Going Green Without Going Into The Red

Reducing loss of reusable packaging: An industry call to action.

Milk crates. They’re a staple of college dorm décor. Pinterest posters tout their versatility via social media. Some “green” farmers use them as nesting boxes for chickens. Creativity and good intentions aside, repurposing stolen milk crates isn’t green and the dairy industry loses an estimated 20 million per year. Each replacement costs about $4 and milks the dairy industry of an estimated $80 to $100 million annually. The environmental impact nets out to the equivalent of 1.34 billion plastic water bottles. So the planet suffers a hit, too. But it’s not crafters, college kids and organic farmers contributing to the majority of these losses. There’s something far more nefarious afoot: A new breed of criminal is heisting them off loading docks and from back alleys and then selling them to underground recycling networks. Along with milk crates, plastic pallets, bakery trays, beverage shells and other containers made from high density polyethylene (HDPE) and polypropylene are disappearing at a rate that is costing retailers and CPG companies an estimated $500 million per year. Yes, you read that right: half a billion dollars.

Why should I care?

Losses trickle down the supply chain, from manufacturer to retailer and eventually to the consumer. So everyone feels the pain. While it may seem at first glance to be a relatively minor offense, this isn’t penny-ante crime. The theft of reusable plastics is big business with organization and an infrastructure that allows thieves to swipe, process and resell large quantities of plastics. And it’s growing nationwide as the value of petroleum-derived plastic increases along with the price of oil and natural gas. Crooks target warehouses, retail stores, restaurants, bakeries and other locations where plastics are left outside and unattended. Bad actors can earn anywhere from 10 to 12 cents a pound from illegal recyclers for stolen containers. Recyclers turn around and shred the plastic into pellets and then sell it for export at 30 to 50 cents a pound. At that point, the cycle starts all over again as bakeries, bottling companies and dairies are forced to replace their stolen assets. Houston police recently busted a major theft ring with a warehouse full of stolen plastics ready to ship to overseas. Assets from more than dozen companies valued in the millions of dollars were found. Local TV affiliate KHOU, reported that police uncovered thousands of pallets, trays and other plastics and a $40,000 shredder shipped from China to process it all into pellets for export. Comments left by viewers on the KHOU website show how low on the radar this crime pings with the general population. One viewer commented: “Hey, he is accused of recycling. Isn’t that good?” No, it’s not good. Over the past decade, illegal recycling operations similar to the one in Houston have been busted in Philadelphia, Atlanta, Dallas, Detroit, Fairfield, N.J., and suburban Washington, D.C. In 2013, a Los Angeles County Sheriff’s task force recovered stolen plastics with a value of more than $7 million. Illegal recyclers were operating out of 28 sites where stolen goods were stored and then ground into pellets for resale.

Cracking Down

Jim Rood, a Baltimore-City-detective-turned-private-investigator, is on a mission to enlighten law enforcement about the issue and crack down on criminals. Rood’s first introduction to this new form of crime was in 2009 when he was hired by a group of businesses in Maryland – including Pepsi Cola, Cloverland Dairy and H&S Bakery – to investigate a rash of plastic pallet thefts. Rood’s investigation uncovered 2.8 million pounds of stolen trademarked plastic at a recycling center in Hyattsville, Md. Companies build loss into their budgets for their reusable plastics, but often not at the current scale of depletion. “They know they’ll lose a few pieces,” says Rood. “But it’s tough to account for people stealing it, shredding it and turning around and selling it.” Rood’s continuing efforts led to the creation of COMBAT (Control of Missing Baskets and Trays), a multi-industry collaboration of beverage, dairy and bakery manufacturers. While initially focused on fighting thefts on the East Coast (New York, Maryland, and Pennsylvania), their efforts have expanded into Florida, Tennessee and Texas. And a Midwest chapter of COMBAT was recently formed. Bill Carlson, VP of Route Sales and Operations for the Turano Baking Company in Berwyn, Ill., leads the heartland effort. In just seven months, Carlson has recruited eight bakeries, two soda companies and two dairies. Carlson’s goal is to educate customers to report suspicious activity, encourage drivers to carefully track their ins and outs and report any losses to management as soon as possible and ultimately help enact legislation to create tougher laws. “The penalty for this kind of theft needs to be more than just a slap on the hand,” says Carlson. And, he doesn’t see the situation improving under the current enforcement combined with the staggering economy: “Times are tough and people are looking for ways to make money.”

Fighting Back

PepsiCo, one the country’s most iconic brands, is leading their own effort to rein in losses. An assessment and awareness program that began in December of 2012 cut losses by 25 percent through 2013. Working in partnership with Rehrig Pacific, PepsiCo’s North American Beverage Unit purchased 200,000 shells equipped with RFID tags and tested them at seven plants in the southeast corridor. This allowed the company to get real data on the real turn of their assets. “We now know how many shells went out and how many came back,” says Mark Howl, Supply Chain Director S&D, for PepsiCo. “This gave us a snapshot of where we stand at any point in time and a better idea of what is really taking place.” The good news, according to Howl, is that that the company is actually getting a better turn rate than originally thought. But the black holes are still gaping and PepsiCo is using a combination of strategies to abate losses:

 Training delivery drivers to understand that tracking shells is an intrinsic part of their responsibilities and to aggressively make sure that what goes out comes back.
 Educating grocers to be good stewards of assets – from proper storage of empties to being more aware of who’s picking them up.
 Enlisting cutting-edge technology as another weapon in the arsenal. Using both RFID and GPS tracking on even a test scale provides reporting, visibility and actionable items that can be leveraged in the fight to control losses. Recovered data identifies the trail of accountability so that uncooperative players are called out and put on notice to change behavior.
 Partnering with law enforcement. Enacting stiffer penalties for crooks and creating a broader recognition of the problem among the industry, general public and local police departments.

Flowers Foods, one of the nation’s largest producers of packaged bakery goods, uses approximately 5.76 million plastic trays every week. For several years, Flowers has been promoting awareness of plastics thefts internally to their bakery teams and externally to independent distributors, retail and foodservice customers. They also added an 800 number on plastic trays for people to call if they found them and included a warning that the trays could not be used legally. The campaign has kept their annual losses to 15 percent – half the industry average of 30 percent cited by the American Bakers Association. The company is also a member of COMBAT and hopes to use that affiliation to further raise awareness. Laws vary from state to state and in some cases, the biggest hurdle to stopping container theft is enacting legislation that makes it a crime.

In addition, many law enforcement agencies do not realize the magnitude of tray and container theft.
 “The best way for companies to fight back is to continually promote awareness of this issue with local law enforcement and with lawmakers,” says Dan Stone, SVP, Logistics and Chief Integration Officer, at Flowers Foods. “Laws and penalties need to be in place for there to be any real impact.”

What’s Next

To be successful in a changing environment, companies need to be one step ahead of the curve.
That’s the goal of Rehrig Pacific Company, PepsiCo, Flowers Foods and other leaders in this industry call to action. Their arsenal includes education, awareness and keeping the conversation at the forefront until a long-term solution is found.

“Dropping this half a billion dollar annual loss will affect our customers directly,” says Brian Lindell, Director of National Accounts at Rehrig Pacific, a world leader in the manufacturing of reusable plastic pallets and containers. Controlling losses helps companies, consumers and the environment by allowing reusable containers to actually be reused. “It’s the right thing to do,” says Lindell. “This isn’t rocket science. Small changes in behavior will make big shifts.” And everyone has a role: From the manufacturer to the route driver to the store manager. Adds Stone: “Container theft is an expensive and very serious problem. We need everyone in our industry to understand that and start fighting it together. Working with organizations like American Bakers Association and the Grocery Manufacturers Association we can get the word out.”