Dreamers: From Refuse to Riches
Tom Szaky turns throwaways into shower curtains, clocks, and more.
When Tom Szaky sees a discarded juice pouch, he doesn't see garbage; he sees a pencil case. An old vinyl LP cries out for new life as a clock. Candy wrappers? An awesome kite. But these are not the musings of an idealistic tree hugger. For the 28-year-old CEO of Trenton, New Jersey–based TerraCycle, they're a revenue model.
Perpetually rumpled and in need of a shave, the fast-talking Szaky (pronounced ZACK-y) is the passionate visionary spearheading the new industry of upcycling. Instead of recycling (shredding, pulping, or otherwise breaking down materials and enabling them to be remanufactured as other products), TerraCycle takes packaging headed for landfills from companies like Kellogg's and Starbucks and resurrects it—more or less whole. Yogurt containers become planters; snack wrappers are transformed into shower curtains. TerraCycle's 85 employees make nearly 200 products, sold at retailers such as Petco, Kmart, Whole Foods Market, and Target.
Szaky’s new reality show, Garbage Moguls, will air this summer on the National Geographic Channel.
Szaky's $7.4 million company, now also forging ahead in Mexico, Canada, the United Kingdom, and Brazil, is a far cry from the business he founded with classmate Jon Beyer in 2002 as a freshman at Princeton University. The two entered a business competition with a plan to sell an organic plant fertilizer made from worm waste. They lost the competition but started the business anyway, pooling their savings, tapping friends and family, maxing out credit cards, and bringing in serial entrepreneur Robin Tator.
With no money for packaging, Szaky and Beyer raided recycling bins for bottles—and were nearly arrested (they didn't realize what they were doing was illegal). They discovered that the limited number of bottle sizes and the interchangeable screw tops meant they could fill the bottles on a high-speed production line.
With their mission—to make products entirely out of garbage—suddenly clear, Szaky knew the time was right to drop out of Princeton.
TerraCycle's first product used dining-hall waste to feed the worms and discarded bottles to package the fertilizer. The result: a cheap, green breakthrough.
Word spread, and in 2004, Home Depot began carrying the fertilizer in its Canadian stores. Wider distribution followed, attracting the attention of Scotts, maker of Miracle-Gro. Scotts sued Terra-Cycle in 2007, claiming that the upstart's green-and-yellow packaging was too similar to Miracle-Gro's. TerraCycle changed its packaging, but Szaky says the lawsuit was "the best thing that ever happened to us." The David vs. Goliath story popped up all over the news, and sales spiked 122 percent, fueling Terra-Cycle's growth and its new product lines.
One of their first successes was a pencil case made from Capri Sun juice pouches. Early on, Tator heard that British Columbia was storing 20 million of the used pouches, pressed into sticky, smelly blocks. He persuaded Canadian officials to let him have the whole mess: "They looked at me like I was on crack!" He then met with executives from parent company Kraft; they loved the idea of upcycling them.
Now, every week, two million units come into the warehouse from fund-raising "collection brigades," operated by schools and nonprofit organizations and sponsored by packaged-goods companies like Frito-Lay. The brigades get 2 cents for every item; for-profit companies' brigades must contribute their cut to charity.
Third-grade teacher Ellen Malissa organized a brigade at Sharon Elementary School in Robbinsville, New Jersey. In one school year, the children collected 20,000 juice pouches. "It was a lot of work for $400," Malissa concedes, "but the kids are much more aware of the importance of recycling. And we bought every child a pencil case made from Capri Sun pouches."
The sponsoring corporations benefit too: They get 5 to 7 percent of net sales of any product made with their packaging, plus bragging rights. Kraft's Jeff Chahley says, "We've helped divert 500 tons of waste [more than 100 million packages] from going to landfill, and we've contributed over $250,000."
Today, everything in TerraCycle's offices looks as if it's on its second (or third or fourth) life. Where did all the shabby furniture come from? "Dumpsters," says Szaky, who likes to point out that waste does not exist in nature. TerraCycle is a "second chance" employer too.
The company doesn't check criminal records: You show up, you do the job, you stay.
Szaky admits he is criticized all the time for working with companies that traditional environmentalists view as the enemy. "But 80 percent of Americans shop at big-box stores," he says. "That's not going to change. The biggest problem with most green, fair-trade, and organic products is that they tend to cost more. At TerraCycle, everything is made from garbage, and garbage is free. People should be able to protect the planet without having to pay a premium for that right."
Getting Ahead with Tom Szaky
When did you know you wanted to be an entrepreneur?
My family left Budapest in 1986, after Chernobyl, and settled in Canada, where a lot of my friends' parents were highly successful entrepreneurs. It seemed so cool. So I had the most badass lemonade stand, and in high school, I had a Web design company.
How did you finance your company?
We've raised $18 million from about 50 people. We're finally profitable. I own 6 percent of the company. All employees get stock options.
What aspects of your life are green?
I'm only mildly green. I do the simple things: I recycle; I compost. And I'm a huge biker. I biked across Canada!
Do you admit to doing anything "wasteful"?
My eco-sin is that I am not yet fully vegetarian. And I drive a very old, very used Acura sedan.
What's the biggest mistake you've made?
We're always doing something wrong, but that's what allows us to learn and grow. When we first started out, we did all the manufacturing ourselves, but that was a mistake. Now we work with contract manufacturers. We provide the raw materials, the product development, and the design. They provide the manufacturing expertise and pay us a licensing fee.
Was it tough to negotiate partnerships with large companies?
It was easy because it's such a monstrous win for them. With big companies, if youcreate something unique that solves a problem, like what to do with tons of garbage, they'll make it happen.
By Donna Fenn (From Reader's Digest - April 2010)
