CASE STUDY
Environmentally friendly products have never been as hot as they are now, and the number of brands touting their “green” credentials has never been higher. TerraCycle products, though, may be the ultimate organic products to hit the market. A 19-year-old Princeton student named Tom Szaky founded TerraCycle in 2003 after visiting Montreal with friends in 2001. There, he saw how worm poop was being converted into fertilizer. The business started out as an idea for Princeton’s Business Plan Contest. Tom placed fourth in that contest and decided to go ahead and start producing fertilizers based on worm poop casting. Tom borrowed money from friends and family to buy a massive worm poop conversion unit.
In April 2003, TerraCycle won the prestigious Carrot Capital Business Plan Challenge, which came with a million-dollar investment. Investors wanted to move TerraCycle away from its broad waste-management mission to exclusively focus on plant food. Tim rejected the investment in order to maintain his vision of the company. He based his business model on recycling, starting with the trash that TerraCycle turned into compost and fed to millions of red worms. The worm castings were then liquefied and put into previously used plastic water and soda bottles. Even the company’s shipping cartons come from recycled materials. TerraCycle’s organic plant food hit the shelves in 2004 with labels boasting that it “Contains Liquefied Worm Poop!” It didn’t take long for the products to take off. By 2006 the company had been named “The Coolest Little Start-Up in America” by Inc. magazine and had passed the $1 million mark in sales, growing as much as 300 percent from the previous year.
TerraCycle received orders, though small, from such Canadian retailers as Walmart and Home Depot, which provided the company with a shelf presence. These initially small orders were followed by much larger orders, and with that came the need to expand the company. After the initial success in the Canadian market, Tom focused on getting business from U.S. retailers, which was not hard to generate, given society’s interest in environmentally friendly products. Tom realized there was a need to grow the company’s product mix, so he introduced new product lines to the market.
TerraCycle achieved its million-dollar sales mark in 2006. By 2007, TerraCycle was offering nine different product lines at Walmart and Home Depot and was attracting the attention of the larger fertilizer companies. Scotts Miracle-Gro sued TerraCycle for infringement of its business ideas and false advertising.
The lawsuit provided huge amounts of positive publicity to TerraCycle, and in August 2007 it joined hands with Honest Tea to launch Drink Pouch Brigade. This program was developed to encourage schools of collect used drink pouches for nominal sums. Subsequently, TerraCycle introduced the Urban Art Pot, which was made from electronic waste, and the Rotary Composter and Rain Barrel, which were made out of wine bottles. Given TerraCycle’s previous success with the Drink Pouch Brigade, it introduced the Yogurt and Energy Bar Wrapper brigades, which led to the idea of “Sponsored Waste.” The Sponsored Waste idea involves partnerships with consumer packaged goods (CPG) companies to undertake waste collection programs for a small payment. After a series of successes introducing a number of different waste programs, Tom sold the pilot for a TV show, called Garbage Moguls.
By 2011, TerraCycle had 100 employees and offices in 20 countries in Europe and South America as well as Israel. TerraCycle donated $3 million in 2011 to different charities. It actively partners with various businesses, such as Old Navy and Home Depot, to collect used products sold by these organizations recycle them into new products. Currently, TerraCycle has 1,500 different products, which are available at a variety of stores, such as Walmart.
The following questions relate to the case ‘TerraCycle – Turning Trash into Products’.
C3-1 Go to www.terracycle.net and look at the types of products the company sells. Describe their product mix. How wide is it? Which basic product lines does it sell? How long are they?
C3-2 Classify different products manufactured by TerraCycle into the types of consumer product categories that you learned in this chapter.
C3-3 How well do TerraCycle’s bottles perform the four packaging functions discussed in this chapter?
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