Leasing Life Out of Trash!
September 8 2008 by Fayazuddin A Shirazi
What can be expected of TerraCycle, a tiny
TerraCycle, which captured substantial media attention last year over its fight with industry leader Scotts’ Miracle Gro on charges of trademark infringement has struck an unusual deal with food and beverage leaders such as Kraft, Coca-Cola, Clif Bar and Kellogs for turning their industrial waste into reusable eco-friendly products.
For a company like TerraCycle, securing partnerships with industry giants such as Kraft Foods and Coca-Cola is not an easy task. How did this happen? Did the struggle with Scotts Miracle Gro in anyway bring the company some recognition?
Prompt comes the reply from the TerraCycle CEO: “Absolutely! One might say, fighting the Goliath (Scotts Miracle Gro) put us on the map. While our brand is well established in the organic /environmental products sector, the Scotts lawsuit helped propel us onto the main stage of big business. It makes me laugh, we got our break fighting Goliath, but it will be working with Goliath (Kraft Foods) is how we will be remembered soon enough,” quipped Tom Szaky, CEO of the seven-year-old upstart in an interview to CE Online.
Wall Street Journal straight away chose to compliment TerraCycle and its CEO for their successful collaborations with “heavy hitters.” “That a five-year-old company like TerraCycle knit together contracts with such heavy hitters so quickly underscores the entrepreneurial potential of locating an industry’s Achilles’ heel — and figuring out how to mend it,” an article published in Wall Street Journal said.
However, Kraft Foods says it is mostly impressed with TerraCycle because of its innovative techniques of turning trash into treasure. “We’re partnering with TerraCycle because they’ve found an innovative way to help prevent packaging waste from ending up in landfills, and their upcycling program rewards consumers for doing good and finds creative outlets for packaging waste,” Jeff Chahley, director Sustainability, Kraft told CE Online.
Tom Szaky believes TerraCycle is in a unique position as it has the infrastructure to collect and recycle industrial waste. The company also runs similar programs, which collect 20 oz bottles to repackage its organic plant food products. “Our core competency is finding innovative ways to reuse waste,” he says.
Kraft is also convinced of TerraCycle’s innovative claims of creating eco-friendly products from the industrial waste. “What’s truly innovative about TerraCycle is that consumers will be able to buy tote bags, umbrellas and a host of other goods made from material that otherwise would’ve ended up in a landfill,” Chahley points out.
TerraCycle’s deal with Kraft will allow it to convert wrappers from Balance energy bars, Oreos and Chips Ahoy! cookies &
Big companies are worried – mostly to flaunt its eco conscious reputation – over the myriad food and drink pouches ending up in landfills, as most of this waste is pretty expensive to recycle, and this is where TerraCycle has a major advantage, says the 26-year-old TerraCycle CEO.
Szaky feels that for a company of Kraft’s size and stature establishing a collection program and finding ways to reuse the collected materials could take months or may be years but for companies such as TerraCycle it is very easy. “For us its’ like everything is ready! We have the products designed, our production needs are identified, plus we also have the infrastructure to collect the waste almost immediately,” says Szaky adding that for Kraft this deal is very attractive since the company promptly recognizes the need for recycling its tons of industrial waste.
On their part companies such as Kraft Foods will sponsor TerraCycle’s collection programs, which requires an investment of at least $150,000 to $3500,000 per year. TerraCycle has set up nearly 4,000 collection brigades across the country, mostly from schools, churches and other not for profit organizations, which are paid two cents for each pouch collected.
TerraCycle, which mostly gets its revenue from the sale of finished products through big retail outlets such as Office Max, Target, Shopko and Walgreens will also benefit from the free advertising and publicity it will get through Kraft products. “We have plans to help consumers learn more about TerraCycle where some of our participating brands — including Capri-Sun and Chips Ahoy! — will be using the TerraCycle logo on their packaging,” Jeff Chahley told CE Online.
Running the collection brigades – a cheap way of collecting pouches and other plastic waste through student consortiums and other voluntary organizations, which will in return get two cents for each pouch collected – successfully and sustaining it for longer periods is crucial for TerraCycle, as it needs constant supply of trash to meet the retailer requirements. To ensure this TerraCycle is yearning to get waste from whatever sources it can lay its hands on. Alongside the company is also trying for new sponsors to support its collection programs. “Keeping brigades operating seamlessly will be critical to Mr. Szaky’s ambitions. The company needs a steady stream of waste to meet retailer orders, but without sponsorships, the brigades are too expensive,” WSJ report said.
What if TerraCycle fails to secure sponsors in the future? Does it have enough resources to keep running the brigades seamlessly? Szaky says though they have resources to run the brigades for few months, eventually they would need a sponsor.
“We have resources to run the show if a sponsor walks away from a program but that is limited to few months,” he says, adding that if the company is to lose a sponsor it can hopefully find another quickly. “Luckily the programs are growing incredibly fast so we don’t expect to lose any sponsors,” Szaky remarked.