Waste not: TerraCycle makes millions by recycling rubbish

Exterior of TerraCycle’s office. (TERRACYCLE)   For nearly two decades, Trenton-based TerraCycle has built its business on waste. The company, which posted about $32 million in sales during 2018, started in 2001 as small provider of fertilizer made from worm droppings. Then it gradually expanded to become “a world leader in the collection and recycling of waste streams that are traditionally considered not recycled,” like toothbrushes and other oral care products, according to a regulatory filing TerraCycle submitted to the Securities and Exchange Commission in connection with its $25 million Regulation A stock offering last year. Courtyard at TerraCycle’s office. (TERRACYCLE) For founder and CEO Tom Szaky, 37, the journey hasn’t just been about reinventing the company. Instead, he said, “Our mission has always been to eliminate waste. We started by making products out of waste, so the product was the hero. Then we realized that if our product was the hero, we would always be chasing after the easiest waste streams. So we made output the hero, and underwent a fundamental shift to a service focus.” Under this incarnation, TerraCycle rolled out turnkey platforms, called Brand Sponsored Collection Programs, which are designed and administered for manufacturers that want to recycle their products or packaging. “For example, Colgate contracted with us to set up a national recycling program to collect and recycle its oral care products and packaging,” according to the SEC filing.

Leveraged business model

In effect, TerraCycle leverages the activities of its brand partners and others. In the Colgate partnership, schools collect empty toothpaste tubes, toothbrushes, floss containers and other used oral care waste and packaging, and then recycle them through other companies that contract with TerraCycle. The schools have an incentive, since the ones that collect the most waste can win a playground made from the recycled materials. Arrangements like these ease TerraCycle’s financial burden, since “[w]e don’t own processing facilities as it produces CAPEX risk and lowers nimbleness,” according to the SEC filing, referring to money-draining capital expenditures. “Also many processors are willing to either use their existing equipment to process our unique waste streams or install new equipment as needed. To our knowledge, no other company collects the waste streams we do for recycling, nor holds the knowledge of how to recycle these materials.” The company isn’t done evolving, added Szaky. “We always ask ourselves if we’re accomplishing our mission — eliminating waste — with our current business model. We recently asked that again and realized recycling is important, but it only solves waste at one level.” Enter Loop, a new TerraCycle enterprise that will let consumers order goods from a Loop website or from sites of partners like P&G which will be delivered to their doorstep in a reusable shipping tote. The customer pays a refundable deposit to cover the tote and, when they need to reorder the product, they place the empty package into a “Loop Tote,” for pickup directly from their home. If there’s recoverable used product left over — like diapers, pads or razors — they’re picked up to be reused or recycled. If a product refill isn’t needed, the consumer’s tote bag deposit is returned or credited to their account. Today, with a global footprint, TerraCycle has about 600 employees; about half of them are in the Trenton headquarters. Szaky said the company has a culture that’s “fun and informal while serious and rigorous in its work ethic,” and noted that’s a big part of TerraCycle’s success. He plans to keep it casual even as the company continues to expand. “The informal atmosphere spurs creativity and innovation,” he noted. “We don’t focus on how you dress; this promotes the flow of information. But as we continue to grow, we’ll have to work at keeping that fun culture, and not forget it. It’s like a plant: if you water a plant, it’s easy to keep it alive. If you neglect it, it’s very difficult to bring it back.”