When I first suggested taking TerraCycle’s operations global, there was nearly a mutiny among my board members and executive team. No exaggeration, they thought I’d lost my mind. As quickly as I’d brought up the idea, it was tabled — that is, until I got a phone call in 2008 that set everything in motion.
The phone call came from PepsiCo-Frito in Brazil. The company’s executives liked what we had done with Frito chip bags in the United States, and they wanted to do the same thing in Brazil. As we’ve done with many brands, we had developed national collection programs for Frito’s nonrecyclable waste, its chip bags. People all across America can collect used bags and send them to TerraCycle. We cover the cost of shipping and pay 2 cents per chip bag to the charity or school of the collector’s choice. We then take the bags and convert them into materials including branded fabrics and plastic pellets. Our team then works with major manufacturing companies to use the new stuff in their products, effectively replacing the need for virgin materials. As an example, Olivet, a major supplier to Wal-Mart, now uses “chip-bag plastic” from TerraCycle as the plastic in the coolers it makes. This renders the chip bag nationally recyclable and produces a major win for the brands and their sustainability goals.
The executives with PepsiCo Brazil indicated that, if we weren’t prepared to open operations there, they would pay us to teach a local company how to replicate our business. It immediately became clear to me that if we didn’t seize the opportunity in other countries, someone else would get there first, and we’d never get another chance.
So I went back to my board, this time with a major corporate partner ready to go. The board members still had a concern, and it was a legitimate one — that the strain of global expansion would burden our operations in the United States and threaten the fiscal viability of the company. I made the following promise (not knowing for sure whether I could keep it): Money will not flow from the United States to our operations in other countries, I told the board. If those operations cannot subsist on their own, they will fail. With this, I got approval to start TerraCycle do Brasil.
This started a journey that has taken TerraCycle into 14 countries beyond the United States: Canada, Mexico, Brazil, Argentina, United Kingdom, Ireland, Sweden, France, Germany, Turkey, Israel, Spain, Holland and Belgium. And there are five more coming in the next nine months: Italy, Switzerland, Philippines, Chile and Uruguay. In most cases, the impetus to open in these countries came from domestic partners that have operations overseas. The companies we work with have global waste problems, and if something works in one market, they like to try it in others. For us, the process has been a learning experience like no other. I wish I could say we got it all right, but of course we didn’t. Here are a few lessons we’ve learned, mostly through trial and error:
1. Setting up a new entity in a new country can be expensive, and there are a lot of hurdles. Some countries require you to have a board that includes citizens of that country. Most require that all of your legal and financial work be done by firms based in the country. One of the methods I’ve found effective is to stretch free advice as far as it will go. Lawyers and accountants are often willing to offer free advice and services, all over the world, as long as they think there will be business later on.
2. Employment taxes can make hiring the right person difficult. I love Brazil and its progressive attitude toward sustainability, but it is frustrating to have to pay close to 100 percent taxes on every employee there. I also learned that it is critical to have local people doing local work. Public relations and customer service are great examples. To work effectively with media and customers, we need someone who not only knows the language but the local customs and norms. When we tried to manage our British public relations and customer service from the United States, we had no success. The moment we hired local representatives, our media interest and customer engagement took off.
3. Managing a global company can be complex. Our Trenton, N.J., operation employs more than 65 people, but none of our foreign entities has more than 10. When we begin operations in a new country, we hire a local general manager who works from his or her home, has no staff and wears the P.R., customer-service, operations, business-development and client-management hats all at once — just like a proper start-up. To maintain global oversight, our team leads in the United States are responsible for managing their counterparts in the rest of the world. Each country’s local general manager reports to me and to each of the United States team leads in their areas of responsibility. In other words, structure your team so that you can manage whatever you take on.
4. Adapt and continue to adapt. While every country in the world has a garbage problem, business and garbage are different everywhere, as are consumer attitudes, customs, retail demands, regulation and everything else. After six months in Mexico, we had fantastic P.R., but very few people had signed up for our program collecting Tang pouches. We realized that in some countries not as many consumers use the Internet for daily communications, so we had to rethink our outreach strategy. We began to focus on phone communications and leveraging local nonprofits to function as our ambassadors.
So far, we’ve been able to stick to my pledge – none of our domestic dollars are supporting the global expansion. And in 2010, our non-United States operations accounted for 10 percent of our revenue. In 2011, I expect our international divisions to generate more than 25 percent of our revenue.
Tom Szaky is the chief executive of TerraCycle, which is based in Trenton, N.J.
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