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You’re the Boss Blog: Maybe There Is Such a Thing as Bad Publicity

January 17, 2013 by Leave a Comment
Sustainable Profits

The challenges of a waste-recycling business.

In part because we are a social enterprise with a mission that most people support — keeping waste out of landfills and incinerators — TerraCycle has been blessed with a lot of good publicity. In fact, we talk about having what we call a “negative-cost” media department that in 2012 generated more than 4,500 articles around the world. That’s more than 12 articles per day! (You can see an example of this coverage here.) We call the department negative-cost because we have been able to produce marketing — books, TV shows — that earns us money while also promoting the company.

While most of this attention has been positive, ABC’s 20/20 did two segments on TerraCycle in December that some folks on our staff didn’t think were entirely positive. One was focused on holiday parties, the other on “workplace romance” — a segment inspired by a post I wrote for this blog about our somewhat liberal approach to romance at the office.

Both pieces seemed to exploit our openness to try to find something salacious or prurient to titillate viewers. The romance segment focused on sex in the office and “who is hooking up with whom,” and it rubbed a few of us the wrong way because it seemed to take our approach a bit out of context. While we were hoping to depict an environment where we neither encourage nor discourage romance, as long as it is mutual and doesn’t offend anyone, we may have come across as actively encouraging it.

The other segment was about what not to do at an office Christmas party. Here, one of our highly valued team members was mocked for demonstrating “overtone chanting,” a form of singing that is actually quite cool and very hard to do. Again, we felt our actions were taken out of context for the sake of “good TV.”

On the other hand, 20/20 is a huge TV show with seven million viewers, and from my perspective, any publicity is good publicity because it increases public awareness of what we do. Think of it this way: a commercial during either of those 20/20 pieces would have cost us hundreds of thousands of dollars, and only given us 30 seconds of exposure. This way, we got more than three minutes on ABC, twice in one month.

The reality is that our “negative cost” publicity does have a cost — it’s just measured not in dollars, but in the control of our own message that we give up because we don’t own the content. When we did a mini-series for the National Geographic Channel (“Garbage Moguls”), there was always some tension because most of the show’s producers insisted that we generate drama that, had I controlled the message completely, I would have preferred not be included. But in the end, TerraCycle made close to $100,000 in talent fees (all profit) and got more than four hours of TV time that has been replayed hundreds of times since, all over the world.

So, yes, there is such a thing as negative publicity — just ask the tobacco companies — but to get lots of attention, you sometimes have to play into what the media outlets want. Just make sure you know what you are getting yourself into. At least, that’s how I look at it.

What do you think?

emTom Szaky is the chief executive of a href=”http://terracycle.net/”TerraCycle/a, which is based in Trenton./em

Article source: http://boss.blogs.nytimes.com/2013/01/17/maybe-there-is-such-a-thing-as-bad-publicity/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

You’re the Boss: How Many Business Models Can One Company Have?

April 20, 2011 by Leave a Comment

Sustainable Profits

At TerraCycle, while we’re trying to keep stuff out of landfills and change the way people think about waste, the ultimate goal is to make money. Over the years, I have been challenged again and again to find ways to build our revenue and refine our business model to make us profitable and to maintain aggressive growth. Along the way, we have changed our model numerous times.

The original plan for TerraCycle was to develop an eco-friendly waste management company. People would pay us to take organic waste and instead of dumping it in landfills we would feed it to worms. But at the roughly $50 per ton we were paid to cart the waste, we couldn’t come close to making money (or getting a date!). By the end of one summer, our plan had evolved. We would still take organic waste and feed it to worms, but we would create most of our value and revenue by selling worm waste as premium fertilizer.

TerraCycle started packaging liquefied waste in used soda bottles as “TerraCycle Plant Food.” With this model change, TerraCycle grew to $3.3 million in revenue in four years, selling our fertilizer to major retailers like Wal-Mart and the Home Depot. To source used soda bottles, we created what we call our “Bottle Brigade.” (If you go to our Web site, you can sign up free and send us used soda bottles.) We paid the shipping and a 5-cent donation per bottle to the school or charity of the sender’s choice. The program was well received by schools, and within two years, 4,000 had signed up. Ironically, the success of the program almost destroyed us. We had to pay hundreds of thousands of dollars in shipping and donation costs, and we simply couldn’t afford them.

Desperate to save the brigade program, we decided to try to find sponsors — corporations that would be willing to pay the shipping costs in return for some positive publicity. We started by approaching first the manufacturers that made the bottles and then other environmentally minded companies. We were completely unsuccessful. These companies did not see the benefit in paying us to collect waste that had nothing to do with their own products — but that’s where we got the idea for our next business model evolution.

While the companies didn’t want to pay us to collect waste produced by other companies, they were very eager to pay us to collect waste from their own products. A concept we started to call “sponsored waste” was born. The idea was to run subsidized collection programs for waste and then turn that waste into new raw materials for products that could be sold to consumers. For example, one of our first products was a backpack made from used juice pouches.

It was immediately obvious to me that there was far more growth potential in selling sponsored waste than there was in selling more worm-waste fertilizer, where we had to compete in a crowded market that is dominated by a few huge players. By Year 5, our growth rate, which had exceeded 50 percent but was relying solely on fertilizer, was slowing considerably.

Nonetheless almost everyone (from my board to my management team) advised me to keep TerraCycle focused on its core business. Our early investors had invested in a consumer product company that sold worm waste plant food in used soda bottles to major retailers. And that’s what they wanted us to do. In their minds, sponsored waste was something completely different and not what they signed on for.

Because I firmly believed that this new path was the right one, I tried my best to convince the investors. And then I just did it. Within a year we were collecting drink pouches, yogurt cups, energy bar wrappers and cookie wrappers that we turned into pencil cases, planters, notebooks, kites and so on. Within that same year, all of these products, and more, were available at major retailers who agreed that they embodied the same product tenets as our plant food — namely, they were better, greener and cheaper (and made from waste).

But there was a problem. As we broadened what we manufactured, our margins decreased, often well into the negative. It had taken us four years to bottle worm waste profitably, and adding sewing lines and other manufacturing lines to our factory only compounded the margin issues. We hardly had any in-house experience with these new manufacturing supply chains, and the products we were making had put us into competition with very strong, typically China-based, manufacturing firms. As a result, we had to drop many of our prices below our costs, to get the business.

For example, we made (and still make) a bag for Target called the reTote, a landmark eco-friendly product made entirely from used plastic bags. The catch was that while we were selling it to Target for a few dollars, our costs in the first year were more than $10 per unit. Our losses peaked in 2008, when we reported a $4.5 million loss on $6.6 million in sales. The issue was simple. We were a fertilizer company, and we knew nothing about making the kinds of products we were trying to make. We needed another business model.

Walking through a Wal-Mart one day, I noticed that Disney and Nickelodeon seemed to have products in every category from backpacks to stationary to shower curtains to food products. Obviously, there was no way these media companies could be expert in so many consumer product categories, so I investigated. It was a good friend and board member, Brett Johnson, who helped me understand the licensing model. Disney merely provided the characters and styles, and other companies designed and manufactured the products. I knew TerraCycle could fit the same model. We would collect the waste and design the products and processes but find best-in-class manufactures and licensees to help us make, market and sell the products.

Today, even our worm-waste fertilizer, which is still going strong, is a licensing deal. Under this new business model, TerraCycle has grown to over $13.5 million in sales, is operating in 14 countries with more than 85 employees. At a profit.

Have we finally found our business model? I believe that you should hold strong to the core of what makes your idea special (in TerraCycle’s case, that’s eliminating waste). But I’m sure TerraCycle will face many more challenges. We’re going to keep our eyes open.

Tom Szaky is the chief executive of TerraCycle, which is based in Trenton, N.J.

Article source: http://feeds.nytimes.com/click.phdo?i=a671e9217d9e6fc82cff16bbc3b72901

Filed Under: Small Business Tagged With: , ,

You’re the Boss: Turning Waste Into Profit

April 6, 2011 by Leave a Comment

Green Money

My company, TerraCycle, has a very unusual business model. We turn the world’s waste into new products. We collect non-recyclable waste, some straight from manufacturers and some from schools, charities and other community groups, and we partner with other manufacturers to recycle or “upcycle” that material into new products — like plastic lumber from juice pouches and shower curtains from sewn-together granola wrappers. Green Money, my channel on this blog, will be a diary of our experiences and decisions, our lessons learned and opportunities missed.

Here’s how our model works: eventually all products become waste. Some, like soda bottles, are recyclable but most are not. Major corporations ranging from Kraft Foods to Colgate-Palmolive work with TerraCycle to create solutions for waste that is currently not recyclable — things like toothpaste tubes and cookie wrappers. These companies pay TerraCycle to run collection programs, covering the costs of shipping and typically making a donation of 2 cents for every item collected to the charity or school of the collector’s choice. We also collect post-industrial waste — like excess packaging, misprints, etc. — directly from these corporations

The waste ends up in one of our warehouses, the biggest being right next door to our headquarters in Trenton. Then TerraCycle works with major manufacturing companies to produce products from the collected waste. To accomplish this, TerraCycle’s science team develops a range of materials from each type of waste and then our products team works with the manufacturer to turn the material into something that can be sold. The idea is to lessen the need for virgin materials and render previously non-recyclable items recyclable. The resulting products are then sold at major retailers like Wal-Mart and Target.

This is not exactly what I had in mind when I dropped out of Princeton to start TerraCycle, but the idea behind the company has always been to turn waste into products. My friend and I started in 2003 by feeding organic waste to worms and then selling the resulting worm waste in reused plastic bottles as TerraCycle Plant Food. From that start, we have grown to a 85-person company that is operating in 14 countries on four continents. Last year we topped $13.5 million in revenue and posted our first profit. Ultimately, our goals are to make a lot of money, establish a global movement of waste collection, and change the way the world thinks about waste. We see ourselves as the national recycling system for all things non-recyclable.

As we pursue those goals, I  hope use these blog posts to describe the company’s experiences and open up a discussion that we can all learn from. Here are some of the topics I will cover in coming posts:

o Going global: I always wanted to take TerraCycle overseas; my executive team and board members felt differently. But one phone call changed everything. We learned out that if we didn’t take our business model global, someone else would. Now, for better or worse, TerraCycle is expanding rapidly overseas. Are we seizing an opportunity? Or are we risking everything?

o Raising capital: For entrepreneurs, it is the ultimate Catch-22: You need money to make your dream come true, but will the price of acquiring that money be the dream itself? TerraCycle evolved from being a consumer products company that sold worm waste to Wal-Mart and other retailers to being a company that runs waste collection programs and oversees more than 1,500 unique products that are made from the collected material. This dramatic shift in our business model didn’t go down well with many of the institutional investors who had invested in our original concept.

o Selling to major retailers: It is a never-ending challenge. You think getting your foot in the door of a big-box retailer is the hardest thing in the world — until you get inside and realize that the challenges keep coming. We have found success with strategies like creating huge co-merchandising programs at Wal-Mart and bringing waste collection vehicles to retailers like ASDA.

o Partnering with corporate giants: Over the years, TerraCycle has taken a lot of criticism for being willing to work with corporations that some in the green community consider evil. Our position is that if we had only worked with small, independent retailers, we would be a much smaller company — and we would have kept a lot less waste out of landfills. But the politics can be tricky.

o Identity issues: They aren’t just for teenagers. TerraCycle’s business model and focus have changed many times. It can be dangerous to shift too often, but it can also be dangerous to wait too long. How do you decide when to make the move?

My goal is for Green Money to be less of a soapbox and more of a conversation. I will raise the issues and challenges we face, discuss our thoughts and processes, and ask for you opinion. I’m hoping that we’ll all learn from one another — or at least commiserate with one another!

Article source: http://feeds.nytimes.com/click.phdo?i=adb120c94deb6d4b9bbb08ea4cd46d28

Filed Under: Small Business Tagged With: , ,