Milwaukee Journal Sentinel
September 18, 2013
The go-to-market strategy for a Madison, WI, bioenergy firm is changing.
Virent, which dropped the word "Energy" from its corporate name several years ago, now sees Coca-Cola's quest to make plastic bottles that contain no petroleum as its fastest path toward commercialization and cash flow.
The Madison clean-tech company has been working for the past decade to develop renewable chemicals and renewable biofuels, including gasoline and jet fuel. The company's chemical process takes plant sugars and converts them using a process developed in chemistry labs at the University of Wisconsin-Madison.
While Virent's biofuel work continues, the company's most immediate focus is on renewable, plant-based chemicals. The goal is to help Coke and other companies concerned about the sustainability of their products find a petroleum-free chemical source for plastic.
During an interview in his office, Virent Chief Executive Lee Edwards unlocks a cabinet and produces a plastic bottle that's made entirely from plant-based materials.
"We've provided our material to Coke, and some of the partners in the value chain, so we have the first examples of renewable, sustainable 100% PlantBottle that we're proud of," he said.
Virent's bottle "demonstrates the performance characteristics that we know they're looking for," Edwards said. "It gives us confidence that it can be integrated into the supply chain."
Coca-Cola introduced its first PlantBottle in 2009 and this year announced it has sold 15 billion in two dozen countries. Plant-based materials account for up to 30% of the plastic in those bottles.
The technology challenge for Virent, Coke and other leading-brand partners is to take the rest of the 70% of plastic—polyethylene terephthalate or PET—and make it from plants rather than petroleum.
Virent is now researching partnerships with chemical companies around the world to move toward production in the next few years.
Coca-Cola has asked Virent and two of its competitors to have the ingredients for a 100% plant-based plastic bottle ready for mass-production before 2020.
"We've been able to demonstrate that this is possible technically in the laboratory. What we're now working on is to make sure that this is replicable and commercially scalable, and that's an ongoing challenge," Jeff Seabright, Coca-Cola's corporate environmental officer, said this year.
Coke is working with a variety of consumer brand partners, including Procter & Gamble, Ford Motor Co., Heinz and others, to create a wider market for the bioplastic bottle that will "really grow out this opportunity," he said.
Rather than building a production site from scratch, the company is looking toward finding a partner that has manufacturing capabilities already in place, whether that's at an ethanol plant or a chemical company.
"We believe that existing players in the market that have manufacturing assets today create a unique opportunity to help this growing market by leveraging those investments with a plantbased alternative rather than a crude oil-based alternative," Edwards said.
Because most of the PET found in bottles and other polyester products is produced in Asia, many of the partnerships Virent is exploring are overseas, he said.
Challenges slow process Virent has advanced its research to ensure that it can make the key bioplastic ingredient—paraxylene—from ethanol.
"Some of what we've been working on lately is, can we come up with a higher and better use of ethanol?" Edwards said.
It's been nearly five years since Virent recruited Edwards, a former executive at BP's solar business and the marketing executive who led the global petroleum company's sustainable rebranding initiative, "Beyond Petroleum."
Virent's path to market has been slower than Edwards had forecast.
Among the challenges, Edwards said, is to prove the technology works, can be produced on a large scale, and can be produced efficiently enough that it delivers a return to Virent's investors. Looking at the sunken stock prices of some competitors, Edwards says he's thankful Virent has remained private and continued to rely on partnerships with the likes of Shell, Honda and Coca-Cola to steer its growth.
Edwards said his role "is to manage a number of opportunities that cover the immediate, the short term, the middle term and the long term." Virent's technology is suited to making renewable jet fuel, diesel and gasoline, but those are more medium or long-term plays.
"The most important one for the company is to accelerate product sales, commercial cash flow into the company," Edwards said.
By remaining private, Virent has taken a different approach than some of its competitors in the biofuels arena.
Competitors like Gevo went public but then saw production and startup delays in deploying its technology. Gevo's stock is now under $2 a share, a drop of more than 80% from its price when it went public. Gevo last month opened its first renewable paraxylene plant, adjacent to its renewable jet fuel biorefinery in Silsbee, Texas. A Japanese chemical company is a project partner.
Reducing gas emissions
Taking bottles beyond petroleum is the goal of Coca-Cola's PlantBottle strategy.
Since it introduced the new packaging, Coca-Cola estimates that the PlantBottle has eliminated about 140,000 metric tons of greenhouse gas emissions from the company's PET plastic bottles, while boosting sales for key brands like Dasani water.
Being able to find a plant-based source for the rest of the plastic bottle will help Coke's "ability to drive our climate goal of 25% reduction across our value chain by 2020," said Seabright. "Reducing the embedded carbon in our packaging is going to be very, very important."
Virent's technology came from the labs at UW-Madison, and its initial focus was to produce hydrogen for hydrogen fuel cell cars. When oil prices soared during the early part of this century, the company began exploring the possibility of producing plant-based gasoline and jet fuel.
On the biofuels side, technology licensed from Virent is being used at a pilot biorefinery built and operated by Shell at its Houston technology center.
The Texas plant will explore production of gasoline, diesel and jet fuel from a variety of feedstocks, ranging from conventional sugars to non-food alternatives that are widely considered to be ethanol's next-generation raw material, according to Shell.
Virent is in talks with other energy companies about partnerships or license agreements for its fuel technology.
"The important piece is we have preserved the opportunity to partner and deploy with other companies in the space," Edwards said. "We're not limited to Shell."
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