The Slow Death of the Plastic Bag

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I'm as guilty as anyone else when it comes to my reliance on plastic bags. I could carry an old-fashioned canvas bag to the store for my groceries and other shopping items, but I never even think of it. Plastic bags have always been so convenient, and the cost is built into the items we purchase, so they appear to be free.

Plastic shopping bags aren't as bad for the environment as paper bags, which require more energy to manufacture, recycle, and transport to stores because of their weight. But plastic bags aren't exactly environmentally friendly, either, because recycling rates are low and many retailers don't use recyclable or biodegradable bags. This is why some retailers such as Whole Foods Market (Nasdaq: WFMI  ) have encouraged shoppers to reuse plastic bags or bring their own for some time.

It's a global movement
Last month, San Francisco passed legislation, taking effect later this year, that bans grocery stores and drug stores such as Walgreen (NYSE: WAG  ) from offering bags made from petroleum products. However, the retailers will be allowed to offer recyclable plastic and paper bags.

San Francisco isn't alone. Japan has recently passed a law requiring retailers to reduce the number of plastic bags used. In a trial run earlier this year, Japan's largest retailer, Aeon, started charging customers 5 yen ($0.04) per plastic bag, and 80% of customers started bringing in their own reusable bags. Ireland has had a plastic-bag tax for about five years, and Paris banned plastic bags at the start of 2007 as well. To the cities and countries listed above, you can add Italy, South Africa, Singapore, and Taiwan as countries that are taking steps to decrease the use of plastic bags.

What does it mean for investors?
The move away from plastic bags isn't likely to be a big deal for investors. We'll continue to buy what we need and what we want; we'll just need to think about how we're going to carry it home. Warehouse clubs such as Costco (Nasdaq: COST  ) don't provide bags at all, and I can't remember when one did. Customers either carry their stuff out or reuse boxes in the store, and Costco hasn't had a problem with sales. In the near term, some retailers, such as Aeon, are likely to see cost savings as customers bring their own bags and Aeon is able to purchase fewer bags. However, such cost improvements are likely to be short-lived because of the competitive nature of grocery stores and retailing in general.

If there's an impact to be had, it's likely going to be among commodity plastics manufacturers, though some of this can be mitigated by a movement toward recyclable plastic bags. But to save a little energy and reduce the amount of litter floating around, a little pain in one industry seems like a small price to pay.

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Whole Foods Market and Costco are both Stock Advisor recommendations. To find out more about the newsletter that's crushing the market's performance, simply sign up today for a free 30-day trial.

At the time of publication, Nathan Parmelee owned shares in Costco. He had no financial interest in any of the other companies mentioned. The Fool has a disclosure policy.


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