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Speaker 1: This is Bloomberg Business Week with Carol Messer and Tim

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Speaker 1: Steneveek on Bloomberg Radio.

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Speaker 2: Really looking forward to our next guest. We've been doing

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Speaker 2: some research and googling ahead and some of the stuff

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Speaker 2: we came across, and just to give you an idea

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Speaker 2: of the amount of trash we're all creating. Average American

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Speaker 2: throws out some four and a half pounds of waste

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Speaker 2: every day, which becomes two hundred and sixty eight million

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Speaker 2: tons of waste nationwide each year. Thirty million tons of

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Speaker 2: this waste is food, twenty seven million tons plastic, eighteen

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Speaker 2: million tons is paper and paperboard, not all of which

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Speaker 2: gets recycled.

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Speaker 3: Him we're talking trash, garbage, waste, call it whatever you want.

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Speaker 3: We produce a lot of it. It's got a massive

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Speaker 3: environmental impact. It contributes to climate change. It also raises

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Speaker 3: the question, Carol, what do we do with it? And

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Speaker 3: how can we be better about it?

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Speaker 2: Which brings us to our next guest. He's here in

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Speaker 2: our Bloomberg and Director Brokers studio. John vander Ark is

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Speaker 2: President CEO of the forty six billion dollar market cap

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Speaker 2: in publicly traded Republic Services based in Phoenix. Stock is

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Speaker 2: up about fourteen percent so far this year. Cascade Investments

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Speaker 2: an investment vehicle and holding company for Bill Gates, of course,

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Speaker 2: the co founder of Microsoft, is the top shareholder in

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Speaker 2: the company, with about thirty five percent of the outstanding stock.

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Speaker 2: Big lead up, John, Thank you so much for being

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Speaker 2: here with us.

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Speaker 1: How are you good? Thanks for having me listen.

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Speaker 2: It's great to have you here and talk to us

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Speaker 2: about the business, the bulk of which you know, contributes

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Speaker 2: to what moves the balance sheet. Tell us give us

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Speaker 2: some perspective.

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Speaker 1: Well, we're actually an interesting we're kind of a backdoor

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Speaker 1: view of the economy because everybody has something they need

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Speaker 1: to dispose of. So we serve small you know, households,

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Speaker 1: we serve small business, we serve large business, we serve

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Speaker 1: national players, governments, so we really get it. We have

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Speaker 1: a very diversified book of business across our you know,

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Speaker 1: almost fifteen billion dollars of revenue, and so that gives

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Speaker 1: us a really good view of the economy. And we're

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Speaker 1: very you know, spread out, and we're resilient obviously, because

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Speaker 1: even in a down economy, everyone is still going to

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Speaker 1: have something they're going to dispose of.

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Speaker 2: So what's your view on the economy. Since you have

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Speaker 2: such a good view and vantage.

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Speaker 1: Point, we're still cautiously optimistic, right the recession. We keep

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Speaker 1: reading about it and here about it, and it's not

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Speaker 1: really showing up at our p and L yet.

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Speaker 2: Now I would say that he doesn't, you say, because

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Speaker 2: you're kind of resilient. But how do you pick?

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Speaker 1: Yeah, you'd see some decline, right, you think about maybe

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Speaker 1: a three to five percent drop in demand, right if

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Speaker 1: an economy is really going to pull back and be

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Speaker 1: in recession. So construction, for examples, portion of our business

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Speaker 1: less than ten percent, but that's down about three percent

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Speaker 1: year over year. So we saw that commercial residential start

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Speaker 1: slow certainly into last year, and we kind of have

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Speaker 1: a six to nine month lag effect on that. So

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Speaker 1: that's down a little bit. But you know, auto's down

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Speaker 1: a little bit in the first half. But then you know,

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Speaker 1: the industrial side of the business is just booming.

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Speaker 3: When do you need to what do you need to

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Speaker 3: see in order to go from cautiously optimistic to optimistic.

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Speaker 1: Well, listen, when I see housing starts, you know, kind

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Speaker 1: of predicted to be up next year, I think that's

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Speaker 1: you know, we'll probably slow a little bit on construction

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Speaker 1: into the early part of the first half, but then

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Speaker 1: we'll pick up in the second half. And listen, I

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Speaker 1: don't think all of the indices are fully accounting for

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Speaker 1: some of the government spending that's coming in on infrastructure spend,

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Speaker 1: and we're certainly a beneficiary of that. So we're seeing that,

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Speaker 1: you know, hit our business and again very very strong.

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Speaker 2: So when you say the industrial side of your business

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Speaker 2: is strong, give me a little bit more color on that.

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Speaker 1: Yeah, two sides of Think about a major petrochemical player, right,

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Speaker 1: we have a lot of things they need to dispose of,

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Speaker 1: certainly some recycling, but special waste, tazardous waste, a lot

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Speaker 1: of environmental services in the middle of that that we

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Speaker 1: take advantage of that. Or think about a brownfield remediation,

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Speaker 1: you know, opportunity where you know, we're in the front

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Speaker 1: of the line there, we're doing the dirt clean up

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Speaker 1: there and we're taking all those materials and bringing those

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Speaker 1: to the right spot.

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Speaker 2: Which is the bigger part of your business? Give us

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Speaker 2: an idea. Is it that side or is it just

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Speaker 2: the regular trash.

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Speaker 1: Yeah, it's a funny, funny business. It's about if you

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Speaker 1: measure based on our customer account, which is fourteen million. Yeah,

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Speaker 1: it's ninety plus percent B two C. So you think

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Speaker 1: about the homeowner where we actually service. If you measure

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Speaker 1: where dollars change hands, it's more than ninety percent B

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Speaker 1: to B because in most cities, the municipality contracts with us,

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Speaker 1: and we consider that a business transaction.

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Speaker 3: Talk to me about these contracts, the most competitors that

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Speaker 3: you have in some market, it's what does the competitive

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Speaker 3: landscape look like? Because you know, every market is completely different.

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Speaker 3: I don't know if you've spent time in New York City,

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Speaker 3: but the trash collection.

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Speaker 2: Here is peasy, never problem, never see it on the sidewalks, never.

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Speaker 3: See it's completely wild. But what is what is the typical.

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Speaker 1: Market for you? It's very a very local market, and

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Speaker 1: so it's based on really where waste moves. Now it's

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Speaker 1: starting to move further distances as landfills close, but in general,

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Speaker 1: you think about a sixty nine mile radius. That's kind

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Speaker 1: of a what defines a local market? And in our markets,

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Speaker 1: you know, we have thousand dots on the map in

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Speaker 1: the US or of customers across forty nine states, we're

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Speaker 1: number one or number two, and more than ninety two

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Speaker 1: percent of our markets so we really think about getting

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Speaker 1: concentration because it's a density game, right, you think about

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Speaker 1: time and weight. That's what kind of drives our economics

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Speaker 1: in terms of collecting something. And then we want a

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Speaker 1: recycling center and a landfill in that market to have

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Speaker 1: vertical integration. And that's what really provides the mote.

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Speaker 2: How much of recycling is part of the business.

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Speaker 1: It's a growing part of the It's kind of fifteen

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Speaker 1: percent and growing. Yeah, and again we see that as

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Speaker 1: a big growth driver. That solid waste is actually shrinking

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Speaker 1: on a per capita basis. Okay, so is that a

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Speaker 1: good thing?

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Speaker 2: What does solid waste mean?

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Speaker 1: That's garbage's industry talk for garbage. So garbage is shrinking

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Speaker 1: on a per capita basis and recycling is growing. And listen,

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Speaker 1: that's our plan. We're trying to drive that diversion. And

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Speaker 1: you know, when I started ten years ago, people used

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Speaker 1: to say, well, we make all our money at landfills

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Speaker 1: because that was our highest margin business. And I'm a

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Speaker 1: customer person. I said, landfills don't pass the time customers pass,

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Speaker 1: and so you need to charge and understand what the

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Speaker 1: product is worth. And that's what we've done. We've taken

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Speaker 1: recycling pricing on the street to probably eighty percent of

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Speaker 1: solid waste five years ago, it's now one hundred and

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Speaker 1: twenty percent.

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Speaker 2: What does that mean?

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Speaker 1: And we've grown it faster?

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Speaker 2: What does that mean?

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Speaker 1: So, Matt, think about a small business and having two

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Speaker 1: containers that the truck comes up and picks, you know,

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Speaker 1: once a week or twice a week. Five years ago,

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Speaker 1: the price of that recycling service was eighty percent of

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Speaker 1: the price of the garbage service, and now we've flipped it,

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Speaker 1: it's one hundred and twenty percent because we've priced recycling

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Speaker 1: way faster and we've grown recycling faster.

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Speaker 2: Does it also mean people want to be recycling people?

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Speaker 1: We know, we do the customer insight where people are

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Speaker 1: passionate about recycling. Yeah, and they want to know it

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Speaker 1: goes to the right spot?

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Speaker 3: Does it though?

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Speaker 1: In our case, absolutely right. That's part of our environmental responsibility,

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Speaker 1: which is one of our values. And I would say

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Speaker 1: most of the time, yes, there are always corner cases

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Speaker 1: where some smaller operators not doing the right thing on

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Speaker 1: the back end, but most of the time you can

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Speaker 1: have pretty good insurance that if you're putting it in

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Speaker 1: the bin, it's going to get recycled.

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Speaker 3: The issue over the last few years has been there

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Speaker 3: isn't really those countries left to buy our recycling like

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Speaker 3: China used to do. China is not doing it at

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Speaker 3: the same rate that they used to. So where do

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Speaker 3: these where do these plastics go?

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Speaker 1: Yeah, when China kind of shut their doors, we went

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Speaker 1: from about thirty five percent of our material going abroad

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Speaker 1: to zero in about three months. And so what's happened

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Speaker 1: is those value chains have really gotten repositioned. So there's

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Speaker 1: a lot of domestic manufacturing that's come online, particularly for

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Speaker 1: fiber and paper, So now our supply is almost entirely domestic.

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Speaker 1: What about plastic plastics is interesting, So most plastics today,

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Speaker 1: rigid plastics get down cycled. So think of your water bottle,

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Speaker 1: Think of your detergent bottle that goes into a pipe, park, bench,

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Speaker 1: or carpet. Now that's good. It's not going to go

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Speaker 1: in the landfill, so it's going to get a second life.

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Speaker 1: But after that, that's going to go in the landfill.

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Speaker 1: So we're forward integrating into that. So to try to

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Speaker 1: take that water bottle and get it back into food

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Speaker 1: grade quality and so it can go right back into

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Speaker 1: a water bottle, and then we think we can turn

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Speaker 1: that at individual polymer six, seven or eight times before

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Speaker 1: eventually it gets degradatory.

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Speaker 2: Is it expensive to do that?

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Speaker 1: Yeah, we're investing about three hundred million dollars to produce

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Speaker 1: four of these centers across the US. The first one

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Speaker 1: opens up in Vegas here in a few months, and

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Speaker 1: we've contracted with Coca Cola, and listen, we could sell

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Speaker 1: out of that center five times over. We had to

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Speaker 1: limit people's buy on the back end because there's such

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Speaker 1: a short supply for this recycled plastic.

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Speaker 2: So go back to what Tim said, does it really

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Speaker 2: get recycled? Because we have all gotten really good at

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Speaker 2: dividing up our garbage in multiple ways, and the question

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Speaker 2: is does it all really get recycled? Does the paper

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Speaker 2: get recycled, does the plastic get recycled? What guarantee do

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Speaker 2: we all have that it's being done? How do we know?

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Speaker 1: Well, listen, not everything that you put in the recycling

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Speaker 1: container is recyclable. Fair, right, So if you put the

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Speaker 1: clamshell you might get at the grocery store that might

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Speaker 1: be made with some recycled plastic, but it's not recyclable.

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Speaker 1: And so one of the things that we're pushing on

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Speaker 1: is working now back upstream to say, how do we

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Speaker 1: get more things in the original form of pet or

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Speaker 1: HDPE that's the water bottle, yeah, and the detergent bottle

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Speaker 1: and milk jug so that it can get a recycled

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Speaker 1: it keep getting recycled.

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Speaker 3: I thought there was a little triangle on that.

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Speaker 2: Yeah, if it has the triangle.

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Speaker 1: Yeah, that's made with post consumer content. It doesn't mean

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Speaker 1: that particular thing is recyclable. So there's a huge opportunity

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Speaker 1: for education here because consumers care and they want to

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Speaker 1: do the right thing.

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Speaker 2: I have to say, I stand over my recycle I'm

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Speaker 2: like this, does this really get recycled? If I clean it,

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Speaker 2: is it going to like go?

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Speaker 3: It's like you spend a lot of energy doing this.

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Speaker 1: I actually do. I do care, empty, clean, and dry.

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Speaker 1: Those are the simple rules.

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Speaker 2: But not everything that has that thing is not. Can

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Speaker 2: we work on that messaging?

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Speaker 1: Can?

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Speaker 3: I feel like I've been lied to for thirty years?

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Speaker 2: I want to get back to our guest, John vander Ark,

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Speaker 2: President CEO of Republic Services. He is still here in

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Speaker 2: our Bloomberg Interactive Broker studio. You know, John, one thing

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Speaker 2: I wanted to ask you is when we were talking

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Speaker 2: about it off air, your company and waste management, top

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Speaker 2: players in this industry, both with ties to Wayne Haisanga.

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Speaker 2: How do you think about and you've been at your

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Speaker 2: company for a decade or so, how do you think

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Speaker 2: about the evolution of kind of how we collect trash?

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Speaker 2: Where it was, where it's going the evolution.

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Speaker 1: Sure, yeah, I can just tell it from my tenure

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Speaker 1: we started. You know, when I started, we talked about

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Speaker 1: ourselves as a garbage company, and then it was a

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Speaker 1: waste company, and then a waste and recycling company, and

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Speaker 1: then a recycling waste company, and now I environmental services

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Speaker 1: and a sustainability company. And that's not just market that's

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Speaker 1: just not marketing speak. That's actually where we were investing

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Speaker 1: in the business. And again I'm trying to challenge every

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Speaker 1: ton that goes into a landfill, because hey, when I

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Speaker 1: put in a landfill's a cost to me. But if

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Speaker 1: I can recycle it and reuse it and repurpose it,

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Speaker 1: then I get a second benefit, a second stream from that.

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Speaker 1: And so and by the way, landfills aren't being cited

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Speaker 1: right that that they're closing up, and so if I

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Speaker 1: can extend the life of my landfill and I can

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Speaker 1: get a second sale of that material in addition to

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Speaker 1: collecting it. That's a win win.

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Speaker 3: Does this does the free market solve this completely? Or

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Speaker 3: does it need government intervention to entice businesses entice people

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Speaker 3: to dispose of their waste?

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Speaker 1: Differently, Yeah, I think listen, regulatory standards help. And we're

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Speaker 1: forward integrating into plastics. We talked a little bit about

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Speaker 1: that before, and we're doing that because we look at

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Speaker 1: what Europe's doing, and Europe has figured out a way

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Speaker 1: to take that water bottle and rather than having it

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Speaker 1: down cycled into a pipe or a park bench or carpet, right,

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Speaker 1: they've used it and they did it because the government

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Speaker 1: put in regulatory standards that new water bottles needed a

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Speaker 1: certain level of post consumer content. And now you see

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Speaker 1: that in California, you see that Washington, you see that

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Speaker 1: New Jersey, and that will hit other states and that's

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Speaker 1: getting the CpG players. So now say, hey, we have

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Speaker 1: to have sustainable packaging, and that's driving us to make investments. Right,

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Speaker 1: we're investing three hundred million dollars in these centers and

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Speaker 1: we're doing it with a good return.

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Speaker 2: So talk to us a little bit about you guys

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Speaker 2: have some clean energy projects, right, You've done stuff with

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Speaker 2: BP landfill biogas to renewable natural guests. Talk to us

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Speaker 2: a little bit about that.

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Speaker 1: Yeah, we have sixty seven projects historically. So when garbage decomposed,

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Speaker 1: it produces two things leech eight, which is like a

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Speaker 1: gray water, which we capture obviously those line fills landfills

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Speaker 1: are lined, and then it produces methane, and methane is

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Speaker 1: very destructive through the environment, obviously, so we've always flared

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Speaker 1: off that methane to convert it to CO two, which

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Speaker 1: is about seventeen times less harmful than the methane we've

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Speaker 1: still burning, but still burning, right, and still a waste.

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Speaker 1: It's still energy going up in the air that it

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Speaker 1: could be converted. So two interred active landfills. We have

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Speaker 1: sixty seven projects today where we take that methane and

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Speaker 1: we push it through either a generator to produce electricity

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Speaker 1: or we clean it up and produce renewable natural gas.

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Speaker 1: And we have now another sixty plus projects in the

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Speaker 1: pipeline to continue to do that. And again that's good

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Speaker 1: for the environment. In some cases, we're powering the neighborhoods, right,

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Speaker 1: around our facilities.

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Speaker 2: How much can you scale that up?

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Speaker 1: Well, you have to get down to a certain size

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Speaker 1: of landfill the capex, so the capital investment doesn't justify today.

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Speaker 1: Now that changes over time, that'll innovate, but we're going

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Speaker 1: to get to seventy five eighty percent of the gas

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Speaker 1: flow across our landfills here over the next five years.

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Speaker 3: Let's talk mna us ecology brought exposure to hazardous waste.

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Speaker 3: How are you thinking about deals moving forward?

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Speaker 1: Yeah, we've alway word with Greg great Grandchell of one

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Speaker 1: thousand acquisitions, so we do about ten to thirty deals

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Speaker 1: a year. This is a highly acquisitive space and our

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Speaker 1: competitors are also roll ups over time. You know, we

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Speaker 1: think our pipeline is strong, and it's certainly strong and

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Speaker 1: recycling solid waste. We spent about nine hundred and twenty

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Speaker 1: seven million in the first half on those deals, and

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Speaker 1: then this environmental solutions business right US Psychology was kind

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Speaker 1: of the platform acquisition in that space that provides an

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Speaker 1: anchor for follow on acquisitions, and our pipeline is pretty

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Speaker 1: full on that side of the business as well.

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Speaker 2: What's the biggest problem you think what you have right

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Speaker 2: now with dealing with trash. We talk a lot about

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Speaker 2: food waste and the impact it has certainly on the climate,

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Speaker 2: But what do you think it is the biggest problem

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Speaker 2: right now? Is it just the quantity?

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Speaker 1: Yeah? I think I think we need more innovation on

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Speaker 1: the value chains to take things out of the landfill

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Speaker 1: and make sure it's truly recyclable. And I think we

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Speaker 1: need to get away from the headlines of what could

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Speaker 1: be done and all the technologies. Again, a lot of

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Speaker 1: the plastics recycling is a good example. There's mechanical recycling,

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Speaker 1: and there's chemical recycling.

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Speaker 2: Are you worried about EV's and batteries and all that

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Speaker 2: good stuff?

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Speaker 1: Listen, we're bullish on EV. We're forward in or we're

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Speaker 1: going to along on EV with our fleet. About fifty

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Speaker 1: percent of our buy within five years will be electric vehicles.

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Speaker 3: Where do you get those who makes electric garbage truck?

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Speaker 1: Well, we've got Pea Rian is it, Tesla No Pete

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Speaker 1: and mac Today and other players all have converted trucks.

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Speaker 1: So it's a conventional diesel truck that they're piloting, which

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Speaker 1: again have limited application. The true game changer is mcneilis

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Speaker 1: who's the planner space they're owned by Oshkosh. They're building

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Speaker 1: the first ever purpose built studs up refuse vehicle, and

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Speaker 1: it's a huge deal because you can then take the

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Speaker 1: weight out of the vehicle, which gives you enough battery

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Speaker 1: that you can run a full day without taking away payload.

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Speaker 1: So if we have to take a you know, an

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Speaker 1: extra trip to the landfill, that's an hour of unproductive

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Speaker 1: time for us. We can't afford to do that. So

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Speaker 1: these vehicles will have the same kind of fit and

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Speaker 1: fitness as the diesel vehicle, but they'll be quieter. The

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Speaker 1: cab space is forty five percent bigger for our drivers

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Speaker 1: because you're taking the engine out of the front and

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Speaker 1: it's battery in the bottom, quieter, Lots of technology benefits,

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Speaker 1: So we're excited about it.

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Speaker 2: No, But when I talked about batteries, like I do

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Speaker 2: wonder about used batteries, old batteries, waste, Like, is that

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Speaker 2: something that you think about.

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Speaker 1: Yeah, we have partners with that. Electronics recycling is another

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Speaker 1: way computy. Yeah, Listen, it doesn't all happen perfectly, especially

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Speaker 1: in other parts of the world. That happens very imperfectly.

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Speaker 1: Here that market is fairly well supplied on that front,

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Speaker 1: and we have partners and we certainly collect that and

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Speaker 1: then we work with partners to process.

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Speaker 2: What don't we know?

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Speaker 3: Oh go ahead, Tim, I was gonna ask, we're automation.

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Speaker 3: We don't have much time left. We got to get

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Speaker 3: you back. Where where's automation happening in your value chain

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Speaker 3: right now?

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Speaker 2: Is it?

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Speaker 3: Is it beyond the idea of just taking the trucks

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Speaker 3: and those trucks automatically pick up the detraction and recycling?

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Speaker 3: Is it, you know, further down in the value chain.

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Speaker 1: Yeah, it's every stage. So on collection, for example, one

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Speaker 1: of the ways we clean up the stream is we

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Speaker 1: now have cameras, so when we tip your garbage container,

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Speaker 1: we have a stream that can see and we can

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Speaker 1: see how much contamination is then recycling and so if

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Speaker 1: you have a contaminated stream, we're going to send you

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Speaker 1: a note and say, hey, you're streams a little dirty,

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Speaker 1: clean it up. If you do a second time, then

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Speaker 1: we're going to charge you. And we understand how to

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Speaker 1: change consumer behavior because if you get charged.

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Speaker 2: This is why I stand over my garbage and I

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Speaker 2: look at it.

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Speaker 1: And even a recycling center itself.

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Speaker 3: What happens in New Jersey when you make a mistake

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Speaker 3: in the trash can.

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Speaker 2: I don't want to know, sleeping with the fish. Is

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Speaker 2: there an AI component twenty seconds?

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Speaker 1: Uh yeah, I mean in our recycling center, sure, no,

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Speaker 1: And our recycling centers for sure. That used to be

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Speaker 1: people picking stuff and now that's optical scanners and all

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Speaker 1: kinds of things. Again helps us produce a better product.

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Speaker 1: What we could talk about trash for so long?

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Speaker 2: I listen. I think it's interesting. There's a lot going on.

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Speaker 1: Come back soon we will.

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Speaker 2: We enjoyed this. John vander Ark, president and CEO of

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Speaker 2: Republic Services, as we said, based in service, based in Phoenix.

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Speaker 2: He stacks up about fourteen percent year to date. We

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Speaker 2: didn't get to talk about Bill Gates that we will

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Speaker 2: do next time. This is Boomberg