Overall, as we think about the idea of waste, we stand strong
that this idea should be an anomaly at some point in human
history because it only really came onto the scene in the
1950s. Before that, all the outputs we
produced were useful inputs to some other Organism.
You know, everything, you know, our chairs would have been wood
or our clothing would have been natural materials, you know, so
on and so forth. It's really since the 50s that
this sort of concept of waste has come onto the scene and it's
a non natural concept. What we have been always
thinking about is how do you use business models to try to create
solutions to waste. Welcome to the Environmental
Transformation Podcast, where we bring you interviews with
industry leaders, climate champions, sustainability
practitioners, EHS and hazmat professionals making an impact
in their businesses today. Each leader solving complex
challenges and delivering solutions within their areas of
expertise. I'm your host Sean Grady and
thanks for joining us today. Before we jump in, make sure to
follow us on your devices and visit my website at
www.seankgrady.com and sign up for our newsletter and e-mail
announcements. Now let's get started.
Welcome to the environmental Transformation podcast.
I'm your host Sean Grady. Today's guest is Tom Zaki.
Tom is the Co founder and CEO of Terrace Cycle and international
leader in innovative sustainability solutions
provider creating an opportunity or creating and operating first
of their kind platforms in recycling, recycling materials
and reuse across 21 countries. Terracycles on a mission to
rethink waste and develop practical solutions for today's
complex waste challenges. The company engages in an
expansive multi stakeholder community across a wide range of
accessible programs from Fortune 500 companies to schools and
individuals. For the listeners who've been on
the show or been following the show for quite a while, Tom came
on the show during episode #20 so that was the first year we
started this back in 2020, which I kid and hardly believe that it
was. It's been five years Tom, since
we last spoke, which, you know, at that point I was just
figuring out how to do this podcasting gig and you are one
of my biggest guests at the time back then.
We are super excited to have you.
And here we are over 100 episodes later and yeah, we,
we're still going strong. We we're doing about 20 episodes
a year and that's just enough to kind of keep a really good, you
know, two a month type cadence and a little break here and
there between holidays. And it's, it's been a lot of
fun. And so, Tom, welcome back to the
show. I really appreciate you, your
time and coming on. Thanks for having me, it's a
pleasure to be back. Yeah, I mean, you, there's been
a lot happening since in the past five years.
I mean, so I think it was one of the posts I saw that, you know,
you you put out on LinkedIn. And I was like, you know, I
would love to have Tom come back on the show and kind of update
the audience because there was so much you guys been doing.
Yeah. This would be great.
Yeah. You founded Terra Cycle with
this mission to eliminate waste at a time when sustainability
was just, you know, far from mainstream.
But now it kind of has been the big focus of mainstream in the
past five years, and in large part by a lot of things you're
doing others. But how has your philosophy
around eliminating the idea of waste, which is kind of one of
your themes here, evolved as Terra Cycle has grown into a
global enterprise? Yeah, absolutely.
And and it's interesting you say that, you know, we've been doing
this now it's year 24, the quarter century next year.
And you know, when we started Terra Cycle, it was, it was very
much sustainability was just emerging.
You know, you didn't have chief sustainability officers at
companies. There may have been someone who
sort of thinks about it on the side to now where you see a lot
of regulation coming. It's certainly a department.
It's, it's really evolved in a very big way for us overall, as
we think about the idea of waste.
This has been something that's been a lifelong fascination of
mine. You know, we stand strong that
this idea should be an anomaly at some point in human history
because it only really came onto the scene in the 1950s.
Before that, all the outputs we produced were useful inputs to
some other Organism, you know, everything, you know, our chairs
would have been wood or our clothing would have been natural
materials, you know, so on and so forth.
It's really since the 50s that this sort of concept of waste
has come onto the scene and it's a non natural concept, you know.
So for us, what we have been always thinking about is how do
you use business models to try to create solutions to waste?
And that historically started with how do we recycle things
that are hard to recycle. That's continued to flourish and
grow, but we've also put a lot of investment into how do we go
beyond recycling. For us, we believe that is the
idea of reuse and that's been our singular biggest investment
as a company is really seeing how we can mainstream reuse and
do that at scale. We've done that through our loop
platform and happy to say, you know, it's not worked
everywhere, but in France. It's the biggest reuse platform
in the country today. And if we hope that we can then
build on top of that and bring it to more markets and even more
scale. You know, I've been to France
many times, my wife and I. My wife's more of a Francophile
than I am, but we go to France quite a bit.
In the past five years, I think I've been six times.
So we enjoy the the culture and the food and everything.
But when you go to like certain restaurants there, AKA maybe a
McDonald's, Kentucky Fried Chicken or whatever, they've got
these reusable products. I think there are the loop
products you guys are using and I go, you know, I know the guys
behind that. That's really cool.
Yeah. And look, this is where France
leads. And I would say it's an
important note for why, right when we started Loop.
And I mean, we've invested $50 million into reuse.
So it's been a big one for us. We ran pilots in US, Canada, UK,
France and Japan. So we took a lot of bets, if you
will, on the proverbial global roulette table.
And France was the one that was able to really get the scale.
And the reason is that something as profound as we use needs
regulatory support. And what France has is that
regulatory framework, which is absent everywhere else.
France has laws that are A, mandating reuse, but B, also
subsidizing it so it becomes economically competitive when it
is embryonic and scale and then that subsidy is not needed,
needed as the scale gets bigger. And I think that's important
because today and you know, many countries we are deregulating,
right? And I think it's important to
note in sustainability in some places regulations not needed,
but in other places it is pretty central to ideas transforming.
Well, I mean, that's great. And I really applaud the the
reuse practices that Loop's been doing, especially in France and
other other locations. I hope it would pick up more
here in the US, but there's needs to be some cultural
changes, obviously, and some economic changes and from a
business perspective. But I was reading a a recent
article that came out by the National Waste Recycling
Association's president, Michael Hoffman.
He says he's raised concerns about America's circular economy
is at risk. And he says we want, he says, he
went on to say that the unified recycling PET imports, reduced
brand commitments and declining demand for domestic recycling
content is threatening US recycling infrastructure and the
jobs in the communities that support it.
Is Terrace Cycle also seeing this kind of play out in real
time right now? And you know, if So, what can be
done to change this concern? God, it's a good, it's a good
point. And I would say the punchline,
and I'll dive into it, is that yes, we see this in general
recycling. Terrace Cycle seems to be immune
to this and I'll explain why in a moment.
But it is important to note that in general recycling, that's
absolutely the case. So maybe just to dive in, the
general recycling business model is a very simple equation.
As a recycler, you would think about what is your cost to get
certain inputs. Let's say you're interested in
PET recycling. So what's your cost to get it
and turn it into a sellable output?
Those are your cost basis and you compare that to what you can
sell the output for. And so you are highly exposed
and very dependent on raw material value.
And if raw material gets cheaper because maybe virgin prices and
oil prices are going down, then you might not have a business
model to run. And that certainly expresses
itself in traditional recycling. Now what makes something
traditionally not recyclable? It's not that it can't be, is
that it just costs more to collect and process and the
results are worth. And mind you, this is the case
for the majority of objects. Our toys, our cosmetic
packaging, our wet suits to our bicycle helmets, our writing
instruments to our toothbrushes are not, are not recyclable, not
because they can't be, but because they just cost more to
collect them process and the results are worth.
And this by the way, is getting worse every year, not better.
Because the biggest mega trend in object design, I think across
all objects is make it cheaper tomorrow than today.
And there's virtues of that. Of course, it becomes more
affordable, more profitable, one or the other or both.
But nevertheless, that is the trend.
You know, the best thing I would say is take any object that's
been around for 100 years and look at its versions over
decades, and you'll notice exactly that trend showing up.
Yeah, on everything, clothing to biscuit packaging to toys.
Right. And so that makes things then
progressively less recycled in the traditional context.
The reason we've been immune to it is we don't depend a Terra
cycle on raw material value. It is a subsidy, but it is not a
dependency. So for example, when we collect
and recycle coffee capsules, sure, when we sell the aluminum
that comes out of that, there is some value, but it offsets maybe
1% of the cost. So if aluminum double s in
value, OK, it offsets 2% of the cost.
But if it goes to 0, which are, you know, hyperbolic examples,
it would increase cost by 1%. It's not that big of a driver
and that allows us to not be challenged by that type of
trend. Now, relative to overall
recycling, Terra cycles tiny, right?
We're about 100 million in revenue.
The overall recycling industry is orders of magnitude bigger
than that. And you're right, this is an
important thing to be very aware of, right?
Traditional recycling competes against virgin materials, and
virgin materials are cheap to extract.
Yeah, Yeah. Well and then the comment about,
you know, these unverified recycling PET imports and having
lower cost version product coming into the country to be
used, you know, for that that virgin product.
I'm my mind's thinking, OK, one, there should be a regulatory
framework that's, you know, kind of maybe puts a little more
emphasis on using recyclable content that's maybe generated
in the US versus taking it from some other country.
And maybe maybe to stem some of this influx, maybe a little
couple extra, some tariffs on some of this stuff could help,
you know, so that puts more pressure for, you know, the
local industries to produce it. And then maybe this there's a
little more commitment from some of these companies to use
recycled content and get some sort of incentive for it.
I don't know but where we need to go with this, but I I'm.
I think all of the above, I think America based on its
regulatory sort of leanings, the easiest would be doing things
like subsidies, you know, let's subsidized recycled content
produced domestically. I think your point is incredibly
valid and using post consumer, not only post industrial content
that should have a subsidy against it so that it's easier
for recyclers to compete because I think to the lay public,
what's in what I think many people don't note is recycling
is a tough business. Yeah, it's dirty.
Business, it's not easy. It's dirty, smelly, gross, but
it's also not oozing in profitability.
Yeah, You know, and I think that it is important to help offset
that. And we have mechanisms for that.
You know, we subsidized certain industries to make it easier,
you know, to create domestic value.
And you know, one of the really interesting things I saw is
where suddenly like, you know, take a tangential example, like
the clothing we use space, which is somewhat tangential to this,
you know, think companies that are big in that thread up and
reel to reel or rent the runaway.
You know, these companies that are doing re commerce and
clothing, their business models have really struggled.
You know, they've really struggled to make money.
And if you look at their share prices, they've been on a
progressive, you know, decrease. But when tariffs came in and
made it more expensive to bring in foreign goods, that's that
was what created the first rally in their business models.
And they started really moving in the right direction.
It's not to say I'm advocating for tariffs or not, but just
more to say that some form of economic benefit to these
domestic players is important because, yeah, on their own, the
businesses are not as easy. Yeah.
And I don't know if Congress or you know, some of these Congress
people will take this type of an approach and look at it a little
closer, but who knows, maybe somebody will take the mantle
and then run with it a little bit and and maybe it'll be some
legislation implemented. But you know, there is
legislation expanding. And then I want to get into
this. I mean, you know, with
governments in introducing stricter EPR, which, you know,
the extended producer responsibility mandates and ESG
reporting requirements, or should I say expectations, How
do you see terror cycles roll, you know, shifting?
Because I gotta imagine EPR is a big benefit to your business.
Yeah, when you're in the right location where those
expectations are real. Yeah, absolutely.
So in EPR, right, if we look at the 20 countries where terror
cycle operates, the vast majority have had federal EPR
for a very long time. And in fact in the Germany,
Austria, Swiss regions, the second biggest PRO which the
administrator of the PEPR taxes owns 25% of our business.
You know, so we have really great connections there.
And in fact, in America, this is what we're seeing now state by
state is where the regs are coming.
California, especially with Senate Bill 54, Senate Bill 343,
Senate Bill 54 more the EPR bill, Senate 343 is more the
truth in recycling labeling bill, but it's coming now.
It's challenging that it's going to be hyper fragmented, you
know, across every 50 state. One unifying factor is that CAA
seems to be the operator of most of these EPR, you know,
regulations, at least the same body that's going to be affect,
you know, becoming the PRO for us.
The way we interact with the EPR is 1.
When we collect and you know, we focus on the things that are not
locally recyclable, right? We don't want to recycle, you
know, collect through Terra cycle things that are locally
recyclable, but things that are not is our domain.
And so in many cases we work with the EPR organizations to
become those alternative collection models for the things
that the core blue box curbside recycling is not for as big as
like in the state of Maine. We run the state's entire
e-waste EPR system goes through US, you know, so it can be
anything from electronics all the way to food packages.
We also see that in in for example, California regulation,
the Senate Bill 54. There is a lot of talk around
reuse. So that could, you know, bring
out the type of work we do in France with reuse into the US at
a level of like a state of California.
And generally we think it's, you know, it's a good thing to start
producing the obligation to pay for those externalities.
I think the thing that needs to be eyes wide open on an EPR is
EPR is not necessarily a silver bullet.
It's a funding mechanism and it generally moves the funding for
recycling away from municipalities, which is
expressed to us individuals in our property taxes or if we
don't own them in our rent to our product prices because it
goes to the producers. So it's sort of moves from a
property tax to a sales tax. The important thing to really be
aware of is the net funding increasing or is the net funding
static or is it decreasing? Because we've seen, for example,
in some provinces in Canada, the net funding goes down when that
move occurs and in fact, less things get recycled.
So it's all about the money flow, right?
If the money flow increases, more will get recycled.
If it actually decreases, which is could, less will get
recycled. And I think that to me has been
the biggest unlock in thinking about this whole topic of
circular economy is that it's not about technical anything.
It's about the money flow. I'll, you know, I'll give you a
joke that's been really an easy way for me to express it.
I'll play that with you if that's all right, which is
imagine a cup is going to appear in front of you and it's gross,
it's dirty, right? You can't just drink from it.
You're going to have to go clean it.
And my hope is that in a vacuum, like no one's watching, you
know, there's no law telling you to do anything.
You're going to take that cup and clean it and drink from it.
So the first cup I put in front of you is a cup made from solid
gold. What's your action?
Are you happily gonna take it or not?
Yeah, absolutely. Yeah, and I imagine you would.
And you'd still clean it because it's valuable, right?
Yeah, and you'd take more and more if more were to appear
fair. Yeah.
OK what if it's now a cheap plastic cup?
Horrendously dirty. One of those like 5 cent plastic
cups. Yeah, maybe.
Depends. Probably not, right?
Depends on if I still have a
bunch of those gold ones sitting on the shelf.
Yeah, yeah. So imagine it's just that.
I imagine you'd ignore it right now.
What could get you to behave the same way on that plastic cup as
the Gold Cup? I imagine if there was also some
money in the cup that is yours to take if you take it and clean
it, right, and it's some money level, let's maybe call it a $20
bill, you go, great, I'll take and I'll take more.
And I think that's the essence of this to create cuz recycling
is a free market system. There is no law forcing any
actor to behave right. So it's all free market.
Which means either the reason to collect and recycle has to be
embedded into the object, which means the value of it needs to
be good enough to bother dealing with it.
Like an aluminum can or a corrugate box.
Or it has to be given to the object.
If it isn't, and if we acknowledge that the biggest
mega trend is to move from the Gold Cup to the plastic cup,
everything is moving in that direction, then it's about
watching the money flow that's attached on top of it.
Yeah, yeah. That's good.
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You know, I think, I think a lot of people also through
education, and I think that's for another area that we don't
really focus enough on is this concept of educating the public
on the value and the virtue, so to speak, of just proper
recycling and having constant, you know, like Schoolhouse Rock.
I, you know, videos for kids that that they, they can just
have it in their background going on.
They're learning about it and it just constantly is playing and
looping through their normal daily life.
And they're always getting a little seed planted about the
value of doing this. And I don't think that we're
doing enough in that space from, you know, an education
perspective to see the value. Of it, yeah, I think you're
right. And you know, what's nice about
that theme from an education and communication point of view is
reduce, reuse, recycle is the first lesson we learn in school.
That is not a climate change lesson.
It's not a diversity of species lesson.
It is a circular economy lesson. It's very easy.
It's the only thing really in sustainability that we
physically touch, you know, that it's and we physically make a
decision on what to do, you know, with the with the waste.
And I think if we drove excitement, a huge benefit will
come. You know, we did this study a
number of years ago with one of the big beverage companies where
we put out recycling bins and trash bins and busy train
stations, and they were both clearly marked right beside each
other, so there's no difference. And we watched how many people
would put the recyclable bottle, like an aluminum can or PT
bottle in the recycling bin. And honestly, it was only half.
The other half, we just throw it in the trash bin, and they're
right fucking beside each other. Like, yeah.
You're like. Yeah, then we added excitement.
We added some devices that when you put in the recycling bin, it
would thank you, like the bin would speak to you or it would
create some cool sound effect. Just some excitement, no money,
nothing else. It went to 95% good.
And we even saw people pulling out of the trash can to put in
the recycling bin or litter off the ground and putting in the
recycling bin to get that fun. And that little excitement I
think goes a long way. And it's important because if
you look at the narrative around recycling, I would say 20 years
ago it was there like that. Now there's a lot of vilifying
at oh, recycling doesn't work. Oh, why bother?
There's a lot of media around being negative on it and
recycling isn't perfect, but it needs to be supported as much as
possible, you know, from communication as well.
I mean, I could just imagine, I mean you could really gamify
that whole thing with, you know, AI and and video cameras.
Now you can have those two bents in there and submit those in a
recyclable product in the trash and go.
Yeah, yeah. And I think it's not and.
Then like it goes with the right one, they go, yeah, you know, I
think pause. And it's, you know, look, it's
not that people are bad. It's not that they are the
aluminum can consciously, Yeah, it's not that.
It's that we are so busy, it's more apathy and you can correct
that by just a little bit of free stimulus.
It's not. Yeah, right.
People for it, yeah, I think that would be kind of a neat
little project and you see recycling rate scope, Oh, man.
Certain locations, yeah, right. Totally true.
Totally. True.
Yeah. Well, you know, OK, well, let's
stay on the loop concept here because the platform is really
good. And when we first spoke five
years ago, you were just kind of getting underway with launching
it and then having some initial success, which I believe, you
know, that was one of the reasons I think we definitely
connected back then was this whole loop concept and I thought
this is really great. So here, you know, Loops
representing a bold vision for reusable packaging and circular
retail systems. So, you know, let's maybe you
could talk a little bit about some of the companies you're
working with and also, you know, what have been the biggest
logistical or behavioral barriers to scaling Loop
globally and how are you addressing them to make them
more convenient for reuse, eliminate single use, you know?
Yeah, no. And it's been a lot of
unintuitive learning, so I look forward to diving in.
So first, just what is Loop's role?
Right. So think you know, products like
a ketchup bottle or a shampoo bottle or you know, a bottle of
Coke, you know, or you know, whatever it may be, a bottle of
laundry insurgent. So our role is to try to make
all that reusable and we have two ways, 2 functions that Loop
does. One is we become a system
steward. So we are out there talking to
all the major producers to join in and then all the major
retailers to sell this stuff those because we don't want to
be a producer or a retailer. And that's been, you know, one
big success point on Loop is we were able to get 200 of the
world's biggest consumer product companies to join.
Think you're Unilevers, your P and GS, your Pepsi's Cokes and
so on and so forth. All the way to Nestle and P&G
are investors and part owners of Loop and so on.
And the role when the brand comes in is we help them enable
reusable versions of their product.
How do you make sure that that product, that package is
reusable, that it can go around and our threshold is a minimum
of 10 times. Then we go across and then work
with the retailers to make sure that they dedicate shelf space
to these reusable offerings and enable that a consumer can bring
back the used packaging to the store and put it into a loop
bin. That's to call it platform
stewardship. Then our operational function is
where the waste management function of reuse, where we are
the bins, we service the bins, we return deposits, we sort out
packaging almost like a Murph, but down to a product level at a
food grade standard. So exactly like a Murph, but the
opposite of like a quick conveyor belt in a dirty
environment. Think like food grade down to a
product level and then instead of shredding and melting, it's
cleaning and then it goes back to the producer.
They fill it up and sell it to the next different consumer.
The American proxy would be propane tanks, but imagine that
expanded to all consumable goods from gummy vitamins to infant
ointment. I mean, you name it, anything
that goes in the package. So that's the essence.
Then we effectively took pilots with all the world's biggest
brands and retailers, like here in the US, Walmart all the way
to Kroger in Canada, Loblaw, which is their biggest retailer,
UK, Tesco and so on and so forth.
Carrefour in France and we first land on online pilots then we
transitioned that's probably when we spoke five years ago
then we transitioned that to in store pilots first interesting
point because we mentioned behavior you couldn't tell the
difference between American, the Japanese, the Canadian, French
or British consumer. Everyone behaved the same.
They were totally fine with it, liked it, did the returns all.
And in fact, all five countries don't have active package reuse
systems on them today. It's not like the French public
are returning, you know, like in Germany, for example, where you
do return your beer bottles and certain soda bottles for deposit
and refill. Yeah.
So that all went well. Then we're able to get into
pilots, 10 store pilots, give or take, you know, in all these
markets. And that all went well.
And that's where we really saw a big differential between France
and everywhere else. France continued to scale
aggressively. And in all other markets, we
were not able to get out of pilots.
So we shut those down. And France became this whole
sort of, you know, bastion of success, while everywhere else
we shuttered. And the big reason is the
regulatory environment in France.
There's mandates mandating that reduce must, you know, be
adopted at a certain scale by 2027.
And their subsidies helped offset some of the early
adoption costs. So that allowed us to really
scale. Now, what are the some of the
unintuitive learnings? And these were, I'll give you 2
of the biggest ones that like I, you know, wow, I had no idea
this was the case till we learned it.
The first is consumer behavior. Because when you talk to a
brand, when you think consumer, if it's an oral care brand, you
are only thinking about the consumer behavior around
toothpaste. Or if you talk to a Coca-Cola,
it's only around the consumer behavior around a can of Coke.
Right. Yeah, yeah.
And you get really sort of pigeon holed.
But the reality is when you and I go shopping, we're not
thinking about toothpaste or or coke.
We're thinking about shopping and getting in and out of that
shop quickly and efficiently and, you know, getting what our
family want. Yeah.
So here's a good example of something unintuitive when we
did, let's say, a reuse display with five products only, and
this would be in France. An example was like a Heineken,
maybe a still and sparkling water with Damon and then like
two different Coke flavors with Coke, like 5 products.
The sales were pretty low and the return rates were dismal,
like 10% of the packaging would come back.
Then you do the exact same store, same everything, but go
to 50 products. So all those same water, coke,
beer, but then you add on shampoo, conditioner, chickpeas,
you name it, a whole random assortment of 50 products.
The purchase rates go up close to 2000% more per product
increase in sales and the return rates go from failure like 1015%
to 8090%, which is a great success.
And So what that taught us is consumers won't do reuse in like
a product by product vacuum. They will either do it big if
there's a lot of choice or not do it at all.
And that includes the purchase and especially the return, which
is a key KPI in the world of reuse.
I could see that I because, you know, basically it takes too
much effort to sort out the one or two or five pieces versus the
50 pieces they currently do every day.
They're like, I just want to do it all at once or not at all
because it's. Too much.
You know, the best metaphor is I'm not going to make an organic
salad with just organic tomatoes.
Yeah, So that and there's lots of derivatives of that learning
that came up. But that was a big one for us,
which means that reuse has got to go big systemic or has no
chance of success. Another was when we first
started Loop, we got really seduced and so did all of our
partners by the idea that when you move to reuse, the package
suddenly becomes a depreciatable asset and not a cost of goods
sold. In other words, in a disposable
package, you got to embed the entire price of that package
into the singular purchase at 100% because the consumer owns
the package in the end and you never get it back.
In reuse, you embed only the use of that package.
So if that package is going to go around 30 times, every
consumer is only charged 130th of the cost because it becomes a
depreciatable asset. And what that opens up is the
ability for the package to become incredibly beautiful,
like Haagen Dazs containers made from stainless steel with
insulation properties and like the best type package you've
ever seen or Cascade package ever museum quality type stuff.
And that is true, but we forgot the pragmatic, which is that a
consumer product company like Nestle is wonderful at making
anything in small volume out of a lab and then great at making
it a massive volume, but really can't do anything in between
those two book ads. And so suddenly in some of these
pilots where we were fulfilling these beautiful, gorgeous
packages at 5 stores, 10 stores, producers came to us and said,
that's all great, but don't call us until you're at 1000 stores
because we can't fulfill anything in between that.
And remember the first lesson, which is you need a massive
assortment. Suddenly you have this no man's
land of how do you, because the retailers can't scale that fast
because they're scaling a system, you know, so you got to
scale it like 20 stores here, 50 stores there.
And so that took us on this whole journey of how do we solve
that? And what we realized is if you
take all packaging forms in the world, all of them something
that packages the content and you put them on one end of the
spectrum, the most expensive packs per kilo or liter of what
you're packaging. Think perfume bottles, laundry
detergent bottles, the wine bottle, Scotch bottles, things
of that nature. And on the other end, you put
the cheapest way to package a kilo or liter thing, flexible
film, you know, yeah, even like even cheaper like a pouch, you
know, or a or a bag for potatoes, right.
Put it over there. Yeah that bottom third those
packages, most of them already conducive to reuse like a Scotch
bottle. You don't have to improve its
quality to be able to have it to go around.
It's honestly way over designed to be used.
Once way over designed it can easily be cleaned and refilled
and boom, no package change. And in fact 1/3 of packaging on
a supermarket is already conducive to reuse with next to
NO0 to next to no changes at all.
And those you can scale through that no man's land.
Yeah, wow. And so there's a lot of these
sort of very interesting unintuitive things, but I think
the key punch lines are it's not the consumer at all.
It's entirely about getting the businesses to go through the
journey because the consumers, they're willing and good to go.
Yeah, yeah. I kind of feel like most people
would or will recycle. Yeah.
Providing it's, you know, I think either easy, right?
You know, it's easy. I mean, let's just be honest,
everybody wants to make it easy. So if it's easy, then you know,
then that's going to be something they'll do.
I think more people would do it if there is more education.
So they're more aware in certain communities.
I think there are probably less interest.
And I think some certain age groups of people are like left.
I would have to say some of the older people in like baby
boomers are probably like, ah, you know, whatever.
But then, you know, GN Xers and Millennials, the GN ZS are
really. Like God, it's the younger are
indexing high because that they're the future of where the
planets moving and it tends to be greater greater for kids that
have grown up where climate change has been the thing their
whole lives versus like you and I, you know, it wasn't a thing
when we were born. Yeah, exactly.
So they're, they're and they're putting their money where their
mouth is on their value purchasing too, right.
You know, they're, they're really doing that, which is
good, which is cool. I mean.
Look, I that that gives good optimism, you know, and I don't
think it's rocket science to solve this stuff.
It isn't. Yeah, yeah.
You know, so I've been on Facebook a lot lately and I for
some reason have got the right algorithm going on because.
You're the right. And I see his terror cycles with
this big IPO reggae going on. Let's dive into that talk about
that. I think that's pretty exciting.
And let's see, you know, maybe, maybe you'll entice a few
listeners to invest. Yeah.
Well, thank you. You know, absolutely.
So first and foremost, you can learn all about everything that
I'm going to describe in a moment at invest.terracycle.com.
And we do file with the SEC now for gosh, five years our U.S.
company. So all that financial
information is posted on sec.gov.
And I would really recommend if anything's interesting what I'm
about to say, please, please download those filings.
And you know, do you know your own review, but that we are in
the middle of a major capital raise through what's called a
Regulation CF and then later will be a Regulation A financing
where basically folks can invest a minimum of $1000 and invest
and own a part of Terrace Cycle US.
And we did this the first time five years ago, actually very
close to the time you and I chatted last, where we raised
$19,000,000 into Terrace Cycle US.
And what's nice is if you invested in that, in that time,
you would have already gotten back I think somewhere between
17 and 20% of your invested capital and dividends.
And that capital allowed us to really grow the company which
grew during that period, I think 75% in, in scale like quite, you
know, quite a bit. We did that through doing 3
really exciting acquisitions in the US, you know, looking at
companies that do e-waste recycling or battery recycling,
light bulb, these are these specialty recycling groups.
And this is something that we're excited to do again.
You know, we've been profitable for over a decade or we've seen
really good growth. And at some point in time, we
would love to get to a liquidity event like an IPO.
And this is the like the right thing for us to do now to like,
you know, really gear us up for some fast growth before
something like that might, might occur.
So we're really pumped about it. The, you know, investors the
first time around, I think have done very well.
A lot of those guys have reinvested in this round.
And again, at invest.terracycle.com, there's
all sorts of information, but I especially encourage folks to go
to the SEC filings because there you get incredible transparency
into the company's financials and its goals and so on.
Yeah, no, that's great, Tom. And I like I said, I really like
the ads that are out there and kind of how you're, you know,
talk about changing the the mentality of recycling and, you
know, recycling those difficult waste streams or those weird
things that people don't think about, you know, and and I think
you guys are tackling some challenging ones, which is
really good. I mean, and, and I mean there
are other companies doing similar or something at scale
with a large, you know, investment in recycling plastics
and things like that. But I think you guys are doing
some really cool stuff there and so excited to see you guys get
some investment revenue coming in.
So how much longer is the IPO or the the reggae, you know,
offering going to be open? For you guys for.
Investors. Right now we are in what's
called The Reg CF which comes before the reggae.
That's for $5,000,000. We are as of today around I
think just over 3,000,000 has come in.
We expect that to close, you know, probably by end of this
month. It's, it's really accelerating
quite nicely. Then we go through the process
with the SEC to approve the reggae and that would probably
assuming approval though we got it last time.
So I'm, you know, not too concerned, but assuming that
goes live early next year and there we would raise potentially
up to 75,000,000 during 2026. And this allows us because we
don't have losses, it's not about plugging losses, it's
about really increasing investment into organic growth
and doing some really good strategic MNA as well.
And so we're really pumped to be able to lean in on doing that.
And you know, we should based on the CF be able to announce an
acquisition early next year that we're working on.
And then if we do the reggae, then do some even more bigger
ones ideally. That'd be great.
Well, you know, one of the little benefits for investors or
potential investors who are considering right now is talk
about this real quick is there's you could earn a 10% bonus.
That's right. You know, let's get the
enticements a little stronger here.
The yeah, yeah, absolutely. So in when you go to
invest.terracycle.com, you'll see there this idea of bonus
shares. This is unique to this first 5
million only. This is not going to be
available in in the reggae and they're effectively depending on
when you invest, you can get, I think if I'm not mistaken, up to
25% extra share. So basically what that means is
if you invest a dollar, it behaves as if you invested $1.25
got. You.
Yeah. So you just get more equity.
And what's nice is, you know, every year, historically, we've
paid out dividends. You know, so you get a dividend
check from us and then the equity value grows as we get
bigger. Well, that's great.
I mean, I think you guys are going to do well with that.
And for the audience listeners, I, you know, recommend you guys
check it out and if it makes financial sense for you guys,
jump in and I'm sure Tom and Terra Cycle would love to have
you guys invest. We would, absolutely.
You know, let's let's dive in if we could a little bit about some
of your partnerships. I mean, you guys are a process,
you process a lot of stuff, but you don't manufacture really
anything that I know of and you don't really have a tremendous
amount of assets in person. I mean, you got some, but I
mean, talk about your partnership network.
I mean, terror cycle success relies heavily on these
partnerships with some of the world's largest consumer good
companies, which is huge. And then also, you know, how do
you navigate the tension between partnering with the major
plastic producer and, you know, also advocating for waste
reduction in circular design? You know, it's like, yeah, yeah,
yeah, yeah, absolutely. So first and foremost, how does
our model work, right? Like we are only dealing with
things that are not locally recyclable, which are not
locally recyclable, like a Gillette razor blade to a RIP
curl wetsuit because it costs more to collect and recycle than
the results are worth. So we need funding from a
stakeholder to be able to offset those economics.
And that could come from a producer.
And we're very proud that we work with most major producers
out there. You know, from your Nike shoes
all the way to your Ferrero chocolates, right?
And hundreds and hundreds in between.
Over 40,000 clients. It could be retailers like your
Walmart all the way to boutiques, you know, like
Akhil's Boutique and so on and so forth.
And we get funding to then be able to effectively make
recycling for these objects work.
That's the sort of business model, if you will.
And the funding can come from, you know, these big producers,
They could also come from direct consumer purchases.
People can go to our website. We always recommend if you do go
to terracycle.com, check out the free programs first that are
paid for by these partners. And then if you still want to
recycle something where there's not a free program, use one of
our paid services where you effectively are picking up that
that bill. That would be like our zero
waste box division and so on. That solves the economics.
Then our operations, you know, we have collection, sorting and
processing and we own and operate about 25% of our supply
chain and then we use different third parties for the other 75%.
So for example, in logistics we own and operate a lot of our
regulated waste logistics. You need a lot of permits and
you know, and capability for that, while waste that doesn't
require permits to move around, we use third parties.
And in that process, what we do is we basically take the waste
and we give a legal guarantee that we recycle everything,
which is quite unique. And then from there, we find
manufacturers who need these inputs to make their products.
So it could be like chip bags turn into automotive parts or
let's say baby food pouches turn into drainage pipes and things
of that of that nature. What's really exciting to us
though, and this goes back to the partners, is when the
partners want to take that waste back into their ecosystem.
And this would look like with Pilot pens, we've commercialized
the world's first pen from used pens in our Japanese division or
with ASIC shoes, they're for shoe made from used shoes and a
ton of other examples. Like, we love it when the
partners don't just want to see that object get recycled, like
Asic's wanting to see shoes get recycled, but then say, how do I
help make shoes from that recycled output to us, that's
phenomenally exciting and starts doing what you were talking
about earlier is keep these materials domestic, keep them in
the supply chains. And then it also reduces the
need to do new extraction, which is the number one cause of all
environmental harm is extraction, farming, mining,
those sort of things. Yeah, yeah, I know, absolutely.
I mean that's, that's really good.
Lots to go there. I mean, you know the your
downstream partners too, I mean that you're partnering with I'm
sure are are really important for you guys and you know, you
probably have a handful of a handful hundreds of them
probably across the country. You know that there that's a
that's like the lifeline for a lot of your business, right?
Yeah, Yeah, it's very important. The distinction though is we
don't depend on certain raw material prices being hit.
This is one of the really magic sauces in our business is almost
all other recyclers need a material to be at a certain
price to make the engine work because the key revenue is
selling that material. So if you're a polypropylene
recycler or APET recycler, you need polypropylene and PET to
hit a price for your business to be profitable.
When it goes up, it's even more profitable.
And inversely, it's sort of like a drilling for oil.
If you know the price per barrel goes down below a threshold,
certain drilling activity doesn't make sense anymore.
Yeah. Right.
We are really different because the economics for us are not the
key. The the economics of the output
materials are not a key driver, right?
They are a subsidy, but they are not really going to materially
affect the price because for us these waste streams were never
profitable to recycle. It never made economic sense to
recycle a pen. And the value of the resulting
pen plastic maybe affects the economics 10% one way or
another. But it's not the material driver
that allows us to to say we can sell the materials at whatever
the market can absorb them at. So we don't have this issue of
we got to wait till raw materials hit a certain value.
That's really good. You know, technology has really
advanced a lot in the past five years since we've spoken and not
that it there wasn't already present then, but it seems like,
you know, it's, you know, exponentially advanced.
And since then, how's Terra Cycle investing in technology,
especially around AI, data analytics, tracking systems,
things like that to improve the material traceability you're,
you know, optimizing recycling streams, providing more accurate
ESG reporting for your partners. What are you guys doing in that
space? How much you investing in that
space? You know what's talk about that?
Yeah, absolutely. Quite a bit.
Not an AI to be fair, right. I mean we use AI as a tool,
right, But it's not like, you know, a key operational
investment area, but a lot of other areas.
We just opened a multi $1,000,000 laboratory here in
our Trent, New Jersey headquarters looking at
mechanical and chemical recycling innovation as well as
we use cleaning innovation. That's been a big one from the
R&D center that's been a long time coming.
We also put a lot of effort into track and trace where it's big
investments in the third party auditing all the way to systems
that we can trace the material all the way through our supply
chain. This allows our brand partners
to make legal claims around, you know recycling occurring and
allows us to be able to make a guarantee that all waste we
collect will be recycled. That's a really, really, really
big one. Then where we invest quite a
bit, like total investment of dollars is into new equipment
for our processing partners. So we may not run a processing
facility, but we'll come into a processing site and be like,
hey, here's $1,000,000, you know, a line that you can then
implement, attach it to your production and now you can
recycle cigarette butts or now you can recycle cosmetic waste
or whatever the waste stream may be.
That's been probably fiscally by far the biggest area of
investment for us is boosting the capability of processors by
doing equipment investments into them.
OK. I mean, that's great.
That's good. I mean.
The other thing too to note there is we believe that there's
no silver bullet solution. So we, you know, many people
have asked us like, hey, is it mechanical solutions or chemical
solutions? We use both wherever they are
the most prudent. And what we find is that what
tends to come out, especially in complex waste streams is a lot
of mechanical components and then maybe a chemical process
here like a solvent process or a depolymerization process.
They're mixed in with a lot of mechanical processes.
So how, how are you helping these companies with their
reporting of, you know, sustainability because that
seems to be one of the things I think is maybe a, a
differentiator and or you know, you know, it's added value to
the whole business. This is a very important part,
right. So in reporting what we can do
is basically track in our recycling programs exactly how
much of that waste stream was generated every location, you
know, down to the day all the way through the supply chain.
This allows folks the big part of reporting now in the US is
compliance with EPR. And so we work the biggest PRO
there is CAA. And so we work to be able to
register the volumes of what these different companies
collect and recycle that is subject to EPR so that they can
really say, hey, we are, you know, voluntarily recycling this
percent of our waste stream in this state.
Here's how it's flowing through the whole system all the way to
end market. Are there any big elephants
still out there for EPR that companies haven't really jumped
in on to establish? You know.
Establish a recycling circular business to to manage that.
I would say from a EPR in specific, EPR still embryonic,
right, like where have we seen EPR come out in the US is
regulated waste streams, you know, think paint, aerosols,
batteries, you know, universal waste per SE there.
It's been there for a long time because those are hazardous
materials and a good industry is really popped up as you know to
serve that. Where it's coming now is
packaging and we're going to see that state by state.
But what's left is all the product that's in that
packaging, which all becomes waste 99% within the year of
purchase. Yeah, yeah, right.
And that you see in more EPR advanced countries like France
coming already. But that's that's going to come,
I think in the US over the next coming decades.
OK, all right. Well, I mean, I've been watching
another one company they they recycle tires.
Yeah, called pre tread. I don't know if you've heard of
them, but they're amazing firm. What they do is they do every
they recycle every bit of the tire and then they make Rd.
barriers out of it. That's really nice.
That's. You know, instead of the
concrete ones you see out there or the.
Big, You know, with electric cars, tire waste goes up.
Yeah, yeah, yeah, they're much heavier.
So you're, you know, using up that rubber at a much faster
pace. Yeah.
So they, they've been, they've been solving that unique
challenge and and doing a great job.
And that company's called Pre Tread and yeah, I encourage you
to check them out. They're pretty good.
They're, I like them good business model, you know, the
consumer role and behavior changes.
Many sustainability solutions depend on this, like active
consumer participation. But based on your experience,
what strategies have you have proven most effective at
motivating consumers engage in recycling and reuse?
I mean, a lot like, I think we've been talking a little bit
about it. It's the money like, like.
Yep, Yep. If I'm going to pay, you know,
go back to the old days when you put a deposit down for, you
know, a six pack of Coke or 8 pack of Coke bottles, right?
You know, is that really the big share it here or something else
that we can do? I'll answer it for reuse because
that's the, you know, the the area where people think there's
the most behavior change. So the golden rule for us in
Loop is we need reuse behavior to behave like disposability.
We want it to feel like disposability.
In other words, have the person do the least amount of shift
possible. I think that's the most
important behavior. Shift is don't actually try to
go for shift if you can avoid it.
So everything we do and we use it to make it mimic A throwaway
sort of process. A good example is when you
return the loop bottles, we give you the option of a reusable
garbage bag. So you put in all the bottles
like a garbage bag and you just drop off the garbage bag and
people love that because it echoes the concept of waste.
So that's really important is to in behavior change, first go for
the least amount of behavior change.
Then what are the other vectors? It's three, you know, that
really drive behavior change. It's economic incentive.
You know, that would be like getting a deposit back in reuse.
It is fun. How do you smile?
How do you, you know, like like some of the examples we talked
about earlier, like create happiness and happiness can come
from fun. It can come from feeling
purposeful, doing the right thing, you know all that.
And that's a really important motivator.
And then the third is you got to communicate it.
People have to be aware and we use our biggest test for good
communication on packaging is the spouse test.
The spouse test is person A bought the thing and it's
totally aware of how it functions, but the last drop was
consumed by person B and they need to know what to do.
And that comes through in really good communication.
And it's those three things that really help create, you know,
the solutions. Don't ask for behavior change
and then motivate it with those 3 vectors.
Yeah, Yeah. That's good.
Yeah, I would agree.
And and that more education would be really be like we've
touched on it earlier, but the education seems to be the one
kind of I think I think we could easily do right.
Well, you know, Hey, Tom, thanks for coming on to the show.
I I've got one last questions. You look ahead at 20-30.
You know, what does the future for Terror Cycle look like for
you and Loop? We're really excited.
You know, we are seeing continuous growth by then you
know, we we hope to have hit our liquidity event and you know
we're getting there by investing in recycling, hard to recycle
materials, recycled content, especially reuse we think is a
huge game changer. And by 20-30, I think we'll be
even more mature. And yeah, for us, it's a very
exciting moment. And it's nice to see that
there's a lot of good tailwind all over the world, you know,
pushing these ideas forward. Yeah, even even though there's
been a little bit of a, you know, poo on, you know, climate
change. I think it's like it's a
reprieve, you know what I mean? I don't think anyone believes
that. Like we solve climate change.
Yeah. Yeah.
We're just taking a break from caring for a moment.
Yeah. But I think still there's a lot
of people in the business world that are still like, no, we're
doing this because it's, you know, it's, it's the right thing
to do, right? Exactly right.
So, well, hey, good luck to you and this, you know your, your
investment efforts there with the stock and investment.
I think it's going to be great. And thanks for coming on the
show. It's been great to talk with you
again and, and maybe highlight all the the great stuff you guys
are doing. And yeah, let's keep the
conversation going and we'll talk soon, OK?
We look forward to it. Thank you so much.
Thanks for listening and watching the show.
If you enjoyed the show then please share it with your
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