Posted on: Sunday, January 11, 2004
Biodegradable-plastic company needs market
By Jennifer Bjorhus
Knight Ridder News Service
ST. PAUL, Minn. — Cargill Dow LLC did the chemistry, creating a tough, price-competitive biodegradable plastic from corn. Japan snapped it up. It's woven into men's shirts in Italy. McDonald's in Sweden and Austria use it in cups.
Now all the small Minnetonka, Minn., company has to do is find more customers for the stuff in the United States.
"Market development is the big job in front of us," said Pat Gruber, Cargill Dow vice president and chief technology officer. "We have to tell consumers this stuff is available."
The challenge is as wide as an Iowa cornfield.
A handful of corn-based products are on the market in the United States now — for instance, Faribault Woolen Mills makes blankets, duvets and pillows, clear plastic deli containers and carpeting from corn.
But in true startup fashion, Cargill Dow — the 6-year-old joint venture of Cargill Inc. and Dow Chemical Co. — has a long way to go to ignite the U.S. market, which has never gotten hot about biodegradable polymers although they've been commercially available in one form another for nearly 20 years.
Cargill Dow, with 250 employees now, remains unprofitable. While it won't disclose sales figures, it has a total of 12 U.S. customers in just four of the seven business segments it has identified.
And not all of those are barnburners.
Interface Flor, a Chicago-based division of Interface Inc., sells two lines of modular residential floor coverings made from Cargill Dow's corn-based fibers. But the carpet is sold only over the Internet, from catalogs and at a few small local retailers. Customers are still skeptical, said Chip DeGrace, Interface Flor's vice president of marketing.
"Their brain goes to `Is it woven corn silk?' You have to walk them through it. Then it's cool," DeGrace said.
Some cultural factors may be involved. The corn resin pellets that Cargill Dow makes were a somewhat easier sell in Europe and Asia, where people tend to be more environmentally conscious and land constraints make garbage more expensive to deal with, some company executives say.
Cargill Dow introduced the pellets in those markets in 1998. Japan took to it so enthusiastically that customers there bought nearly all the pellets Cargill Dow could produce at the small pilot plant it had in Savage, Minn., before it launched a Nebraska plant in 2002. Sony, for instance, uses the polymer in the plastic body of some Walkman products.
In the United States, the marketing only got under way after the Nebraska plant could churn out enough supply. Shifting out of research-and-development mode, Cargill Dow laid off about 40 R&D employees in August and is beefing up its marketing staff. It has contracted with a gaggle of outside firms such as Gibbs & Soell Public Relations in Chicago, Loeffler Ketchum Mountjoy in North Carolina and IQ Marketing in Edina, Minn.
The business challenge is far different than simply introducing a new soap or cereal. Cargill Dow must simultaneously generate end-user demand for biodegradable products in the United States while also convincing manufacturing companies that cook the pellets into usable forms, the so-called converters, to switch from petroleum-based plastic pellets to Cargill Dow's corn-based alternative.
"There's times we feel a little bit like Henry Ford and the development of the Model T," said Cargill Dow spokesman Mike O'Brien.
