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Packaging That Means Green

By Olga Kharif When Jim Middleton decided two years ago to test biodegradable plastic containers in a Wild Oats Markets store in Portland, Ore., he felt the motivation of an environmentally conscious citizen. He couldn't have had many other reasons. Back then, using green containers seemed foolish. They cost 50% more than regular containers. And if you piled something like hot macaroni into them, the bottom fell out.

Yet Wild Oats (OATS) soon discovered that taking care of the environment can pay off handsomely. The customers of Wild Oats, a store that sells organic foods, loved the containers, which are made from a biodegradable material produced by Cargill subsidiary NatureWorks. The store's deli sales rose by more than 15%, due at least in part to people who embraced the idea of taking home food in an eco-friendly container.

MAINSTREAM PUSH. The move had another, more surprising, benefit: As the price of oil, which goes into production of traditional plastics, has skyrocketed, Wild Oats has had a buffer with its biodegradable, nonoil-based containers. As a result, it's paying 3% to 5% less for the eco-friendly packaging than regular ones, says Middleton, senior director of operations support for Wild Oats stores. "To me, it's a no-brainer now," he says.

The containers exemplify how eco-mindedness can dovetail with cost savings. That's why companies such as Coca-Cola (KO) and Whole Foods (WFMI) over the last year have begun using or testing biodegradable plastic packaging. By the end of 2005, consumers could see the introduction of biodegradable plastic utensils, cups, water bottles, shavers, cosmetics cases, and shotgun cartridges. A company named Pvaxx recently unveiled a cell-phone cover, now undergoing testing by Motorola (MOT), that, when buried in soil, not only disintegrates but also sprouts sunflowers. The plastics contain sunflower seeds.

Combine the new economics of containers with environmental consciousness among consumers and tough local landfill regulations, and you have a recipe to take biodegradable plastics -- a seemingly contradictory term if there ever was one -- mainstream. These materials disintegrate into carbon dioxide, water, and biomass (the same stuff that's left over from a banana peel) when in contact with sunlight, water, or bacteria found in soil. It only looks and feels similar to plastic, although its ingredients are quite different. For instance, packaging from Biosphere Industries in Carpinteria, Calif., is made of starches and grass fibers.

MOUNTING LANDFILL COSTS. While this emerging market is still tiny, some industry insiders believe it could eventually reach $50 billion. Chemicals manufacturer BASF (BF) has seen U.S. sales of its biodegradable plastic, Ecoflex, rise 80% in the past year, says Keith Edwards, product manager for Ecoflex in Florham Park, N.J.

BASF plans to double its manufacturing capacity, currently at a modest 8,000 tons a year. With the additional capacity, the plant will edge closer to the manufacturing capabilities of traditional plastics plants. Biosphere Industries hopes to increase its monthly production from 4 million units to 24 million within a year.

Local environmental regulations are having an impact, as beach communities -- aiming to reduce pollution -- are cracking down on using Styrofoam. New landfills are also hard to come by, and dumping old-fashioned plastic containers is becoming harrowingly expensive. Landfills in New York charge $100 a ton to dispose of waste -- or twice the amount asked for by those who compost (placing waste into piles that can decompose).

THINK WAFFLES. These factors are encouraging many grocery stores to latch onto biodegradable packaging. While three-fourths of their garbage is made up of materials such as spoiled food that can easily go into compost piles, the stores need containers that can also decompose, says Steve Mojo, executive director of the New York-based Biodegradable Products Institute, which certifies green plastics.

More important, a number of companies have developed ways to make biodegradable plastics -- which have cost four to five times more than their regular counterparts for years -- less expensive. In mass production for only about a year, green plastics from Biosphere Industries can be up to 40% cheaper than traditional plastics. "We're not trying to promote the fact that it's biodegradable by itself," says Biosphere Industries owner Elie Heldon Jr. "It's an add-on. We emphasize the cost advantage."

That's because Heldon has developed a simple manufacturing process akin to baking waffles: You mix together a bunch of starch-based materials, like corn and potatoes, with other organic ingredients. Then, you pour the stuff onto a form and bake it. And soon, you've got a biodegradable lunch tray or a muffin container.

MAKING SENSE. The beauty of those containers is that unlike early versions that were brittle and caved in under heat, Heldon's wares are more durable than traditional plastics. They can go into a microwave or regular oven and can easily handle temperatures of up to 420 degrees. Biodegradable plastics from other manufacturers, such as Pvaxx, which expects to make its products commercially available within a year, are also crack-resistant. Eventually, Pvaxx is aiming for its plastic to be used in making cell-phone cases as well as the insides of electronics equipment.

Beyond their practical appeal, some biodegradable plastics can have a fun side, too. Pvaxx's cell-phone covers, made out of biodegradable plastic, could contain seeds of sunflowers or trees. Tired of a cell-phone cover? That's O.K. Just make sure you bury it when you're done. "This would instill an environmental message in kids," says Peter Morris, project manager for Pvaxx, based outside of London.

Green plastic will never replace with traditional plastics completely. No one wants TVs or computers to decompose. But with costs coming down, biodegradable plastics are starting to make sense to both the eco-conscious and the penny-pinchers. Kharif is a reporter for BusinessWeek Online in Portland, Ore.

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