If The Graduate were made today, Mr. McGuire might not be so keen on plastics. By now it's a mature industry, with 500 billion pounds of the stuff produced every year. But hidden in that massive trove is a segment that hopes to capture the same explosive growth predicted back in 1967. Say it with me: "bioplastics."
Setting up a sustainable shop
Since plastics only account for about 5% of total U.S. petroleum consumption, it's unlikely that even a complete shift toward bioplastics will devastate oil producers. Dow's shift toward bioplastics produces at a lower cost (negating the need for pricey oil) by controlling the entire chain of production, from the sugarcane field to the processing plant. Its nearest (literally and professionally) direct competitor is Brazil-based Braskem
This is another dip in the pond for Dow, which previously tried to develop a new corn-based bioplastic with Cargill but decided to abandon the partnership and the product in 2005. Why? It's hard to get people to accept new products, according to Luis Cirihal, Dow's executive in charge of the new sugarcane project. After Dow walked away from the partnership, Cargill doubled down on the corn-based bioplastic, renamed its manufacturer NatureWorks LLC, and should soon expand its manufacturing capabilities.
Late to the party, but bringing lots of favors
Dow's polyethylene effort begins in the midst of what has been a huge rise in bioplastic demand. Bioplastic consumption has increased by several orders of magnitude since 2000, and total bioplastic production capacity is expected to increase sixfold, to 2.1 million tons, by 2013. Despite its late start, Dow's plans dwarf the capacities proposed by smaller bioplastics rivals Cereplast
Will size triumph over innovation? Add these companies to your watchlist and keep track of their progress.
Fool contributor Alex Planes holds no position in any of the companies mentioned in this article, but appreciates their sustainability efforts in a tree-hugging-hippie kind of way. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.