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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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Natureworks PLA: The Wonder Plastic?

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)...

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...

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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