Waste Management is the largest waste management company in North America with 29% market share of landfill volume in the United States.1 Waste Management maintains extensive operations in Canada as well, but the revenue contribution is much smaller at less than 5%. Waste Management benefits from physical network effects as a result of its nearly unrivaled network of 254 landfills, 337 transfer facilities, 135 landfill gas to energy facilities, 97 materials recovery facilities, 497 hauling operations, and 15,200 collection routes.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 Waste Management will continue to grow their pricing, revenue, and profits faster than inflation for years to come.
In summary, we think Waste Management is a dominant network with enduring pricing power that essentially serve as toll collectors on U.S. and Canadian consumption, thereby making it a great way to participate in the long-term growth of North America.
To read a more detailed description on WM as discussed in a prior investment letter, click here.
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1 See https://www.wasteinfo.com/diratlas.htm.
2 See https://investors.wm.com/static-files/ad3eab93-1f46-4150-8844-de02ebf9b18b.
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/.