Toddling recycling company grows up

[Wesley Roe and Marjorie Lakin Erickson]

MONDAY, AUGUST 28, 2000
  WORK & MONEY

Toddling recycling company grows
up

Canadian firm heads overseas attempting to turn dirty
diapers into dollars.

Ruth Walker (walkerr at csps.com)
Staff writer of The Christian Science Monitor

                            MISSISSAUGA, ONTARIO

Roy Brown knows an amazing fact about South Korea and
Japan: Parents there change their children's diapers about 15
times a day - twice as often as North Americans.

Such news raises his hopes of doing big business in Asia.

               Mr. Brown is president and chief executive of
               Knowaste Inc., which recycles disposable
               diapers. Asia, he says, has less empty landfill
               space than the United States and Canada.
               And Asians are willing to pay more to dispose
               of waste.

               Knowaste's recycling process may prove
               more cost-competitive in Asia than it has been
               in Canada. The first North American
company to recycle diapers, Knowaste is a case study in the
shifting economic currents in which environmentally minded
businesses must operate.

In theory, municipalities should be beating down Brown's door.
Disposable diapers seem to have a half-life in landfills nearly that
of nuclear waste. And many Canadian cities are running out of
politically acceptable landfill space. (Earlier this month, Toronto
approved a controversial plan to stuff its refuse into the shafts of
an abandoned mine in the northern Ontario community of
Kirkland Lake.)

But for the moment, Knowaste is "a technology in search of a
market," Mr. Brown admits.

The company started in the early 1990s when Ontario's socialist
government nearly tripled landfill fees in order to encourage
recycling. Knowaste offered to haul off diapers from hospitals,
daycare centers, and neighborhood curbsides to its recycling
facility, charging fees competitive with landfills.

But when a conservative government took power in 1995, it cut
landfill fees back to earlier levels. The recycling sector went into
a freefall. Knowaste could not compete with cheaper traditional
garbage haulers. "It taught us a lesson - don't build a business on
a government policy," Brown says, sadder but wiser.


             NEW END RESULT: Rather than
             clog landfills, used disposables
             picked up by Knowaste Inc. of
             Toronto are recycled.
             COURTESY OF SMALLPLANET



Adapting at home and overseas

The company has reinvented itself since, and now has two
business lines - one in Canada and the other in Europe.

One line is SmallPlanet Inc, a residential service in metro
Toronto which provides biweekly pickup of used diapers for $6
a stop. It charges slightly less to those customers who buy
disposables from SmallPlanet. The company does not make new
disposables from used ones, but instead sells name-brand
diapers at roughly standard retail prices. SmallPlanet also retails
a select line of environmentally friendly baby-care products.

"Convenience with a conscience," is the slogan at SmallPlanet.
"We thought [customers] would join us out of environmental
concern, and stay with us for the convenience," says Brown.

But the environmental aspect really is paramount. Lis Soderberg
is typical of Smallplanet's 2,100 customers in metro Toronto.
"The environmental aspect is about 66 percent of the reason I'm
with Smallplanet," she says with perhaps surprising precision,
and then rethinks her assessment. "Definitely more than half - not
quite three-quarters," this mother of two and voiceover talent
says. "I'd love to see more money devoted to programs like
these," she adds.

Knowaste's other operation, an industrial-scale recycling facility
in Arnhem, in the Netherlands, opened last December. It takes
diapers from hospitals and nursing homes and recycles them into
reusable high-quality paper pulp, plastic, and a substance called
super-absorbent polymer. (Among other uses, SAP has helped
clean up oil spills.)

It's not quite the same as spinning straw into gold. But these
three end products are sold to industrial manufacturers.
Knowaste's Canadian plant is more research oriented and gives
its recycled goods away since they aren't produced in
commercial volumes. To catch the eye of recycled solid-waste
buyers, Brown says, "you need to have truckloads and
truckloads of the stuff."

Knowaste's technology - patented in Canada, the US, Europe,
and Japan - is a process rather than a machine, Brown says. It is
essentially a pulp-and-paper plant with a wastewater treatment
capability built in.

The company's revenues were US $1.2 million for 1999.
Three-quarters of that was from Smallplanet's Canadian
operations. But the privately held company sees its future in
Europe. Waste disposal fees there are typically $120 to $140
per ton (compared with $40 a ton in Canada and as low as $20
a ton in the US) - a function of land prices, not government
policy. "It's a much more mature recycling market," Brown says.

Greater population density helps, too - the area surrounding the
Arnhem plant has some 65 million inhabitants, more than twice
as many as all of Canada.


             NEW END RESULT: Pulp bales
             that can be used in recycled
             paper.
             COURTESY OF SMALLPLANET



California here we come?

Still the company hopes to make inroads into the US. The Los
Angeles County Waste Management Task Force has been
considering disposal options, including Knowaste, and will
report to the Board of Supervisors early next month. "We have
every reason to believe they will be positive toward us," says
Brown. His company is also pursuing a contract with a small
municipality in California.

Can recycling make it as a business, and not just an expression
of consumer idealism? Industry analysts are of mixed opinions.
"Recycling is treated as a social good," says one New York
brokerage analyst who requested anonymity. "It's something
most individuals find attractive. But the economics are poor. It
doesn't merit investment."

Jaimi Goodfriend, an analyst at First Analysis Securities
Corporation in Chicago, is modestly more bullish. She says that
waste-management companies involved in recycling are,
relatively speaking, where the action is. "And the prices for
OCCs" - old corrugated containers, a benchmark commodity in
the waste-management sector, rather like sweet light crude in the
oil business - "have been much, much higher." She sees the
outlook as "more favorable."

Meanwhile, Brown's eyes are on Asia. Just imagine: 15 diaper
changes a day.

    For further information:

      Knowaste


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