Can paper replace plastic?A packaging giant bet it can

Kalamazoo, Michigan – When a new building-sized machine is launched this month, it will begin to turn mountains of recycled cardboard into cardboard suitable for more environmentally friendly packaging.
This $600 million project is the first new cardboard production line built in the United States in decades. It represents a huge bet of 2.54% of the owner Graphic Packaging Holding Co. GPK, betting that there will be no foam cups, plastic clamshell containers or six Piece of ring.
Graphic hopes to provide more environmentally friendly packaging so that consumer goods companies that purchase its products can promote a cleaner supply chain to their investors and consumers.The company said that once Graphic shuts down four smaller and less efficient machines, including one in its 100-year-old Kalamazoo complex, it will use less water and electricity and reduce greenhouses by 20%. Gas emissions.
As the acronym implies, ESG investments have invested trillions of dollars in funds that promise to invest in consideration of environmental, social, and governance goals.This in turn prompted the company to work hard to reduce waste and greenhouse gas emissions.
Graphic stated that green investment has opened up a market worth more than $6 billion per year for replacing plastic with paper on store shelves, even if this may cause consumers to see slightly higher prices.
Graphic’s gamble is a major test of whether the torrent of ESG capital can transform the supply chain.Plastic packaging is generally cheaper than paper, more effective in many applications, and sometimes even has a smaller carbon footprint.Consumer products companies will have to be persuaded that their customers will pay more, and paper packaging is indeed more environmentally friendly.
Graphics managers argue that without a cleaner supply chain, their customers have little chance of meeting emissions and waste targets.”A lot of these goals permeate us,” said Stephen Scherger, chief financial officer.
As far as plastic manufacturers are concerned, they say they are investing in recycling and waste collection technologies, and once factors such as transportation weight and avoiding food waste are taken into account, their products have advantages over paper.
Graphic is headquartered in Sandy Springs, Georgia, and sells packaging materials to the largest food, beverage and consumer products companies in the United States: Coca-Cola and Pepsi, Kellogg’s and General Mills, Nestlé and Mars., Kimberly- Clark Corp. and Procter & Gamble Co..Its beer box business generates approximately $1 billion in revenue each year.It sells about 13 billion cups every year.
Graphics and other manufacturers of cardboard (a single piece of cardboard mainly used for packaging) are working hard to introduce new products, such as fiber yokes for six-packs and microwaveable dinner plates molded from cardboard.Graphic has announced plans to launch a series of cups with water-based coatings to replace polyethylene linings, one step closer to the holy grail of compostable cups.
When Graphic announced plans to build a new cardboard factory in 2019, investors initially questioned the cost and necessity.However, green investment has since gained momentum, and new investors have supported the project.
In September, Graphic sold $100 million in so-called green bonds to help pay.Obtained a green designation through Michigan’s program to promote recycling facilities, allowing it to sell interest-bearing debt without being affected by federal and state taxes.Serge said that the demand for bonds exceeds the supply by 20 times.
Elsewhere, the company is adding $100 million in equipment to its plant in Texarkana, Texas, to convert more loblolly pine pulp into super-strong cardboard for cups and beer crates.In July, Graphic spent US$280 million to purchase 7 processing facilities that fold cardboard into packaging, bringing the total to 80.In November, the company acquired a US$1.45 billion competitor in Europe, where sustainable packaging trends are often the birthplace.
It spent approximately $180 million to move several facilities in Louisiana under one roof to reduce the distance traveled between them by millions of miles each year.It installed a boiler to burn treetops and other organic waste from the Macon Pine Pulp Mill in Georgia to power its plant.The energy consumption and emissions of the two southern factories have affected the carbon footprint of the cardboard yoke sold by Graphic in Europe to replace shrink packaging.
In July, hedge fund manager David Einhorn revealed that his Greenlight Capital already holds $15 million in Graphics.Greenlight predicts that cardboard prices will continue to rise because of too little investment in production.
“The United States has added so little cardboard production capacity that the average cardboard mill in this country is more than 30 years old,” Mr. Einhorn wrote in a letter to investors.He said that demand should increase as consumption and ESG push to remove plastic from the supply chain.
After World War II, plastics became ubiquitous, when a shortage of natural materials triggered a race for synthetic alternatives, including nylon and organic glass.​​​​Extracting fossil fuels and converting them into plastics generates a lot of greenhouse gases.According to a 2016 report by the World Economic Forum, the Ellen MacArthur Foundation, and McKinsey, only 14% of plastic packaging is collected for recycling, and only a portion of it is ultimately used to make new products, while approximately one-third of plastic packaging The packaging is not collected at all. According to Goldman Sachs Group Inc. (Goldman Sachs Group Inc.) published in 2019, only 12% of plastic is recycled, while 28% is incinerated and 60% remains in the environment.
This frequently cited study in 2016 described the ocean in crisis, soiled by soda bottles, shopping bags, and clothing fibers. Every minute, a garbage truck rolls up garbage equivalent to plastic in the water.The study said that by 2050, by weight, there will be more plastic in the ocean than fish.
Following severe crackdowns by government authorities from California to China, stock analysts listed plastic use as one of the biggest threats facing packaged goods companies.Companies including Coca-Cola and Anheuser-Busch InBev mentioned the shift from plastic to paper in their sustainability reports for investors and external companies that calculate corporate ESG scores.
“It will take us a whole year to use as much plastic as the leading beverage company uses in just two weeks,” said the chief sustainability officer of grain manufacturer Le’s at an investment conference earlier last year. Bragging, because the executives of the beverage company are waiting to sell to the same audience.
In 2019, Graphic executives announced plans to seize market share from plastics and build the most advanced recycled cardboard machine in Kalamazoo.”You won’t see paper islands floating in the ocean,” said Joyost, Graphic’s head of Americas, in a meeting with stock analysts.
However, even if a large number of companies promise to reduce emissions and reduce waste, it is difficult for new factories to sell.This is a huge expense, and it will take two years to put it into operation and make money.In an era where the average holding time of stocks is calculated by months, two years is a long time for investors.
Graphic CEO Michael Doss (Michael Doss) prepared the board to fight back.”Not everyone will like this,” he recalled.”Our industry has a record of over-expansion and poor capital allocation.”
Graphic was originally a division of Coors Brewing Co., Colorado, and the boxes produced by the company would not get wet by refrigerated trucks.In the early 1990s, Coors divested its box business into an independent public company.The subsequent acquisitions gave Graphic an important position in the southern pine belt, where its factory made cardboard from sawmill waste and trees that were not suitable for wood.
Graphic holds approximately 2,400 patents and has more than 500 pending applications to protect its packaging designs and machines installed on customer production lines to fill and fold cartons.
Its executives said that the current focus of research and development is to expand the use of cardboard from grocery shelves to deli shops, agricultural products and beer coolers.”We are attacking any plastic products,” said Matt Kearns, Graphic’s packaging designer.
However, plastic is cheaper than cardboard.Advances in paper packaging, such as compostable cups, may increase costs.Paperboard manufacturers have raised prices several times in the past year to make up for their rising costs.Adam Josephson, paper and packaging analyst at KeyBanc Capital Markets, said some buyers are exploring cheaper alternatives to cardboard.
“Can companies like Graphic sell more products when the cost is much higher than the products they already sell?” Mr. Josephson asked.”This is very problematic.”
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For some companies, green means using more plastic.Plastic packaging is lighter than boxes, which means less fuel is burned during transportation.The recycling rate of plastic is relatively low, but the same is true for paper cups and takeaway containers, which are made of paper but also incorporate polyethylene.An industrial process is required to strip the reusable pulp.
Wendy’s Co. stated that its restaurants will dump plastic-lined paper cups next year and replace them with transparent plastic, and said that more consumers will be able to recycle.”This shows how plastic is seen as an environmental opportunity rather than a burden,” said Tom Salmon, CEO of Berry Global Group Inc., which makes cups with 0.66% of Berry.
Paper does not always have a small carbon footprint.Making cardboard consumes electricity and water, and produces greenhouse gases.
One of Graphic’s most promising new products is KeelClip.The cardboard yoke is folded on top of the jar and has finger holes.It is rapidly replacing plastic packaging and six-piece rings on European beverage shelves.KeelClips are as easy to recycle as cereal boxes. Graphic says that their carbon footprint is only about half of shrink packaging, which is a common way of packaging beer in Europe.
Graphic brought KeelClip to the United States, where it had to contend with the ubiquitous plastic six-piece loop.This six-piece ring is cheap and as light as a feather, although it has been enduring as a symbol of human abuse of nature for decades.Generations of American schoolchildren have seen photos of trapped wild animals.
KeelClip does not need to use a lot of plastic packaging during transportation, and it is unlikely to block the dolphin’s mouth.However, Graphic stated that KeelClip’s carbon footprint—the amount of emissions generated at each step of its manufacturing and distribution—is slightly higher than that of a six-piece ring.
According to Sphera, an ESG consulting company hired by Graphic to analyze packaging, each KeelClip produces 19.32 grams of carbon dioxide, while the plastic ring is 18.96 grams.
Graphic stated that it is working hard to solve this problem.DiamondClip, also known as EnviroClip, is under development.The company stated that it is strong enough to hold six sweaty beers, but light enough to have a carbon footprint of only half of the plastic ring.

Post time: Jan-05-2022