There is an interesting and (to me) surprising news story circulating through the business press this week.  It concerns the merger of two, very large paper merchants:  Unisource and XpedX.  Here are a few examples of what’s being written (Bizjournals, Bloomberg, RISI).

To folks not familiar with the paper business, the existence and importance of paper merchants is something of a mystery.  To a surprising extent, paper manufacturers do not sell their products directly to companies that use paper.  Instead, they tend to sell mostly to a variety of distributors, brokers, converters, other sorts of middlemen.   These companies don’t make paper, they just buy it, store it, sometimes re-package or re-shape it, move it, and then sell it. This class of business is known collectively in the industry as Paper Merchants.  Oddly enough, the most famous paper merchant might be the fictional Dunder Mifflin made famous in the wonderful TV comedy series, The Office.  If you don’t buy or sell paper for a living; or (like me) work closely with folks who do; it would be easy to overlook this industry sector entirely.  But that would be a mistake, because it’s big and very important.

Paper merchants are important because paper is hard to sell and hard to buy.  It is mostly manufactured in very large-scale, highly-productive, capital-intensive factories.  Paper making is also fiercely competitive.  Paper consumption, on the other hand, is an extremely diverse and specialized business.  It includes a dizzying array of products from glossy retail catalogs to coffee cups, to corrugated shipping boxes – and about a million other things in between.  Long ago, most companies who specialized at making paper collectively threw up their hands at trying to cater to this crazy array of customers and users.  The paper merchant business evolved to fill the gap.

When Chain of Custody (CoC) standards for programs like FSC and SFI were conceived, paper merchants and other distribution business models were largely overlooked.  They quickly became a very important – even dominant – part of the picture as the green standards became a big deal in the markets for paper and paper products.  Some of (in my opinion) the best paper merchants have embraced the CoC systems and used them to best advantage – to add value to their customers supply chain, and promote the fundamentally sustainable nature of their products.  Unisource and XpedX are both examples of this, and acknowledged leaders in their field.  They each hold certificates for all three of the leading CoC programs (PEFC, SFI, & FSC), and promote them actively.

The other thing that Unisource and XpedX have in common is that they are both big – really, really, really big.   According to RISI, the combined new company will be capable of generating $10 billion in annual revenue.  Maybe you can imagine how much paper that is. I know I can’t.