CHEP Builds A Better Pallet And It's Blue To Boot
LINDA WERTHEIMER, HOST:
It's MORNING EDITION from NPR News. I'm Linda Wertheimer.
RENEE MONTAGNE, HOST:
And I'm Renee Montagne. Good morning. Everything you see in the grocery store - really almost any store - probably got there riding on wooden pallet. For decades in this country, nobody really improved on the palate until, suddenly, someone did. Jacob Goldstein from our Planet Money team has this story about the battle for a better pallet.
JACOB GOLDSTEIN, BYLINE: Let's start with the old kind of pallet - the kind people have been building since World War II and thousands of small shops - like this one.
STEVE MAZZA: My name is Steve Mazza. We are at S&P Pallet.
GOLDSTEIN: And you're the S in S&B Pallet?
MAZZA: I am the S in S&B Pallet. Yes.
GOLDSTEIN: OK. S&B is in Plainfield, New Jersey. It's a low-tech operation - wood, saws, hammers. And of course it's low-tech - it's pallets. They're stacked in giant piles around a dirt yard.
GOLDSTEIN: I'm constantly thinking what if this mountain of pallets next to us fell on my head? Do you think about that? Or not that much?
MAZZA: No, we don't think about it much. These pallets are pretty stable when they are stacked like that, so...
GOLDSTEIN: For Mazza, pallets are perfect in a simple way - like, say, a mousetrap or a paperclip. 15 pieces of cheap wood nailed together to keep things a few inches off the floor. They work with a forklift. And it seems like pallets would stay the same forever. Until Steve Mazza saw the blue pallet. Back in the '90s, bright blue pallets started appearing in pallet yards and behind grocery stores. Most of us wouldn't of noticed anything different other than the color. But Mazza did. He remembers the first time he saw one. He was actually at a pallet industry conference.
MAZZA: I actually went to a pallet yard and a guy said, hey, that's one of those blue pallets. I said can I have that? And he said sure. And I took that blue pallet - and we were having a general session for an association meeting - and I walked into that general session, I put that pallet over my head and I slammed it down on the floor. And I said, you know what guys? That pallet over there is not just a pallet. It's the end of our industry.
GOLDSTEIN: These blue pallets were all coming from one company. It's called CHEP - C, H, E, P. It's a subsidiary of a multibillion dollar, multinational corporation. And CHEP started pushing a different kind of pallet, called the block pallet. The wood is put together a little differently and it's stronger and easier to move around a warehouse. But the blue pallets were about twice as expensive as traditional pallets. David Lee, an executive at CHEP, says it was a tough sell.
DAVID LEE: You had to persuade them - here's a better mousetrap.
GOLDSTEIN: So how did CHEP get customers to buy this luxury pallet? They didn't. This was CHEP's real innovation. CHEP said we are not going to sell you the pallets. We're going to rent them to you. If you're, say, a toothpaste company and you want to get your toothpaste from your factory to the grocery store, you pay CHEP, say, five bucks and they let you borrow one of their pallets. Then, once your toothpaste gets to the grocery store, CHEP comes and picks up its pallet and rents it out again. Of course, this means CHEP has to keep track of all those pallets, which is not easy. David Lee says it's why all the pallets are painted blue - so they stand out.
LEE: We have a nice, white logo on the side and a big sign that says property of CHEP on every single pallet so nobody in the U.S. can say that they don't know who owns that pallet.
GOLDSTEIN: The company has contest for workers who find pallets in the wild. Lee says he recently found one helping to hold down a bouncy castle at a county fair. CHEP has been surprisingly successful in convincing companies to rent pallets and in keeping track of all those pallets. In the ultra-local pallet world, there is now a giant national player.
LEE: We have something like 78 million circulating in the United States.
GOLDSTEIN: So if you walk into, say, a Costco today and look up at the racks, you'll see lots and lots of blue pallets. For the thousands of people who built the old, you know, just wood-colored pallets, this has been a huge shock. But Steve Mazza, the guy from the pallet shop in Jersey, isn't complaining or trash-talking the blue pallets. He says the blue pallet is better and he wants to get into the better pallet business. He wants to go national. And for that, he'll need lots of pallets.
GOLDSTEIN: How many pallets would you have to build to get going?
MAZZA: At minimum - very minimum - 5 million to 10 million pallets. Just for 5 million pallets, you need $100 million.
GOLDSTEIN: 100 million? Do you have a $100 million?
MAZZA: I don't have $100 million - surprisingly not.
GOLDSTEIN: But he's working on it. He's teamed up with a bunch of other small pallet companies and they're launching this new company. It's called 9BLOC and they basically want to beat CHEP, but with more of a local touch. The pallet business - this business that didn't change much for decades - is now full of people who are trying to figure out better ways to do things. There is a red pallet that's starting to appear, also a plastic pallet with a high-tech tracking system built into it. That one didn't work out so well. The company filed for bankruptcy last year. [POST-BROADCAST CORRECTION: The company was sold to a group of investors after filing for bankruptcy protection. It continues to operate.] Maybe you can overthink a pallet. Jacob Goldstein, NPR News.
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