Green companies think they can charge premium prices,” says
TerraCycle founder Tom Szaky. And though he could probably have an
easier time of it if his own eco-conscious company followed suit, Szaky
says the tendency for competitors to keep green products at the high
end of the price range is, in fact, helping him. “Since we’re not doing
it,” he says, “we’re gaining a lot.”
Szaky launched TerraCycle as a college student in 2002, when he came
up with the idea of commercializing liquid plant food made from
biological waste—what he described as “worm poop”—and then poured in
used soda bottles because he couldn’t afford conventional packaging.
It was supposed to be a temporary packaging solution until the
company got its legs. But, Szaky says, “Once we realized we could mass
produce soda bottles, it became the essence of what we do.”
Szaky obtained his stock of used bottles from recycling programs he
established in elementary schools in exchange for a donation. He
cleaned the bottles, wrapped homespun labels on them, filled them and
topped them trigger sprays reclaimed from manufacturer rejects and over
runs.
Szaky dropped out of Princeton when, three years after launching
that flagship product, orders from Wal-Mart and Home Depot came through.
Of course, TerraCycle is today a much larger company. But it still
shuns prestige pricing—largely because it has modeled itself to make an
array of consumer products and packaging entirely out of waste.
That’s not to say there haven’t been challenges—chief among them the
question of how to fulfill growing retail orders when the primary
source of packaging material was elementary school cast offs. By the
time TerraCycle had achieved distribution in 4,000 retail locations,
the company was spending $500,000 each year to fund the collection of
used bottles.
The turning point came when Stonyfield Farm challenged Szaky to come
up with an alternative use for its polypropylene yogurt cups (which
aren’t widely recyclable). He answered the challenge much like he had
for used soda bottles; he upcycled them, putting a hole in the bottom
and turned them into planting pots. The kicker, though, was that
Stonyfield agreed to fund the entire yogurt cup collection program.
Stonyfield kicked off that pilot program and, soon after, Honest Tea
began funding a collection program for its used drink pouches. Then
Kraft’s Capri Sun and Kool-Aid brands joined in.
Soon, TerraCycle was awash in a $1 million drink pouch sponsorship
and was making headway into new product categories as it began
refashioning the spent pouches into accessories now sold at Target.
The beauty of the initiative, which Szaky has dubbed “Sponsored
Waste”, is that TerraCycle gets paid on both ends. “You get paid for
your raw materials and then you’re paid for your finished product,” he
says.
TerraCycle still sponsors collection programs in schools and
churches (largely a corporate social responsibility effort), but the
company has anchored its future around “Sponsored Waste” so that it
obtains the majority of its material base from other consumer products
companies.
It’s a big reason why the company has enjoyed a 300 percent growth
rate for the past four years, and why that success shows no signs of
stopping. Last quarter, for instance, has been what Szaky describes as
a “landslide”, with Clif Bar, Balance Bar, South Beach diet bars, Chips Ahoy, Oreos and other brands coming aboard.
TerraCycle now plays broadly in the lawn and garden space—with
everything from deer repellant to compost bins—and it is expanding into
a dizzying array of consumer product categories, from household
cleaners and reusable tote bags to office products and, even, Christmas
ornaments.
The key to it all is upcycling, Szaky says, which requires that you
creatively use the shape and characteristics of an existing package
instead of trying to crush it, mulch it, melt it down or reform it.
Upcycling requires less energy than recycling, he explains.
What is great for a brand like Capri
Sun, he says, is that it has now come up with a solution for a
non-recyclable package that, otherwise, would be destined for the
landfill. “They sign with us and the packaging becomes ‘reusable’ for
them,” Szaky says. “It’s a total paradigm shift”.
The consumer also wins as TerraCycle breaks the status quo that says
the more eco-friendly a product is the higher the price. A shower
curtain the company is launching at Wal-Mart next year is a great
example. Because TerraCycle obtains candy wrappers and other flexible
packaging at no cost, it can take that raw material and make a shower
curtain for the same price as the least expensive shower curtain in
Wal-Mart.
It’s clear that, by leveraging the very idea of waste, Szaky is
changing the way people do business. “If people are willing to pay us
for our raw materials,” he says, there’s really no limit to what
TerraCycle can do. Garbage is just something we hadn’t been creative
enough to solve yet.” BP
Name: Tom Szaky
Age: 26
Title: Founder and CEO
Years in current position: Seven
Ultimate branded package? All Purpose Plant Food in reused 20oz soda bottle
What’s on your nightstand? Confessions of an Economic Hitman
