Natureworks: Market Development for Bioplastics
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Case Details:
Case Code : MKTG169
Case Length : 23 Pages
Period : 1997-2007
Pub Date : 2007
Teaching Note :Not Available
Organization : NatureWorks
Industry : Chemicals and Petrochemicals
Countries : USA
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Excerpts
Natureworks PLA: The Wonder Plastic?
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Cargill's efforts to create plastics from corn began in 1988, when it assigned
the job of developing new uses for corn sugars to Pat Gruber (Gruber) who had a
doctorate in biological chemistry from the University of Minnesota and had
joined Cargill that year,. Though researchers had developed PLA from corn sugars
as early as in the 1930s, it had very limited commercial applications. Also, it
was too expensive to manufacture. Gruber, therefore, started work on developing
PLA through a new process of fermentation of corn sugars that would overcome the
cost and performance limitations (Refer Exhibit II to learn more about how PLA
is manufactured)...
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Popularizing the Polymer
There were several facets to Cargill Dow's marketing strategy for NatureWorks PLA. In the initial years, as conventional plastics had a price
advantage, Cargill Dow stressed the environment-friendly characteristics of
the material.
Forming Alliances
A major component of Cargill Dow's strategy was to form alliances with
converters, manufacturers of packaging material, retailers, and lifestyle
brand owners. For example, in 2002, Cargill Dow teamed up with Biocorp N.A,
a leading provider of bio-degradable packaging. Biocorp manufactured cups
made with NatureWorks PLA. The first customer for the cups was the Coca-Cola
Company, which used them as venue cups at the 2002 Winter Olympic Games held
at Salt Lake City...
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Dow Exits
Despite these efforts, neither the demand for NatureWorks PLA nor its
profitability reached the levels that Dow had expected them to. In late
2004, newspaper reports suggested that Dow was thinking of exiting the
joint venture. Dow finally sold its stake in the JV in January 2005 to
Cargill. Andrew N. Liveris, President and CEO, Dow Chemicals, said,
"Customers are not willing to pay a premium for environmentally friendly
polymers." Soon after Dow exited from the joint venture, the JV, now a
wholly-owned subsidiary of Cargill, was renamed NatureWorks LLC. |
Dow, reportedly, was not happy with the pace of growth of the
bioplastic industry. "We believe [industrial biotechnology] holds significant
promise for the chemical industry in the long term... what gets tricky is
determining the timeline... too much time was needed to get [this] to the next
level," said George Blitz, business vice president of Dow Ventures, in June
2005...
Excerpts Contd...>>
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