So you ramp up recycled fiber, you have physical logistics challenges based on where the other mills are. So far, we believe the way we’ve been doing it for IP for our containerboard system has resulted in the lowest marginal cost. There’s a question mark though about the duration of this type of mismatch between our capacity and our order book. And as we learn more about that and we now believe we’ve seen the bottom of the demand decline in destocking, we will then evaluate what does the upturn look like? And then if there’s a different decision to be made and marginal cost have changed through the year where it’s not as expensive to load up those other mills, you would see us make a different decision. And so that, that’s how we try to operate it.
And you can see an example of two different methods in two different parts of the same company that have different marginal cost attributes based on the products we’re making.
Mark Weiintraub: Very clear and helpful. Thank you.
Operator: Your next question comes from line of George Staphos with Bank of America. Go ahead.
George Staphos: Thanks very much. Hi everybody. Thanks for the details and great operating performance in the quarter. Mark and Tom, a question for you. So to the extent that we have data and it’s certainly not a perfect analog for what you’d be seeing in the box market, nonetheless, scanner data, retail takeaway remains relatively weak. And obviously a lot of what drives the box market is consumer non-durables. It’s the center of the store. So what are your customers telling you in terms of what is happening at retail and sell through and takeaway relative to hopefully what’s an uptick now in their purchase patterns from you and through the supply chain loading the center of the store?
Tom Hamic: Sure. George, this is Tom. I – we look at scanner data as well, but we also look at we try and push it down to what is box intensive, so what uses boxes. Our analysis would suggest that the retail channel of that space is somewhere between minus 2% year-over-year and plus 1%. The difficulty obviously is taking the revenue line, which is what you normally get, and then, okay, what is inflation for this set of goods? But if you take a broad range that’s about where it comes out, I would say that when you look at the perishability of the segments, so think of a segment that produce that’s been the most resilient, that’s been our strongest segment exiting Q3 relative to the past. But the ones that are struggling are exactly what you said non-durables and durables.
And I think it’s because the shelf life is so long that they built up their supply chain and cover for risk. And now obviously they’re going to have to pull it down further. But I don’t think that the health of the consumer beyond the goods recession that we’ve talked about will negatively impact box demand in a material way.
George Staphos: Okay. That’s very interesting. So there the fact that you’ve got such large shelf life, and I also I guess for that matter, the supply chain opening up that allows customers to really take down their inventories on the stuff that can stay the lumps on the shelf because they probably have the most of that and they’re saying consumer isn’t going into a shell from what you’re seeing on the retail side. Would that be a fair summary of what you’re saying?
Tom Hamic: I think that’s exactly right. I mean, I think about the classic motor oil in the department store, that’s not going to time out, but during the pandemic, you could see people stocking that type of thing up. And so I think you’ve got multiple places where people talk.
