Turning trash into cash

Recycling, instead of being mainly a “feel good” issue for supermarkets, is gaining in economic and stra­tegic importance. The dollars in­volved can be large: According to the Food Marketing Institute just three of its members last year made almost $50 million on recycling sales, mainly from cardboard and plastics.

While recycling cardboard boxes and shrink wrap from distribution operations has long been a moneymaker for chains, the supermarket industry’s sizable waste stream of perishable products is likely to get more than passing attention from upper management.

Recycling is here to stay, says John Connolly, a waste consultant based in Hampton, N.H. “It’s not a fad.” The supermarket’s interest in recycling has waxed and waned over the past two decades, and has mainly been seen as a public relations issue that is not really central to a company’s strategic mission. That is changing.

Beyond cardboard and plastics, by far the largest question facing management is what to do with the 50% or more of a supermarket’s waste stream that has the potential to be recycled, but for now mostly ends up in landfills. This includes organic food waste—everything from spoiled produce to meat trimmings, to bakery and deli waste.

Only a fraction of this organic waste is now being composted or recycled, but a number of industries are gearing up to make money out of this mountainous stream. Some trash haulers are recognizing that there are opportunities to handle organic waste as a separate business.

Likewise, a variety of “alternative receiving facilities” are popping up to recycle organic wastes using proprietary technologies. For example, Connolly is working with two startups that convert organic waste from supermarkets, food processors and restaurants into energy. One uses anaerobic digestion to produce methane that, in turn, powers fuel cells or turbines to produce electricity; and the other uses a chemical and heating process to turn waste into bio-fuel.

Connolly notes there has been a big jump in interest in recycling over the past two years. In part this is driven by the economics of waste management. Typically, a 55,000-square-foot supermarket with a full range of perishables will spend $3,000 or more a month for waste disposal. That total has been rising in recent years, driven by the increase in fuel charges by haulers and tipping fees at landfills. Costs vary dramatically by region. For example, the cost per ton for dumping at a landfill in New England or the Northwest is close to $100, explains Tyler Brunson, principal in Waste Consultants, based in Ashville, N.C.

For supermarkets, organic waste recycling will never be a big revenue producer, but according to Connolly, it should at least be revenue neutral. Recycling centers charge less than traditional landfills, and the spread in fees should cover the generator’s extra operating costs involved in segregating, compacting and hauling of organic waste as separate from trash.

For example, by diverting wet organics from an $80-per-ton landfill to a $40-per-ton recycling center, the savings should easily cover the extra costs involved for supermarkets in separating and handling of the organics. The corollary to this observation is that recycling is viable from an economic standpoint, only where there is a reasonable spread in rates between landfills and recycling centers.

Connolly explains that even in areas like Ohio, where low landfill tipping fees make the economics of recycling wet food waste “challenging,” interest is growing. In part, this has to do with non-economic factors, he says.

According to a survey conducted by the Food Marketing Institute’s Sustainability Task Force, 92% of customers say it is important for supermarkets to be proactive about environmental issues. Recycling is one such issue. How to translate this and other general consumer perceptions about corporate behavior into active support for specific supermarket policies, however, can be a marketing challenge. At least one such successful example is the case of some New Jersey supermarkets that are promoting the sale of bagged fertilizer made from their own recycled organic waste.

As the cost of waste disposal has in­creased, more operators are taking a closer look at their spending. They are turning to com­panies like Environmental Waste Solu­tions (EWS), based in Baton Rouge, La., which will audit a chain’s disposal costs, suggest changes to lower fees and then, if hired, negotiate contracts and continue to monitor the waste operation. They collect their fees as a percentage of the savings received by generators. Diane Shapiro, vice president at EWS, explains most companies are overpaying by 30% to 35% for waste services.

One problem for supermarkets, she says, is a lack of transparency in the billing process. Monthly bills are not typically itemized, even though they include three separate components: Equipment lease costs, transportation charges and landfill tipping fees. Another problem is that haulers often add a surcharge to landfill fee. For this reason, Connolly recommends that supermarkets familiarize themselves with their operators’ fee schedules.

The growth in interest in recycling among food retailers is prompting some waste haulers, mainly small operators, to redefine their business and to move beyond their basic transportation function.

For example, some haulers are offering to analyze the recycling potential from a supermarket’s waste stream, recommend strategies and equipment to maximize the diversion rate of recyclables and train store-level employees.

Haulers benefit in two ways from this approach, Connolly explains. They may be able to charge a few dollars extra per ton for the value-added service. In addition, they earn higher fees because of the higher volume of recyclables being transported.

“This approach can be very synergistic for everyone involved,” Connolly adds. 

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