Coca Cola (NYSE:KO)
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6 Months : From Apr 2019 to Oct 2019
By Bob Tita
Beverage companies with ambitious goals to use more recycled plastic in their packaging are facing a shortage of discarded containers from recycling programs.
Less than a third of the six billion pounds of plastic most commonly used for drink bottles and food containers is recovered by U.S. recycling programs. Most of what is recovered becomes polyester fiber for rugs and clothing or plastic sheeting. Just a fifth, some 330 million pounds, ends up in new bottles and food containers.
Big drink-and-food makers will need four or five times that much recycled plastic to meet the targets they have set to satisfy consumer calls to waste less and reuse more, according to the Association of Plastic Recyclers. Coca-Cola Co. wants to use 50% recycled plastic by 2030. Nestlé Waters North America, a unit of Nestlé SA, is aiming for 50% recycled plastic in its domestic brands by 2025. PepsiCo Inc. aims to use 25% recycled plastic in all of its bottles and packaging by that year. Most of those and other beverage companies use less than 10% recycled plastic in their packaging now.
But the volume of plastic for bottles -- technically known as polyethylene terephthalate, or PET -- has been stagnant for years.
"We have to increase recycled PET. This is unquestionably one of the biggest challenges in the U.S.," Simon Lowden, president of Pepsi's snacks group, said in an interview.
Coke, Pepsi, and other bottled-beverage companies pay millions of dollars annually to improve curb-side recycling through groups such as the Recycling Partnership. In Atlanta -- through a grant of $4 million from the Coca-Cola Foundation -- the Recycling Partnership and city officials this spring deployed teams of people to city neighborhoods to check recycling bins for contaminants right before collection crews arrive.
"Most people want to recycle," said Bruce Karas, Coke's vice president of sustainability and environment.
But beverage companies also have worked for decades against one of the most effective recycling practices: deposit programs that pay a nickel or dime for each bottle returned. They acknowledge that deposits succeed at collecting cans and bottles for recycling, but say the deposits are essentially a tax on their drinks that give millions of dollars in unredeemed deposits each year to state governments. The programs also create additional logistical costs for beverage distributors and retailers that need to store and collect the empty bottles.
"We can make curb-side better. That's really where we see the future of recycling," said William Dermody, a vice president for the American Beverage Association, the trade association for the soda industry.
Ten states that charge deposits on beer, water and soda containers have higher collection rates than states with curb-side recycling programs. They collect a third of all the recycled PET collected annually in the U.S., according to the Container Recycling Institute. The group calculates these bottles also are converted into new food and beverage containers at a higher rate than plastic from curb-side programs that contain more unusable material.
"If you have a deposit system, you get fantastic collection rates," said Leon Farahnik, chief executive of CarbonLite Industries LLC, a Los Angeles-based processor of recycled plastic flakes used to make new bottles. In California, enough PET is being recovered through the deposit program to make 70% of the new beverage bottles sold there annually, according to the state's recycling department.
Fees for curb-side recycling service have been rising to counter falling prices for scrap materials caused by lower exports of old paper, cardboard and plastics to China. Officials in China tightened their standards for contamination in U.S. scrap exports last year, leaving many recycling companies without a buyer for their waste and causing a glut in domestic scrap markets.
Higher rates have helped stabilize collection programs, but the increases could discourage municipalities from providing access to recycling to the roughly one-third of U.S. households that don't have collection service yet, industry analysts said. That would further check the supply of recycled plastic for food-and-drink companies.
Republic Services Inc., the second-largest trash hauler in the U.S. behind Waste Management Inc., last year sold 240 million pounds of PET harvested from curb-side programs, about 14% of the total amount of PET recovered in the U.S.
Phoenix-based Republic is renegotiating municipal contracts with higher rates that can be offset through the sale of recycled material. Cleaner material and higher volumes of collection for more valuable items such as aluminum cans will improve the economics of recycling, Republic CEO Donald Slager said.
"People want to recycle, great. They have to have skin in the game," he said.
Write to Bob Tita at firstname.lastname@example.org
(END) Dow Jones Newswires
June 30, 2019 12:18 ET (16:18 GMT)
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