Crown Cork & Seal Co. Inc. has sold its Nationwide Recyclers division to a private investment group that plans roughly to double the company's PET recycling capacity and make other investments in the industry.
The investors bought the PET recycling unit May 1 because they see demand increasing as the beverage industry uses more recycled plastic in bottles and as environmental pressures grow. The investment group is led by Tom Hiles, a former executive with Toronto-based beverage manufacturer Cott Corp. and with Pepsi bottling franchises in New York and North Carolina.
Hiles declined to name the other investors, but said their financial adviser is McColl Partners, a Charlotte, N.C., investment bank led by former Bank of America Chairman Hugh McColl. Hiles said the other investors are not from the beverage, plastics or recycling industries.
Terms were not disclosed.
Hiles said the new company, called Nationwide Recyclers LLC, plans roughly to double the capacity of the operation's sole plant, in Polkton, N.C.
That factory currently can produce between 18 million and 20 million pounds of repelletized PET annually, but the investors want to boost that to 35 million pounds by the end of next year. The company also wants to acquire or build other PET recycling operations eventually.
``I think the market for [recycled] PET is going to increase dramatically over the next few years,'' said Hiles, who will be chairman and chief executive officer of Nationwide.
Besides the public pledges from Coca-Cola Co. and PepsiCo Inc. to use 10 percent recycled PET in their bottles, Hiles said he expects other beverage companies, including store brands at big retailers, to use more recycled PET. They will not want to be perceived as environmentally unfriendly or lose a marketing advantage, he said.
Thus far, however, Coke and Pepsi have not marketed their use of recycled PET. Some soft drink industry officials have said they would be reluctant to do so both because consumers aren't very interested and the companies are smarting from criticism that they backed away from recycled PET use a decade ago.
But Hiles said he thinks recycled PET use will continue to grow and environmental pressure on the packaging industry will pick up: ``I think my assumptions are well-founded.''
While the company is betting that the growth will happen, Hiles said the investors acknowledge that the plastics recycling market is risky.
``We're taking a crapshoot,'' he said. ``We understand this is not a stable market.''
Crown officials said they are selling the business because it no longer fits with their operations. The company spun off its PET bottle-making unit, Constar International Inc., last year in an initial public offering, but did not include Nationwide in that.
Nationwide's expansion comes amid other growth in the PET recycling industry.
About 100 million pounds of additional PET reclamation capacity will become available this year, giving the industry about 940 million pounds capacity, according to estimates from the National Association for PET Container Resources in Charlotte, N.C.
Coke and Pepsi's entry into recycled PET could boost demand significantly. For Coke alone, getting to 10 percent recycled content in its PET bottles will require about 100 million pounds of recycled PET, according to an analysis by the Plastic Redesign Project in Madison, Wis.
By comparison, NAPCOR said only 77 million pounds of recycled PET went into all food and beverage applications in 2001.
U.S. industry used about 700 million pounds of recycled PET in 2001, with much of that going to fiber and carpets.
One industry observer, who asked not to be named, said that while demand from the beverage industry could increase significantly, recyclers continue to face problems getting enough supply of PET from collection programs. That has scared off other investors, the observer said.