NatureWorks Aims to Create a World Beyond Plastic- and it's Building Manufacturing Power to Meet that Goal
In the conference room of NatureWorks, paper cups and empty salad containers are placed just so on product display shelves, above a pair of children’s shoes, socks and a package of diapers. Across the room, a small throw rug and blanket hang next to a fashionable white shirt that wouldn’t be out of place at a downtown hipster hangout.
In another company, such a collection might seem like an offbeat contemporary art exhibit, but at this Minnetonka-based purveyor of eco-friendly bioplastics-materials made from renewable plant materials, not oil-it’s a stunning display of a manufacturing innovation that’s led to diversity, growth and market traction. Tapping into the demand for more environmentally responsible products, the company has been expanding its market penetration for a decade, and now boasts far more consumer items manufactured by customers-a host of global brands-than any conference room shelves could hold.
Beyond favorable market dynamics, aggressive research and development, and a broad product portfolio of tailored grades of resin for different applications, NatureWorks boasts other advantages as well: a lean operation, a strategic owner and a manufacturing process that doesn’t rely on only one type of raw material. It’s no wonder that it’s tough to book the conference room these days, much less browse its contents. Despite just 100 employees, NatureWorks is a major player at the intersection of biotech and business.
From Field to Market
The firm got its start when Minnetonka-based Cargill began looking for opportunities to use agricultural byproducts like cornstarch. The firm partnered with Dow Chemical, and the companies created the small NatureWorks enterprise in 2000, made more powerful by the construction of a major plant in Nebraska.
The adjacent Cargill facility plant churns out lactic acid from plant sugars at a prodigious rate. NatureWorks then takes that building block and turns it into more than 15 grades of its Ingeo biopolymer. The company notes that Ingeo is a “natural plastic,” which may have sounded like an oxymoron even just a few years ago.
Most intriguingly, Ingeo can be formed into containers and packaging that looks like, well, plastic. And it’s familiar plastic at that: soda cups at sporting events, disposable plates at a picnic, the ubiquitous clear cup of iced coffee—all can be made using NatureWorks Ingeo resins. And these biodegradable products are so similar to the landfill-choking plastic models that consumers usually can’t tell the difference.
As NatureWorks kept expanding and researching, its ownership structure shifted, according to Steve Davies, director of marketing and public affairs. In 2005, Dow went through reorganization and exited many of its joint ventures, including the one with Cargill. Convinced that NatureWorks could be successful, Cargill became the sole owner, although a Japanese company, The Teijin Group, did come in as part owner for a few years before the recession made it sputter and hand the reins back to Cargill.
NatureWorks now finds itself well-poised for a little world domination. It is owned by Cargill, but it operates pretty independently, Davies notes. That creates an environment similar to a startup, despite having such a heavy-hitter as an owner. Staff members take on numerous roles, Davies says, and the efficient operations and market potential make the enterprise attractive to investors, he believes.
Another company advantage is diversity in the range of products that can be made from Ingeo. In addition to the stunning range of packaging products that seems to be getting larger every day, Ingeo is being used by brand owners in durable goods like photocopiers, electronics cases, mobile phones and auto parts. An expansion into textiles and non-wovens a few years ago has resulted in Ingeo fiber used in clothing, rugs, upholstery, bedding, baby wipes and disposable diapers. One customer even used the fabric for her wedding dress.
“With most new companies, the mantra is: Focus, Focus, Focus,” says Davies. “But from the beginning, we knew that we had to have as much breadth as possible, so we wouldn’t be stuck in any niche.”
Then, too, there’s the wave of environmental friendliness that just keeps getting stronger. Consumers are looking for green products, but they’re also growing tired of trying to determine what’s eco-friendly and what’s simply eco-hype.
“We welcome that level of skepticism,” says Davies, adding that consumer wariness prevents “greenwashing,” a derogatory term used to describe companies that take on an environmentally aware stance even though they can’t demonstrate how their practices or products are better for the world than, say, asbestos or car batteries. Davies says, “We have peer-reviewed research that demonstrates the benefits of Ingeo. We back up our claims of lower greenhouse gas emissions and reduced energy consumption in the manufacture of Ingeo compared to petroleum-based plastics.”
Also, NatureWorks avoids the greenwashing label because the company doesn’t market a “green product line,” he adds. Instead, there’s an expansive product collection from brand owners that has a green basis. Davies believes there’s a difference, especially in consumer perception. He says that when consumers opt for eco-friendly products, they usually think they have to make a sacrifice of some type. And people automatically think green products are priced higher—which was sometimes the case in the past since manufacturing and materials costs were higher—or that they aren’t as durable. “In reality,” Davies notes, “as the bioplastic industry has begun to achieve a greater economy of scale and the cost of petroleum–and everything made from it–has only climbed, our customers are often seeing that we’re now at cost parity or getting very close to it.”
Perhaps the company’s greatest advantage, though, is that it’s not tied to corn as a raw material. NatureWorks uses corn at its Nebraska site because it’s plentiful, but the company can use any type of plant sugar. If it were to open a facility in South Asia, for example, the manufacturing process would utilize the most abundant source of sugar, which happens to be cassava in that area of the world. In Brazil, they would use cane sugar, and in parts of Europe, they could utilize sugar beets. No matter what plants are used, the same Ingeo would be made, Davies says. And because plants are a renewable resource, NatureWork’s supply can stay steady.
That’s a formidable benefit, because it allows NatureWorks to consider global expansion while matching its raw material supply to whatever is the most efficient, locally abundant agricultural resource.
Despite its advantages, NatureWorks wrestles with some challenges. Even though its manufacturing plant produces more bioplastic in a single location than anywhere else in the world, the company has had to work hard to get some price parity with more traditional plastic. That effort has resulted in some success in certain products like cups and diapers, but there’s still a ways to go before all the manufacturers throughout the sometimes long supply chain to the final consumer can scale up enough to be more competitive with oil-based plastics.
Then there’s a curious mix of risk-taking and caution that’s worked well up until this point, but may need to be tweaked in the future. The company took a chance on market dynamics when it opened its large Nebraska plants, but stayed lean just in time to ride out the economic dips (and plummets) of the last 10 years. That level of efficiency kept the company growing when others were struggling in developing and marketing bioplastics, but although that time has passed, it appears that it’s still keeping its belt tight. There might be a strategic hire or two in the near future, but don’t look for a flood of job listings anytime soon.
“We’re very careful with hiring and growth,” says Davies. “Especially in biotech, you hear about these companies that are trying to get out of the ‘valley of death.’ They had an initial large investment and did a lot of hiring, and now they can’t climb back up. We stay very aware of how each move, each hire, will affect us in the long-term.”
The company’s spare Minnetonka offices—situated in a humble, single-story building with several businesses nestled beside it—certainly do make it seem like a lean operation. But given the stunning range of products from leading brands and retailers on display in the conference room, it’s not the small company it looks to be. Instead, it’s a bit of a mouse that roars. NatureWorks’ ability to keep innovating at such a rapid pace, and to move into new markets like durable goods, fibers and nonwovens, should provide fodder for growth for years, if not decades.
“You can have eco-friendly options for products like baby wipes and vacuum cleaner bags and potato chip bags,” says Davies. “We want to show it can be done, because we’re doing it. We’re happy to be the leader here.”