Paper Straw Maker Hoffmaster Is Adding Capacity And Hiring As It Expects The Switch Away From Plastic To Greatly Boost Business
With some of the world’s biggest companies and entire cities banning plastic straws, Hoffmaster Group Inc. and Aardvark Straws, makers of paper straws, are ramping up for a surge in demand and sales.
Plastic straw bans have been declared in places like Seattle and Vancouver and at global companies like Starbucks Corp. SBUX,McDonald’s Corp.MCD,Hyatt Hotels Corp. H, and Ikea, opening the door for alternatives.
On August 6, Hoffmaster, a company that makes paper tableware, announced that it had acquired Aardvark Straws, “the sole U.S. producer of paper straws,” according to the release. By the time MarketWatch spoke with Andy Romjue, president of Hoffmaster, a little more than a week later, the company had already begun taking steps to meet a flood of orders. Media reports have already put the surge in demand at 5,000% in recent months.
“We’ve got equipment on order to service five times the capacity we currently have,” said Romjue, who called the previous eight days a “whirlwind” in which the company has made “significant” investment to increase capacity.
“We’re expanding the facility and ramping up employment.”
Hoffmaster began working with Aardvark around 2012, according to Romjue. Even back then David Rhodes, global business manager at Aardvark, was talking about a plastic straw ban.
The world has become more aware about plastic pollution threatening oceans and marine life. Viral video of a sea turtle getting a plastic straw removed from its nose raised the level of urgency about the environmental repercussions of plastic waste.
“All of a sudden, one day, it happened,” Romjue said of the bans.
The wholesale business for paper bags and disposable plastic products grew to an annual revenue of $82.1 billion in the five years leading to 2017, according to data from IbisWorld. Disposable plastic boxes, containers, cups and dishes accounted for 10.9% of that business. Household paper and plastic products and products classified as “other” each accounted for 11.5%.
Romjue said between $1.5 billion and $2 billion in plastic straws are sold each year. Paper straws accounted for less than 1/10 of 1% of that sum.
The bans instantly made paper straws a growth category.
“It can go to 20% to 50% of the market,” he said.
When dealing with a major change in a daily habit, consumers can be reluctant, if not downright opposed, to change. Diners grabbing a straw to drink their iced coffee in the morning might not be thinking about the oceans.
But the bans have happened in cities where awareness is heightened, say experts. And when major companies make a change in their practices, it can help encourage a shift in behavior.
“If you would’ve asked six months ago, I would’ve said it’s a going to be a long build,” Romjue said. But if this is the new standard at some of the biggest restaurant chains in the world, “anyone who considers themselves premium would want to be on the eco-train. Everyone is moving in that direction.”
Larine Urbina, the vice president of communications in the U.S. and Canada for Tetra Pak, a food processing and packaging company that also makes plastic straws for its small cartons like juice boxes, said the company shares the concern about plastic pollution in the world’s waters. However, it’s focused on “small cartons with attached plastic straws,” like juice boxes. The company is “committed” to finding an alternative to these items.
“Until we achieve this objective, banning straws indiscriminately is not a solution as it will not solve the problem of plastic litter and, in the case of straws attached to small cartons, could lead to alternatives that are actually worse for the environment,” she told MarketWatch.
Tetra Pak thinks the better solution is one that leads to “major improvements in waste management and recycling infrastructure worldwide, while raising awareness on the importance of recycling and impact of littering,” she said.
For now, plastic straws are what everyone is focused on. Starbucks has already introduced a straw-less lid as part of its commitment to eliminate plastic straws from its 28,000 stores by 2020.
And Marriott International Inc. MAR says plastic straws will be eliminated by July 2019. The company has already replaced mini toiletry bottles with in-shower dispensers in about 450 hotels in an effort to reduce waste.
“This is certainly a demand shock for both single-use plastic or paper straws, but many of the major retail users are already looking at substitutes,” said Bill Leedale, senior adviser at IFS, an enterprise software company. Among the alternatives are reusable glass straws and straws made out of bamboo.
“There is certainly a shift in the supply chain, but paper is not the only solution in the intermediate term,” Leedale said. “The shortage may be more prevalent in the health-care industry where alternatives may have some resistances due to regulatory requirements.”
Supply chain technology has advanced to incorporate artificial intelligence and machine learning to solve problems. This sort of technology can be helpful in a situation such as this where companies have to determine a brand new demand.
Fred Baumann, group vice president of industry strategy at JDA Software, says using algorithms and even social media sentiment gathered from things like Instagram posts, can help get a handle on what consumers think.
For example, data from CivicScience, a consumer intelligence research firm, found that 31% of the population thinks people will use fewer plastic straws six months from now, but Gen Z, who are under the age of 18, don’t use too many straws to begin with.
“What we’re trying to do is build an eco-friendly disposable market, which is what we need if we want the world to be around,” said Hoffmaster’s Romjue.
Tonya Garcia is a MarketWatch reporter covering retail and consumer-oriented companies