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
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,
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
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
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