New model for SDW industry and Tetrapak packages gathering Made by Benchmark Company exclusively for CL Cup Moscow’12 >>
12 December 2012
Agenda
1. Russian SDW industry: New business model
2. Applying the gathering model to Tetra Pak packages
3. Summary
2
Due to implementation of domestic sorting and improving industrial sorting we will achieve 50% of recycling in 2020 Now
Solid Domestic Waste
40%
7% Sorting Facilities
60%
Recycling facilities
33% Landfills
2020
Food waste Non-food wastes
max
50%
\
Sorting Facilities
min Landfills Source: Benchmark company analysis, case data.
Recycling facilities
To achieve sustainable growth Russian SDW industry should be modernized in all three segments of its value chain 1
3
2
Industrial Sorting
Domestic Sorting
Waste Utilization
Doesn’t exist in Russia
Weak development due to DS absence
Landfill dominating on the market
No financial stimulus
The most profitable segment potentially
Landfill is more attractive financially
No government restrictions
Predominance of municipal companies
No government policy on the subject
Upgrade and build new capacities
Switch from landfills to recycling
Goals Build the segment from scratch
Source: Benchmark company analysis, case data.
4
A new law is needed to be approved to establish sorting 1 rules and build new infrastructure for separated sorting
Goal
Sorting Law
Build infrastructure
Action Waste is sorted into two fractions: food and non-food waste
Upgrade existing containers/ Install containers with 2 sections
Develop infrastructure, which makes waste sorting possible
Fines for waste-sorting violations
Open waste collection points
Solder rubbish chutes
Source: Benchmark company analysis, Benchmarking from the China, India, USA, EU experience.
5
Sorting promotion initiatives will support new law and 1 encourage people to sort domestic waste more actively
Sorting Promotion
Massive social ad campaign
Impact
Citizen involvement in local short-term initiatives
Domestic Sorting engagement
Source: Benchmark company analysis, case data.
Increase the waste quality
Books & lectures for youth about importance of waste sorting
Simplify industrial sorting/ increase efficiency
We need to expand sorting facilities by building new 2 sorting plants as well as upgrading the current ones
Goal Capacities expansion
Develop technologies
Tax preferences Source: Benchmark company analysis
Action Build new sorting capacities next to the recycling plants
Switch from handwork to automatic sorting technologies
Decrease taxes
Expand to the Eastern part of Russia
Adoption of new technologies
Provide favorable tax period for builders of sorting facilities 7
We should restrict landfills and develop recycling 3 business to make the SDW industry completed
Goal Discourage landfill
Stimulate recycling
Keep incineration Source: Benchmark company analysis
Action Additional taxation on landfillers
Restrictions on new landfill territories
Constraints on food wastes landfill
Tax preferences
Government subsidies
Promotion activities
Government restrictions on harmful incinerators
Switching to electricity producing incinerators
Making incineration more ÂŤgreenÂť 8
The key changes in industry landscape are domestic sorting introduction and huge increase in recycling facilities Value Chain 1 Customers Transportation 2 Sorting Landfill 3 Recycling Incineration Total
Current Profit 2012
New Profit 2020
%
Bln Rub
%
Bln Rub
12,5 40 25 10 10 -
2,5 0,5 4,5 0,2 0,1 7,8
10 35 5 15 10 -
4,1 6,3 0,7 4,4 0,2 15,7
Rough Estimation
Slight decrease in profit margin due to growth of competition Taxes from landfills will transfer to customers for waste sorting Recycling subsidizing from landfill taxes
x2 in profits
Investments
$150M Source: Benchmark company analysis
$790M
$1500M 9
The initiatives should be launched following the value chain logic and readiness of facilities from the previous segments 2013
2014
2015
2016
2017
2018
2019
2020
1. Domestic Sorting Sorting law Educate consumers Build infrastructure
2. Industrial Sorting Develop technologies Build sorting facilities
3. Waste Utilization Discourage landfill Stimulate recycling Keep incineration
Source: Benchmark company analysis, case data.
10
Agenda
1. Russian SDW industry: New business model
2. Applying the gathering model to Tetra Pak packages
3. Summary
11
Tetra Pak should cooperate with all three segments of the chain to increase the rate of packages recycled
Tetra Pak Consumers promote ideas about significance of carton sorting and recycling
Industrial Sorting
Recycling
ensure to sort carton packages as a separate fraction
consultancy & technical assistance
explain the profitability of packages recycling
act as intermediate in negotiations between Sorting and Recycling Source: Benchmark company analysis
12
Tetra Pak package gathering includes initiatives from the first segment of SDW industry 1
3
2
Domestic Sorting
Industrial Sorting
Waste Utilization
New sorting law
Expand capacities
Restrict landfill
Build infrastructure
Develop technologies
Increase recycling
Educate consumers
Tax preferences
Keep incineration
Source: Benchmark company analysis, case data.
13
Brand-new methods of collecting will encourage citizens to give the used cartons back Build infrastructure
Investments
Measures Boxes for cartons in schools & offices
Carton collecting facilities
$1M
Carton collecting actions during festivals and other public events Bonus stimulation (e.g. tickets; accumulating cards) for cartons returned back
Source: Benchmark company analysis, companies data, case data.
$0.2M
ticket
$0,8M
14
Education initiatives will increase awareness to the recycling problem and lead to higher carton sorting Local initiatives
Social Advertising
Lectures to youth &employees on
the topics of ecology
Nationwide social advertising TV & billboard campaign
Ads in the points of sale
Volunteer movement $1M
$3 M
“Recycling for dummies”
Social media Virus video to spread the idea of
segregation
waste separating Online contest on carton collecting $0,1 M Source: Benchmark company analysis, case data
Manual with rules of recycling & Website about the carton recycling efficiency
$0,3 M 15
The carton price after sorting should be higher since profit after recycling is twice higher than for waste paper The cost of wastepaper paid to the suppliers of waste almost equals the cost of Tetra Pak Package
The total price of Tetra Pak materials after recycling is twice higher than the price of recycled waste paper
Tetra Pak Package Price per kg
3 rub
10 Aluminum
2 52%
Plastic
5
Paper
4
5
Sorting Step Price per kg
3 rub Waste Paper
Source: Benchmark company analysis, case data.
Tetra Pak package, 1kg
Recycled Paper, 1 kg
16
Agenda
1. Russian SDW industry: New business model
2. Applying the gathering model to Tetra Pak packages
3. Summary
17
Executive summary
Domestic Sorting
Industrial Sorting
Creation of domestic sorting system
Almost 100% of non-food waste comes to industrial sorting
50% of the waste will be recycled in 2020
Nationwide promotion of sorting
Upgrading to the automatic technologies
Initial incentives for landfilling are demolished
Utilization
Tetra Pak Create stimulus for Tetra Pak carton recycling Source: Benchmark company analysis
Augment the recycling rate of Tetra Pak carton
Increase the price for Tetra Pak carton to be recycled 18
Benchmark Company high-experienced team of fellows with strong spirit that study and work together for 4 years Elizaveta Ivahnenko
Mark Khlynov
Maria Kochmola
Sergey Slutskiy
Great case cracking track
Excellent academic study
Unique working experience
Semifinal of McKinsey&Co BD Championship’12 3rd place at Microsoft Case Competition’11 Semifinal of CL Cup Russia’11
High achievers of Finance Worked in PwC, JTI, MCG University, top-5% of course rating Organized Fincontest’12, Russian Grants from Russian Economy Innovation Convention’11 Fund, Potanin Foundation, Lukoil, Participated in student consulting Gazprombank, Vozrozhdenie project with BCG ad-hoc support
Thanks for your attention! Any questions?