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Plastics man's pallets are breaking the mould

Firm hopes to clean up with hygienic alternative to wood


ON paper, the ingredients for starting a successful business are pretty straightforward: a brilliant idea, a bit of backing, and a growing customer base. Then mix well and watch the millions roll in.

In the real world, it's a bit trickier, as Iain McArthur discovered when he founded the Edinburgh-based Plastic Pallet Company in August last year. He set up the business to take advantage of the growing need in the food distribution sector for pallets which would meet European Union hygiene regulations.

After a slow start, he has now hit the jackpot with a £2m contract for a major meat processing company. It is likely to lead to other seven-figure deals with firms in the same line of business, and he says the major multiples are "watching with interest".

The deal is the result of several years of shaping, twisting and adapting his original idea until the advantages to major business became blindingly obvious.

It all began in the Middle East, where McArthur - "a plastics man all my life" - was working first for multinationals, then in his own company with the major firms as customers.

"I had built my company up from zero to $11m turnover over 10 or 11 years," he said. "But changes in trading conditions meant it became unviable, and I was heading home nursing tremendous losses.

"Then one of my customers persuaded me to buy a containerload of plastic pallets, which they manufactured. I didn't want them, but I took them because it had been a good customer.

"I was astonished at how easy it was to sell them in the Middle East."

The pallets, often made from recycled material, had several advantages overtraditional wooden pallets, not least that they could be sterilised for use in the foodstuffs, dairy, healthcare and brewery sectors. The drawback was that they were up to five times more expensive in the UK.

When McArthur returned to the UK, he spent a year researching the market - the barriers to entry, the routes to market, the competitive influences. He hit his first hurdle when he tried to raise venture capital.

"The fact is that it's a dirty fingernails business, and when I was trying to raise money on the business angel circuit, nobody was interested in anything which wasn't hi-tech and promising astronomical returns," he said. He turned his focus to the possibility of leasing, which he admits is
more expensive in the long-term, but is attractive to accountants because costs can be spread over a period and are off-balance sheet. He also introduced the option of electronic tagging and bar coding, so that pallets could
be tracked and returned.

His potential contract with the meat producer left McArthur with a dilemma:did he concentrate on landing the plum or building up a base of smaller-scale clients? In the event he decided on the former, keeping the business ticking over with bread-and-butter deals for 100 pallets here and 50 there.

He found that the big players wanted two things: simplified methods of payment and reduced costs. McArthur solved the problem by teaming up with two logistics companies to offer them an outsourcing solution for their pallet requirements.

In return for regular monthly payments, the onus is on the Plastic Pallet Company to track, collect, wash, sterilise, and redistribute the pallets.

"It means," said McArthur, "that the company can put its goods onto a pallet, load it onto a lorry and forget about it.

"They are not plagued by multiple invoicing, audit trails, bureaucracy and regulations.

This article was kindly provided by Dr. Richard Dixon for ScoWaste, a mailing list run by SRMS for RAGS and FoE Scotland

This article originated from the Herald,11/9/02.































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