Republic Services Group is the second largest waste management company in North America with 19% share of landfill volume in the United States.1 Republic Services maintains extensive operations in Canada as well, but the revenue contribution is much smaller and, though it’s undisclosed, likely a similar percentage to Waste Management at around 5%. Republic Services benefits from physical network effects as a result of its extensive network of 206 landfills, 240 transfer stations, 73 landfill gas and renewable energy projects, 72 recycling centers, 356 collection operations, and 5 million average daily pickups that is second only to Waste Management’s in size and scope.2 The company also benefits from a not-in-my-backyard (“NIMBY”) dynamic that makes it extremely difficult for new supply of landfills and other waste management facilities to enter the market. In fact, because of NIMBY and industry consolidation, the number of U.S. landfills has fallen from 7,683 in 1986 to 1,733 today.3 When combined with steadily rising demand for waste management, this supply-side rationalization has resulted in tipping fees, or the price landfills charge trucks to drop off trash, rising over time. In fact, from 1982 to 2021, U.S. municipal solid waste landfill tipping fees increased from $8.07 per ton to $58.2 per ton,4 a compound annual growth rate of 5.2% per year compared to inflation’s compound annual growth rate of only 2.7% per year. Going forward, with waste management demand projected to continue increasing over time,5 NIMBY and regulatory costs continuing to rise, and the network value of the largest industry participants continuing to increase more quickly than smaller competitors through consolidation and market share gains, we believe industry leaders like Republic Services will continue to grow their pricing, revenue, and profits faster than inflation for years to come.
In summary, we think Republic Services is a dominant network with enduring pricing power that essentially serve as toll collectors on U.S. and Canadian consumption, thereby making them a great way to participate in the long-term growth of North America.
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1 See https://www.wasteinfo.com/diratlas.htm.
2 See https://investor.republicservices.com/static-files/80ed742a-dffc-4640-9407-7c04edb8afab.
3 See https://www.wasteinfo.com/diratlas.htm and https://en.wikipedia.org/wiki/Landfills_in_the_United_States.
4 See https://www.youtube.com/watch?v=uUmtJIBibMM&t=291s, https://www.wastedive.com/news/us-waste-recycling-market-waste-business-journal-2023/650693/, and https://www.bls.gov/data/inflation_calculator.htm.
5 See https://www.statista.com/statistics/1266862/projected-waste-management-market-size-north-america/.