The market
The global market for biodegradable plastics is expected to experience double-digit growth by 2015, reaching approximately $6 billion. If current trends continue, this figure will double again, reaching an estimated $12 billion by 2025. While currently 65% of all bioplastics are produced for food and beverage packaging, by 2025 a quarter of the market is expected to be concentrated in higher-margin applications in the automotive and electronics sectors. The bioplastics industry has even targeted medicine as a core market niche, with profit margins expected to be up to ten times higher than those currently charged for plastic cups and utensils. The European Bioplastics Trading Group expects its production capacity to triple between 2007 and 2011, reaching 1.5 million tons. It is expected that, by 2025, approximately 15 to 20% of the petroleum used for plastics will be diverted to plant-based sources, using algae and bacteria.
An analysis of global bioplastics production indicates that there are approximately 500 production and processing companies. Because the industry is characterized by strong growth and numerous innovations, it is a major magnet for entrepreneurs and investors. This is the rationale behind the expectation that the number of bioplastics companies will increase tenfold to 5,000 within the next decade. Helmut Kaiser Consultancy points out that less than 3% of all plastic waste is recycled globally, compared to 30% for paper and 35% for metals. Numerous attempts to transform plastic waste into bags and clothing have garnered media attention but have failed to break through the mountains of plastic or reduce the accumulation of plastic in the artificial islands of garbage that pollute the oceans.
Biodegradable plastics are gaining popularity with a growing number of consumers eager to direct their spending power toward eco-friendly solutions. Meanwhile, bioplastics are increasingly competing with agricultural land that would otherwise be used for food production. Corn, the primary commodity from which bioplastics are made, competes with tortillas in Mexico and corn flakes in Japan. Increased demand and the subsequent price hikes are making this staple food more expensive. The complexity of the situation has prompted the UN to warn policymakers and industry leaders that the shift toward green plastics could affect food security. In a world where more than a billion people go to bed hungry every night, the choice between conserving oil and providing a daily meal requires rethinking our economic models. Moreover, a bioplastic cup behaves no differently than a cup made from fossil fuels. Once trapped in a landfill site where it is deprived of air and heat, it simply will not decompose.
Innovation
The supply of raw materials for plastics has forced scientists and business developers to rethink their strategies. NatureWorks, the American-Japanese joint venture between Cargill and Teijin, continues to work with corn as its primary source of starch, the raw material for bioplastics. This has generated debate about the use of genetically modified corn, which now dominates the American market and is rapidly penetrating the European market, as demonstrated by the recent announcement that NatureWorks is doubling its production on the continent to 140,000 tons per year. The debate goes beyond genetics. It also centers on the greater need for fertilizers and herbicides required for corn compared to soybeans.
Professor Yoshihito Shirai of the Institute of Life Sciences at Kyushu Institute of Technology (KIT) in Japan opted for a simple yet innovative solution. He observed how restaurants in Japan discard large quantities of food. As the strain on the local landfill increased and the desire to reduce carbon emissions grew stronger, Professor Shirai combined all available expertise and, with the help of his colleagues and students, designed a polylactic acid (PLA) production unit based on starch derived from food waste. Although its starch content is lower than that of corn, its financial model is compelling, and its environmental benefits surpass those of any other bioplastic, especially PLA produced from corn.
The first cash flow
The city of Kita-Kyushu launched an early composting program to reduce stress on the landfill. Japan, an island nation with limited habitable land, charges one of the highest landfill fees in the world. Diverting restaurant food waste from the landfill generates an initial cash flow: the restaurants continue to pay for waste collection, but the money is now collected by the plastic producer who is paid to take the waste. Thus, instead of having to source genetically modified corn, which is heavily irrigated and depletes aquifers, Professor Shirai established the first plant in cooperation with the environmental company EBARA, which is committed to achieving zero waste and zero emissions. EBARA is also the largest pump manufacturer in Japan.
The production volume is small compared to the 100,000-ton production units of the bioplastics industry. This means that Mr. Shirai could not economically utilize standard processing technologies. Instead, he opted for a simple fermentation process that generates PLA overnight, using a batch method. Although the conversion rates are much lower than those of corn, the energy cost of transportation and processing is only a fraction of the market standard, and its size can be adapted to the local landfill.
The opportunity
Shirai and KIT did not set out to build a new industry; their primary goal was to demonstrate the technical and commercial viability of small-scale processing of food waste into PLA-type plastics. Even at a rate of one ton per day, the process is commercially viable simply because the selling price of plastic bags used for garbage collection is ten times higher than the cost of their raw material, petroleum. This type of profit margin is always likely to attract new players to the market. In this case, fossil fuel-based bags are replaced by polymers made from food waste, which never compete with food for human consumption, while simultaneously eliminating methane emissions from food decomposition, thus extending the economic lifespan of the landfill. This is certainly a business model that can be implemented by entrepreneurs worldwide.
