Garbage: It's a foul business. Tom Szaky, the founder and CEO of TerraCycle, knows that's the popular opinion. He's been asking business students at New York University annually how many of them would like to get into waste management. Not a single one has raised a hand for more than a decade.
Szaky understands the resistance. His chosen sector is known not just for being filthy, but also for having upside-down economics, entrenched large players, and high operational costs leading to industry rigidity. But none of those challenges has stopped Szaky from innovating in the field, or from maintaining profits--which is why he's been called the Elon Musk of waste.
Over the past two decades, Szaky, 40, has grown TerraCycle from a scrappy fertilizer-in-recycled-packaging business in his New Jersey dorm room to a 550-employee, 20-country trash-management and recycling company, purveyor of recycled content, and foundation for funding waterway cleanup. Now he is building his biggest innovation yet: an international, circular supply chain to help major companies sell products in long-term reusable packaging.
Szaky founded the first iteration of TerraCycle in 2001 as a freshman at Princeton University, when he brought to market a fertilizer he'd created out of worm excrement to--the story goes--help his buddies grow marijuana. He packaged it in used soda bottles, and, within five years, TerraCycle was selling its Worm Poop Plant Food in Home Depot and Target stores. The company built a headquarters facility in Trenton, New Jersey, partly out of trash-bound plastic waste, that at its height of poop-production housed millions of worms. In 2006, it reached $2.5 million in sales and was featured on the cover of Inc. magazine as the "the coolest little start-up in America."
Szaky had grander visions. He saw a huge gap in recycling's supply and demand. While companies want to acquire recycled materials for their packaging, the only items that are desirable are pristine ones--perfectly clean, clear plastic soda bottles, for example--that end up in bins and that municipal or paid services actually select to recycle. Szaky estimates there's 10 times more demand for recyclable plastic than the amount that's supplied.
He couldn't help but think: What about the 99 percent of our stuff that ends up being landfill trash or non-recyclable plastic, glass, and metal? Could he recycle cigarette butts? Chewing gum? He'd try. But the strategy almost sunk the company, Szaky says: "I almost got fired through it. We lost half our team. It was a big moment where we said, "We have to reframe what we do and make waste the hero."
TerraCycle pivoted instead to focus on the 30 percent of the material that lands in curbside recycling bins that isn't desirable to standard recycling processes. Over a decade, the company built divisions that managed facilities' recycling--think, all the break-room garbage, the plastic forks, the coffee pods--as well as mail-in recycling programs for brands' product packaging. For free, customers can mail in used squeeze pouches for baby food (Gerber, for one), used tubes of toothpaste (Colgate), shoes (Teva), and plastic toys (Hasbro). TerraCycle over the years developed yet another profitable line of do-gooding business: selling consumers zero-waste boxes for their almost-recyclables such as plastic film. In 2021, it launched operations that manage reuse and recycling of salons' hard-to-dispose-of product packaging.
TerraCycle, which does half of its business abroad and half domestically, under two entities, made a total of $70 million in revenue in 2021. It's on track for $80 million this year. The growth has been consistent: The company has appeared on the Inc. 5000 list of fastest-growing companies in the country six times since 2009. Continued profitability, despite setbacks due to the pandemic, has allowed the company to invest in its latest major leap: In 2019, it announced it would be launching Loop, a global system for in-store returns of consumer packaging for reuse by brands.
First, though, TerraCycle had to persuade some of the biggest consumer brands to not only redesign their packaging but also to commit to become reusers of that packaging, ideally 10 or more times over. It also had to convince major retailers to sell products in the new, unfamiliar packaging, as well as to host drop-off boxes so customers could return it. Oh, and it would have to get customers to change their whole outlook about trash as well. "The root cause of waste is disposability," Szaky says. "That's what we have to attack. And the solution to disposability is reusability."
TerraCycle already had working relationships with major consumer-product companies, five of which--PepsiCo, Unilever, Nestle, Mars, and Procter & Gamble--became its first partners. Retailers, though, would be a tougher sell: Many worried that they wouldn't be able to get a critical mass of customers to use Loop. In response, TerraCycle built online-learning platforms to test consumers' appetite for paying deposits and returning more costly packaging, and found, Szaky says, that the concept "has resonated beautifully with consumers." The company found retail homes for its return bins, too, at Carrefour in France and some Kroger locations in the western United States. Loop launched at the World Economic Forum in 2019. But then the pandemic hit.
TerraCycle's product-innovation, sales, and marketing teams kept working with brands, even as much of corporate operations and product design went virtual. Today, 200 brands, including Burger King, Pantene, Clorox, Gerber, and Stubb's Legendary Bar-B-Q, have some items whose packaging goes through Loop's system in parts of the United States, Japan, and France. "It's a big moon shot, in the sense that we're still losing money on it," Szaky says. (TerraCycle will generate revenue from consulting with companies on their reusable packaging development and supplying them with recycled materials, as well as from contracting operations for redelivering containers to their home companies for refill--which only becomes efficient as the program grows.) "Now the whole focus is getting it to scale."
If he can pull off that feat--and at least one more big retail launch is coming in 2022--Szaky hopes it will nudge brands to create and adopt even more significant innovation in packaging. Certain products can have humidity and temperature sensors built into their packaging, for example, which could produce real-time expiration dates. Another example: Packaging can actually be designed to help prolong products' lifespans. Haagen-Dazs, for instance, is creating a reusable metal container that can keep ice cream frozen, and therefore fresh, longer. Szaky is optimistic that's the sort of innovation that might finally turn the economics of recycling right-side up.
"The really exciting thing about reuse is that if your package moves from a cost to an asset, you can significantly increase the value of the package, and do phenomenal things," he says. Maybe in a year or two, he'll see some future entrepreneurs' hands raised.