Down in the Dump

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FINANCIER

RICK DEFIEUX

General partner, Edison Venture Fund, Lawrenceville, N.J., a $40-million venture capital firm with a half-dozen investments in environmental companies

If you'll excuse the pun, this company looks pretty good on the surface, but you might find some problems as you dig deeper. It has developed a good product with tangible advantages in application. The problem is that any success it does have will require a substantial marketing effort, and right now its marketing is grossly insufficient. Paul Russo cannot do this alone.

For one thing, trimming the cost of daily cover is not the landfill operator's primary concern today. In many sections of the country, a valid permit in the waste-disposal business is tantamount to a license to steal; this is a very, very profitable industry.

What these landfill guys want to do foremost is keep their permits intact. Cost cutting is less important than staying in compliance with changing regulations. If Rusmar expects to sell its foam on the economics, then the numbers have to be very strong and show an overwhelming benefit. For some landfills, too, switching from soil to foam cover may precipitate a regulatory review of the entire landfill, which no operator would be eager for.

The second reason I think this company needs a substantial marketing effort is that landfill cover is not the regulators' number-one concern, either. Because foam is not environmentally beneficial -- it's basically just environmentally equivalent to soil -- regulators aren't particularly motivated to spend a lot of time on something that's just going to improve a landfill operator's pretax margin. They have a lot of other issues to think about.

Finally, Rusmar is facing formidable competition; 3M is very capable of outselling it, with Rusmar's rain-resistance disadvantage as a lever.

If Rusmar increases its direct-sales force, it needs very knowledgeable people and needs to focus on two or three or four states and do a full-court press on those agencies. If it simply can't afford to do that, then it's got to get an alliance with companies that know both the operators and regulators -- engineering consulting firms, maybe, that know how to deal with regulators.

I thought the revenue line was not outrageously unrealistic. The bottom line, I think, is that it has a shot at building a successful company, but it's got its hands full.

CUSTOMER

RICK WATSON

Engineering manager, Delaware Solid Waste Authority, which operates three state-owned landfills

We recently completed a six-month test of Rusmar's foam at one of our main landfills, and we've decided to stick with it on a full-time basis. The combined cost of the foam and the application machinery is actually slightly higher than soil. Each month we spend $6,200 to lease the machine and about $7,500 on foam. If you looked at it strictly on a daily cost basis, you could not justify using the foam.

What makes it worthwhile is the space savings. Landfill space is tough to get, and we need to maximize what we have. At the landfill where we tested it, soil takes up 30% of the volume. We think the foam will extend the life of that site by at least 10%. The reason it's not longer is that you can't use foam every day. If rain is forecast, you have to revert to soil. You have to use soil on weekends, too. We found that we used the foam an average of 16 days a month.

An extra benefit is labor savings. It takes the crew close to three hours to cover a day's garbage with soil, but only 30 to 45 minutes to do the job with foam. We had experience with Sanifoam before, on a test basis, and it was a pain to apply. The foam was OK, but the machinery jammed up and created a lot of extra work to clean it out. Rusmar's machinery is very easy to use, and it doesn't jam. That's really one of its strongest selling points. The people who have to use it really like it.

Our main concern is dealing with a start-up. We're concerned that if we buy the application machinery at a cost of $120,000 or so, then we're taking a chance -- but Rusmar has offered to minimize that risk by leasing the machinery instead.

CUSTOMER

GARY STEEDE

Manager, Outagamie County Landfill, Appleton, Wis.

I don't agree with the evaluation of Sanifoam, the 3M product. We've used it for five years and never had the kind of problems described here. We're happy with it, and our maintenance has never taken more than an hour.

Still, I would have inquired about Rusmar's foam if I'd known about it. They're talking 5¢ or 6¢ a square foot, whereas we're paying 12¢ to 13¢ -- so right there I'm interested. But I wasn't even aware that the product existed, and we've been using foam coverings for years. Rusmar needs advertising. It needs to get into more trade shows and publications like Waste Age and Public Works to make the operators aware this product is available. Otherwise it's going to have a hard time selling.

It also hasn't addressed the critical question: how long its foam lasts. It mentions 36 hours. The foam we're using now lasts a minimum of three days, and I wouldn't want to go any less than that. We have to alternate our active area every day, so duration is a big, big factor.

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