Fri | Feb 21, 2020

Styro vacuum as Wisynco exits - Old and new suppliers filling styrofoam void, but it may not be enough

Published:Sunday | January 26, 2020 | 12:08 AMNeville Graham - Business Reporter
One of the replacement containers for meals on the go that has replaced styrofoam boxes.
One of the replacement containers for meals on the go that has replaced styrofoam boxes.

New suppliers are rushing in to fill the void left by the ban on styrofoam food containers, but the twin burdens of duties payable and ability to service clients consistently are acting as constraints on would-be suppliers.

At least one supplier is already voicing concern that without a domestic manufacturer, the market may fall short on meeting the demand for containers.

The size and value of the styrofoam market pre-ban is not clear, but based on disclosures made previously by the sole manufacturer of such products then, the Financial Gleaner estimates it may have amounted to about $3.5 billion.

Wisynco Group, which manufactured under the Sweet brand, is estimated to have had 30 per cent of the market, with importers holding the other 70 per cent.

Eric Kelly, supervisor at Chang’s Trading, one of the go-to places for caterers, event planners and restaurateurs, says the transition from styrofoam was seamless. The company had no difficulty sourcing substitutes made of waxed cardboard for cups, and three different types of various sized food containers made of bagasse; cornstarch, more formally known as polylactic acid or PLA; and a combination of both materials.

Those materials are less sturdy than styrofoam, and also less efficient at keeping food warm. And they’re said to be more expensive.

“There is really no substitute for styrofoam in terms of price and durability, but these boxes come closest by way of competition,” Kelly told the Financial Gleaner.

Chang’s has been a retailer of food service industry implements for more than 25 years, selling serving containers and utensils cake making and decorating items, along with event execution supplies such as food servers, stands and small items.

Producers and suppliers of styrofoam were given more than a year’s notice to make the switch. The ban took effect on January 1, one year after the ban on single-use plastics.

Among the importers, DSL Imports says it controlled 40 per cent of the market, while the rest was split among another 10 distributors, the chief ones among them said to be GraceKennedy and Icon Importers & Distributors. Moses Chybar of Icon says he had about 5 per cent of the market.

Wisynco produced both styrofoam and plastics as Jamaica’s sole synthetic food container manufacturer.

Chairman William Mahfood said in a mid-month interview that his company was in the process of reducing inventory levels on raw material and that within this quarter, Wisynco would be totally exiting the food container business.

They’re not even considering continuing as a distributor of imported packaging.

“We’re still selling some fibre substitutes, and we’ll continue selling, but we’re coming out of that business; so I’d say over the next two or so months we will be coming out totally, because it is a very difficult business to be in. It is a commodity business and it’s hard to compete without a manufacturing base,” Mahfood told the Financial Gleaner.

“We’ve taken our eye off it because we’re moving away. Rather than be interested in that we want to deal with our core business,” he said.

Wisynco is a beverage manufacturer, but it also has a large distribution operation that handles multiple local and foreign brands.

With Wisynco out of the market, companies like Chang’s Trading will now have to rely on new players such as Miracle Corporation and We Alter Eco Limited for supplies. Both stepped into the food container business less than two years ago, when there was already talk of a likely plastics ban.

We Alter Eco’s Managing Director Suraj Buxani says, however, that his motivation for entering the market was related to concern about the environment.

“We are not reacting to a ban that may give rise to any business opportunity. We were in the business before the ban, and in fact even if they had say postponed it we would have continued selling a decent amount of product,” he said, noting that the bagasse containers, wooden and PLA utensils and paper cups they sell were already emerging as a consumption trend.

“The products that we are offering have as much to do with lifestyles as they have to do with any ban that there may be. There are people who if these products had been offered 10 years ago, they would have used them,” Buxani said.

The first few days of the styrofoam ban and the six months leading up to it have not been easy for the new suppliers. They had to wear down resistance among many who were still hoping that the ban would not materialise.

Kelly at Chang’s Trading says some customers were allowed to inspect the product to see that it can do the job, but this was after bad news got out about the initial batch of bagasse containers, specifically, their lack of durability.

“The first set of bagasse containers were fraught with problems, as while they did not leak, they got soft and the lunches could not be stacked on top of each other,” Kelly said of the products they used to test the market in the latter half of 2018.

“Somehow, the second set of bagasse containers came in cheaper and we’ve passed on the savings to our clients. In addition, the quality is better with no complaints so far,” he said.

That ‘somehow’ had to do with the fact that new importer, Miracle Corporation, had to switch suppliers in reaction to complaints.

“We have a new supplier that we’re dealing with out of China. So far, there have been no complaints. There are the very few instances where people will hold a lunch for too long before consuming it, but those are rare,” Miracle Corp Managing Director Richard Lee told the Financial Gleaner.

Lee said the first batch of supplies was secured in the rush to fill orders when it became apparent that Government was serious about the ban. The containers were also more expensive, because they were sourced through the United States, although China was the country of origin. Present orders are done factory-direct out of China.

Everyone contacted for this story agreed that the ban on styrofoam was warranted, due to the environmental danger. But, with no more manufacturing base to protect, both Buxani and Lee say the Government needs to relook its tax policy, with the goal of either reducing or removing the levels of duties payable on imported bagasse containers.

Paper containers enjoy duty-free status, and they want the same to apply to bagasse.

“I really believe that sustainable alternatives like bagasse ought to be duty-free and, potentially, even GCT-exempt. People are complaining about the cost, and if we are on a course of sustainability why not lessen the cost of going that route?” Buxani questioned.

“It is that much more expensive, sometimes as much as 100-150 per cent; therefore, Government should really consider even a reduction of the duties on these substitutes,” Lee said.

The various importers of styrofoam are all said to have switched to imported substitutes, but new players have also been said to enter the market.

Regarding the latter entrants, both Mark Decaseres of DSL and Lee describe it as ‘crazy out there’, especially with new Chinese importers getting into the business.

In the meantime, apart from the 100 displaced workers at Wisynco, business was described as good for those supplying substitutes.

Lee, though, has a lingering disquiet about the ability of his company and new players to fill the void left by Wisynco’s exit; and says he would be first in line to partner with any player who wants to open a container-making factory.

“My concern is going to be the combined ability of all the suppliers to fill the gap left by the Wisynco pull-out. I don’t know that we are collectively in a position to adequately meet the demand of the country,” he told the Financial Gleaner.

“Right now, the demand for these alternatives is exploding, and while I hope I am wrong, I doubt very much that we can meet the demand in the short term,” he said.

neville.graham@gleanerjm.com