Strategic Investors: Profiles of investors with strategies to consider.
Wooden pallets have been around almost as long as global trade. Pallets – also known as ‘skids,’ date back at least to ancient Egypt and Mesopotamia, and in spite of improvements over the centuries, they really haven’t changed much. David Storper, Founder and Chief Investment Officer of 5P Investment Partners, believes this needs to change for the sake of the environment and for improved efficiency.
Storper’s firm targets ESG investments a range of sectors and distressed models, but has developed a specialty in the smart mobility, global shipping and logistics. One of its latest investments is in Paxxal, an Indiana-based packaging and shipping company, creates recyclable cargo pallets that are making supply chains around the world more efficient, hygienic, and eco-friendly. Storper says that Paxxal’s sustainable solution to a shipping industry hungry for change makes it a match made in long-term investment heaven. Storper was interviewed by Karma Contributing Editor Michael Moran.
Michael Moran: Wooden pallets are one of the staples of global logistics. Why do they need replacing?
David Storper: One of the investments that we’re currently live on right now is a company called Paxxal, and they are in the process of developing a business that will be making cargo pallets. And these pallets will not be the traditional wood pallets, but would really be made out of a composite of plastic polystyrene and another product that will in any event we feel change the logistics industry.
I think in this day and age, people are very much focused in the investment world on things that are environmentally, societally, as well as governmentally, sensitive. This investment meets all of those criteria.
The market for pallets worldwide is about 5 billion pallets a year and what this company has really spent a few years developing is a pallet that, for one, will not be subject to damage. These pallets can last for quite some time.
A wooden pallet will typically have at times, from a durability standpoint, a product life cycle of maybe one to three trips. On the pallets that this company Paxxal is developing, these can last for years without any kind of rehabilitation necessary.
They are are also much lighter. A wooden pallet could at times weigh 70 to 80 pounds. From a transportability standpoint, the more weight the more fuel that will be used.
Replacing one million one-way wooden pallets, and that means that just looking at one-way trips per year, would essentially reduce the use of fuel by 72,000 gallons. It’s similar to taking 135 cars off the road, and that would also be saving 22,500 incandescent light bulbs.
From a cost perspective, companies that would purchase a pallet that is a composite could probably save a fair amount of money. The manufacturing cost for a wooden pallet is typically in the $18-to-$20 range. On a traditional plastic pallet, it could be as high as $35 to $55, and on the pallet that we’ve been working on, that cost would be about $25 to $30. You could say that it’s certainly more money than a wooden pallet, but at the end of the day, the lifespan could be more than 10 years. You know, the wooden pallet, we can’t even put a number on what the lifespan is because a lot of them will have costly repairs. In any event, we feel that the market would be moving much more towards the composite that we’ve devised.
So overall I think that the focus of what we do at 5P is generally looking for companies that have the qualifications and the characteristics of things that are certainly environmental, societal, and governance related that we feel will certainly have an impact on an industry and likewise a long-term investment.