Simon Hodson, CEO, EARTHSHELL CORP., LUTHERVILLE, MD. This company's biodegradable packaging could ease the fast-food garbage pileup.
By Alan Cohen
June 1, 2003
(FORTUNE Small Business) – Simon Hodson can--and will--tell you everything there is to know about hinged-lid Big Mac containers, with an enthusiasm usually reserved for World Cup soccer matches. His single-mindedness isn't entirely surprising. The co-founder and CEO of EarthShell Corp. and his investors have spent more than $350 million to develop environmentally friendly plates, bowls, and packaging and sell them to skeptical customers. "There's a $30 billion world market for food disposables," Hodson says. "It's not a question of if this will take over, but when."
Ironically, Hodson knew nothing about fast-food containers when he started out in 1983. What he understood was the family business: concrete. His father was a pioneer in the ready-mix concrete industry who dreamed of creating a multipurpose, environmentally friendly composite from low-cost natural materials. A century earlier Thomas Edison had tried it and failed. The younger Hodson came up with the idea of combining limestone--which must be mined but is easier on the environment than oil--with natural binders like potato or cornstarch to create a petroleum-free alternative to plastic.
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Tapping his well-connected lawyer for an introduction, Hodson pitched technology investor Essam Khashoggi on the idea. The younger brother of Saudi investor and former arms broker Adnan Khashoggi gave him just over $1 million in 1983 and came up with the idea of replacing polystyrene fast-food packaging with the material Hodson developed.
Yet environmentally friendly food disposables had historically lost money. Many weren't as durable or cheap as traditional paper or plastic. So EarthShell played up its product's affordability and performance. To get a competitive edge, EarthShell planned to license its technology to existing manufacturers in exchange for royalties, rather than invest in its own factories. But vendors were wary. "They wanted proof that people would buy this," says Vince Truant, EarthShell's president and COO. So EarthShell built a costly test plant and lined up would-be customers, notably McDonald's. And by 1998, EarthShell (Nasdaq symbol: ERTH) had gone public. Unfortunately McDonald's didn't approve EarthShell's Big Mac packaging until 2001 and has yet to start full production.
With the delays pummeling EarthShell's stock and the venture losing $39.5 million last year, Khashoggi pumped in emergency funding. But by early 2003, EarthShell had raised $12.4 million and licensed Sweetheart Cup Co. to make its disposable plates and bowls. "EarthShell has a good, strong product," says Tom Uleau, Sweetheart's vice chairman and chief operating officer. EarthShell's wares are also showing up on Wal-Mart's shelves, and it's involved in a deal with DuPont to develop and market sandwich wraps. Meanwhile, Hodson keeps eyeing new uses for his material. "If we can replace a paper cup, we can replace a corrugated paper box," he says. Don't even get him started on photocopy paper. |
