Private Players in Packaging

The packaging industry is well populated with large competitors.  There is still room for new players to step through the door with innovative packaging solutions.  Of course, conscientious investors are most interested in those companies with new products or services that can help reduce packaging waste.    About one-third of an average dump of municipal waste at a U.S. landfill is made up of packaging material.  This is costly for local governments since it requires about $50 per ton to send garbage to a landfill.  There is a cost for consumers as well.  About 10% of the tab for on-line purchases goes to cover packaging costs.  Anyone with a service or product to reduce these costs should get a warm reception in the market.

It stands to reason that investors could benefit significantly by backing innovators with solutions to reduce these costs.  In this fourth article in this series, we look at four newcomers to the packaging playground  -  all are privately players.

Perfect Plastic

PureCycle Technologies has developed an alternative recycling process that separates contaminants from plastic waste originally developed by Proctor & Gamble Company (PG:  NYSE).  The result is improved the quality of resins from recycled polypropylene (PP) plastic materials.  In 2017, the process was put into use at a demonstration recycling plant built in Lawrence County, Ohio.   A commercial-scale plant is planned in 2020.

Recycled Plastic Pellets

PureCycle’s commercialization attempt could have a significant impact on PP recycling by closing the loop on plastic already made from fossil fuels.  The most important market for polypropylene is flexible packaging.  For all uses the PP market is valued near $75 billion and is expected to reach $99 billion by 2022.  Besides competition from other types of plastics, environmental concerns can be a headwind for PP.  Incorporation of recycled materials can help burnish the image of large producers such as LyondellBasell and INEOS.   The availability of high quality or ‘virgin’ recycled resins is a plus for acceptance by these plastics producers.

The company is part of the Innventure portfolio.  Innventure licenses technology for commercialization.  PureCycle Technology is the product of a partnership with an angel investment group called Wasson Enterprise.  We expect future funding rounds to offer opportunities for accredited investors.

Compostable Bottles

Forget plastics from fossil fuels.  Danimer Scientific proposes to make biopolymers from compostable materials.  In September 2018, the company acquired a fermentation facility in Kentucky.  The plant had once belonged to algae technology aspirant Alltech.  Danimer plans to produce its proprietary Nodax polyhydroxyalkanoate (PHA) material there.  Plans are to begin production in late 2019.

Danimer Recycling Pilot Plant

Polyhydroxyalkanoate is a polyester produced in nature by microorganisms such as bacteria.  To produce Nodax PHA Danimer uses canola oil as food for soil bacteria.  After harvesting the PHA is processed into powder form and combined with other biopolymers to produce plastic resins. 

It is a major undertaking for a small, untested company.  Danimer has an experienced partner in Nestle to develop biodegradable plastic bottles to Nestle’s water business.  The bottles will be compostable as well as recyclable.  Danimer also has a relationship with PepsiCo, which expects to get access to the Danimer-Nestle product.

Danimer has raised a total of $4.1 million through two venture capital rounds.  Most likely additional capital will be needed to scale production of Nodax PHA.  Investors can watch for news of progress with the Kentucky plant for clues to the timing of future financings.

Biology at its Best

Danimer is not alone in trying to avoid fossil fuel altogether by turning organic waste into plastic.  Full Cycle Bioplastics is also developing polyhydroxyalkanoate or PHA bioplastic using mixed organic waste and some cooperative microorganisms.   Full Cycle is targeting industrial operating environments for co-locating its process, but does not appear to have found an initial site. 

Full Cycle also expects to find a warm reception in the packaging industry that is hungry for both high quality, virgin resins to make plastic products and an environmentally friendly material that will gain points with conscientious consumers.  The company also makes note of the fact that they plan to rely on waste organic material that is a source of carbon dioxide as the material degrades.  While it might be a bit far-fetched, perhaps Full Cycle can help Canada solve its problem of large forest areas that are ‘emitting’ more carbon from decaying leaves that new growth is ‘sinking.’

Full Cycle Bioplastics has already raised over $2 million in two different early funding rounds.  A social impact fund was a participant.  That seed capital will not last long.  The company’s corporate website welcomes investment inquiries from accredited investors, suggesting management is looking for new capital. 

Magnetic Appeal

Aronax Technologies Group LLC of Spain proposes a magnetic additive for packaging materials that would create better air and moisture characteristics.  It can replace aluminum coatings that render some packaging materials non-recyclable.  Aronax makes the magnetic additive from silicates and iron oxide.

Aronax has received some funding from prize money won in the Circular Materials Challenge made by the Ellen MacArthur Foundation.  The 2018 winners were announced at the World Economic Forum in Davos in January 2018.  The company also won the Open Innovation Contest sponsored by AES Corporation (AES:  NYSE) to find solutions for extreme heat environments found in energy infrastructure.  The latter prize was won with Aronax’s sound imaging camera, making clear the group has some versatility.

Unfortunately, Aronax is a bit of a mystery.  At the time of this article publication the Aronax corporate website was not functional.  An investor with an interested in helping qualify more packaging material for recycling would do well with extra due diligence into Aronax to make certain there is responsible management in place.

Retails are also getting involved in the packaging pollution problem.  The next post profiles four retailers with significant e-commerce operations.

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.