• Market Crumbs

Drama In The World Of Polystyrene Foam

Photo via Caleb Lucas on Unsplash

Dart Container Corporation is a perfect example of a company whose products are everywhere, yet you don't pay much attention to. Dart is the world's largest manufacturer of foam cups and containers, producing about as many as all of its competitors combined.

The company produces more than 4,000 products such as cups, lids, cutlery, straws and portion containers. Dart even acquired Solo Cup Company, whose infamous red cups are frequently used at tailgates and parties, in 2012 for approximately $1 billion.

Dart, which shipped its first foam cup in 1960, is seeing one of its most popular products catch heat. Environmentalists and politicians are going after expandable polystyrene products—colloquially called Styrofoam, which is the material used in some of Dart's most notable products. The company says 20% of its $3 billion in annual sales comes from foam products.

Cities and states across the country are rushing to ban the use of expandable polystyrene products. Maine became the first state to ban their use last year, with Massachusetts, Colorado, Maryland, Hawaii and Oregon at various stages of instituting bans.

When Maryland voted to ban the use of foam, Dart immediately struck back. The company shut down two warehouses in the state, costing 90 employees their jobs.

In San Diego, Dart responded to a similar ban by filing a lawsuit alongside a restaurant trade group. The lawsuit contended that San Diego should've undertaken a detailed environmental analysis before implementing the ban. San Diego has since suspended its enforcement of the law while it performs the analysis.

Dart believes it is being unfairly targeted as other products, such as paper, negatively impact the environment as well. "We don’t believe there are good, objective reasons to single out certain materials," Dart’s CEO Jim Lammers said.

While Dart says it has adapted to declining foam sales by offering more paper products and containers made from recycled material, Dart wonders what happens next. "If you just give up on foam," said Michael Westerfield, director of recycling at Dart, "what are they going to want to do next?"

Dart contends foam can be recycled, but most cities don't accept it as they do plastic because they can't find buyers who are willing to pay for it. Dart believes that one day recycled foam can be used to make new products, but health regulators have not yet given approval to do so.

Dart has a team of chemists and engineers who are working on new products such as new coatings for paper cups that don't use plastic. They're also studying how its products compose in soil samples. "I guarantee you we are going to be different 10 years from now," Lammers said.

While Dart is just one example of a company fighting environmentalists and politicians who are trying to protect the environment, it provides an interesting insight into how they refuse to go down without a fight. If Dart ultimately loses the ability to sell foam products, it remains to be seen if they create products that can fill the void or see sales take a hit. While the debate over recyclables and climate change is not going to end any time soon, it will be interesting to see what commonly used materials end up in the crosshairs of environmentalists and politicians after expandable polystyrene.

Leftover Crumbs

  • They'll cut rates if the S&P 500 falls a few percent. Federal Reserve Chairman Jerome Powell told Congress yesterday that the Fed finds the "economy in a very good place." Powell said the Fed "believes that the current stance of monetary policy will support continued economic growth, a strong labor market and inflation returning to the committee’s 2% symmetric objective." United States President Donald Trump, who doesn't watch the stock market, didn't waste anytime bashing Powell on Twitter, saying "When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15. Germany & other countries get paid to borrow money. We are more prime, but Fed Rate is too high, Dollar tough on exports."

  • Are the days of buying competitors coming to an end? The United States Federal Trade Commission has ordered Alphabet's Google, Facebook, Apple, Amazon and Microsoft to provide information on acquisitions that were too small to report to the FTC and Justice Department. "The commission plans to use the information obtained in this study to examine trends in acquisitions and the structure of deals, including whether acquisitions not subject to (antitrust) notification might have raised competitive concerns," the FTC said. The FTC is seeking information on deals that occurred last decade, requesting information between January 1, 2010 and December 31, 2019. "All options are on the table," FTC Chairman Joe Simons said regarding potential enforcement actions.

  • They're bringing in the expert. Elon Musk's SpaceX has reportedly hired William Gerstenmaier, who was previously NASA’s Associate Administrator for Human Exploration and Operations. The position, which he held from 2005-2019, saw him oversee NASA’s human spaceflight program. Gerstenmaier's 40 year career at NASA also saw him work on programs such as the Space Shuttle and International Space Station. Gerstenmaier, who is described as "arguably the most influential person when it comes to US spaceflight," would benefit SpaceX as it prepares to send NASA astronauts to the International Space Station between April and June. SpaceX confirmed Gerstenmaier is "a consultant for the company’s reliability engineering team."

  • Keeping up with the Joneses. United States household debt increased by more than $600 billion last year, making it the largest annual increase since the lead up to the financial crisis, according to the New York Federal Reserve. With last year's increase, total household debt surpassed $14 trillion for the first time. Fed economists said the growth in household debt is largely attributable to increasing mortgage debt balances. "The data also show that transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers," Wilbert Van Der Klaauw, senior vice president at the New York Fed, said.

  • Will the new company's colors be pink or yellow? T-Mobile is closer to its $26.5 billion acquisition of Sprint after a federal judge approved the deal, rejecting claims the deal would violate antitrust laws. The deal will bring together the United States' third- and fourth-largest wireless carriers, with the combined company named T-Mobile. U.S. District Court Judge Victor Marrero said following his ruling that the deal "is not reasonably likely to substantially lessen competition." New York Attorney General Letitia James said the states involved in the suit are considering filing an appeal.