Episode 94: Innovating with Bottle-to-Bottle Recycling (Transcript)

[00:00:02] Liz Bothwell: Hi everyone, welcome to Waste360's NothingWasted! Podcast. On every episode, we invite the most interesting people in waste recycling and organics to sit down with us and chat candidly about their thoughts, their work, this unique industry and so much more. Thanks for listening and enjoy this episode.

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[00:00:28] Liz: Hi everyone, this is Liz Bothwell from Waste360 with Leon Farahnik, CEO CarbonLITE Recycling. Hi, Leon, thanks for being on the show today.

[00:00:40] Leon Farahnik: Hi, Liz. Thank you for having me.

[00:00:42] Liz: Leon, we normally start at the beginning of the show. I'd love to hear a little bit about your background and how you ended up in recycling.

[00:00:52] Leon: Sure. Of course, I was born in New York. My father was from Iran and we moved back to Iran. I was there till I was 16 years old, then I came back and went to high school in US, and a college here in California. Then, went back actually, to Iran and built my first plant when, I think, I was 22 years old, and build my first plastic packaging plant because my father was already involved in plastic packaging. At that time, in Iran, we had manufacturing facilities.

I built my first plant at that time, and then, unfortunately, as you're well aware, we had an unfortunate situation in Iran, we had to leave, and started the whole life again in the United States. Build a small company in 1979, and grew it to be a sizeable company in plastic, grocery sacks, actually. We were one of the first ones who brought those grocery sacks that you use today in the supermarket, into US.

From there on, I purchased several other companies and put them together, all in plastic packaging. Of course, when you are involved in plastic packaging, you automatically are involved in recycling meaning that you recycle your own waste inside your plant. You're constantly in a recycling mode to try not to have material going into the landfills or outside. In 2002-- Don't know exactly the dates, but in 2002, I purchased the packaging company in packaging of food items, cakes, cookies. It was PET packaging. PETs is really polyester, that's what we're involved in. That's what all the beverage companies use for their beverage usage.

I purchased the company and at that time, I decided that we should do some recycling because we wanted to have post-consumer content in our packaging at that time. We build a plant in the '2000s, and ended up to have a recycling plant in West Virginia actually, and use that material in our finished products. We have post-consumer content in our packaging.

From then on, of course, in 2010, I sold pretty much all my businesses. At that time, my feeling was sooner or later recycling has to be the most important aspect in plastics because we cannot have the issue of plastics as everybody talks about all the time, ending up in landfills, ending up in oceans, and waterways. My feeling was sooner or later, this will become a major issue for all plastic packets.

At that time, in 2010, I thought about it and decided that we should build a recycling facility to start with, and recycle plastic bottles. Meaning, take bottles from the market mostly. In California, for example, we started to take used bottles, and transformed them again back to raw material that customers can again make new bottles from. That's how CarbonLITE got started in 2010, and we went into production in 2012.

[00:05:29] Liz: Great. I love that perspective that you actually came from packaging, I hadn't realized that. What a great perspective in order to build a recycling facility, know what all the nuances are, and what you're looking for in a recycled product.

[00:05:46] Leon: Yes. As I said, in my business lifetime, I have built 22 plants from scratch, all in plastic packaging. I'm well familiar with the plastic industry, that's why I felt that sooner or later, recycling is going to be the future of this industry. We can see that today now, mostly because no plastic or nothing else, really, in general, biodegrades in landfill. Landfills need oxygen and light to really biodegrade anything.

In reality, nothing can get biodegrade in a landfill. The proven fact is that once I was challenged that no paper- because that time when I was in plastic, grocery sacks, I was challenging that they are biodegradable and they will biodegrade in the landfill. I said, "Okay, let's prove a point." We went, dug out the landfill, and took out an 80 years old newspaper that was from 80 years ago, and you could literally look at it and read the news, 80 years ago.

That was my proof that I showed everybody, that doesn't matter plastic, paper, whatever you can think of, cannot biodegrade in a landfill. That's when I proved the point that the only solution I see, of course in Europe and all that, they have other solutions in burning plastic or creating energy, but of course, again, you have the issue of pollution, or issue of CO2 in the atmosphere. My feeling at that time was recycling is really the only option.

Now, of course, you have different kinds of recycling, but our recycling as we call it, we call it a mechanical recycling that we literally take bottles, wash them down completely. Then, go through a grinding system, and then again it's washed very clearly. Then, that material goes into special equipment that make it food grade, pelletize, and make the resin that then it's sold to major beverage companies to make new bottles all over again. Our idea is bottle-to-bottle, means that our specialty is only in PET and polyester. We focus on that heavily.

It's the most used in the market, one of the most used material in the world. About a hundred billion pounds of PET or polyester is used in the world every year. Out of that, of course, 70 billion pounds of it ends up to be clothing, carpets, and other variable items. 30% of it in the world ends up to be packaging, and close to six billion pounds of that is used in the United States for beverage containers, another three to four billion for other types of food packaging is used in United States.

They're very well used material, and the good thing about it is that the bottles are collected, and [unintelligible 00:09:55] by people who collect garbage. What they do is then separate the bottles, the PET bottles, as we call it, or polyester bottles, and separated. Then, we buy that material, and then we transform it as I said, into a finished resident, to be able to make new bottles again. We do not make bottles or anything like that, we only make the raw material.

[00:10:27] Liz: Got you. That's a pretty [inaudible 00:10:29] process though. Leon, I'd love to learn more about your new plant in Pennsylvania. Could you tell us about that?

[00:10:38] Leon: Yes. We have three plants as of now we have a plant here in Riverside, California, and then we have a plant in Dallas, Texas, and our third plan that's our most advanced plant is built in Pennsylvania. Actually, it's just starting to start-up, we, unfortunately, had some delays in that respect because of the corona situation, of course, that affects us all over the facilities, but especially in Pennsylvania because we couldn't bring in our engineers from Europe. Because part of our equipment comes from Europe and we couldn't bring engineers from Europe to help us start up the production.

Now, some of them are back and we were working on that, and we have started some production in Pennsylvania. It's a very, very sophisticated plant. We have spent over 70 to $80 million to build it. There are very, very expensive plants. There are huge investments, and if you want to meet the requirements of beverage companies, you have to be very good at the quality of what you create, and the only way to really create the right quality for your customers is a very sophisticated plan. So Pennsylvania is, as I mentioned, very sophisticated. Even we have robots in place that help us in certain areas.

Hope that would-- and it is the largest plant in our group. We are, today, the largest producer of food-grade material in the United States and in the world. We are very proud of it, that we are doing something right for the environment. We save over a hundred eighty thousand tons of carbon footprint a year for our customers versus them using virgin material. I'm doing my share for the environment. It's a very tough business. It's easy to talk about it. After 40 years in plastic business, I would consider this the hardest business I ever attempted to achieve.

[00:13:13] Liz: What makes it so difficult?

[00:13:16] Leon: In reality, Liz, if you're taking garbage, in a sense, because you're taking bottles that have been used and mixed in with garbage and all that, and you're taking those kinds of bottles and then transforming it into a resin, a raw material that is usable in water bottles in all kinds of beverage containers, you have to go through a lot of decontamination to make sure that meets the approval of huge beverage companies. That's reality, taking garbage and making it into a food-grade material that passes through the systems of the major beverage company.

[00:14:12] Liz: How much are you handling now at that facility? Whether it's by day or hour, I'm not sure how you're measuring it.

[00:14:20] Leon: No, we will be when it's in full production in all of our facilities. When Pennsylvania gets going as well, all over the country, we will be using over one million pounds of dirty materials, some of it, of course, is deposit bottles that are cleaner. We would be using about a million pounds of [unintelligible 00:14:46] of bottles a day, and so for every day, we're going to be purchasing over a million pounds of bottles and transforming it into a finished good resin and materials for our customers.

[00:15:05] Liz: That's fantastic. Leon, are you starting to see an increased demand for these types of materials compared to virgin?

[00:15:13] Leon: Yes, we are. Of course, we are. In all aspects, we are sold out in all our facilities. The issue, of course, is to make the material and deliver. Unfortunately, we have had a lot of headaches throughout the year. 2020 was not a good year because of our issues with the coronavirus and people getting sick, unfortunately, and creating stoppages. We had a very, what I would say, tough time in 2020. Hopefully, with vaccines on the way and people feeling better, hopefully, we have a better 2021 in front of us, but it was a very tough year for us.

[00:16:06] Liz: I bet. A lot of people feel that pain, it's been a rough year, but it's just amazing that you were able to get this facility done and keep it moving forward, so congrats on that.

[00:16:18] Leon: Thank you. Took a lot of financing and took a lot of help from-- We have a great group of people who work for us. We have a great team of management. It's people who make it happen, it's really the people and you have to take care of your own people. They are the ones who make it happen. I might have to foresight or might have some dream, but without a good management team and without good employees, dreams are hard to achieve.

[00:16:51] Liz: Absolutely. I agree with that, so true. I feel like this industry really attracts a really great type of person. I'm sure your team is wonderful.

[00:17:04] Leon: It is. As I said, very tough business, not a clean business, so people who are working in recycling, mostly in part of our business go through-- It's not a fun business, let's put it that way. You're taking garbage so you have your issues. 

[0017:27] Liz: Exactly [laughs]. I know so much has happened since the China bans on recycling and contaminated materials. Do you think-? I mean, it sounds like you definitely are. Do you think the US, as a whole, is stepping up and innovating as a result of this?

[00:17:44] Leon: In reality, Liz, we have no choice. We have to, there is no if, buts about it, everybody's working hard because since the China wall went up, of course, everybody's started facing a lot of difficulties, what to do the material. Unfortunately, a lot of the material has ended up in landfills, and that's what we don't want because- I have said something-- I said that a while ago as well, and it's a good thing. I like it when I say it.

I say, 50 years from now, Liz-- I'm not around, but 50 years from now or 30 years from now, things go pretty fast. I think mining landfills would become a huge business because people will mine landfills and take out all this stuff, because every single thing in those fields are recyclable and can become a product. I think, I said 30 to 50 years from now, landfill will be the big mining business and people taking it out, and then looking at it and saying, "Those people, those days were crazy. Why would they throw all this material out in the landfill? They could have made new material out of it." But that's what we have.

In Europe, of course, you have a lot less landfills availability. People are much more [inaudible 00:19:12] in doing recycling. Here we are blessed with a lot of land, so we have a lot of places to dump our usage and as Americans, we are the most consumable packaging and consumable in every aspect in the world. We consume a lot and we create a lot of garbage as well. A lot of it ends up in the landfills.

[00:19:52] Liz: It definitely does. To your point, I do think that we have been forced to innovate, maybe faster than we had planned, but we're definitely seeing the results of that.

[00:20:04] Leon: Yes. I think you're seeing-- I am even seeing a lot of people getting involved in a lot of different kinds of things, how to use the materials for furnishing, park benches. A lot of companies are involved in taking the material and making other material, housing material out of it. We have to do something because we can just continue dumping it in the landfills. Unfortunately, some of it ends up in our waterways, then in the oceans, then we see what we have faced with the oceans and environment.

Unfortunately, we don't have a good answer for the size of garbage in the ocean. We don't have a quick answer. I wish could stop the garbage going into the oceans. In the mouth of those rivers that go into the oceans from all over the world. If we could do something that things don't enter, stop the garbage or stop all material from entering the ocean at the mouth of the river. At the end, where it enters the ocean, not to let it go, and then have this huge takes aside, as they say, of garbage swirling in the ocean.

I'm hoping that people have more conscious of not throwing things in the waterways or just throwing in garbage and not taking care of it. Our infrastructure in US is not as advanced, and a lot of the beverage companies are working hard to help out and create situations that people can bring back their bottles. Of course, in US you have 10 states that have the deposit system. They do a very good job of collecting the bottles, and being recycled.

I wish it was all across the country that everybody had a deposit system or other systems. You have the reverse vending machines that Europeans use a lot. You can have a vending machine in front of every single store of Walmart, or Costco, or Target, all your big stores, and giving the people the opportunity to bring back their bottles, and putting it back into those machines and get a coupon or whatever to go and use it for shopping inside that store. That's done very heavily in Europe.

Germany has a 95% the recycling or collection system, and we just have to learn. We have to do it and help out at least on the-- unfortunately in the United States we only collect about 29 to 30% of all the bottles. Imagine 70% of it ends up in landfills and in other areas, unfortunately, waterways, other areas. We lose 70% of it, not being used. That's our biggest issue that, I guess, beverage companies are facing, and needs to be attended to. Something should be done about it.

[00:24:05] Liz: Definitely. That whole resident and consumer behavior angle comes in right in education on how to properly recycle what is actually recyclable and beyond the bin. I'd love to see some of the bigger beverage companies working with partnerships like The Recycling Partnership to actually field these studies and do them and actually see how they can raise recycling rates and reduce contamination at the same time.

[00:24:37] Leon: Totally. I agree with you. The beverage companies right now, with the commitments they have made in the market by 2025, they want to be at least 25%. Just to achieve that 25%, you need 12 plants like our plant in Pennsylvania to be able to supply the needs of the beverage companies, but of course, you need your collection to improve drastically as well, because you might have the plants, but you might not have the use bottles to recycle.

It's a combination of a hand in hand. Beverage companies, of course, need to help recyclers to stay alive, to be able to do what they are trying to do, a sense of helping in the market. You can see now it's the first time I saw it, last night I saw the advertising on TV, actually, of, "Collect your bottles, please bring back your bottles." Very nice advertising by the beverage companies, major beverage companies. It was very impressive. They really understand the situation they are facing and they are working hard at it.

Unfortunately, it's not something that can be resolved overnight. It takes time and people will get used to doing the right thing because 30% or 29% collection is not acceptable. That it's really-- I would consider it a disaster compared to Europe. As I say, Germany has 95%. Funny enough, I'll tell you, if I'm not mistaken, in Oregon, they increased their- people bring back their bottles in deposit states, they get five cents or 10 cents, depending on the size. In Oregon, they increased the repay to 10 cents, and all of a sudden collection rate from, I think it was in 70, became close to over 90% of collecting all the bottles in the states.

It's only a, unfortunately, matter of money, and unfortunately matter of introducing financial capability, giving money to people to do what is the right thing to do from the first place. But you have to give the incentives to people to do things. That's why I think then bigger answer, and I think that best answer is reverse vending machines that are now very, very sophisticated. They can do 100 bottles in the matter of minute, and then a collection system that comes around and collects all the bottles from all this equipment and then recycle it.

The incentive for people is come back, bring your bottle, and then you get coupons to buy your grocery items. Then people will be incentivized to do that. I think that's one of the best ways to increase collection.

For example, in Germany, the deposit for a bottle is over 30 cents euro. Meaning that if you do paid a deposit of over 30 cents euro to get that bottle, to get your beverage, and then of course, because it's so expensive, people always bring it back to get back their credit back. Here, with five cents, people are not as much incentivized as if they had to pay 20 cents or 30 cents for a recycling or for their beverage bottles. They would really be incentivized to bring it back and get their money back, or use it as they're shopping.

[00:29:20] Liz: Absolutely. It's a lot about incentives, and what motivates people and what will actually make them do this. I think there's a lot we could do and have to do.

[00:29:34] Leon: We have no choice. I'm really saying it, Liz. I don't see any choice, but it doesn't matter how we recycle, but we have to any item that'd be used. I feel that 30 years from now or so, your garbage out of your house, every single item of it will be recycled, meaning that from your food to composting, would be the biggest thing for food items. Unfortunately, we don't have enough composting across the United States. I think the best composting is in San Francisco area.

Bottom line of it is that no garbage, nothing that you use in your household should end up in a landfill. All of it should become another product, a new product, or same product back again. That's the future, there's no way around that system. Really, there is no way around that system. People who use packaging, companies who use packaging in every aspect, they have to take responsibility and make sure that it happens that way, that the products get recycled because we have auto plastic industry, we have five, six different items of different properties that are not recycled, and they're all ending up in landfills.

It's a shame. It really is a shame. If I'm talking only about plastics, everything in plastic field can become another product or can be recycled. There is no such a thing as a non-recyclable plastic. We have a long ways to go, and a lot of investments, billions and billions of dollars of investment for people to do it. To do something and to invest billions of dollars, you want to make sure that is a profitable business. Unfortunately, right now, recycling is and hasn't been a profitable business for anyone, including us. It's a very tough business, and it takes time until you become profitable company in recycling.

Recycling has its own issues, it needs the brand owners and it needs all the people who use packaging to make sure that there are more recyclers in the market, should be more recyclers who help them to recycle, and help them financially to build more plants because more plants we have for recycling, more competition, you have more of all good things. Then, the prices can be more competitive with the virgin material in the market. It has to go hand in hand.

[00:32:53] Liz: It definitely does. I wanted to ask you about your locations for your plants, are you basing that on your customers and their locations? How do you find your next location?

[00:33:07] Leon: Yes. Our locations are very close to our customer base because that's how we locate our plant, is all near our customers like in Pennsylvania, we are near all our customers that are located in Allentown, Pennsylvania that use a lot of our material. In Dallas, we are literally across the street from one of our customers.

Literally, yes, most of our material is shipped in both trucks, so it goes long distances. Most of our customers are within 50 miles, 40 miles, or 30 miles of our facility, or even a hundred yards away. Yes, we locate our facilities near our customer base, and that's what they are excited about.

[00:34:10] Liz: That's fantastic, it sounds like you work with a lot of the major beverage companies.

[00:34:16] Leon: Yes. All major beverage companies today are heavily working with post-consumer. They want to enhance their usage; you can see bottles in market now with 100% post-consumer content. Everybody's trying, but of course, the availability it's not just the beverage companies, you have all the cosmetic companies, the ones that use PET in their shampoos or other areas want post-consumer. You have all your PNGs of the world using a lot of post-consumer material at Walmart, Costco and Target, all the big stores requiring that their suppliers give them material that has post-consumer content in it. They are very strict on that.

Unfortunately, to be honest, what happens is that they want post-consumer and they want recyclability, but when it comes to the pricing, when it comes to pay for it, unfortunately, doesn't happen. It's a chain reaction, the bottle company, a beverage company, or a packaging company goes to Walmart and says, "I have to pay a lot more than Virgin for post-consumer", and Walmart says, "No, you have to have a post-consumer, but we're not going to pay more. We'll figure out something else to do, but keep our price the same." What you're facing is you're not getting the Walmart's of the world to pay the extra prize they need, or extra for the suppliers of their packaging to be able to pay more for their usage of post-consumer.

It all goes down and comes to people like us that we don't make any money. Literally, they can destroy all recycling in United States by not accepting the fact, it's like, "I love recycling, and I love you to add post-consumer in my product line, but I don't want to pay for it. Go figure out how to do it without paying more for it." This is really responsibility of the Walmart's, the Costco's, the Targets, all these biggies, to be much more aggressive in a sense of trying to help this situation.

Beverage companies are really trying to help, and the MacArthur Foundation that is working very hard towards the environmental goals. We appreciate that. Beverage companies are putting resources and financial support to try to get recycling better, but they are faced with a situation that they need the Walmart's of the world to help them out in pricing and helping them out. You cannot ask your supplier, "I want a 100% post-consumer. I want 50% of your bottle to be post-consumer, but you know what? I'm not paying more for it".

It is an unfortunate situation.

That has to change, that mentality in the market has to change for recycling to succeed. If that doesn't change, nothing changes because the suppliers, the manufacturers, all that they are trying to make to be profitable as well, you can't blame them. Then, they come to people like us and say, "We cannot pay more because we cannot charge more." As I said, it's the effect, it goes from the top and then the bottom.

I think, in US, with the amount of consumption that each person in the United States does, we are the largest consumers in the world, we have to have tremendous amount of recycling. There are now chemical recycling discussions and everything else, but we have to have a lot more recycling infrastructure, so materials don't end up in landfills, and make it profitable for MRFs to be able to separate the packaging, and everything else to be able to not put it in landfills. As I said, we have a lot of land, we can't just dump. That's the easiest, fastest way to get rid of garbage. That's not our future.

[00:40:03] Liz: No. You're right, the model has to work and the infrastructure has to be in place. It will have to be a full-on effort by everyone to make this work, and things have to change. To your point, they will have to change in order for this to succeed.

[00:40:19] Leon: Exactly.

[00:40:21] Liz: I just read that you're making a pelletized material as well, can you tell me a little bit about that and what it's used for?

[00:40:27] Leon: I want to understand the question better. We pelletize everything, the materials we sell to the beverage companies and other packaging groups is pelletized material, but maybe you're talking about more of what we are doing with-- because what we are doing as well, we are taking caps and labels of our bottles.

[00:40:52] Liz: Yes. That's what I mean.

[00:40:55] Leon: That's what you're talking about. We're taking caps and labels of the bottle and manufacturing a material that can be used to make trash cans and other items that are not food-contact items. We do that as well because we were one of the first big recyclers in US of the bottle recycling, so we are learning as we go after eight years in production, we're learning a lot. We're trying to stop putting things in landfills, so we try to come up with answers for all of our unused material that we have a lot of it, and think of ways to make that into a finished good as well. That's what we're working towards.

[00:41:52] Liz: That's fantastic to hear, awesome. You're doing so many great things, Leon, is there anything else that you're paying attention to in the world of waste and recycling?

[00:42:03] Leon: No. Of course, there's a lot of areas of plastic that can be recycled, and people are looking more into it. As I said, as long as you make it profitable for the companies like us, then you will have a lot more suppliers and a lot more recyclers. We will be a better country and better world. That's my opinion.

[00:42:37] Liz: That's a good opinion, I like your vision and where you think we are going because it's a great place. Thank you for your time, I look forward to hearing more about the Pennsylvania plant, and any future facilities that you do. You're doing [unintelligible 00:42:55], thank you for finding time.

[00:42:55] Leon: Yes, yes, we are [crosstalk]. Hopefully, we are successful in our growth, and we will grow, our customers really want us in a lot of locations, but there's the issues of financial and issues of investments. Beverage companies really want to help out do recycling, and help recyclers, and have more plants of recycling. Again, I mentioned that collection is a very important aspect because if you don't have it, doesn't matter how many plants you have, if you cannot get the material into your facility.

[00:43:44] Liz: Right. Yes, obviously, you need that. It sounds like you have a good plan, and I really appreciate you spending time today. I feel like I've learned a lot, and our listeners will too. Thanks, Leon.

[00:43:58] Leon: Thank you, have a great day, Liz. Thank you.   

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