Avocados to Plastics

“I suppose there are people who can pass up free guacamole, but they’re either allergic to avocado or too joyless to live.”

Frank Bruni

Fact is, there is nothing like a good ‘guac’ laced with chiles and cilantro.  This is timeless wisdom.  We are not the first to appreciate the wonders of avocados.  Ancient Central American tribes started cultivating avocados as early as 7000 BC.  By the time 2017 rolled around, Mexico produced 1.9 million metric tons of Hass-type avocados, most of that in the State of Michoacán.  About 1.2 million tons of it gets exported to the U.S. and beyond.  The remaining 760,000 metric tons gets lapped up at home.

All except the seeds  -  those big round nuts at the center.  The seed represents about 15% of the whole avocado fruit.  It has a hard shell and is composed mostly of fiber and carbohydrates.  There is a bit of protein.  Unfortunately, the seed defies practical or culinary application and ends up in garbage heaps and landfills.

Let’s think of that in terms of the total avocado crop that gets eaten in Mexico  -  15% of 760,000 equals 114,000 metric tons of seeds thrown away.  A Mexican start-up called Biofase imagines the seeds less as waste as a valuable feedstock.

Biofase has developed a novel technology for the manufacture of biodegradable plastic made from avocado seeds.  The technology leads to hybrid and compostable resins that can be processed with conventional molding equipment just like plastic resins made from petroleum.  Biofase resins can be used to replace polystyrene, polypropylene and polyethylene.

The company has its own commercial products.  First is a biodegradable straw suitable for both hot and cold liquids.  There is also biodegradable flatware that meets FDA standards  -  all the better to eat more guacamole.  The company is ready to sign up distributors.

The economics of seed-to-plastic is improved by the fact that avocado producers and processors are currently paying to have the seeds hauled away for disposal.  Thus the seed feedstock is available for free or even with compensation.  Biofase is locating production facilities near avocado growers and processors.

Even with cheap feedstock Biofase avocado-based resin is still more expensive than conventional petroleum-based plastic.  Biofase resin had been selling for about a 15% premium.  The company plans to scale production to higher, more efficient levels that should bring costs to a more competitive level.  As a ‘drop-in’ resin, Biofase products are likely to win customers looking for sustainable alternatives to carbon-based plastic resin.

Biofase is a privately held company that has been financed mostly by its founder, a chemical engineer.  Now that the company has proven its technology and business model, finding third-party investors should be easier.  What is more the market for bioplastics is significant and fast growing.  According to Ceresana, a market research firm, the market for bioplastics is estimated to reach $5.8 billion by 2021.  Bans on straws and other single-use plastics will be a driver of demand.  Investors with a tolerance for early-stage risk might find Biofase worth watching for future investment opportunities.     

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.