Speaker 1: This is Bloomberg Business Week with Carol Messer and Tim
Speaker 1: Steneveek on Bloomberg Radio.
Speaker 2: Really looking forward to our next guest. We've been doing
Speaker 2: some research and googling ahead and some of the stuff
Speaker 2: we came across, and just to give you an idea
Speaker 2: of the amount of trash we're all creating. Average American
Speaker 2: throws out some four and a half pounds of waste
Speaker 2: every day, which becomes two hundred and sixty eight million
Speaker 2: tons of waste nationwide each year. Thirty million tons of
Speaker 2: this waste is food, twenty seven million tons plastic, eighteen
Speaker 2: million tons is paper and paperboard, not all of which
Speaker 2: gets recycled.
Speaker 3: Him we're talking trash, garbage, waste, call it whatever you want.
Speaker 3: We produce a lot of it. It's got a massive
Speaker 3: environmental impact. It contributes to climate change. It also raises
Speaker 3: the question, Carol, what do we do with it? And
Speaker 3: how can we be better about it?
Speaker 2: Which brings us to our next guest. He's here in
Speaker 2: our Bloomberg and Director Brokers studio. John vander Ark is
Speaker 2: President CEO of the forty six billion dollar market cap
Speaker 2: in publicly traded Republic Services based in Phoenix. Stock is
Speaker 2: up about fourteen percent so far this year. Cascade Investments
Speaker 2: an investment vehicle and holding company for Bill Gates, of course,
Speaker 2: the co founder of Microsoft, is the top shareholder in
Speaker 2: the company, with about thirty five percent of the outstanding stock.
Speaker 2: Big lead up, John, Thank you so much for being
Speaker 2: here with us.
Speaker 1: How are you good? Thanks for having me listen.
Speaker 2: It's great to have you here and talk to us
Speaker 2: about the business, the bulk of which you know, contributes
Speaker 2: to what moves the balance sheet. Tell us give us
Speaker 2: some perspective.
Speaker 1: Well, we're actually an interesting we're kind of a backdoor
Speaker 1: view of the economy because everybody has something they need
Speaker 1: to dispose of. So we serve small you know, households,
Speaker 1: we serve small business, we serve large business, we serve
Speaker 1: national players, governments, so we really get it. We have
Speaker 1: a very diversified book of business across our you know,
Speaker 1: almost fifteen billion dollars of revenue, and so that gives
Speaker 1: us a really good view of the economy. And we're
Speaker 1: very you know, spread out, and we're resilient obviously, because
Speaker 1: even in a down economy, everyone is still going to
Speaker 1: have something they're going to dispose of.
Speaker 2: So what's your view on the economy. Since you have
Speaker 2: such a good view and vantage.
Speaker 1: Point, we're still cautiously optimistic, right the recession. We keep
Speaker 1: reading about it and here about it, and it's not
Speaker 1: really showing up at our p and L yet.
Speaker 2: Now I would say that he doesn't, you say, because
Speaker 2: you're kind of resilient. But how do you pick?
Speaker 1: Yeah, you'd see some decline, right, you think about maybe
Speaker 1: a three to five percent drop in demand, right if
Speaker 1: an economy is really going to pull back and be
Speaker 1: in recession. So construction, for examples, portion of our business
Speaker 1: less than ten percent, but that's down about three percent
Speaker 1: year over year. So we saw that commercial residential start
Speaker 1: slow certainly into last year, and we kind of have
Speaker 1: a six to nine month lag effect on that. So
Speaker 1: that's down a little bit. But you know, auto's down
Speaker 1: a little bit in the first half. But then you know,
Speaker 1: the industrial side of the business is just booming.
Speaker 3: When do you need to what do you need to
Speaker 3: see in order to go from cautiously optimistic to optimistic.
Speaker 1: Well, listen, when I see housing starts, you know, kind
Speaker 1: of predicted to be up next year, I think that's
Speaker 1: you know, we'll probably slow a little bit on construction
Speaker 1: into the early part of the first half, but then
Speaker 1: we'll pick up in the second half. And listen, I
Speaker 1: don't think all of the indices are fully accounting for
Speaker 1: some of the government spending that's coming in on infrastructure spend,
Speaker 1: and we're certainly a beneficiary of that. So we're seeing that,
Speaker 1: you know, hit our business and again very very strong.
Speaker 2: So when you say the industrial side of your business
Speaker 2: is strong, give me a little bit more color on that.
Speaker 1: Yeah, two sides of Think about a major petrochemical player, right,
Speaker 1: we have a lot of things they need to dispose of,
Speaker 1: certainly some recycling, but special waste, tazardous waste, a lot
Speaker 1: of environmental services in the middle of that that we
Speaker 1: take advantage of that. Or think about a brownfield remediation,
Speaker 1: you know, opportunity where you know, we're in the front
Speaker 1: of the line there, we're doing the dirt clean up
Speaker 1: there and we're taking all those materials and bringing those
Speaker 1: to the right spot.
Speaker 2: Which is the bigger part of your business? Give us
Speaker 2: an idea. Is it that side or is it just
Speaker 2: the regular trash.
Speaker 1: Yeah, it's a funny, funny business. It's about if you
Speaker 1: measure based on our customer account, which is fourteen million. Yeah,
Speaker 1: it's ninety plus percent B two C. So you think
Speaker 1: about the homeowner where we actually service. If you measure
Speaker 1: where dollars change hands, it's more than ninety percent B
Speaker 1: to B because in most cities, the municipality contracts with us,
Speaker 1: and we consider that a business transaction.
Speaker 3: Talk to me about these contracts, the most competitors that
Speaker 3: you have in some market, it's what does the competitive
Speaker 3: landscape look like? Because you know, every market is completely different.
Speaker 3: I don't know if you've spent time in New York City,
Speaker 3: but the trash collection.
Speaker 2: Here is peasy, never problem, never see it on the sidewalks, never.
Speaker 3: See it's completely wild. But what is what is the typical.
Speaker 1: Market for you? It's very a very local market, and
Speaker 1: so it's based on really where waste moves. Now it's
Speaker 1: starting to move further distances as landfills close, but in general,
Speaker 1: you think about a sixty nine mile radius. That's kind
Speaker 1: of a what defines a local market? And in our markets,
Speaker 1: you know, we have thousand dots on the map in
Speaker 1: the US or of customers across forty nine states, we're
Speaker 1: number one or number two, and more than ninety two
Speaker 1: percent of our markets so we really think about getting
Speaker 1: concentration because it's a density game, right, you think about
Speaker 1: time and weight. That's what kind of drives our economics
Speaker 1: in terms of collecting something. And then we want a
Speaker 1: recycling center and a landfill in that market to have
Speaker 1: vertical integration. And that's what really provides the mote.
Speaker 2: How much of recycling is part of the business.
Speaker 1: It's a growing part of the It's kind of fifteen
Speaker 1: percent and growing. Yeah, and again we see that as
Speaker 1: a big growth driver. That solid waste is actually shrinking
Speaker 1: on a per capita basis. Okay, so is that a
Speaker 1: good thing?
Speaker 2: What does solid waste mean?
Speaker 1: That's garbage's industry talk for garbage. So garbage is shrinking
Speaker 1: on a per capita basis and recycling is growing. And listen,
Speaker 1: that's our plan. We're trying to drive that diversion. And
Speaker 1: you know, when I started ten years ago, people used
Speaker 1: to say, well, we make all our money at landfills
Speaker 1: because that was our highest margin business. And I'm a
Speaker 1: customer person. I said, landfills don't pass the time customers pass,
Speaker 1: and so you need to charge and understand what the
Speaker 1: product is worth. And that's what we've done. We've taken
Speaker 1: recycling pricing on the street to probably eighty percent of
Speaker 1: solid waste five years ago, it's now one hundred and
Speaker 1: twenty percent.
Speaker 2: What does that mean?
Speaker 1: And we've grown it faster?
Speaker 2: What does that mean?
Speaker 1: So, Matt, think about a small business and having two
Speaker 1: containers that the truck comes up and picks, you know,
Speaker 1: once a week or twice a week. Five years ago,
Speaker 1: the price of that recycling service was eighty percent of
Speaker 1: the price of the garbage service, and now we've flipped it,
Speaker 1: it's one hundred and twenty percent because we've priced recycling
Speaker 1: way faster and we've grown recycling faster.
Speaker 2: Does it also mean people want to be recycling people?
Speaker 1: We know, we do the customer insight where people are
Speaker 1: passionate about recycling. Yeah, and they want to know it
Speaker 1: goes to the right spot?
Speaker 3: Does it though?
Speaker 1: In our case, absolutely right. That's part of our environmental responsibility,
Speaker 1: which is one of our values. And I would say
Speaker 1: most of the time, yes, there are always corner cases
Speaker 1: where some smaller operators not doing the right thing on
Speaker 1: the back end, but most of the time you can
Speaker 1: have pretty good insurance that if you're putting it in
Speaker 1: the bin, it's going to get recycled.
Speaker 3: The issue over the last few years has been there
Speaker 3: isn't really those countries left to buy our recycling like
Speaker 3: China used to do. China is not doing it at
Speaker 3: the same rate that they used to. So where do
Speaker 3: these where do these plastics go?
Speaker 1: Yeah, when China kind of shut their doors, we went
Speaker 1: from about thirty five percent of our material going abroad
Speaker 1: to zero in about three months. And so what's happened
Speaker 1: is those value chains have really gotten repositioned. So there's
Speaker 1: a lot of domestic manufacturing that's come online, particularly for
Speaker 1: fiber and paper, So now our supply is almost entirely domestic.
Speaker 1: What about plastic plastics is interesting, So most plastics today,
Speaker 1: rigid plastics get down cycled. So think of your water bottle,
Speaker 1: Think of your detergent bottle that goes into a pipe, park, bench,
Speaker 1: or carpet. Now that's good. It's not going to go
Speaker 1: in the landfill, so it's going to get a second life.
Speaker 1: But after that, that's going to go in the landfill.
Speaker 1: So we're forward integrating into that. So to try to
Speaker 1: take that water bottle and get it back into food
Speaker 1: grade quality and so it can go right back into
Speaker 1: a water bottle, and then we think we can turn
Speaker 1: that at individual polymer six, seven or eight times before
Speaker 1: eventually it gets degradatory.
Speaker 2: Is it expensive to do that?
Speaker 1: Yeah, we're investing about three hundred million dollars to produce
Speaker 1: four of these centers across the US. The first one
Speaker 1: opens up in Vegas here in a few months, and
Speaker 1: we've contracted with Coca Cola, and listen, we could sell
Speaker 1: out of that center five times over. We had to
Speaker 1: limit people's buy on the back end because there's such
Speaker 1: a short supply for this recycled plastic.
Speaker 2: So go back to what Tim said, does it really
Speaker 2: get recycled? Because we have all gotten really good at
Speaker 2: dividing up our garbage in multiple ways, and the question
Speaker 2: is does it all really get recycled? Does the paper
Speaker 2: get recycled, does the plastic get recycled? What guarantee do
Speaker 2: we all have that it's being done? How do we know?
Speaker 1: Well, listen, not everything that you put in the recycling
Speaker 1: container is recyclable. Fair, right, So if you put the
Speaker 1: clamshell you might get at the grocery store that might
Speaker 1: be made with some recycled plastic, but it's not recyclable.
Speaker 1: And so one of the things that we're pushing on
Speaker 1: is working now back upstream to say, how do we
Speaker 1: get more things in the original form of pet or
Speaker 1: HDPE that's the water bottle, yeah, and the detergent bottle
Speaker 1: and milk jug so that it can get a recycled
Speaker 1: it keep getting recycled.
Speaker 3: I thought there was a little triangle on that.
Speaker 2: Yeah, if it has the triangle.
Speaker 1: Yeah, that's made with post consumer content. It doesn't mean
Speaker 1: that particular thing is recyclable. So there's a huge opportunity
Speaker 1: for education here because consumers care and they want to
Speaker 1: do the right thing.
Speaker 2: I have to say, I stand over my recycle I'm
Speaker 2: like this, does this really get recycled? If I clean it,
Speaker 2: is it going to like go?
Speaker 3: It's like you spend a lot of energy doing this.
Speaker 1: I actually do. I do care, empty, clean, and dry.
Speaker 1: Those are the simple rules.
Speaker 2: But not everything that has that thing is not. Can
Speaker 2: we work on that messaging?
Speaker 1: Can?
Speaker 3: I feel like I've been lied to for thirty years?
Speaker 2: I want to get back to our guest, John vander Ark,
Speaker 2: President CEO of Republic Services. He is still here in
Speaker 2: our Bloomberg Interactive Broker studio. You know, John, one thing
Speaker 2: I wanted to ask you is when we were talking
Speaker 2: about it off air, your company and waste management, top
Speaker 2: players in this industry, both with ties to Wayne Haisanga.
Speaker 2: How do you think about and you've been at your
Speaker 2: company for a decade or so, how do you think
Speaker 2: about the evolution of kind of how we collect trash?
Speaker 2: Where it was, where it's going the evolution.
Speaker 1: Sure, yeah, I can just tell it from my tenure
Speaker 1: we started. You know, when I started, we talked about
Speaker 1: ourselves as a garbage company, and then it was a
Speaker 1: waste company, and then a waste and recycling company, and
Speaker 1: then a recycling waste company, and now I environmental services
Speaker 1: and a sustainability company. And that's not just market that's
Speaker 1: just not marketing speak. That's actually where we were investing
Speaker 1: in the business. And again I'm trying to challenge every
Speaker 1: ton that goes into a landfill, because hey, when I
Speaker 1: put in a landfill's a cost to me. But if
Speaker 1: I can recycle it and reuse it and repurpose it,
Speaker 1: then I get a second benefit, a second stream from that.
Speaker 1: And so and by the way, landfills aren't being cited
Speaker 1: right that that they're closing up, and so if I
Speaker 1: can extend the life of my landfill and I can
Speaker 1: get a second sale of that material in addition to
Speaker 1: collecting it. That's a win win.
Speaker 3: Does this does the free market solve this completely? Or
Speaker 3: does it need government intervention to entice businesses entice people
Speaker 3: to dispose of their waste?
Speaker 1: Differently, Yeah, I think listen, regulatory standards help. And we're
Speaker 1: forward integrating into plastics. We talked a little bit about
Speaker 1: that before, and we're doing that because we look at
Speaker 1: what Europe's doing, and Europe has figured out a way
Speaker 1: to take that water bottle and rather than having it
Speaker 1: down cycled into a pipe or a park bench or carpet, right,
Speaker 1: they've used it and they did it because the government
Speaker 1: put in regulatory standards that new water bottles needed a
Speaker 1: certain level of post consumer content. And now you see
Speaker 1: that in California, you see that Washington, you see that
Speaker 1: New Jersey, and that will hit other states and that's
Speaker 1: getting the CpG players. So now say, hey, we have
Speaker 1: to have sustainable packaging, and that's driving us to make investments. Right,
Speaker 1: we're investing three hundred million dollars in these centers and
Speaker 1: we're doing it with a good return.
Speaker 2: So talk to us a little bit about you guys
Speaker 2: have some clean energy projects, right, You've done stuff with
Speaker 2: BP landfill biogas to renewable natural guests. Talk to us
Speaker 2: a little bit about that.
Speaker 1: Yeah, we have sixty seven projects historically. So when garbage decomposed,
Speaker 1: it produces two things leech eight, which is like a
Speaker 1: gray water, which we capture obviously those line fills landfills
Speaker 1: are lined, and then it produces methane, and methane is
Speaker 1: very destructive through the environment, obviously, so we've always flared
Speaker 1: off that methane to convert it to CO two, which
Speaker 1: is about seventeen times less harmful than the methane we've
Speaker 1: still burning, but still burning, right, and still a waste.
Speaker 1: It's still energy going up in the air that it
Speaker 1: could be converted. So two interred active landfills. We have
Speaker 1: sixty seven projects today where we take that methane and
Speaker 1: we push it through either a generator to produce electricity
Speaker 1: or we clean it up and produce renewable natural gas.
Speaker 1: And we have now another sixty plus projects in the
Speaker 1: pipeline to continue to do that. And again that's good
Speaker 1: for the environment. In some cases, we're powering the neighborhoods, right,
Speaker 1: around our facilities.
Speaker 2: How much can you scale that up?
Speaker 1: Well, you have to get down to a certain size
Speaker 1: of landfill the capex, so the capital investment doesn't justify today.
Speaker 1: Now that changes over time, that'll innovate, but we're going
Speaker 1: to get to seventy five eighty percent of the gas
Speaker 1: flow across our landfills here over the next five years.
Speaker 3: Let's talk mna us ecology brought exposure to hazardous waste.
Speaker 3: How are you thinking about deals moving forward?
Speaker 1: Yeah, we've alway word with Greg great Grandchell of one
Speaker 1: thousand acquisitions, so we do about ten to thirty deals
Speaker 1: a year. This is a highly acquisitive space and our
Speaker 1: competitors are also roll ups over time. You know, we
Speaker 1: think our pipeline is strong, and it's certainly strong and
Speaker 1: recycling solid waste. We spent about nine hundred and twenty
Speaker 1: seven million in the first half on those deals, and
Speaker 1: then this environmental solutions business right US Psychology was kind
Speaker 1: of the platform acquisition in that space that provides an
Speaker 1: anchor for follow on acquisitions, and our pipeline is pretty
Speaker 1: full on that side of the business as well.
Speaker 2: What's the biggest problem you think what you have right
Speaker 2: now with dealing with trash. We talk a lot about
Speaker 2: food waste and the impact it has certainly on the climate,
Speaker 2: But what do you think it is the biggest problem
Speaker 2: right now? Is it just the quantity?
Speaker 1: Yeah? I think I think we need more innovation on
Speaker 1: the value chains to take things out of the landfill
Speaker 1: and make sure it's truly recyclable. And I think we
Speaker 1: need to get away from the headlines of what could
Speaker 1: be done and all the technologies. Again, a lot of
Speaker 1: the plastics recycling is a good example. There's mechanical recycling,
Speaker 1: and there's chemical recycling.
Speaker 2: Are you worried about EV's and batteries and all that
Speaker 2: good stuff?
Speaker 1: Listen, we're bullish on EV. We're forward in or we're
Speaker 1: going to along on EV with our fleet. About fifty
Speaker 1: percent of our buy within five years will be electric vehicles.
Speaker 3: Where do you get those who makes electric garbage truck?
Speaker 1: Well, we've got Pea Rian is it, Tesla No Pete
Speaker 1: and mac Today and other players all have converted trucks.
Speaker 1: So it's a conventional diesel truck that they're piloting, which
Speaker 1: again have limited application. The true game changer is mcneilis
Speaker 1: who's the planner space they're owned by Oshkosh. They're building
Speaker 1: the first ever purpose built studs up refuse vehicle, and
Speaker 1: it's a huge deal because you can then take the
Speaker 1: weight out of the vehicle, which gives you enough battery
Speaker 1: that you can run a full day without taking away payload.
Speaker 1: So if we have to take a you know, an
Speaker 1: extra trip to the landfill, that's an hour of unproductive
Speaker 1: time for us. We can't afford to do that. So
Speaker 1: these vehicles will have the same kind of fit and
Speaker 1: fitness as the diesel vehicle, but they'll be quieter. The
Speaker 1: cab space is forty five percent bigger for our drivers
Speaker 1: because you're taking the engine out of the front and
Speaker 1: it's battery in the bottom, quieter, Lots of technology benefits,
Speaker 1: So we're excited about it.
Speaker 2: No, But when I talked about batteries, like I do
Speaker 2: wonder about used batteries, old batteries, waste, Like, is that
Speaker 2: something that you think about.
Speaker 1: Yeah, we have partners with that. Electronics recycling is another
Speaker 1: way computy. Yeah, Listen, it doesn't all happen perfectly, especially
Speaker 1: in other parts of the world. That happens very imperfectly.
Speaker 1: Here that market is fairly well supplied on that front,
Speaker 1: and we have partners and we certainly collect that and
Speaker 1: then we work with partners to process.
Speaker 2: What don't we know?
Speaker 3: Oh go ahead, Tim, I was gonna ask, we're automation.
Speaker 3: We don't have much time left. We got to get
Speaker 3: you back. Where where's automation happening in your value chain
Speaker 3: right now?
Speaker 2: Is it?
Speaker 3: Is it beyond the idea of just taking the trucks
Speaker 3: and those trucks automatically pick up the detraction and recycling?
Speaker 3: Is it, you know, further down in the value chain.
Speaker 1: Yeah, it's every stage. So on collection, for example, one
Speaker 1: of the ways we clean up the stream is we
Speaker 1: now have cameras, so when we tip your garbage container,
Speaker 1: we have a stream that can see and we can
Speaker 1: see how much contamination is then recycling and so if
Speaker 1: you have a contaminated stream, we're going to send you
Speaker 1: a note and say, hey, you're streams a little dirty,
Speaker 1: clean it up. If you do a second time, then
Speaker 1: we're going to charge you. And we understand how to
Speaker 1: change consumer behavior because if you get charged.
Speaker 2: This is why I stand over my garbage and I
Speaker 2: look at it.
Speaker 1: And even a recycling center itself.
Speaker 3: What happens in New Jersey when you make a mistake
Speaker 3: in the trash can.
Speaker 2: I don't want to know, sleeping with the fish. Is
Speaker 2: there an AI component twenty seconds?
Speaker 1: Uh yeah, I mean in our recycling center, sure, no,
Speaker 1: And our recycling centers for sure. That used to be
Speaker 1: people picking stuff and now that's optical scanners and all
Speaker 1: kinds of things. Again helps us produce a better product.
Speaker 1: What we could talk about trash for so long?
Speaker 2: I listen. I think it's interesting. There's a lot going on.
Speaker 1: Come back soon we will.
Speaker 2: We enjoyed this. John vander Ark, president and CEO of
Speaker 2: Republic Services, as we said, based in service, based in Phoenix.
Speaker 2: He stacks up about fourteen percent year to date. We
Speaker 2: didn't get to talk about Bill Gates that we will
Speaker 2: do next time. This is Boomberg