building supply chains around these things to help carry them around.
So that is one of the things that we've seen
kind of cut into box consumption. We don't know that
it's a big thing yet, but it is out there
and it is a thing. The other thing that we've
seen is a movement to larger format boxes, some that
are the size of a palette, you know, forty eight
(28:59):
inches long, four inches wide, and maybe forty inches tall.
A great playhouse for your young kids.
Speaker 2 (29:04):
I remember doing that with huge boxes, turning them into houses.
Why would anyone invest in this space currently? Because when
you describe this enormous clut in supply and then the
fact that demand is going down. Maybe it's because of
the tariffs. Maybe if the US starts manufacturing more goods,
it'll domestically it'll start to pick up again. But it
(29:28):
seems like most of the lines are kind of trending
in the wrong way. What exactly is like the allure
of this industry, That's.
Speaker 4 (29:37):
A great question. I wish I knew the answer, other
than they do have dividends that they have been paint
and consistently pain so.
Speaker 2 (29:46):
It's considered like a div a, fairly like stable.
Speaker 4 (29:49):
Very stable dividends. I think it's a pretty safe investment.
We do see. I mean it's very popular. From a
terminal standpoint. I get bluebird clients that reach out all
the time. They're looking to figure out if this is
still a good investment. And while we don't do buy
sohol recommendations. We still see a lot of traffic in
these in these lanes.
Speaker 2 (30:08):
Does it just depend on how big your company actually
is and how much pricing power you have in the market.
Speaker 4 (30:14):
Well, see, I think that's a myth. I think I
think there really isn't pricing power. If there were pricing power,
we wouldn't see some of the actions that we're seen
in the world today. And what I mean by that
is there are some mills that make a really robust paper.
It performs really really well, and there are scientific properties
(30:34):
to that paper that set it apart from anything else,
and yet they aren't getting the premium that they should
be getting because there is an alternative. And it's it's
like wanting a Ferrari and selling for a Mustang. They're
both great, but one obviously has the allure and one
(30:55):
has its client base too. And when you can buy
a Mustang and it, you're not always gonna want to
buy that Ferrari.
Speaker 3 (31:04):
Well, actually this sort of gets me to where I
want to go. First of all, what would be the
name of the biggest box or packaging expo in the
United States? Like that gets together somewhere.
Speaker 4 (31:14):
Yeah, in big round terms for.
Speaker 3 (31:16):
Packaging pack Expo, where's that Vegas?
Speaker 4 (31:19):
This is going to be in Vegas this year May.
Speaker 3 (31:21):
We'll go on day all right, So, sitting aside the
volume and pricing trends, which we take for granted, everyone
is curious about what would be the hot topics right
now that would be discussed at pack Expo.
Speaker 4 (31:32):
Ooh. Sustainability has been a really big topic for a
long time, and it's matched with extended producer responsibility laws.
So this is a state by state initiative to basically
shift the burden of recycling away from its residents and
onto the companies who are creating the waste.
Speaker 2 (31:52):
How does that work exactly?
Speaker 4 (31:54):
So right now we have a handful of states who've
actually passed legislation. Oregon's the first one that is real
kind of enacting this, and they've set up a fee schedule.
They've measured how much waste their state produces in a
month or in a year, and they've allocated a certain
number of dollars per pound or cents per pound for
(32:15):
each one of those commodities. And if you're selling something
into the state, they are essentially placing a fee on
the waste that you're sending in their state and you
have to pay a check to them.
Speaker 3 (32:25):
Can you tell a little bit more about the economics
of recycling, because I put a lot of the cardboard
I use into the proper into the proper bin. The
economics of recycling, like I'm always and this goes with
any recycling really, which is that when I think about
the labor that actually when I think about a the
degree of diligence that people and I would say I'm
(32:46):
probably higher than average diligence about proper bin allocation, but
I know I'm not perfect. But when I think about
the degree of diligence and the inefficiency and then the
labor and all of this stuff, and then talk to
us like when is it actually economic and when is
it just sort of some sort of cargo cult type
behavior that people engage in where there's no real purpose.
Speaker 4 (33:07):
Well, most of the time the recycling fees are paid
by taxes. My street, for instance, that was not the case,
and I had to pay twenty five dollars a quarter
for a bin. Not terrible, but I had to pay
for it. The economics in big round numbers work like this.
It costs anywhere from about four hundred dollars a ton
upwards the seven hundred dollars a ton to go out
(33:29):
and do the collections and processing for recovered materials, all
of that stuff. So you'll see a truck come and
pick up your recyclables. It goes to a facility called AMRPH,
a municipal Recovery facility, and there it's processed and they
have lots of lines that sort things out plastics and
metals and papers and all of that stuff, and then
they produce bales, so a compact cube of sorts of
(33:53):
these materials and then they get sold. So if we
were to just use a big round number and say
five hundred dollars a ton, the net ton that comes
out of the murph only has a street value between
one hundred to one hundred and forty dollars a ton.
Speaker 3 (34:08):
Yeah, listen hearing that right. That sod is terrible.
Speaker 4 (34:11):
That's terrible. And the craziest thing is the correated box
is what really makes household recycling even work. Because we
know from data, and this is something we I challenged
several years ago. Our best data says that we recycle
about sixty six percent of the correated boxes in the
US it's a pretty good number. The industry used to
(34:33):
say ninety three percent of boxes got recycled. There's no
way that's possible. But we don't have the data to
say it's lower than sixty six percent, But we do
have a methodology that we used to kind of get there.
It was actually supported by the National Renewable Energy Lab.
You can probably shoot some holes and some other stuff too,
but big point is we know that about sixty percent
(34:54):
of these get recycled, and we know they have a
very robust aftermarket. We process about thirty five million tons
of old coreated cartons almost every year. About a third
of them are going to go overseas. There are a
lot of other countries that want the virgin fiber that
we produce here.
Speaker 2 (35:14):
Now that we've revealed the depressing truth about recycling, let
me ask a slightly more positive question, which is have
there been any cool technological developments when it comes to
box making.
Speaker 4 (35:25):
They are constantly patenting boxes, making new equipment to make
them faster, improving the way we make the paper. We're
trying to make stronger paper that's lighter in weight. So
if you think about some of these, we'll go back
to the EPR laws. For a second, those fees are
based on the weight of what you're consuming. So if
(35:46):
the companies can buy a lighter weight material, then their
fees go down. So there's a push now to see
if we can lightweight the paper, make it as strong
but with less weight. And so these are things that
we're going to see really take some shape in the
next five to ten years.
Speaker 3 (36:01):
You know, I'm glad you mentioned export. One of the
things that I've noticed whenever I am traveling abroad, even
to fairly rich countries, but I definitely notice it when
I'm in poorer countries is that the quality of packaging
materials is distinctly worse than here. So and the example
that I often notice is, you know, you buy a
bottle of water in a US grocery store. It's nice,
(36:22):
it's dirty, it holds its form very well. You buy
a bottle of water it's a grocery store in Guatemala,
where I was a couple years ago. In Mexico, it's crinkly,
it smashes over easily. You could tell that it's a
less durable plastic. Is there similar you know, if I hadn't,
if we were to look at the cardboard boxes running
(36:42):
through a developing economies such as a Guatemal et cetera.
Would we see that this is noticeably different than the
quality of cardboard that we're seeing here.
Speaker 4 (36:51):
It really depends on what the technical term is going
to be furnished, right, So what are you using to
make the boxes? The US has historically been a maker
of Kraft linerboard, meaning they cut down trees, they chip
the trees, they turn those chips into new virgin paper.
That's actually been declining and reversing. We've seen more and
more recycled capacity come online. And because we've still had
(37:14):
a very good virgin base, the recycled paper here in
the US has been very good. Now in other countries,
they may not have Southern yellow pine, so they are
buying our occ or they're using their own occ OCC's
old cordiered cartons. Sorry, So they're just going to repulp
the stuff that they have. And if they start with
a low quality box, then they're going to get a
(37:35):
low quality paper on the back end, and so sometimes
they are going to have a lower grade paper. And
in other areas of the world, they actually have different
definitions for that kind of paper, so they would have
different grades of it, and so yeah, sometimes you get
the low grade paper because it's a commodity and it'll work.
Speaker 2 (37:53):
So I just have one more question, just to wrap
it all up. Ah, that's a packaging joke. Okay, wrapping
it all up. Summarizing what's your prediction for the second
half of the year in terms of box shipments.
Speaker 4 (38:05):
We think they're still going to be very challenged. Full year.
We're saying they're probably gonna be down two and a
half percent, maybe as high as three percent. It really
depends on what happens. A lot of this is stemming
from tariffs and policy coming out of the White House,
so it really depends on how much confidence some of
these companies have as they look forward. We've seen the
(38:29):
number of containers coming into the US, like the cargo
ships was front loaded, right and now that the tariffs
are kind of here, or maybe they're not here, they've
been kind of tapering off a bit. It will be
very curious to see what happens. But to maybe think
about it another way, most Americans buy stuff when they
have money, and when they don't have money, they put
(38:51):
on credit cards, and we're seeing records amount of credit
card debt, and that's not a great sign for if
people are going to spend money. So we don't really
think that it's a really hot outlook for even the
for the holidays, our American is gonna spend money. Probably
Is it going to look exactly like it did in
prior years?
Speaker 2 (39:09):
Probably not all right, Ryan Fox, Containers and Packaging analysts
at Bloomberg Intelligence, thank you so much.
Speaker 3 (39:16):
Thanks for having me, Joe.
Speaker 2 (39:29):
I learned a lot about boxes.
Speaker 3 (39:31):
That goes great. Yeah, I love Ryan.
Speaker 2 (39:34):
You know, one thing I really like about Ryan and
people like that is when they trot out all the
numbers off the top of their head. That was really impressive.
That was no notes, and he had answers for pretty
much everything.
Speaker 3 (39:46):
If someone had asked me how I thought they would
measure box shoes, I might have guessed cubic feet, right,
square feet, but yes, I would have you know, all
this covering the world stuff. Yeah, it's pretty cool.
Speaker 2 (39:59):
Yeah, And I guess the question over how useful a
macroeconomic indicator boxes actually are still kind of lingers. Because
we did have retail sales data for the past two
months that are available that came in like pretty resilient,
pretty strong, despite the decline in box shipments.
Speaker 3 (40:18):
What was the term used cart to carton commerce?
Speaker 4 (40:20):
Yeah?
Speaker 3 (40:21):
I really like that because it's true, right, what is
e commerce that now encompasses so many different things? So
there is this sort of classic e commerce where you
go on a website and you buy a thing and
it comes in a box. But then there's of course,
you know, buy and you pick up at the store,
and that's a slightly different variation, or maybe you get
food delivered in a cardboard box, et cetera. So I
(40:41):
like the idea of okay, e commerce is so broad
that if we want to have like, for like trajectories
of some of these used cases for cardboard boxes, we
have to maybe get a little bit more granular.
Speaker 2 (40:51):
Well that reminds me, actually, I think one thing that's
still really underappreciated about the packaging industry is how much
it feeds into broader inflation. Yes, yes, and this is
something I remember some economists bringing this up during the
post pandemic era. But the interesting thing is now, even
though box shipments are going down, prices still seem to
(41:11):
be kind of sticky and even going up. So what
does that mean for inflation?
Speaker 3 (41:16):
I always think about this, and sometimes it maybe gets
a little metaphysical. But when you buy a thing in
a grocery store, Let's say, buy an avocado, Like, what
are you buying when you buy the avocado, right, Because okay,
there is the physical avocado that you might cut open,
But then you're buying the time it's spent in a
refrigerated space. You're paying rent to those owners of refrigeration, transport,
you're buying the transportation, et cetera. It's interesting to think
(41:38):
about any good that you buy period ahead of lettuce
et cetera. How little is the lettuce whatever, even the
lettuce means, because there is labor that went into the
planting of the lettuce, and there is the land of
the lettuce, et cetera. To the idea of what are
you buying when you're buying something, often that it includes packaging,
but often it's just never really clear at all what
it is except this bundle of goods and service.
Speaker 2 (42:00):
I'm buying an entire slice of the economy. You literally are, Okay,
now that we've gotten into a metaphysical discussion about boxes,
shall we leave it there.
Speaker 3 (42:08):
Let's leave it there.
Speaker 2 (42:08):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (42:14):
And I'm joll Wisenthal. You can follow me at the Stowart.
Check out Ryan Stuff at Bloomberg Intelligence. A lot of
fascinating stuff there. Follow our producers Kerman Rodriguez at Kerman
armand desh O Bennett at Dashbot and kill Brooks at Kilbrooks.
From our odd Laws content, go to Bloomberg dot com
slash odd Lots were the daily newsletter and all of
our episodes. You can chat about all of these topics
(42:35):
twenty four to seven in our discord Discord dot gg
slash odline.
Speaker 2 (42:40):
And if you enjoy Oddlots, if you like it when
we talk about boxes, then please leave us a positive
review on your favorite podcast platform. And remember, if you
are a Bloomberg subscriber, you can listen to all of
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is find the Bloomberg channel on Apple Podcasts and follow
the instructions there. Thanks for us, name
Speaker 4 (43:21):
Yeah
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the All Thoughts podcast.
I'm Tracy Alloway.
Speaker 3 (00:22):
And I'm Joe. Wasn'tal Joe.
Speaker 2 (00:24):
I Am going to put something on the table and
you tell me what it is, Okay, go on, all right,
here I go.
Speaker 3 (00:35):
It is a this is so, this is incorrugated. I
believe cardboard box and has taped it, says fragile and
I would I guess it's about I don't know. I'm
not good at measurements. It'd be eighteen inches by thirty
six inches something like that.
Speaker 2 (00:52):
That is a very good physical description of a cardboard box. However,
I'm going to say you're wrong. It is in fact
a macroeconomic indicator. The other acceptable answer is it's part
of the odd Loocks logo.
Speaker 3 (01:06):
That's right, that's right. It's a box, and that is
core to odd lats. But you know, now we're going
to talk about literally, when you think box, you don't
often first think magic, money, box, pozes. And when you
think box, you often don't necessarily think of the container ship,
which is often called a box. Is in the book
The Box. But I think when people think about a box.
(01:27):
They think about a cardboard box, corrugated or not.
Speaker 2 (01:30):
Now is a very good time to be thinking about boxes,
by the way, because there's been some commentary about this,
but we've basically had a sort of box apocalypse.
Speaker 3 (01:38):
Yeah in the States, we still having one.
Speaker 2 (01:41):
Uh, jury's kind of out and we'll get into that
in the discussion. But US box shipments, so boxes of boxes,
which I find funny box reception anyway, US box shipments
have fallen to the lowest second quarter reading since twenty fifteen.
That's according to the Fiber Box They.
Speaker 3 (02:00):
Are probably like they're like folded up, yeah, yeah, so
you a bunch of them. They're maybe wrapped in plastic
or something like that. So shipments of those lowest it's
like twenty fifteen.
Speaker 2 (02:10):
Yeah, And I think there are some other numbers we
can get into that are like the worst since the
financial crisis and things like that. And obviously the concern
is boxes tend to contain products that people are buying, right,
So if no one's buying boxes, what does that say
about retail spending, the health of the consumer, and the
direction of the broader economy. That's when you get into
(02:32):
the macro indicator.
Speaker 4 (02:33):
Stuff.
Speaker 3 (02:33):
You know, I love e commerce, but I hate breaking
down boxing. I know so much and then you like
rip it up. There's no it's never quick. I would
like to see some innovation on the ease of collapse ability.
Speaker 2 (02:46):
You know what I did, because I buy a lot.
I trained my dog to rip apart Amazon boxing.
Speaker 3 (02:51):
Oh that's amazing, but.
Speaker 2 (02:52):
Then he kind of went on strike and stopped doing it.
Speaker 3 (02:54):
Well, that would be cool for your kids to do it. Yeah,
put them to work.
Speaker 2 (02:58):
Okay, Well, I am happy to say we do, in
fact have the perfect guest. We're going to be speaking
with Ryan Fox. He is a containers and packaging analyst
for Bloomberg Intelligence. So Ryan, thanks so much for coming
on all thoughts.
Speaker 4 (03:10):
Thanks for having me.
Speaker 2 (03:12):
It's so nice to actually meet you in person, because
we've been ibing for a while talking about boxes. I
don't know how this became so interesting to me, but
probably because of the decline that we've been seeing. Walk
us through the numbers, like, how bad is the actual
fall in boxes of boxes? Shipments of boxes?
Speaker 4 (03:30):
Yes, so when we think about box shipments, they are
shipped like you said, knockdown flat or KDF for sure.
Speaker 3 (03:37):
KTF stands for oh, knocked down down, flazing. I already
learned something.
Speaker 4 (03:41):
And so they're shipped sometimes on pallettes, but they're going
to in the US and markets like food manufacturers, beverage manufacturers,
people who make industrial products. About fifty percent of the
boxes that we consume in the US are going to
go through a grocery store. So that's a really good
way to think about it.
Speaker 2 (04:00):
Huh.
Speaker 4 (04:00):
What we've seen box shipments have fallen in the first
half about two point three percent, and this is largely
due to uncertainties that are stemming from tariffs. We saw
a big ramp up during the pandemic where box shipments
grew the first year of the pandemic by about three
and a half percent, actually two point four percent, then
three and a half percent the following year. When we
think about it in concrete terms, we talk about box
(04:24):
shipments in terms of billions of square feet. And when
we talk about billions of square feet, like four hundred
billion square feet would wrap around the earth like thirty
times or something like that, it's a very.
Speaker 3 (04:34):
Big what exactly is being measured here?
Speaker 4 (04:37):
Right, So if you were to take this box here
and we were to tear it all apart. And so
by the way, this is a this is a regular
slotted carton. Okay, this is a double wall box.
Speaker 3 (04:48):
Is not corrugated.
Speaker 4 (04:49):
No, this is corrugated. So let's let's take a little
quick parenthetical thought. So cardboard is actually not this. This
is a corrugated fiberboard box. For all you box nerds
out there, this box has this particular one is a
double walls. There's five layers. The flat sheet is called liner,
the wavy part in the middle is called medium. I
am so much in heaven right now. You don't even
(05:10):
know if we were to unfold this thing, separate the
glue seam and lay it out flat and you just
do basic maths, or you take your tape measure and
you go with and lengths, So that would measure it
in terms of square footage. And this box right here,
it's been cut down so it doesn't look as big
as it really is, but it's probably somewhere around twenty
(05:30):
square feet. We could measure it if we wanted to,
but we won't. But if you were to do that
for every single box, that's how they will measure it.
What's really kind of important is these boxes are made
on a variety of different machines. And one of the
reasons why it's called a corrugated box is it's made
on a corrugator and that's a machine that takes different
kinds of paper and it laminates together. They stick together
(05:53):
with typically cornstarch or some other starch product. So one
of the mechanisms is called the corugator roll and it's
a role with these little wrinkles in it. They steam
the paper and it forms those little arches and that's
what gives the board its strength. There are different sizes
of these little things like then they're called flutes, but
(06:14):
you can't play them. They don't make any music.
Speaker 3 (06:16):
So interesting, it's super interesting. Let's just keep talking about
this box. What is it about the corrugation process that
makes it stronger?
Speaker 4 (06:21):
So from a physics standpoint, it's what gives the box
its shape and substance, and there is a lot of
science that goes behind this. In fact, we now have
ways to predict how the box will perform in real
world situations just mathematics.
Speaker 2 (06:36):
Do we do box testing where we beat up a box?
Speaker 4 (06:38):
Absolutely? Yeah. And so for a lot of companies they
have to go through the ISTI International Safe transit authority.
They actually test the box to make sure it will
hold up against ups or FedEx or in some instances
they go so far as to make sure that no
matter what happens, it's going to survive. And those tests
(07:00):
and costs thousands of dollars, So it's a very robust process.
Speaker 2 (07:05):
What's the best box before.
Speaker 4 (07:07):
We go, Before we go into what everyone has their
favorite box. I mean as adults, you've you've really gotten
into adulthood when you get that box and you're like,
that's a really good box.
Speaker 3 (07:21):
Anything that's easy to collapse.
Speaker 4 (07:22):
Anything that's easy to collapse is one way.
Speaker 2 (07:24):
No, anything that's easy to open. I like the zippers.
Speaker 4 (07:27):
The zippers seeah, a lot of people like the zipper polls.
There are some boxes that are very elaborate and they
don't require much at all to set them up. They
kind of fold and lock in on themselves. Yeah, we
call those die cut boxes. They are made from a
cutting die that looks like a big cookie cutter, and
they will make any shape that you want to make.
(07:49):
The most popular style is what we call a roll
end box, and they can tuck on the inside, they
can tuck on the outside, but this is really a
nice box. It's it's a box that you might see
if you were to buy something online, and they're really
trying to go for that wow factor because they're going
to get for that tadaka, open the box and show
off the product.
Speaker 3 (08:10):
Let's talk more about this box on the table here, Like,
are you learned enough in the space you could say like, oh,
I think this came from x mil or X year,
or like you have any other insights there?
Speaker 4 (08:20):
Okay, yeah, so this box doesn't have it, okay that
I can see. But on most boxes there me in
the USA, there is a small little stamp on the
bottom of the box. It's round, and it's called a
box maker's certificate. Okay, there are around eleven hundred facilities
in the US that make corgated boxes, and that little
stamp on the bottom will tell you what company made
(08:42):
the box and where it's located, and more specifically, it
will tell you what the stuff is made of. You
might go, that's kind of a stupid detail, but it
goes back over sixty years, actually goes back over one
hundred years to when boxes were first starting to come around.
Most people don't know that corgated boxes are only one
hundred and thirty one hundred and forty years old, only
(09:04):
implemented in the late eighteen nineties.
Speaker 3 (09:06):
I'm trying to think of before this was a joe.
What do you think the first corrugated as if I
would even begin to have a guess anyway, keep going.
Speaker 4 (09:13):
So, right after the turn of the century, in the
early nineteen hundreds, companies were looking for ways to ship
their product. The only mechanism they had. In that time,
we didn't really have eighteen wheelers, we had trains, and
so the rail companies, as they were making new rails,
they're cutting down forests. They had lots of wood to
do something with. So what did they do? They made crates.
(09:36):
But crates were very expensive and they were very heavy,
and so people were looking for alternatives, and they came
up with a correated box. Actually goes back funding New
York story. The Dumbo area is home to the Gear
Building and Gear was one of the early pioneers of
paper packaging, and he kind of discovered by accident that
(09:58):
you could score pay paper and create these nice little boxes.
Speaker 2 (10:02):
I will never look at Dumbo the same way again. Okay,
Actually that reminds me, so who are the actual big
players in the paper industry, because I don't think I
could name a single one off the top of my head.
Speaker 3 (10:15):
I can, oh who International Paper and what used to
be smurfet Stone.
Speaker 2 (10:19):
Oh yeah, Smurfit Okay, that's good, So.
Speaker 4 (10:22):
You're exactly right. International Paper recently got even bigger. They
acquired D. S. Smith.
Speaker 3 (10:27):
Out of four, there was one named Crown.
Speaker 4 (10:30):
Crown was also know.
Speaker 3 (10:32):
That I actually in the brief time when I was
an equity ana list over about twenty years ago. I
think I did a little research into.
Speaker 2 (10:40):
This space box analyst a fellow box.
Speaker 3 (10:43):
All right, very brief, devil in box anyway, keep going.
Speaker 4 (10:46):
Yeah, So International Paper recently bought D. S. Smith. They
got even bigger. They were keeping pace with Smurfit Kappa
based out of Dublin, Ireland, who bought west Rock, who's
here in the US. They became kind of the first
global mega company. IP followed suit. So they're the two
biggest in the US and the biggest in the world.
Packaging Corporation of America is number three in the US,
(11:09):
followed by Georgia, Pacific prad Industries, and a variety of
smaller independents.
Speaker 3 (11:14):
Now, the other thing one of the other boxes come
from trees, right or lumber comes from trees. You know, Well,
you've talked about lumber a lot on the show, and
one of the things that we learned, you know, there's
been consolidation in the lumber space. But also particularly after
the Great Financial Crisis, there was a lot of reduction
in mill capacity. Now that's related to housing specifically, which
was ground zero. But what is the story of American
(11:36):
mill capacity over the last twenty years, From prior to
the Great Financial Crisis to the twenty tens to now.
Speaker 4 (11:42):
We really didn't see a whole lot of new mill
capacity come along, like twenty years ago. There was some investment,
there was there were some new mills that would come along.
I actually spent ten years working in the cordgated packaging
industry before coming to Bloomberg and worked for one of
those integrated companies who has their own paper mills. The
mills that I worked for were one hundred percent recycled,
(12:05):
and so some of their investment would have shown up
in that last twenty years. They've built many of the
most recent mills over the last twenty years. But we
really saw an explosion of growth right around the time
of the pandemic. So in twenty twenty three, two and
a half million tons of new one hundred percent recycled
container board making capacity came online. And now container board
(12:27):
is a technical term. It's the big term for the
paper that goes in these boxes. So container board means
lineerboard and were the medium, so it's just speak term.
Speaker 2 (12:37):
So everyone's shipping flour for their like sour dough or
something during the pandemic, or buying new ovens to remodel
their houses while they can. Just going back to the
idea of the box as a macroeconomic indicator, I mean
I do see people talking about like this idea of
boxes as a leading indicator every once in a while.
(12:57):
It is unconventional, but some people do it. How valuable
our box shipments are tracking the box industry in terms
of trying to figure out what's going on with the consumer.
Speaker 4 (13:08):
Very important for the consumer. Like I said, about fifty
percent of box consumption is going to go through a
grocery store. So when you start to see box shipments slip,
we probably need to be looking at grocery stores and
CpG companies to see what's going on there. And we
have seen a very challenged consumer environment over the last
(13:30):
two years. My personal opinion, I would say we're in
a consumer goods recession because of what we've seen. First
half of twenty twenty five, box shipments were down twelve
percent from the height of the pandemic. That's a massive
fallof So earlier we talked about how we would measure
these things in billions of square feet. Well, in twenty
twenty one we hit four hundred and sixteen billion square feet.
(13:54):
The first half was right around half of that, so
like about two oh eight, it was really add quick
math with one hundred and ninety billion square feet for
the first half of twenty twenty five, So pretty big fall.
Speaker 3 (14:07):
Yeah, what's happening with prices? And so obviously right, so
measuring square feet is one thing. What is happening with prices?
Speaker 4 (14:32):
Well, the pricing discussion is one that is sure full
of controversy. So what drives pricing is is it truly
supply and demand? Is it something that's more cost based?
For many, many years in the US it was supply
demand based, where mill operating rates would hit ninety six percent,
inventories would get real low, and they would raise prices
(14:52):
or the opposite, mill opera rates would go below ninety percent,
inventories would rise, and prices would fall. But over the
last year and a half we've actually seen none of
those fundamentals hold up. So mill operating race have barely
been ninety percent. Inventories hit five weeks at the end
of the first quarter, and yet price is still went
up five weeks. Five weeks is a lot of inventory.
Historical averages are around four weeks to kind of set
(15:15):
the floor there. Three and a half weeks gets a
little dangerous. When it's a little lighter than that, we
start worrying about supply chain issues. About half of the
container board is made at a paper mill and shipped
by rail to a box plant, and rail isn't quite
as fast and efficient as an LTL or will actually
be a full truckload. But you can carry more rolls
(15:38):
by rail than you can buy a truck, so you
kind of have to have a little bit more of
that time to allow for the transit for those roles.
Speaker 2 (15:45):
What's your take on why paper companies are actually increasing
prices even you know, when inventory seems to be high
and demand is going down.
Speaker 4 (15:53):
Well, it's funny you asked that so four years ago
I started trying to figure out if we could read
the tea leaves, so to say, and we put together
a mix of inputs, and having worked in the industry,
we kind of know how the sausage is made. And
what we did was we put together this series of
inputs and we correlated it back to historic movements, and
(16:13):
our algorithm explains ninety three percent of the reasons why
prices have moved for Bloomberg terminal.
Speaker 2 (16:20):
Cost up box pricing algo.
Speaker 4 (16:23):
Yeah, so bc BCI index for people who are on
the terminal Ye.
Speaker 3 (16:29):
See, keep going well bcb bloom Wait what is it BCI?
BCBCI says for Bloomberg cordated box cost Index. And up
until this year when we did our the last multiple
ration analysis, it had a ninety three percent our square
so it was really good, right, Well, pricing in the
(16:51):
industry diverted from our index this year where prices went
up even though costs are going down. And that's actually
not a complete anomaly. We did see this in our
index a few years back in twenty seventeen, twenty eighteen,
but it wasn't quite as pronounced. Oh so sorry, just
to be clear, because I want to get this right.
The index that I'm looking at is the box cost index,
(17:14):
so it's not so much that it's measuring the cost
of box like so that box prices can go up
even though this line on a chart is rolling over correct.
This is important though.
Speaker 4 (17:24):
Yeah, and some might call this kind of organic margin expansion,
others have more colorful words for it. But in the
US ninety percent of the industry is vertically integrated. And
what that means is they have their own paper mills,
they move that paper to their own box plants, and
sell it to their own customers, and so there really
(17:46):
isn't much of an open market the way there is
in other regions, and other regions like in Europe, they
don't have that vertical integration level. So there is a
much more robust open market, and it drives prices down
because of normal supply demand fundamentals. If you do have
just an absolute blood of inventory, prices are gonna fall.
Our best data says globally we have around fifty million
(18:10):
tons of oversupply of container board. Now we don't have
that just in the US. That's that's a global number,
but that does kind of alter your frame of consciousness Tracy.
Speaker 3 (18:23):
By the way, this is just so fantastic everyone she
got a Bloomberg terminal because now I'm reading the PDF
that describes how the methodology. The weights, by the way,
are the cost of diesel, the cost of caustic soda,
natural gas price, US recycled fiber price, corn price index,
repair and maintenance, average truck rate, US average jar rely earnings.
And this is how they derive the cost of a box.
(18:45):
And it walks through all the methodology. It's really fantastic.
Speaker 2 (18:47):
It's so funny to think that corn is an input.
Speaker 3 (18:51):
Seven percent weight. According to the Bloomberg methodology, the biggest
weight is the US recycled fiber price of thirty seven percent.
Speaker 2 (18:58):
Makes sense just on the how much of the decline
this year in terms of box shipments is just an
inventory clut. Do we have like a good read on
that versus demand.
Speaker 4 (19:08):
From a box standpoint, We don't have a good read
on that. Okay, if we're thinking about the grocery store,
those boxes turn over very quickly. Having worked in the industry,
the box is going to get made at the box plant,
it's going to go to a customer. We're going to
think like general mills, and Kellogg's and Hershey's and all
of the big brand names that we know. It's not
(19:30):
going to necessarily sit in their facility for very long.
It will maybe get back into the system within thirty days.
In fact, I've been to the grocery store, and my
kids hate it when we go to the grocery store
because I'm always turning over boxes to see who made them.
But sometimes they will date stamp the boxes as to
when they were produced, and I've seen as quick as
(19:52):
thirty days in the store, and oftentimes when Smurfitt Kappa
bought west Rock, I was able to see a brand
new Smurfet west Roc BMC within ninety days of that transaction.
So it's just an interesting, little like tidbit. And if
you find yourself turning boxes over from now on.
Speaker 2 (20:09):
You can start doing that.
Speaker 3 (20:10):
How stable is the relationship between square footage of boxes
and the actual goods sold in boxes? And the reason
I asked this is that you know, I remember the
first several times that I ordered groceries, for example, online,
and I would get these deliveries as like this seems
really inefficiently packed, Like you get a box and there's
(20:31):
two tomatoes in there and it's like, was this really
did they really need to just have this?
Speaker 4 (20:35):
Or Amazon?
Speaker 3 (20:36):
So, but I imagined Amazon doesn't love this either. I
imagine they're always trying to optimize for box capacity such
that you know, you buy a new remote control for
your candle fire or whatever, it doesn't come into a
big box, do they. Is their progress always being made
on the efficient use of the cubic footage space within
these boxes?
Speaker 4 (20:54):
Yes? All right, So let's talk about two things first. First,
we're going to talk about who the consumer is. Scond
we'll talk about right sizing. So first, when we think
about consumers, Walmarts, Targets, Amazon Home Depot, they are consumers,
and the majority of boxes that are made are intended
for them, not for us.
Speaker 2 (21:16):
In fact, that's why they call them big box stores.
Speaker 4 (21:18):
Right right, So we can get into this later. But
this old box actually has its own aftermarket in which
probably eighty percent of the stuff that we recover comes
from those stores, not from our doorsteps. So when we
think about consumers, we really need to think about the
big stores first because that's who the main consumers of
these boxes are. And so when you think about the
(21:41):
changes that we're seeing, if we're seeing significant changes at
those stores. We may be thinking about things like shrinkflation
or companies altering the size of their products and then
having to alter the size of the boxes that hold them.
So I think while it's an important idea, it's probably
less significant than what we get at homes and Amazon,
(22:02):
for instance. Let's talk about traditional e commerce, or I
think I may start referring to this as cart to
carton commerce. Oh good, because e commerce today, or digital
sales as some people talk about it, can also include
things like Uber Eats or instacart. It could also include
a buy online pick up at the store, So a
(22:22):
cart to carton commerce might be a better way to
think about it, or like a I don't know, maybe
you can come up with a new term.
Speaker 2 (22:30):
I'll think about it.
Speaker 4 (22:31):
So, Amazon, from our best guesses, represents about eight percent
of all of the boxes made in the US at
least in twenty twenty four. And what we're seeing from
a lot of these companies who do that kind of
traditional e commerce or the cart to carton, we're seeing
the right sizing. So you may have gotten an Amazon
(22:51):
box that looks a little bit weird, right, it's lightweight,
real paper, it's folded in on itself, it's got that
zipper pull on it, and it just doesn't quite look
like this box on the table that's been taped up
and it's a regular slided card. You may have seen that,
or you may have gotten a paper mailer, and Amazon
has really been forging the way and mailers in packging technology.
Speaker 2 (23:16):
Wait, what's a paper mailer?
Speaker 4 (23:17):
A paper mailer is a bag. Oh, it's made from paper.
Speaker 2 (23:22):
Oh, I've only evergotten the plastic ones of those from Amazon.
I don't think i've gotten a Oh wait, no, I
probably have with the bubble wrap inside.
Speaker 4 (23:29):
Some of them don't even have bubble wrap anymore.
Speaker 2 (23:32):
I haven't gotten one of those. Okay, but this reminds
me if I am working in the procurement department of
an Amazon or I don't know, a Walmart or someone
like that, what are the factors that go into me
deciding what boxes I actually want for the business?
Speaker 4 (23:49):
That's going to be a reflection of what your product is.
And every product has its own specification or what kind
of box it needs. So if you're making a widget,
you will determine how many of those widgets are going
to go into a box and that's going to be
a function of its weight and fragility, and what kind
of other internal packaging you might need.
Speaker 2 (24:11):
Let me ask this question in a different way. Why
does Amazon at least historically seem to like big boxes.
Speaker 4 (24:19):
Well, I don't know that I can answer for Amazon
on that one, but it does seem to be maybe
at the discretion of people who are packaging at their
packing stations and what their available inventory of boxes might be.
Like I've seen some of these things in action. It's
a package. It's just a small packaging desk of sorts
with some overhead bins that have knockdown flat boxes in them.
Speaker 3 (24:42):
This must be an interesting sort of engineering problem because
I might, at the end consumer levels a look at
this inefficient use of box space. I got a box
and all has a little remote control. On the other hand,
maybe the optimization occurred because the packer has for boxes
to choose from and they had more choices. Maybe they
could have had a more efficient space to good ratio.
(25:05):
But then that would have taken up more warehouse space
and made that whole process less efficient. So there's probably
all kinds of algorithms that I'm not even thinking about.
As the end consumer here.
Speaker 4 (25:13):
There are lots of algorithms, and when you think about
boxes and pacging in traditional e commerce, they are looking
to optimize not just from a packaging standpoint, from a
pricing position, but really from a cube in the shipments.
So we have to think that Amazon's going to process
all these orders, or Chewy or whatever the e commerce
(25:36):
platform is. They process the orders, They're going to go
through their distribution centers. And if you're Amazon, you have
your own trucks. You want to make sure that you
can put many of those things on a truck as possible.
Speaker 3 (26:02):
You know, when we're talking about broader macroeconomic data these days,
in particular, there are a lot of questions about the
degree to which the aggregates are missing part of the story,
and specifically in a lot of commerce these days. Anytime
there's some retail CEO that like things are holding up well,
but it's really being driven by the high end. The
high end is keeping it afloat the middle consumers getting squeized,
(26:24):
lower incomes getting exqueized, you know, all kinds of things.
You know, we're talking in aggregates when you talk about
box square footage having been shipped, But is there more
granular data that one could look at in terms of
the quality of cardboard, et cetera. That could tell us
different things about what's strong within the economy. Even if
the big numbers are declining.
Speaker 2 (26:43):
The fancy boxes, Uh, the fancy box is not really.
Speaker 4 (26:48):
So one of the problems that our industry faces is
that we don't have great data. Having worked in the
industry and having provided that data, it's the chore that
no one really double checks. So you've you've brought on
a new customer, right, and you're submitting all your paperwork
for the new customer. One of those things is a
classification of their NAICS code, the North American Industry code. Well,
(27:12):
no one ever checks to make sure that's proper, right.
You just kind of wing it. You look it up
and see if they've maybe followed it with the Secretary
of Commerce or something like that, and that's it. So
the granular data is murky at best, but it is
insightful and it is consistent because there is a cost
to changing your supplier, like we do see it happen,
(27:36):
and for very big box customers, they don't like changing.
You have a long standing relationship, typically many many years.
You have lots of skews, and if you're a really
big company and you have operating facilities all over the place,
you don't want to go through that. So the data,
while murky, might be consistent, and we do see some
of those things. Like in twenty twenty four, for instance,
(27:57):
we saw that manufactured food felt like by three point
seven percent, So if you combine that with beverage, it
was a little over of a four percent decline in
box usage. Now, how do we describe that. Did those
companies see similar falls in their volume? I think I
think the data would suggest that that's probably very close.
(28:18):
Corregated packaging does have some known trade offs. One of
those things is a returnable plastic container that is mainly
being pushed right now towards produce. Walmart specifically Sprouts Market
have been pushing some of their people to adopt returnable
plastic containers as a viable option. It reduces waste. They're
(28:38):
building supply chains around these things to help carry them around.
So that is one of the things that we've seen
kind of cut into box consumption. We don't know that
it's a big thing yet, but it is out there
and it is a thing. The other thing that we've
seen is a movement to larger format boxes, some that
are the size of a palette, you know, forty eight
(28:59):
inches long, four inches wide, and maybe forty inches tall.
A great playhouse for your young kids.
Speaker 2 (29:04):
I remember doing that with huge boxes, turning them into houses.
Why would anyone invest in this space currently? Because when
you describe this enormous clut in supply and then the
fact that demand is going down. Maybe it's because of
the tariffs. Maybe if the US starts manufacturing more goods,
it'll domestically it'll start to pick up again. But it
(29:28):
seems like most of the lines are kind of trending
in the wrong way. What exactly is like the allure
of this industry, That's.
Speaker 4 (29:37):
A great question. I wish I knew the answer, other
than they do have dividends that they have been paint
and consistently pain so.
Speaker 2 (29:46):
It's considered like a div a, fairly like stable.
Speaker 4 (29:49):
Very stable dividends. I think it's a pretty safe investment.
We do see. I mean it's very popular. From a
terminal standpoint. I get bluebird clients that reach out all
the time. They're looking to figure out if this is
still a good investment. And while we don't do buy
sohol recommendations. We still see a lot of traffic in
these in these lanes.
Speaker 2 (30:08):
Does it just depend on how big your company actually
is and how much pricing power you have in the market.
Speaker 4 (30:14):
Well, see, I think that's a myth. I think I
think there really isn't pricing power. If there were pricing power,
we wouldn't see some of the actions that we're seen
in the world today. And what I mean by that
is there are some mills that make a really robust paper.
It performs really really well, and there are scientific properties
(30:34):
to that paper that set it apart from anything else,
and yet they aren't getting the premium that they should
be getting because there is an alternative. And it's it's
like wanting a Ferrari and selling for a Mustang. They're
both great, but one obviously has the allure and one
(30:55):
has its client base too. And when you can buy
a Mustang and it, you're not always gonna want to
buy that Ferrari.
Speaker 3 (31:04):
Well, actually this sort of gets me to where I
want to go. First of all, what would be the
name of the biggest box or packaging expo in the
United States? Like that gets together somewhere.
Speaker 4 (31:14):
Yeah, in big round terms for.
Speaker 3 (31:16):
Packaging pack Expo, where's that Vegas?
Speaker 4 (31:19):
This is going to be in Vegas this year May.
Speaker 3 (31:21):
We'll go on day all right, So, sitting aside the
volume and pricing trends, which we take for granted, everyone
is curious about what would be the hot topics right
now that would be discussed at pack Expo.
Speaker 4 (31:32):
Ooh. Sustainability has been a really big topic for a
long time, and it's matched with extended producer responsibility laws.
So this is a state by state initiative to basically
shift the burden of recycling away from its residents and
onto the companies who are creating the waste.
Speaker 2 (31:52):
How does that work exactly?
Speaker 4 (31:54):
So right now we have a handful of states who've
actually passed legislation. Oregon's the first one that is real
kind of enacting this, and they've set up a fee schedule.
They've measured how much waste their state produces in a
month or in a year, and they've allocated a certain
number of dollars per pound or cents per pound for
(32:15):
each one of those commodities. And if you're selling something
into the state, they are essentially placing a fee on
the waste that you're sending in their state and you
have to pay a check to them.
Speaker 3 (32:25):
Can you tell a little bit more about the economics
of recycling, because I put a lot of the cardboard
I use into the proper into the proper bin. The
economics of recycling, like I'm always and this goes with
any recycling really, which is that when I think about
the labor that actually when I think about a the
degree of diligence that people and I would say I'm
(32:46):
probably higher than average diligence about proper bin allocation, but
I know I'm not perfect. But when I think about
the degree of diligence and the inefficiency and then the
labor and all of this stuff, and then talk to
us like when is it actually economic and when is
it just sort of some sort of cargo cult type
behavior that people engage in where there's no real purpose.
Speaker 4 (33:07):
Well, most of the time the recycling fees are paid
by taxes. My street, for instance, that was not the case,
and I had to pay twenty five dollars a quarter
for a bin. Not terrible, but I had to pay
for it. The economics in big round numbers work like this.
It costs anywhere from about four hundred dollars a ton
upwards the seven hundred dollars a ton to go out
(33:29):
and do the collections and processing for recovered materials, all
of that stuff. So you'll see a truck come and
pick up your recyclables. It goes to a facility called AMRPH,
a municipal Recovery facility, and there it's processed and they
have lots of lines that sort things out plastics and
metals and papers and all of that stuff, and then
they produce bales, so a compact cube of sorts of
(33:53):
these materials and then they get sold. So if we
were to just use a big round number and say
five hundred dollars a ton, the net ton that comes
out of the murph only has a street value between
one hundred to one hundred and forty dollars a ton.
Speaker 3 (34:08):
Yeah, listen hearing that right. That sod is terrible.
Speaker 4 (34:11):
That's terrible. And the craziest thing is the correated box
is what really makes household recycling even work. Because we
know from data, and this is something we I challenged
several years ago. Our best data says that we recycle
about sixty six percent of the correated boxes in the
US it's a pretty good number. The industry used to
(34:33):
say ninety three percent of boxes got recycled. There's no
way that's possible. But we don't have the data to
say it's lower than sixty six percent, But we do
have a methodology that we used to kind of get there.
It was actually supported by the National Renewable Energy Lab.
You can probably shoot some holes and some other stuff too,
but big point is we know that about sixty percent
(34:54):
of these get recycled, and we know they have a
very robust aftermarket. We process about thirty five million tons
of old coreated cartons almost every year. About a third
of them are going to go overseas. There are a
lot of other countries that want the virgin fiber that
we produce here.
Speaker 2 (35:14):
Now that we've revealed the depressing truth about recycling, let
me ask a slightly more positive question, which is have
there been any cool technological developments when it comes to
box making.
Speaker 4 (35:25):
They are constantly patenting boxes, making new equipment to make
them faster, improving the way we make the paper. We're
trying to make stronger paper that's lighter in weight. So
if you think about some of these, we'll go back
to the EPR laws. For a second, those fees are
based on the weight of what you're consuming. So if
(35:46):
the companies can buy a lighter weight material, then their
fees go down. So there's a push now to see
if we can lightweight the paper, make it as strong
but with less weight. And so these are things that
we're going to see really take some shape in the
next five to ten years.
Speaker 3 (36:01):
You know, I'm glad you mentioned export. One of the
things that I've noticed whenever I am traveling abroad, even
to fairly rich countries, but I definitely notice it when
I'm in poorer countries is that the quality of packaging
materials is distinctly worse than here. So and the example
that I often notice is, you know, you buy a
bottle of water in a US grocery store. It's nice,
(36:22):
it's dirty, it holds its form very well. You buy
a bottle of water it's a grocery store in Guatemala,
where I was a couple years ago. In Mexico, it's crinkly,
it smashes over easily. You could tell that it's a
less durable plastic. Is there similar you know, if I hadn't,
if we were to look at the cardboard boxes running
(36:42):
through a developing economies such as a Guatemal et cetera.
Would we see that this is noticeably different than the
quality of cardboard that we're seeing here.
Speaker 4 (36:51):
It really depends on what the technical term is going
to be furnished, right, So what are you using to
make the boxes? The US has historically been a maker
of Kraft linerboard, meaning they cut down trees, they chip
the trees, they turn those chips into new virgin paper.
That's actually been declining and reversing. We've seen more and
more recycled capacity come online. And because we've still had
(37:14):
a very good virgin base, the recycled paper here in
the US has been very good. Now in other countries,
they may not have Southern yellow pine, so they are
buying our occ or they're using their own occ OCC's
old cordiered cartons. Sorry, So they're just going to repulp
the stuff that they have. And if they start with
a low quality box, then they're going to get a
(37:35):
low quality paper on the back end, and so sometimes
they are going to have a lower grade paper. And
in other areas of the world, they actually have different
definitions for that kind of paper, so they would have
different grades of it, and so yeah, sometimes you get
the low grade paper because it's a commodity and it'll work.
Speaker 2 (37:53):
So I just have one more question, just to wrap
it all up. Ah, that's a packaging joke. Okay, wrapping
it all up. Summarizing what's your prediction for the second
half of the year in terms of box shipments.
Speaker 4 (38:05):
We think they're still going to be very challenged. Full year.
We're saying they're probably gonna be down two and a
half percent, maybe as high as three percent. It really
depends on what happens. A lot of this is stemming
from tariffs and policy coming out of the White House,
so it really depends on how much confidence some of
these companies have as they look forward. We've seen the
(38:29):
number of containers coming into the US, like the cargo
ships was front loaded, right and now that the tariffs
are kind of here, or maybe they're not here, they've
been kind of tapering off a bit. It will be
very curious to see what happens. But to maybe think
about it another way, most Americans buy stuff when they
have money, and when they don't have money, they put
(38:51):
on credit cards, and we're seeing records amount of credit
card debt, and that's not a great sign for if
people are going to spend money. So we don't really
think that it's a really hot outlook for even the
for the holidays, our American is gonna spend money. Probably
Is it going to look exactly like it did in
prior years?
Speaker 2 (39:09):
Probably not all right, Ryan Fox, Containers and Packaging analysts
at Bloomberg Intelligence, thank you so much.
Speaker 3 (39:16):
Thanks for having me, Joe.
Speaker 2 (39:29):
I learned a lot about boxes.
Speaker 3 (39:31):
That goes great. Yeah, I love Ryan.
Speaker 2 (39:34):
You know, one thing I really like about Ryan and
people like that is when they trot out all the
numbers off the top of their head. That was really impressive.
That was no notes, and he had answers for pretty
much everything.
Speaker 3 (39:46):
If someone had asked me how I thought they would
measure box shoes, I might have guessed cubic feet, right,
square feet, but yes, I would have you know, all
this covering the world stuff. Yeah, it's pretty cool.
Speaker 2 (39:59):
Yeah, And I guess the question over how useful a
macroeconomic indicator boxes actually are still kind of lingers. Because
we did have retail sales data for the past two
months that are available that came in like pretty resilient,
pretty strong, despite the decline in box shipments.
Speaker 3 (40:18):
What was the term used cart to carton commerce?
Speaker 4 (40:20):
Yeah?
Speaker 3 (40:21):
I really like that because it's true, right, what is
e commerce that now encompasses so many different things? So
there is this sort of classic e commerce where you
go on a website and you buy a thing and
it comes in a box. But then there's of course,
you know, buy and you pick up at the store,
and that's a slightly different variation, or maybe you get
food delivered in a cardboard box, et cetera. So I
(40:41):
like the idea of okay, e commerce is so broad
that if we want to have like, for like trajectories
of some of these used cases for cardboard boxes, we
have to maybe get a little bit more granular.
Speaker 2 (40:51):
Well that reminds me, actually, I think one thing that's
still really underappreciated about the packaging industry is how much
it feeds into broader inflation. Yes, yes, and this is
something I remember some economists bringing this up during the
post pandemic era. But the interesting thing is now, even
though box shipments are going down, prices still seem to
(41:11):
be kind of sticky and even going up. So what
does that mean for inflation?
Speaker 3 (41:16):
I always think about this, and sometimes it maybe gets
a little metaphysical. But when you buy a thing in
a grocery store, Let's say, buy an avocado, Like, what
are you buying when you buy the avocado, right, Because okay,
there is the physical avocado that you might cut open,
But then you're buying the time it's spent in a
refrigerated space. You're paying rent to those owners of refrigeration, transport,
you're buying the transportation, et cetera. It's interesting to think
(41:38):
about any good that you buy period ahead of lettuce
et cetera. How little is the lettuce whatever, even the
lettuce means, because there is labor that went into the
planting of the lettuce, and there is the land of
the lettuce, et cetera. To the idea of what are
you buying when you're buying something, often that it includes packaging,
but often it's just never really clear at all what
it is except this bundle of goods and service.
Speaker 2 (42:00):
I'm buying an entire slice of the economy. You literally are, Okay,
now that we've gotten into a metaphysical discussion about boxes,
shall we leave it there.
Speaker 3 (42:08):
Let's leave it there.
Speaker 2 (42:08):
This has been another episode of the Authoughts podcast. I'm
Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 3 (42:14):
And I'm joll Wisenthal. You can follow me at the Stowart.
Check out Ryan Stuff at Bloomberg Intelligence. A lot of
fascinating stuff there. Follow our producers Kerman Rodriguez at Kerman
armand desh O Bennett at Dashbot and kill Brooks at Kilbrooks.
From our odd Laws content, go to Bloomberg dot com
slash odd Lots were the daily newsletter and all of
our episodes. You can chat about all of these topics
(42:35):
twenty four to seven in our discord Discord dot gg
slash odline.
Speaker 2 (42:40):
And if you enjoy Oddlots, if you like it when
we talk about boxes, then please leave us a positive
review on your favorite podcast platform. And remember, if you
are a Bloomberg subscriber, you can listen to all of
our episodes absolutely ad free. All you need to do
is find the Bloomberg channel on Apple Podcasts and follow
the instructions there. Thanks for us, name
Speaker 4 (43:21):
Yeah
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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