It is an adapt-or-die world in the plastic bag manufacturing business, and Chicago's impending ban on the flimsy bags is piling on the pressure.
The measure, which goes into effect Aug. 1, requires stores to provide shoppers with reusable or recyclable bags of any material or commercially compostable plastic bags. At the start, the restriction applies only to chain stores — defined as three or more under the same ownership — and franchises larger than 10,000 square feet. Smaller stores have another year before the ban affects them, and restaurants are exempt. Penalty fees can range from $300 to $500 for each day of infractions.
Chicago aldermen passed the ban in 2014, giving Chicago retailers more than a year to prepare. Most retailers — national and local — say they are ready. Behind the scenes, however, the transition hasn't been smooth for plastic bag manufacturers.
“We had to make a special investment in equipment to be able to produce the bag that is required by the Chicago bag ordinance,” said Phil Rozenski, senior director of sustainability at Novolex, the Hartsville, S.C.-based parent company of nine brands that manufacture packaging. “We have to have special machinery, and that influences our manufacturing process.”
Novolex is one of the largest packaging manufacturers in the country, employing more than 5,100 people at 35 factories around the country, including two in Chicago and one in suburban Alsip, Ill. Novolex does $1.9 billion in yearly revenue, according to its website.
Rozenski declined to say how much of that revenue is made on plastic retail bag production for Chicago-area retailers, but it was significant enough to push the company to conform.
“This is the first large marketplace that we are doing this in. We only invested enough to support Chicago,” he said, although he would not disclose how much the new equipment cost. “This was a substantial investment just to be able to satisfy Chicago.”
But the investment seems like it will pay off. One of Novolex's clients is Itasca, Ill.-based supermarket chain Jewel-Osco, which has 35 stores in Chicago. Jewel is scrapping its airy plastic for a bag that is about five times as thick, considered reusable under the specifications of the ordinance. Because Hilex Poly, the Novolex brand that manufactures retail bags, adapted, Jewel-Osco did not have to turn to a rival to meet its new needs.
“It's the path of least resistance, especially with a national chain,” said Mara Devitt, partner at Chicago-based retail consulting firm McMillan Doolittle. “If they have someone who can reliably or cost-effectively produce these supplies for them, it makes sense . . . to maintain those relationships.”
Retailers don't want to have to find one supplier to make bags for its Chicago stores and another to make bags for its stores everywhere else, Devitt said. They want their suppliers to handle those complexities for them. Bag manufacturers "are the ones that are truly having to adapt,” she said. “From a retail perspective, it's about having to train your people to explain (the change) to the customer.”
But sometimes adaptation isn't enough.
Chicago-based BioStar Films employs about 100 people in its Back of the Yards factory producing plastic bags for industries ranging from retailers to dry cleaners.
Scott Starr, vice president of BioStar Films and Wheeling, Ill.-based sister company Aargus Plastics, said about 35 percent of Aargus' and BioStar's business is based in the Chicago area. The companies can produce bags that fit into Chicago's ban, but Starr said a hit to business was inevitable. “We are going to have to end up making less product,” he said. “If we have to reduce the amount of output, then we are going to end up eventually reducing employees.”
ABSORBING THE COSTS
Starr declined to disclose revenue and named only one Chicago-based client: Binny's Beverage Depot.
The first phase of the ban will affect five of Binny's 31 liquor stores, a spokeswoman said, including its giant Lincoln Park store, which goes through about 7,000 bags a week. Binny's will provide customers with compostable bags at those locations — a product BioStar does not have the ability to make.
“We can't change what we are capable of manufacturing,” Starr said. “There isn't anything we can do but in this case suffer from reduced business once the ban goes into place.”
Compostable bags, like the thicker plastic bags, are more expensive than the bags being outlawed. Camilo Ferro, managing partner of Chicago-based Renew Packaging, the company making Binny's new bags, said compostable bags cost between 5.5 and 12 cents, depending on the size, shape and thickness. Flimsy plastic bags cost 2 or 3 cents.
Binny's plans to absorb the cost of its new compostable bags, a spokeswoman said. The bags will not biodegrade in a landfill but will need to be returned to Binny's to be recycled.
Meanwhile, Renew Packaging is adapting in its own way, stocking up on compostable bags, watching and waiting for more retailers to turn away from the thicker plastic.
“It's the growth of composting,” Ferro said. Thicker plastic “is the easy way out right now, but long term it's not going to be the easy way for them.”
Ferro said he, too, will be watching to see how plastic bag manufacturers adapt.