Plastics reclaimers are giving mixed reviews to Coca-Cola Co.'s commitment to build a 100 million-pound food-grade PET recycling plant in Spartanburg, S.C., and its long-term goal to recover or reuse all the PET it puts into the U.S. market.
The $45 million plant, a joint venture with Spartanburg-based United Resource Recovery Corp., is part of a $60 million recycling initiative Coca-Cola announced at a Sept. 5 news conference in Washington. The plant, to be called NURRC, for New United Resource Recovery Corp., will begin operating in September 2008 with a 40 million-pound line. A second 40 million-pound line is likely to start six to 12 months later, and a third line eventually will be added to process 20 million pounds.
The news came a day after Coca-Cola announced that 250-275 employees will be laid off at its Atlanta headquarters. Those employees will get preference in applying for 150 new management jobs Coke created as part of its recent restructuring, according to the soft drink giant.
Coca-Cola's profit has not kept pace with sales growth during the past two years, rising only 4.8 percent since 2004, despite a sales increase of nearly 11 percent to more than $24 billion in that period. According to the newsletter ``Beverage Digest,'' volume Coke sales in the U.S. have been declining since 2000 and Diet Coke sales declined, for the first time ever, in 2006.
Meanwhile, Coca-Cola is looking to shrink its PET usage through packaging redesigns. A new Coke bottle design in the U.S., introduced Sept. 4, will cut the firm's domestic PET usage by 100 million pounds a year - which equals the amount of PET that Coke now recycles annually in the U.S.
Coca-Cola's investment in the Spartanburg plant is in part an equity stake and in part a loan to URCC to build the plant, which reportedly will be the largest of its type in the world. Coke has similar investments in PET recycling plants in Mexico, Switzerland, the Philippines and Austria.
The proposed plant concerns a number of PET reclaimers, because Coca-Cola has said that, initially, it must buy 90 percent of the material it needs to operate the plant. Reclaimers are worried that the new plant will make business conditions more difficult for them.
``Will the plant make supply tighter?'' one reclaimer asked. ``How could it not? Where will they get the material and who are they going to take it from? How are they going to save money if it forces prices up and there already is a shortage of materials?''
A reclaimer in the eastern U.S. agreed: ``How could it possibly help reclaimers? It is scary. You have to think that it will make things more difficult for us. The announcements seem politically motivated just to get good press for themselves. The plant investment doesn't make sense.''
``This will create a new demand for 100 million pounds of material,'' said a recycling executive who asked not to be identified. ``There is already a supply problem, so this will further exacerbate that. It is going to drive up the price of recycled PET.''
Coca-Cola said one of its reasons for building the plant is to reduce its exposure to the price volatility in the market.
URRC President Carlos Gutierrez said Coke currently plans to buy 60 percent of the Spartanburg plant's output of recycled food-grade PET flake. The rest will be sold to others. Coca-Cola will use post-consumer curbside material, not deposit bottles, as raw material for the plant, Gutierrez said. Coke did not address the issue, but several reclaimers said the soft drink firm sells the deposit bottles because it is a better revenue stream.
The plant will boost URRC employment at Spartanburg from 35 to 150, by the addition of grinding and sorting operations to process baled PET.
Some industry observers wonder whether Coke's investments in the recycling infrastructure really will boost PET recycling rates in the U.S. - which have fallen to 23 percent from almost 39 percent in 1994.
``The weak link in recycling isn't the lack of processing so much as the lack of relatively clean collected material to process,'' said Betty McLaughlin, executive director of the Container Recycling Institute in Washington. ``The plastics recyclers who have been going begging for the limited amounts of material that are collected and have been competing with the Asian markets would probably prefer to see Coke investing in collection rather than competing with them.''
In that regard, Coca-Cola pledged financial support to help Philadelphia-based RecycleBank - a program that has expanded household recycling in New Jersey, Delaware and Pennsylvania - grow nationwide. Currently 100,000 households participate in RecycleBank's program and the program plans to expand into New England in the fall.
``After that, we are looking at Illinois, the Southeast region and the West Coast,'' said RecycleBank President and co-founder Ron Gonen. ``Our focus is the 25 largest markets in North America,'' with a target of 1 million households by 2009.''
Coca-Cola also has committed to boosting its internal recycling by establishing a number of centralized collection centers for its retail customers and suppliers through its Coca-Cola Recycling LLC joint venture with its largest bottler, Coca-Cola Enterprises. Those efforts, however, will focus on materials generated internally, and Coke did not disclose details of how it will proceed with the project. Neither did the company set a specific timetable for 100 percent recovery of materials.
Also, Coke did not increase its commitment of using recycled content in PET containers for soft drinks, water and teas, to the disappointment of some in the industry.
``We have no fixed timetable,'' for reaching that goal, said Jeff Seabright, vice president of environment and water resources at Coca-Cola.
``It is a very laudable goal,'' said one industry executive. ``But when you don't set a timetable, what good is it?''
Seabright said Coke currently recycles about 10 percent of the 1 billion pounds of PET it annually puts into the marketplace and the company hopes to recycle or reuse 30 percent by 2010. Others dispute the amount of PET that Coca-Cola uses annually, putting it at twice as much as the firm claims.
Coke's goal, Seabright said, is to have ``more than 10 percent'' recycled content in its PET beverage containers by 2010. But that level only matches what it had achieved in 2004 and 2005, before sliding back to less than 5 percent in 2006.
``We want to move as aggressively as we can,'' he said. He added that in Switzerland, Coke uses 50 percent recycled content in its PET bottles.
Supply is always an issue for plastic recyclers, said Steve Alexander, executive director of the Association of Postconsumer Plastic Recyclers in Washington. APR ``welcomes any announcement that helps to move the need from a supply and demand standpoint, emphasizes the need for more collection of material and stimulates markets for post-consumer resin,'' he said. ``We are hopeful that this announcement impacts all three of those areas.''
