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April 29, 2011

Plastics News

Suppliers say Coke mandates triggered recycling shutdown

SPARTANBURG, S.C. (April 29, 1:45 p.m. ET) -- Suppliers are caught in a squeeze and don’t understand why they are not being paid if the plan is to resume production of recycled food-grade PET sometime this summer at the Coca-Cola Co. joint venture plant in Spartanburg.

They also said that some of Coca-Cola’s mandates helped trigger the shutdown of the plant, and wonder what will be the outcome of the ““restructuring” of the joint venture between Coca-Cola and United Resource Recovery Corp. LLC.

“What are you negotiating?” asked one recycling industry executive. “If they force URRC out of the picture, they are ‘stuck’ with the largest bottle-to-bottle plant and would have to completely revamp the plant, or shut it down — and how do they explain that.”

For its part, Coke continues to assert that it is committed to being a joint partner in the NURRC Spartanburg plant, making it viable and incorporating recycled content into its PET bottles.

"We remain committed as always to our recycling and recycled content efforts," said Scott Vitters, general manager of the PlantBottle packaging platform at Coca-Cola.

As for payments to suppliers, “they’re not telling me what’s going on,” said one supplier. He told Plastics News that NURRC is two months past due on the payment of $25,000 for two truckloads of material that he sent them in January prior to the March shutdown of the plant.

“Bad news is news. But no news is frustrating. When no one calls you back, it doesn’t do a thing but fuel the fires of anger.

Another supplier that delivered 350 truckloads of material to NURRC and who is owed more than $1 million has also not been paid and reiterated the same message.

“They need to speak up and return phone calls and let us know what the plans are. You have to be accountable with the people you’re doing business with.”

But Vitters and an executive with URRC dispute the claims of those suppliers.

“NURRC has a schedule of payments that they are working down as part of the restructuring,” Vitters said.

Likewise, Carlos Gutierrez, president and CEO of URRC, without elaborating further, said “all I can tell you at this time is that suppliers are being paid,” suggesting that suppliers call him directly.


In a statement, Coke said: “We can’t comment on the business dealings between NURRC and their suppliers as the business is wholly operated by URRC.”

But other sources in the recycling industry said NURRC simply “doesn’t have any money” because of a larger struggle between Coca-Cola and URRC over how to supply the plant with material.

Sources said URRC had told Coke for more than six months that it would make more economic sense to use PET bales from bottle deposit states than to spend the money to clean up less-expensive curbside bales.

“They kept telling Coke that that approach was not sustainable,” said one recycler. “But Coke continued to set a price ceiling on what they [NURRC] could pay” for bales, effectively forcing NURRC to purchase curbside materials. “Now NURRC is stuck with all those invoices,” the source said.

Part of that clash in approach stems from the way Coke portrayed the Spartanburg plant from the onset, sources said.

“The problem is that from Day One, Coca-Cola had said that they weren’t going to use deposit bottle because they said they had found a new way to recycle curbside bottles,” said one recycler. “But their process didn’t work.

“Now they say that it is just a small glitch,” said the recycler. “But they’ve been pontificating how they’re saving the world” with what was planned to be the largest food-grade recycled plant in the world. “They can’t have it both ways.”

Recyclers are also angry over how Coca-Cola has handled the entire shutdown, including keeping the shutdown quiet until Plastics News broke the story April 18.

“They have literally thrown the entire recycling industry under the table by saying that they couldn’t get a consistently quality of material,” said one source. “The reality is that there are a lot of PET recycling plants operating successfully by running deposit bottles.”

“Besides, they and everyone else in the beverage industry have always tried to undercut and eviscerate the bottle deposit system that would get them the material they need by always opposing bottle bills,” said the recycling executive.

For its part, Coke has said that any collection system needs to focus on all containers and not on a single specific package, such as PET water and soft drink bottles.

Coke continues to state its intent to resume normal operations at the plant after “new equipment” is installed.

“You’ve got a restructuring taking place and new equipment will be coming in,” Vitters said last week, without detailing a specific timetable. “It will be there shortly. That hopefully will get it operating to where it needs to be to be sustainable and we will be able to ramp it up.

“We are heavily invested in this plant” -- upwards of $50 million -- “and want to see it work. We are working to get this plant up and running and driving recycled content up and recycling up. We are looking at how to get bottle-to-bottle [PET recycling] right,” he said.

Gutierrez has been working with a German equipment manufacturer for six months to address the dramatic decline in the quality of the material coming in to make recycled PET, according to Chris Dow, managing director of British recycled PET and high density polyethylene recycler, Closed Loop Recycling Ltd. in Dagenham.

“Carlos has developed a new piece of equipment that will dramatically clean up his recycling stream and improve his yields,” said Dow, who saw a video of the new equipment in action during a test run when Gutierrez made a presentation in Hamburg, Germany, on April 13. “It is a brand-new type of machine that will have a spillover benefit to everyone in the industry.”

But some wonder how much of what Gutierrez develops he will want to ultimately share with Coca-Cola.

“Carlos is a very, very shrewd bargainer,” said one recycling executive. “I can’t imagine he is going to let Coca-Cola run roughshod over his reputation.”

“Maybe Coca-Cola never wanted it to succeed,” said the executive. “This would be the perfect foil for them. They could have purposely done this so that they could say that can’t consistently get the quality they need,” to help them make the transition to their plant-based PET bottles.

But one executive close to the situation disagreed, saying Coca-Cola is committed to both approaches.

“I do not see a problem with them using both techniques to improve their environmental image,” he said.


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