The garbage industry has long worked on the principle that people produce trash in good times and in bad, but even rubbish volumes dropped during the 2008 recession.
Now, with volumes far from fully recovering, waste companies have their eye on a tough business to win -- the potential $8 billion household trash market jealously guarded by authorities in some of the country's biggest cities.
Companies such as Waste Management Inc (WM.N), Republic Services Inc (RSG.N) and Veolia ES Solid Waste Inc have been hit hard by the reduced waste volumes.
Waste Management's revenue growth has slowed for three straight quarters, while Republic's revenue fell in the last quarter, after a string of flat results.
Analysts expect both Waste Management and Republic to report a drop in profit and flat revenue growth compared with a year earlier, when they report third-quarter results in two weeks.
Waste Management's stock has dropped more than 10 percent in the past six months. Republic's shares haven't recovered since they fell 13 percent on April 27 after the company's quarterly profit missed analysts' estimates.
Waste management companies can't make people throw out more garbage, but they can try and coax more municipalities to contract out household waste collection and ensure that more of it ends up in private facilities.
That is a potential $8 billion opportunity presented by the 25 percent of municipalities, including New York City, that still handle their own waste, says the Waste Business Journal, a research firm that tracks the waste management industry.
Tough times may help persuade reluctant municipal authorities.
"Municipalities that increasingly face fiscal constraints may want to privatize, in other words sell off their landfills, garbage trucks and staff," said Morgan Stanley analyst Vance Edelson.
Politics also plays a big role. Big municipalities are wary of laying off perhaps thousands of workers and facing off with unions if waste management is privatized, analysts say.
Still, privatization is not a new concept in the $50 billion U.S. garbage industry. Three decades ago, more than 75 percent of collection and disposal of trash was managed by municipalities, said Waste Business Journal.
But the garbage industry has found it tough to get contracts from larger cities, especially in the Midwest and Northeast. Some, like New York City, have privatized only a part of the process.
NEW YORK SAYS NO
Waste from households and small businesses in New York City is collected by the Department of Sanitation but is then given to private contractors who haul it to remote out-of-state landfills, Deputy Commissioner Vito Turso said.
The city's bill for waste collection, recycling, street cleaning and disposal through the Sanitation Department totals $1.3 billion a year, he said.
The department, he said, is not looking to outsource the collection of waste to the private sector as it could not identify any significant cost savings through privatization.
Chicago, on the other hand, has split its waste collection duties between Waste Management, another hauler and its own public works department.
"This drove cost down for the city by about $7 million," Waste Management spokeswoman Lynn Brown said.
Waste collection is the biggest cost for municipalities -- and the biggest opportunity for the private sector.
In 2010, private sector companies made about $26 billion from collecting garbage, versus about $1.7 billion from its later transfer, the Waste Business Journal says.
The ability to pool resources has helped the private sector grab the bulk of the work.
While a municipal sanitation service maintains its own garbage trucks and staff, private companies can deploy the same trucks and people to cover multiple contracts.
"There is expertise involved and capital requirements (in waste management) that really are beyond us," said Timothy Croll, solid waste director of Seattle public utilities.
Seattle contracts waste collection and disposal to Waste Management and local firm CleanScapes for $90 million a year.
The companies involved are cagey about their opportunities, as they must fight among themselves for contracts as well as try to expand into new municipal areas.
"As municipalities decide to privatize, we seek to participate in that opportunity in a competitive environment," Waste Management's Brown said.
Republic CEO Don Slager told analysts on his last post-earnings call that expanding into new areas was not his company's focus. "We think there could be some opportunity there for us eventually," he said.
(Editing by Rodney Joyce and Ted Kerr)