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The product managers over at Waste Management have always had a lot to deal with. People generally don’t do all that good of a job of recycling what they use and this can make it difficult to create a profitable business based on reusing what people have thrown away. However, in the past they’ve been able to do it. These days things have become a bit tougher. International changes and that pesky pandemic have disrupted their best laid plans. Just exactly how is a recycling product manager supposed to run a successful business when all of this change is going on?
Dealing With Changes In The Recycling Market
The product managers at Waste Management are dealing with an extraordinary amount of change in their recycling business. Two years ago, one of their biggest customers, China, decided to ban imports of mixed paper and plastic and introduced limits for scrap metal, upending global recycling markets. The disruption forced the product managers at Waste Management, the largest residential recycler by volume in the U.S., to re-examine their product development definition. The result of China’s shift has been the removal a major source of demand for recyclables, driving down their prices. There was a ripple effect also. China’s actions also resulted in higher processing costs, as many countries around the world followed the Chinese example and set higher quality standards for their imports of recycled goods. The product managers at Waste Management responded by asking municipalities to pay more for recycling services, the so-called fee-for-service strategy. Just when the product managers thought that there couldn’t be any more change, the Covid-19 coronavirus struck.
The Waste Management product managers can remember when at the peak, approximately 30% of their recycled commodities were going to China. Today, it’s dropped to below 3%. They have certainly seen downward pressure on commodity prices. In the recycling business, an average recyclable-commodities mix includes plastic, cardboard, mixed office papers, newspapers, metal and aluminum. Their peak rates in 2017 were around $140 per ton (that would look good on anyone’s product manager resume), and today, they are at around $39 per ton. That imbalance in the supply-demand equation drove a fundamental shift in the marketplace that they think could persist for some time.
One of the biggest problems that the Waste Management product managers are dealing with is that the prices for recyclables are currently very low. They have made great strides on moving forward with a fee-for-service model and are seeing tremendous value from that. Last year their impact to the revenue line from declining commodity values was over $300 million, and in spite of that, they were able to manage the overall profitability of the business to essentially flat. The product managers think of their customers in segments. When they have really short-lifecycle customer contracts, where the customer comes to them on a day-to-day basis, they can renegotiate the rate on a very real-time basis based on changes they’re seeing in market dynamics.
Recycling Going Forward
On the residential side, Waste Management tends to have longer-term contracts, three to five years, sometimes even 10 years. While the product managers can proactively engage with the customer and talk about the changing dynamics that they’ve seen, there’s not necessarily going to be great receptivity to renegotiate terms while a contract is still running. The customer says to the product manager, “We want to wait until our contract is up so that we can renegotiate.” The product managers know that they’re halfway through that process, but because of the duration of some of our contracts, there’s going to be a long tail getting all the way through.
In order to keep their business going, product managers have to find ways to try to convince municipalities and residential customers to keep recycling even though there might be an increase in price. What they have seen is that communities remain fairly steadfast in their commitment to recycling. The larger communities are going to be better equipped to really stand behind that commitment because it will be shared by more people in terms of the incremental costs. What Waste Management can do is give communities information and insight about the environmental value and benefits that are created from their recycling program.
Now that they can no longer export recyclables to China, the Waste Management product managers have a real problem on their hands. However, Waste Management has successfully identified alternative outlets for almost all of its recycled content. The Waste Management volumes redirected from China have been distributed to new customers in India, other Southeast Asian countries and the U.S. The product managers have not seen something in terms of commodity prices that will make them change their view on the viability of the business in the long term. With their focus on operating more efficiently and providing the service for a fee, they think the dynamics of the model have shifted enough that they will continue to make it economically viable.
What All Of This Means For You
How often do any of us ever think about what happens to the recycling that we generate? Probably not all that often. However, over at Waste Management its part of their product manager job description to think about things like this every day. As challenging as it may be to be a recycling product manager, it turns out that it become even more difficult when things changed in the international recycling market and the Covid-19 pandemic arrived. Waste management product managers had to adjust. The recyclables that had been sent to China are now being sent to other countries. This coupled with a new operating model will make Waste Management successful in the future.
The world of Waste Management product managers was turned upside down when China banned imports of recycled materials. China’s move has created downward pressure on the price of recycled materials. To deal with this they have implemented a fee-for-service model. Waste Management has longer term contracts on the residential side that they can’t quickly renegotiate. A key part of the product manager’s job these days is to convince municipalities and residential customers to keep recycling.
The Waste Management product managers have had to deal with a great deal of change. One of their primary customers cut them off and then a global pandemic struck. However, they have adjusted to these changes. They have created a new way of doing business that reflects the world that they are now operating in. It looks like they are going to be successful going forward. Next time you throw something in the recycling bin, think about the product managers who are going to be using it.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Should the Waste Management product managers look for ways to get back into the China market?
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What We’ll Be Talking About Next Time
In order to be a successful product manager, we need to have data. In fact the more data that we can get our hands on, the better we are able to do our jobs. In the world of consumer products product managers have been having it pretty easy in the past few years. The powerful data collection abilities of Google have make large amounts of information about our customers available to us to purchase. However, it turns out that Google is planning on making some changes in regards to the information about consumers that they collect and this could have a big impact on product managers.