How TerraCycle Plans to Takeover the Garbage Industry

Fast Interview: In this Q&A, TerraCycle founder Tom Szaky talks about why eco-friendly products don't have to be expensive, his quest to corner the trash market, and why his wife performed in Carnegie Hall in a dress made from recycled juice pouches.

Garbage in, garbage out? This old cliché may become obsolete as trash becomes the raw material of innovation and green business. Upcycling, or turning disposable items into new products, is becoming big business. The leading player in this growing industry is TerraCycle, which makes a variety of products from recycled material: fertilizers from worm poop, backpacks from juice pouches and reusable tote bags from plastic bags. Based in Trenton, New Jersey, the 60-person company had $8 million in sales last year and expects $15 million this year.

You started TerraCycle in college with no business experience. How have you learned to manage a company?

I think I can boil it down really simply: it revolves around consistently screwing up and learning from your mistakes. I wouldn't call myself a world-class manager by any stretch. The important thing is trying to listen to the problems people have, learning from screwing up and not doing it again.

You've said you'd like to take Scotts Miracle-Gro out in five years. Are you serious?

When we were just a plant food company, Miracle-Gro was the big competition and that's who we wanted to focus on taking out. Now we have products all over the place. We're still looking at expanding the fertilizer category but we're not necessarily set on dominating it. Our goal is to be the leading eco-friendly organic brand in any category we enter, versus taking out the dominant players. In cleaners, it's more important for us to beat Seventh Generation and Mrs. Meyers than it is to beat Windex. That's a very attainable goal. Once we establish ourselves in all these categories, the green movement is going to become the leading way to do products and we just have to sit back and let that take its course.

So what does that mean for you and Scotts? Do still want to take them out?

What I want in relation to Scotts is when eco-friendly products are more in demand than chemical products, within fertilizers at least, that TerraCycle becomes the leader in the eco-friendly space. And that will happen over time, I'm certain of it. It's just a question of whether TerraCycle will be the leading eco-friendly player, whether Scott's introduces an eco-friendly product or whether it's somebody else.

TerraCycle comes up with new products every week. Give an example of how you turned a waste stream into a product.

Plastic bags are a massive issue because there are 300 billion thrown out every year in North America and there's no really good solution. Reusable bags are a problem because they're fundamentally heavy-duty bags, which are very eco-friendly in their function but not necessarily eco-friendly in how they're manufactured. Target approached us with a question: "hey solve our plastic bag problem." We took the plastic bag, started evaluating what we could do with it and figured out we could fuse it, which means pressuring it together, to make a fabric. It's a unique process where you sort of push them together with a huge amount of force and heat. Once we had the material, we could make anything out of it that we wanted. We started by constructing a reusable bag and now we're developing things like coasters, placemats, trashcans and spiral bound notebooks out of the same material.

You often talk about eco-capitalism. What's that?

It's sustainable business 2.0. In the first generation of sustainable business, you have companies like Stonyfield Yogurt, Honest Tea, and Seventh Generation that took the existing paradigm of a yogurt, iced tea or cleaner and made it more eco-friendly and worked within the existing paradigm. Eco-capitalism is sort of reinventing the paradigm. The most important innovation is looking at things people don't value as a fundamental building block. It's not just physical garbage — it could be people, ideas or objects. The first generation of sustainable business created very eco-friendly products but at a premium price. The inputs had a greater cost because they were better, eco-friendly, organic, and all that. With eco-capitalism, you're able to do the best thing for the environment, the best thing for society — all at a great price. And garbage is the essence of that.

Some smaller companies make products from recycled materials but few have made it to the big leagues. How has TerraCycle managed to get on shelves of stores like Home Depot, Target and Wal-Mart?

First of all, it's a mentality. Our goal is to use garbage not as a novelty and not as a way to make premium products. Our goal is to use garbage to create products that are extremely cheap. We have a pencil case that we make out of used juice pouches, and because the juice pouches cost pretty much nothing, we're able to retail that pencil case for $1.99. Someone else would probably do it for $10. So price is a critical difference.

We have a marketing and manufacturing engine to make products at a mass scale. We look at this and say, how can we make it really, really big? That is a whole mindset that separates us from other companies. Unlike all of those companies, we have partnerships with the companies that produce the garbage to begin with, like Kraft, General Mills, Frito-Lay or Coca Cola. Those partnerships enable us to do this in a very big way and be cost effective. All those pieces — price, our ability to manufacture and market — are key reasons why we're able to succeed in major retail and why these other companies probably can't even get a meeting.

When big companies partner with TerraCycle, they often get lots of publicity for green initiatives.

We have a PR element to all the programs. We broke the Kraft partnership with a major feature in the Wall Street Journal and since then there's been about 40 articles written on the partnership, which is two or three a day at least. That's very valuable and an important element to what we do. We're going to solve the world's waste stream by getting the waste stream producers to help pay for it and make everyone look great in the process.

Are you green in your personal life?

My wife is a pianist and she did a performance at Carnegie Hall less than a year ago and wore a dress made entirely from trash, from 6,000 used juice pouches. She's really concerned about the environment. But in our personal lives we're very normal people. I don't view myself as an environmentalist. I view myself as a concerned person for the environment, but I want to create choices for people that don't require them to have to spend more money or make sacrifices to become green. Right now, most green choices require sacrifices.

You've talked about locking up every waste stream in America. What do you mean?

When we do a partnership with, say, Capri Sun, we become the exclusive company to use juice pouches. Not only are we creating the only infrastructure to upcycle waste, we're also owning it entirely. Our goal is to, in a sense, privatize and own the entire collection system of all the non-recycled waste streams that we have in our lives.

Can you create a monopoly on garbage?

That's precisely right. You create a monopoly on waste. What's ironic is that if you really look at it, waste is a very valuable resource. It's a great raw material with very good economics because it's so cheap. And no one is looking at it. I can talk all day long about it and no one else tries to do it. No competitor has really emerged. It's not a normal business model and hence it's not something that people are really looking to get into. And who wants to deal with garbage?

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