March 27, 2006 | General

Economics Of Supermarket Organics Diversion

BioCycle March 2006, Vol. 47, No. 3, p. 30
Toter washing, use of standard vs. compostable bag liners, and calculating hauling and tip fees are among the operational and economic considerations discussed in this second of a two-part series.
Part II
John F. Connolly

ANY foray into innovative waste management scenarios needs to meet operational and economic criteria, make environmental sense, and be synchronous with government and industry initiatives. When it comes to targeting diversion of commercial organics, program evaluation based on the bottom-line typically trumps any other consideration. That economic analysis is conducted from the perspectives of the generator, the hauler, and the processor. It also takes into account innovative stimulus programs that might involve task/technical assistance, grant monies, regulatory relief, or public relations initiatives.
This two-part series presents a cost of service framework for analyzing the economics of commercial organics diversion. It focuses on the supermarket sector. Part I (February 2006), focused on a variety of factors relating to initiating a compactor- or a toter-based collection program at supermarkets. At the end of the article, the discussion turned to the use of liners for both barrels used to collect organics within the store and, in the case of toter programs, to line the 64-gallon toters as well. Part II continues that discussion, as well as delves into economic issues that factor into hauling and tipping fees.
For purposes of analysis, Part I provided the following baseline numbers to use:
– A full-service supermarket averaging $425,000 per week in sales.
– Total waste of eight tons per week, or 415 tons/year. This assumes OCC (corrugated cardboard) is already being recycled effectively.
– Organics diversion of 50 percent in a compactor program, or approximately 210 tons/year.
– Organics diversion of 25 percent in a toter program, or approximately 104 tons/year.
– Disposal fee for trash: $85/ton.
– Disposal fee for organics: $45/ton.
– Hauling fee per compactor haul: $150/ haul.
– Hauling fee per toter pick up: $50/pick up.
The primary motivation for lining the collection containers and toters is sanitation. Other factors are visibility of containers to the customer on the sales floor, the chain’s standard operating practices, ease of emptying containers for store employees (ergonomics & workplace safety), and reduced in-store retail labor expense. For the most part, supermarkets utilize can liners in all areas of the sales floor operation and in many of the behind-the-counter prep areas as well.
In terms of program economics, there are several ongoing expense items to be considered and weighed against each other when stores make their decision about use of barrel and toter liners. These include: cost of the cart liners; use of a compostable cart liner vs. a standard plastic liner bag; retail labor costs related to toter washing; and water usage. Given the large amounts of water and cleaning chemicals already consumed during supermarket operations, the cost of water and cleaning/sanitizing agents is insignificant in the process. A related consideration is whether the composting facility receiving the materials will accept organics waste in standard plastic or compostable bags.
For comparison purposes, the following costs were used for standard and compostable plastic bags:
Standard Plastic Bags: A 33-gallon plastic liner (fits a 20- gallon collection container) costs about 10 cents/bag. A 64-gallon toter liner costs about 40 cents/bag.
Compostable Plastic Bags: A 33-gallon compostable bag liner costs about 30 cents/bag. A 64-gallon compostable bag liner costs about $1.25/bag.
It should be noted that bag manufacturer and volume pricing are variables that will determine the costs to a chain. Bag sizes, thickness, and distribution methodology will also factor into the chain’s price for these supplies.
Weekly cleaning of lined collection containers is usually sufficient to maintain a chain’s standard practices of cleanliness/sanitation for traditional waste cans. Typically, barrels and carts used for storing food residuals need to be washed out after emptying each time if they are not lined. A large store can have as many as 20 lined organics collection containers staged across the various departments. For the collection containers, cleaning/sanitizing is easily accomplished on a rotating basis at the end of the day at the back room mop sink area or is sometimes included as part of the daily meat department cutting room cleaning process, where meat trimming collection barrels are routinely cleaned and sanitized. Hot water hose systems with auto-proportioning nozzles for degreasers/cleaning solutions and sanitizing solutions are effective in this process.
Given the standard operating practice of lining waste collection barrels in a store, the recommendation for a compactor system would be to utilize compostable liners for every organics collection container requiring a liner. A store with a compactor usually opts to use the more expensive 33-gallon compostable bags if the composting facility is willing to receive the bags. Emptying the contents of the collection containers, including the bag, directly into the compactor is the most effective operational method to use at the store. It is also the easiest operational process, as employees simply have to empty the container, including the bag, directly into the compactor chute or ring up the neck of the bag, pull it out of the barrel, put it into the compactor, and move on. A compactor program allows a larger percentage of diversion, and the incremental cost of compostable bags may be $1,000 annually for a store. With anticipated savings of $7,000/ year, the use of compostable liners for the departmental collection containers makes operational and economic sense. The cost of these compostable bags can be as low as 30 cents/bag for a 33-gallon compostable liner. Compared to 10 cents per bag for a plastic liner, the incremental program supply cost is manageable within the scope of a compactor process.
Cleaning 64-gallon toters poses a more difficult logistical challenge for the stores. Unlined toters need to be cleaned after each cycle of emptying. In most toter programs, pick up occurs two or three times per week, and frequently as many as six times per week in very high volume locations such as on Cape Cod, Massachusetts in the summer. Staging eight to ten toters for cleaning after a morning pick up of organics interferes with the normally busy workflow of activities in the backroom or meat cutting room areas during the daytime operations, and it isn’t feasible to interrupt department production to clean the toters. Nor can these toters realistically be taken out of circulation for the day, waiting to be cleaned at night. Cleaning a regular 20 or 32-gallon trash container can be accomplished in less than five minutes per can on an as-needed basis. Alternatively, the process for cleaning/sanitizing and repositioning eight to ten 64-gallon wheeled toters could take approximately 90 minutes (10 minutes/toter). Toter washing would incur retail labor expense of approximately $50/week, or $2,600/year – translating to an incremental cost of $25/ton of diverted organics. The washing of the 64-gallon toters after each pick up does not make operational or economic sense for a supermarket.
Some hauling companies have toter washers on their trucks, capturing the rinse water in a tank attached to the vehicle. Of course, to clean these toters at the truck entails hauling time and hauling company labor which would need to be factored into the per stop time for the hauler, with these costs passed through to the generator via the fees charged by the hauler.
For these reasons, the line-or-not-to-line debate becomes much more significant with toter-based programs. Stores first have to decide about washing over lining. The weekly cost of washing was noted above at $50/week. If standard plastic bags are used, a program can be designed where the bag is secured into the container, typically around the top of the toter with an industrial-scale rubber band. When the toter is tipped into the collection vehicle, the contents empty out but the plastic bag stays in the toter. The store can then replace that bag. In many instances, a double liner process is utilized where the secondary liner in each toter facilitates emptying, particularly in freezing weather, and provides an additional layer of protection for the toter should the inner liner tear or break. The inner liner is removed from the toter upon emptying and disposed of as trash, a relatively small environmental price to pay for the greater value of composting supermarket organics. A clean liner is put into the toter in its place. The secondary liner remains in the toter for use until such time as its gets soiled and poses a sanitation concern.
Typically stores on a toter program that generate 2 tons/week of compostables would use about 1,500 64-gallon bags/year. These stores save an average of $1,900/year in the diversion process ($40/ton differential between landfill disposal vs. composting). The inclusion of a plastic toter liner at 40 cents per liner adds approximately $600/year to the program cost, bringing the annual savings to approximately $1,300/store. If these stores opted to use 64-gallon compostable bag liners instead of plastic, their supply cost would be close to $1,900/year, which effectively negates the savings obtained through the differential in disposal fees. Very few supermarket chains will move forward aggressively with an organics program that carries with it the operational requirements and difficulties of a toter process along with adding expense to the overall bottom-line management of their waste stream.
However, let us say that the price of a standard 64-gallon plastic bag increased from 40 cents to 70 cents each due to rising costs of petroleum, and the price of a compostable bag came down to $1.00/bag due to increased demand and production efficiencies. In that scenario, the price differential is only 30 cents/bag. A store using 1,500 64-gallon bags a year would only be paying an incremental $450/year to use compostable bag liners, which is much more palatable to a grocery supply expense budget – and still yields a slight annual savings/store of $400. At this juncture, an almost cost-neutral scenario coupled with the chain’s environmental mission statement and community relations efforts, might entice a chain to move forward. One upside to the toter concept is that it is a process that facilitates the delivery of clean organics to the composter, with easy determination of contamination made right at the store. The compactor process can “hide” contamination until the can is tipped. This quality of toter feedstocks delivered to the composting facility would be a leverage point for the supermarket to perhaps gain a lower disposal fee at the composting facility in return for the operational commitment of organics void of any contamination.
A related, significant issue is that composting facilities are not always willing to receive compostable plastic bags, particularly 64-gallon bags. Smaller, farm-based sites that compost these materials in open windrows do not want to take the risk of the bags creating a litter problem as they break down over the course of the composting process. Additionally, a composting facility bringing in only 10 to 15 tons/day of material from supermarkets may be reluctant to allow compostable bags as they may present a fairly large visible presence relative to the lower volumes of organics diverted in a toter process – regardless of the relatively quick degradation times, as identified via the BPI certification of ASTM D6400. This is a challenging dilemma for the toter-based concept in supermarket programs, but one that lends itself to the ongoing discovery of improved operational methods and the technological advances underway by the various manufacturers of biodegradable plastic products. Communication, education, demonstrated degradability characteristics, and integration of compostable bag expense into the economic analysis of an organics diversion program are factors that will lead to greater acceptance of this supply item as an integral part of a chain’s/composter’s program.
What drives a supermarket chain, or independent supermarket operator to go forward with this? Currently, a selling point of an organics diversion program is that it costs less than current disposal fees. In the examples noted in this article, a differential in disposal fees for trash and composting has been assumed to be $40/ton. That differential can be considered an average, at least in Massachusetts, and provides for the potential annual savings identified in this article for a full-service supermarket with weekly sales of approximately $425,000.
Findings in Massachusetts show that supermarket chains have historically been dependent on the hauling community to spearhead the development of their organics diversion programs. The current waste hauling paradigm is one where the hauling company will provide a total service inclusive of hauling and disposal. Disposal fees charged to the generators may incorporate a portion of that disposal fee per ton for the hauling company (i.e., it is a revenue for the haulers), and can add as much as $20/ton to the disposal cost to the chain. This is in addition to the hauling charges for transportation of cans or collected waste from the store via toters to the receiving facility. As such, there is a premium charged to the chains for engaging primarily with the hauling company for disposal of organics at composting facilities without knowing exactly what the disposal fees per ton are.
Given the slim savings available to the chains in this process using toters, or the savings balanced against the capital expenditure of a new compactor, it is advantageous for the chains to engage directly with the composting facilities for the best disposal fee per ton possible. By doing so, the chains are able to realize the best possible differential between trash disposal fees and composting fees. Hauling charges are best kept transparent to the process, and should reflect only the cost of hauling materials from the stores to the receiving facilities. Chains are well served to engage with an organics-niche hauler for a contracted price that specifically charges for hauling expense only. For a chain looking to move forward with this concept, the incremental savings obtained through a direct relationship with the composting facility can create enough of a financial incentive to prompt a decision to move forward with their programs on a large scale. It is this large-scale involvement and commitment on the part of the chains that the Massachusetts Department of Environmental Protection (Mass DEP) is looking for in the proposed certification program being developed (see below).
Currently a number of chains in Massachusetts are engaging directly with the composting facilities for disposal of organics. In addition, the chains and the composting facilities are seeking innovative methods of identifying, facilitating and/or managing the hauling component in a way that: Meets the needs of the chains relative to costs and operational consideration; Meets the needs of the composting facility for timely delivery of quality feedstocks; Provides incremental opportunities for the hauling companies to leverage trucks and drivers through optimal route density; and Extracts the required economic productivity out of the supermarket organics model for maximum diversion of grocery store compostables. The results are leading to the identification of new, organics-niche hauling companies willing to partner with generators and the composters and to leverage the synergies and benefits of supermarket composting. The composting community in Massachusetts has proactively engaged in learning and understanding the needs of the supermarket chains and conversely, the supermarket sector has found the benefits of engaging in knowledgeable, synergistic business relationships with the composting facilities and the hauling community.
As part of its long-term goal of banning disposal of commercial organics, the Mass DEP and the Massachusetts Food Association (MFA), a supermarket industry group, have signed a memorandum of understanding that will encourage grocery stores across the state to increase their recycling participation – particularly in the composting of such items as food residuals and waxed cardboard. The agreement outlines a collaborative effort between the state agency and the industry group to advance recycling at supermarkets across Massachusetts by expanding their existing Supermarket Organics Recycling Network (SORN). Mass DEP will provide technical assistance to stores that want to start new programs and is developing a voluntary certification program to provide regulatory relief incentives for supermarkets that establish and maintain comprehensive recycling programs centered on organics.
One aspect of the MOU is to encourage grocery store chains to look five-plus years ahead to when the ban could be enacted, and voluntarily establish organics diversion programs now. A major factor in encouraging this action is cost – establishing relationships with composting facilities and organics-niche hauling companies now when all parties have advantages in setting up synergistically profitable business relationships, versus waiting until compliance is required and losing flexibility in negotiating fees for service. These advantages include the offer of technical assistance from the Mass DEP.
Expected benefits of this MOU to the supermarket sector in Massachusetts are: 1) As program development expands to additional locations and composting capacity begins to be optimally utilized, it is anticipated that organics disposal fees will drop or, at a minimum, increase at a lesser rate than landfill disposal fees; 2) Successful program results may lead to the negotiation of lower, long-term organics disposal fees for the chains; and 3) Route density for organics-niche hauling companies will improve, thereby maximizing collection vehicle use and driver labor.
Cost-avoidance for the chains may be realized and modeled into the supermarket sector projections of long-term disposal costs going forward. Voluntary and proactive efforts early on may preclude the opportunistic disposal fees that the supermarket chains may find when seeking organics disposal solutions in a short time-frame and with limited established relationships with composting facilities five years from now.
Proactive efforts may set the stage for solidifying an established infrastructure where the synergistic efficiencies of generators, composters, and hauling companies can enhance a process-driven concept capable of growing at a reasonable pace with known capacities, a financially responsible cost structure, and a positive return on investment for all business partners involved in the process. Community and public relations benefits are intangible at this time, though the expectation is that there is an upside potential in terms of a competitive advantage resulting in increased sales and/or customer acceptance to supermarket operators who market themselves as being environmentally responsible regarding recycling efforts in the communities they serve.
John Connolly is president of JFConnolly & Associates, based in Hampton, New Hampshire. He works with generators, haulers, composters and public agencies to establish cost-effective and sustainable commercial organics diversion programs.

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