Trellis Earth restarts Cereplast plant with fresh business plan
Trellis Earth Products Inc. has acquired the assets of bioplastics company Cereplast Inc., which filed for bankruptcy earlier this year. According to Bill Collins, founder, chairman and president of Trellis Earth, his company is ready to restart Cereplast’s manufacturing facility with an improved business plan.
Cereplast filed a voluntary petition for Chapter 11 bankruptcy on February 10, 2014. The case was later converted to Chapter 7 at the request of the company. On June 20, Trellis Earth announced the pending acquisition of Cereplasts’s assets for $2.6 million, including an 110,000 square foot bioplastics production facility in Seymour, Indiana, and the company’s entire patent portfolio. The acquisition closed on June 30 and the company is already offering product for sale.
“As part of the asset acquisition, we inherited over 1 million pounds of inventory,” Collins said. “That inventory is for sale today.” Trellis Earth has already signed a four-year lease on the building housing the manufacturing facility in Seymour, he continued, noting the equipment is in working order and the facility is stocked with ingredients and ready to resume production immediately. “We have customers that have been eager to get their custom blends manufactured,” Collins continued, adding that the facility will begin toll compounding this week and next week.
While the plant is starting operations immediately, several improvements will be made to both the equipment and the business plan. “Cereplast was a brilliant pioneer,” Collins said. “They did a good job of bringing the concept of bioplastics to the marketplace, but they didn’t build a profitable company…They really struggled in their business model.”
Collins explained that Cereplast marketed its bioplastic material to traditional plastics manufactures, most of which have strong ties to the petrochemical sector and are focused on traditional petrochemical plastics. Trellis Earth, however, is adding finishing equipment to the Seymour facility and plans to focus primarily on the sale of finished bioplastics products in the food service sector. Collins estimates the improved business model will allow his company to realize 30 percent gross margins, rather than the 15 percent available by marketing exclusively to plastics manufactures.
“From our view, the secret to unlocking the potential in the bioplastics industry is to sell directly to the end user, and in our case that is food service companies, and we believe that will usher in a new era in bioplastics that is quite frankly long overdue because the technology has been there for quite some time,” Collins said.
According to Collins, the Seymour plant currently has three extrusion lines with three pelletizing extruders. One extruder will be retrofitted to create sheet-stock. Rather than producing bioplastic pellets, that extrusion line will produce bioplastic rolls which will be offered for sale and used in-house for thermal forming into clamshells, portion cups, plates and similar finished products. “We are going to be making school lunch trays for the U.S. school lunch program,” Collins said. The company also plans to install injection molding equipment and a high-capacity thermal former. All those additions are scheduled to be fully installed and operational within four months.
While the focus will be on finished bioplastic products, Collins stressed that Trellis Earth will continue to service existing Cereplast customers. “People who were buying the resins that Cereplast was supplying can now order those resins from us, but 95 percent of our sales we expect to be in finished goods,” he said.
Trellis Earth has been active in the bioplastics sector for seven years. According to Collins, his company has focused primarily on blending biomass with conventional petrochemical-based plastics. The company has three contract manufacturers in China and has built its business with imported product. The Cereplast acquisition now gives Trellis Earth a manufacturing presence in the U.S.
While Trellis Earth has acquired Cereplast’s entire patent portfolio, it does not plan to continue to pursue all the products Cereplast was developing. Specifically, Collins said Trellis earth has no plans to continue development of Cereplast’s algae plastic at this time. Although the product might have future applications for products like fence posts, Collins said the material’s dark green color, odor and tendency to impart taste limits its marketability.