Field of dreams: Cargill Dow is changing the plastics industry with a little help from a traditional cash crop. Finance manager Brad Witt, CMA, is keeping the new play cost efficient. (Profile).

Cargill Dow LLC wants to be part of what it considers a second industrial revolution -- a revolution that creates products that don't deplete the earth's natural resources and doesn't compromise our lifestyles. With its NatureWorks PLA corn-based plastics, they may have just set that revolution in motion.

We owe a great many of our modem conveniences to the advent of the first industrial revolution. Without it, we wouldn't have mass production, access to such a wide variety of products or the money to buy such products. Industrialization, however, brought with it a dependency on fossil fuels, and pollution emissions that harm our environment.

NatureWorks PLA could turn all that around, at least in the plastics industry. It is a fully compostable plastic made from plant starch. It can be used to make everything from plastic film, candy wrappers and plastic food containers to textiles.

The idea isn't brand new -- polylactide polymer has been used in the medical field since the 1960s for surgical implants, sutures, and staples. Worldwide, 14 major international corporations are looking at developing PLA plastics and textile products. Cargill Dow was the first company to develop a manufacturing process which allows PLA to perform equal to or better than traditional petroleum-based plastics while remaining price competitive.

From seed to grocery store, this new plastic can reduce fossil fuel consumption by as much as 50%. In addition, the company claims that the process involved in making the polymer can generate 15-60% fewer greenhouse gases than regular plastics manufacturing. The company is aiming for between 80% and 100% reductions in the foreseeable future.

The production process is fairly straightforward. Sugar is fermented to create lactic acid molecules, which are then heated and chemically treated to create a polymer. As Brad Witt, CMA and finance manager at Cargill Dow explains, "we source corn right now, but ultimately we will be able to use biomass, or any agricultural material or residue with fermentable sugars to do this."

Earlier this year the company launched its new Ingeo[TM] fibre to a packed house in New York City. "Everyone who was invited turned up," says Witt, from the company's Minnetonka, Minn., head office. Cargill Dow already has a contract with a company in the U.S. to produce carpet tiles with Ingeo fibre, and some bedding made with it is already available at Bed Bath and Beyond, Herberger's and Younkers department stores stateside.

New model business

The breadth and depth of this relatively new joint venture between Cargill, Inc., an international marketer, and distributor of agricultural, food, financial and industrial products, and Dow Chemical keeps Witt constantly on the go. "It's a great opportunity to get involved in many different areas of finance," he says.

"In 2002 we were just getting our plant in Nebraska running. This year, we're creating a viable enterprise for the future, getting all our functions in sync with the goal of the organization."

Witt has to make sure that the company is getting a good return on its investment -- that prices are at a level that they should be and that decisions are economically sound. It's the final piece in the ideal triple bottom line business model -- one where the social and environmental principles take care of themselves. And it sounds straightforward, but with such a new product the field for error -- and reward --is pretty open.

"We've built a business model incorporating yields and raw material costs, but we've made it dynamic enough to adapt to growth and change with an evolving production process," Witt explains. "Since starting out, we've determined that we have three grades of product that attract costs differently, so we've been able to break down costs more thoroughly. Prior to this year, we hadn't been able to work it out as precisely, but now our commercial team has a solid model with which it can approach the marketplace."

Most of the company's product is shipped out to Japan and Europe, where the response to the new packaging material (which under the right conditions can degrade in about 60 days) has been very enthusiastic. This means selling product in currencies other than the U.S. dollar, so Witt forecasts and manages the foreign currency exposure for the company.

While foreign currency forecasts are a moving target, corn isn't so volatile. The company built its own lactic acid plant, to convert sugar into the lactic acid required to make the polymer, next to its existing polymer plant and a Cargillowned corn milling plant in Nebraska. "Using corn stabilizes our costs, because the market for corn isn't nearly as volatile as the market for hydrocarbons," explains Witt.

The process also cuts down on insurance costs. "We've had to manage our profile in the eyes of a variety of different groups," explains Witt. "When we first approached them, insurers thought of us as a chemical company. But last year, as I explained the product and process to them, we were able to make them understand that we're less of a risk -- the process is less hazardous than that for regular plastics because, for example, there are only low energy exothermic reactions and the raw materials are so much more benign. So that brought our insurance costs down substantially."

Depth training

Witt joined Cargill Dow in 2000, after 13 years at Dow Chemical. Originally from the Kitchener/Waterloo area of Ontario and a graduate of Wilfrid Lauder University, he started his career with Dow in Sarnia, while still working toward his CMA designation (which he received in 1992). From 1989 to 1994 he was assigned to various plants within the Sarnia site.

"Dow made a great effort to move cost accountants among plants every couple of years - giving them valuable experience with the many products Dow manufactures," he says.

In 1994, Witt moved into Dow's corporate treasury group, first in Canada and then, in January 1995, in Dow's global headquarters south of the border in Midland, Michigan.

His assignments in the corporate treasury group started with credit risk in the company's plastics and polyethylene business. He worked to develop and implement risk and reward optimization strategies for accounts receivable management.

It was after a couple of years as manager of financial planning, where Witt was responsible for coordinating global funding and investment activities and forecasting currency exposures, that Cargill Dow came into the picture.

His background is what gave Witt the edge when Dow chose to present him with this opportunity -- and the joint venture ultimately offered him the position. "My background was different from most people's," he explains. "I had handson exposure to credit risk, currency risk management, funding, cost accounting and financial accounting -- this position needed that breadth of skills."

The CMA designation also helped along the way. "It was a huge springboard," he says. "When Dow hired me, they required that I either have it or be working towards the designation. It was a critical choice in my career. The CMA designation gave me the confidence to handle any situation I was presented with at Dow. And it gave me a hunger to learn more. It gave me the core skills, which I complemented by doing my MBA."

Market watch

Now, Witt has a product that he can put his whole heart into, as well as his knowledge. "This is something I really believe in. My wife and I have always done what we can to help the environment, and it's nice to be able to do so through my work as well. North American consumers aren't motivated by just environmental benefits. They really like that synthetic products can now be derived from annually renewable resources. Consumers like knowing their food is packaged in natural-based materials. I really believe you're going to see this material being used even in North America a lot more down the road. And this company is going to be a large part of that."

The North American market is warming to the PLA idea. The company is in negotiations with a couple of large firms that could bring its product into the mass market in Canada, for such uses as food packaging and plastic bottles. And production is steaming ahead for clients in Europe and Asia.

"We all know where oil prices were recently," notes Witt. "It's a finite resource, and the price can only go up while our processes will become more cost efficient.

"The situation for counties like Japan and Germany is different," notes Witt. "They're looking for new waste solutions because they have such finite land resources."

"Meanwhile, we're using brand new technology. We have milestones in place to improve it, and we've hit them all so far. Because we can use any agricultural residue with fermentable sugars, there are opportunities for cost reductions -- in materials, production and volume. We're getting the plant running smoothly and constantly looking for opportunities to take out costs."

Besides all of that, reports from some users suggest that it even performs better as thermoformed packaging than petroleum-based containers. Because NatureWorks PLA is stiff and rigid, customers can reduce the thickness of the containers without compromising their quality.

In addition to it's excellent flavour and aroma barrier, NatureWorks PEA candy twist wrap has strong retention levels and fold and hold 20% better than cellophane and three times better than polypropylene.

One biotechnology company alone can't set a second industrial revolution in motion, of course. Fuel cell companies, wind power and solar energy producers, as well as all of those companies who take on a triple bottom line approach to management, are all a part of what could be a great shift in the way we treat scarce resources. Planting a seed, of course, is the first step..

Robert Colman is editor-in-chief of CMA Management.