Market News

 March 10, 2020
Footprint is proving that sustainability can scale

 Few things make America's plastic addiction seem as urgent as walking through a Phoenix-area Sprouts Farmers Market with Troy Swope, cofounder and CEO of Footprint, a plant-based packaging company using technology to wean corporations off single-use plastics. Sprouts is a natural-food chain that collects waste to be recycled at each of its 30 stores, and last year averaged more than 1,000 pounds of recycling per location every day---meaning that what we are observing represents the best of many bad options in the grocery business.

We pass plastic milk jugs, plastic chip bags, cardboard pasta boxes with tiny plastic display windows, plastic bags containing chopped lettuce, and clear plastic egg cartons. "So much waste," Swope groans, in his trademark PLASTIC KILLS T-shirt.

Sprouts cofounder Kevin Easler, who is now the CEO of sustainable-business investment company Zenfinity Capital and chair of Footprint's board, has joined us for this stroll. He points out a mountain of strawberries in plastic clamshells: "This one drives me crazy," he says. All too often, "grocers go to their suppliers and say, 'Put it in something besides plastic,' and the suppliers go, 'There is nothing else.' " Plus, he adds, in the case of the strawberries, "plastic encourages mold."

Swope eyes a boxed water that markets itself as Earth-friendly. "Not only does it have both paper and aluminum," he sighs, "but the inside has a hidden plastic lining that isn't easily recycled."

We reach the meat section, where Swope and Easler pause to appreciate Beyond Meat's (No. 12) new Beyond Sausage tray, an unusually sturdy and attractive-looking brown-fiber case that biodegrades in 90 days. It's made by Footprint.

Swope created Footprint in 2013 with Yoke Chung, a close friend and now the company's chief technology officer, in order to tackle food packaging's environmental and human-health problems. They started by searching store aisles for pointless plastic---TV packaging, toothbrush boxes, wine shippers---and then cold-calling the manufacturer in hopes of business. Today, the company, which has 1,200 employees and factories in the U.S. and Mexico, is gaining prominence in an industry where the widely available and cost-effective options remain woefully eco-unfriendly. The trillion-dollar (and growing) consumer packaged goods industry's meat trays, shelf-stable bowls, disposable cups, and other containers account for almost 150 million tons of single-use plastics annually. This equals about 25 Great Pyramids of Giza---and less than 14% of it is recycled each year. The rest is landfilled, burned into the atmosphere, or left in the environment, where, after remarkably brief service, it will spend the next 10 to 1,000 years polluting forests, turning the ocean into a polymer soup, and eventually entering our food chain, where the compounds break down, releasing substances believed to cause cancer, endocrine system disruption, "pre-polluted" childbirths, and other problems. Sustainable alternatives, meanwhile, have yet to reach meaningful scale.

But the sausage tray we are looking at is nontoxic, compostable, and already on shelves in more than 4,000 U.S. stores. It's made with biodegradable molded fiber, which is engineered to outperform plastic. (Unfortunately, the trays often wind up wrapped in plastic; nobody has yet devised an affordable alternative to polymer cling wrap.) Footprint uses materials such as virgin newsprint and double-­lined kraft (basically, clean postindustrial cardboard scraps) with patented food-safe chemistry to produce the tray, as well as shelf-stable cups and oilproof microwavable bowls that can stay frozen for 180 days.

Footprint currently sells eight versions of the tray, in four colors, to traditional meat brands. (During the company's 2018 sustainability summit, a Tyson rep tracked down a Footprint executive during an intermission and said, "I buy more plastic than anybody in here, and I'm realizing more than half of it doesn't have to be plastic.") In 2017, Footprint helped ConAgra move its Healthy Choice frozen line from plastic CPET containers to decomposable bowls. Leading producers of mushrooms and corn have embraced Footprint's fiber trays. One of the world's largest processors of cut vegetables plans to move its bagged lettuce greens to Footprint's fiber boxes in early 2020. After a study last August revealed that the compostable bowls favored by health-conscious chains like Sweetgreen, Chipotle, Dig, Fresh&Co, and Dos Toros were in fact full of PFAS, a class of "forever chemicals" linked to cancer, several of the chains called Footprint in a panic. Sweetgreen has already debuted its new packaging in select stores. Pegged to Super Bowl LIV in February, Footprint (the event's "foodware sustainability partner") debuted a decomposable eco-cooler that holds 24 beer cans, keeps a bag of ice frozen for 24 hours, and has an iPhone holder built into the lid, which doubles as a speaker.

Currently, Footprint is devising alternative packaging for Philips, Bose, Target, Foxconn, and more. Its edge, says Easler, is that its executives "think like Intel engineers."

Actually, for more than a decade, beginning in the mid-1990s, Swope and Chung were Intel engineers. They met on the Chandler, Arizona, campus in 1995, when the Pentium processor was brand-new and Intel had just shattered the billion-dollar-profit ceiling to become the world's largest chipmaker. Intel CEO Andy Grove's rank-and-yank system was firmly in place, weeding out the bottom tenth of the workforce annually. Some employees called in sick rather than give presentations. The California-born Swope and the New York native Chung respected each other's ability to thrive at the company and over time became inseparable, owning matching Land Rovers, lifting weights together at EOS Fitness during lunch, and becoming next-door neighbors not once, but twice.

They believed that the way Intel was packaging its semiconductors wasn't optimal. One of the world's most advanced tech companies was shipping half-million-dollar bundles of microchips in plastic containers that leached---or "outgassed"---volatile organic compounds. Swope got permission to form a department with the sole task of innovating packaging. His team used advanced polymers developed for aerospace to protect wafers (the flat sheet of silicon upon which a microchip is built) from moisture, oxygen, and other contaminants, ultimately saving Intel $350 million over a four-year period.

This led to a worrisome realization. If a company like Intel, which was operating under Grove's strict "only the paranoid survive" philosophy, had been tolerating the use of plastic that leached harmful chemicals, what was happening elsewhere? Footprint development VP Cary Newton, who interned at Intel, remembers Swope wondering, "What about the single-use crap that is outgassing onto my produce?"

Swope left Intel in 2007 to launch a next-generation industrial packaging outfit, Unisource Global Solutions, and Chung joined him two years later. They managed to persuade several of their Intel contacts---­Apple, Dell, HP---to switch to a molded-fiber alternative to EPS and EPE, popular foam packaging the company manufactured in China until competitors there reverse-engineered their IP and began producing cheaper knockoffs. A short while later, they met Easler, who was 10 years into growing his Sprouts empire. Easler knew that molded fiber could be a game changer for the consumer packaged goods industry and backed the trio. Footprint launched in 2013.

The new company turned its attention first toward disrupting frozen food. "We took the hardest thing in the grocery store," Swope explains. "We felt like once we mastered that, we'd have a moat separating us from our competition." They created containers that met the industry's challenging standards, including a barrier that oil couldn't permeate for 18 months, plus the ability to withstand flash freezing and 400-degree ovens but still decompose in 90 days.

ConAgra gave Footprint its first major break. Hoping that a bowl resembling butcher paper could appeal to younger consumers and help goose the declining sales of frozen foods, the food giant considered using Footprint's container for a small organic frozen-meal brand it had just acquired, called Blake's. Instead, after seeing the actual product, executives decided to think bigger and use it in their new Healthy Choice Power Bowls. Sales jumped 24% the following year. ConAgra CEO Sean Connolly told Mad Money's Jim Cramer that the plant-based material was "what's fueling our growth so far," because it was making frozen dinners cool with millennials again.

Footprint's research and development takes place in its Gilbert, Arizona, headquarters, past cubicles, meeting halls named after Teenage Mutant Ninja Turtles, and a lounge area with arcade games. There's a metrology lab where engineers do mass spectrometry, or---as I observed in November---"stick tests" in which a brand's instant mac and cheese is microwaved in Footprint bowls, then stirred to see which bowls repel cheese sauce best. One day, Brandon Moore, the senior VP in charge of design, might have his team drop-testing 70-inch flat screens in boxes to see when they'd shatter. ("You could hear the men in the office scream with every drop," one employee recalled.) The next, they may be rigging a contraption to simulate the swing of an arm carrying a six-pack of beer.

Moore counts the TV box among the R&D team's greatest accomplishments. "Everyone told us it couldn't be done," he says, beaming---yet now they've got a product that's been used by Target and Walmart to protect TVs from damage during shipment. Over the past six years, Footprint secured nine patents that cover 125 distinct inventions, including a biodegradable six-pack ring that has more give than its dolphin-entangling polymer counterpart but degrades in saltwater after 12 hours (MillerCoors started putting them on cans of its Colorado Native beer last summer), and paper straws, which decompose in three months but can sit in liquid for four days without losing shape (Wegmans, Whole Foods, and Chick-fil-A are among the customers currently using the straws). The most deceptively simple-looking item of all---the little flat meat tray---has already been reconfigured five times, to improve tear resistance and tensile and compression strength.

While giving me a tour of Footprint's production floor, Chung leads me behind a giant set of industrial curtains hiding new proprietary machinery that will begin cranking out 150,000 bowls per day later this year, a fivefold increase over the old system. Gesturing at skylights 30 feet above us, he says, "We brought our IP lawyer out here, and he goes, 'You gotta cover those up---someone will fly a drone over.' "

We throw away 250 billion disposable cups per year. Only a small percentage get recycled, because of their plastic, waterproof lining. Most municipal recycling centers can't separate the paper from that layer. The quest to solve this problem has foiled chemists and engineers for decades and has led to such products as edible wafer cups, inflatable thermal mugs, and carnauba-wax-covered vessels that resemble Chinese takeout con­tainers. (Starbucks has tested all three.)

The problem isn't inventing a cup with no plastic lining. It's scaling one. You'd need more than 8 billion to supply Starbucks and McDonald's alone. And on average, recyclable materials add 2 to 4 cents per cup---which is an extra $120 million to $240 million a year if you're Starbucks. That's why, in 2018, Starbucks and McDonald's (alongside others like the Coca-Cola Company, Yum Brands, Wendy's, and Nestlé) partnered with social impact fund Closed Loop Partners to launch the NextGen Cup Challenge to seek designs that were more widely recyclable, compostable, or reusable---"a moonshot for sustainability," as Starbucks put it. Organizers received 480 proposals.

Several weeks before the submission deadline, Easler alerted the Footprint team about the contest. Jeff Bassett, senior VP of marketing and another cofounder, realized: "We have a bowl. Why can't we make a cup? We already had the base technology."

So, Footprint entered. Its prototype---called the CoolTouch---was named a winner, alongside 11 others. Bassett unveiled the design last September, during Climate Week, to a group of investors at a pitch event in Manhattan. The cup uses an aqueous-based coating instead of the standard polyethylene liner. This barrier actually keeps liquids hot longer than plastic; the design is completely sealless (the cup has no seam down its length, as Footprint's products are cast in molds) and requires no extra sleeve. It currently costs about 30% more than a traditional cup, but McDonald's is testing a version of the compostable lids (which fit so snugly you can tip a cup over and nothing spills), and Footprint is developing a different style of cup for another big brand. (The company customizes its designs to meet the specifications of each major customer.)

Food multinationals have started showing up in Gilbert to see if Footprint can produce the sustainable-packaging solutions they've hatched on their own. Some are even willing to alter the product inside, if Footprint's fiber packaging proves incompatible. Together, they're questioning some of our most ingrained packaging habits: Why put chips in bags when they encourage breakage and grease up knuckles? Must shampoo be liquid in a squirt bottle? Can anybody actually reach the last particles of laundry detergent in the bottom of those tubs?

When I ask why one large company isn't advertising its business with Footprint, Swope says, "A lot of them can't really celebrate what they're doing. If they say, 'Look, we got rid of the plastic in this,' they're afraid customers are going to go, 'Wait, that means your other products still use it.' We have this paranoia about needing to constantly innovate. It's a great vehicle for getting people off plastic."