A New Jersey-based eco-friendly plant food company has struck a deal with Kraft Foods (NYSE: KFT) to turn its used packaging into purses, backpacks and other merchandise, company officials announced this week.

Under the partnership, TerraCycle, which already packages its own worm-waste fertilizer in recycled plastic bottles, will expand its waste collection sites to include Kraft brands such as Capri Sun, Chips Ahoy! and Oreo cookies. The companies will also sponsor teams to collect trash and will donate two cents per item to local community groups and schools.

The move is aimed at diverting reusable waste from area landfills and garbage dumps.

"Sustainability is about looking out for future generations," Jeff Chahley, senior director of sustainability for Kraft, said in a statement. "It's so cool to see trash turned into merchandise that's unlike anything else on the market."

Tom Szaky, TerraCycle's 26-year-old founder, ranked No. 1 on Inc.com's 30 Under 30 list of the nation's top young entrepreneurs in 2006. He currently blogs about eco-capitalism for the site.