One Word: Biopolyols
If it’s escaped your notice that mattresses and couch cushions are now made with soy, don’t feel bad. That’s what happened to HOM Furniture, too.
HOM, based in Coon Rapids, carries Serta mattresses at its own stores around the Midwest and at the Gabberts store in Edina that it acquired in 2008, about 50 Serta models in all. The retailer has carried Serta for years.
Then a year ago, HOM learned that Serta was making a change in its products. Some of the petrochemical content in the mattresses was being replaced with BiOH, which is made from soy oil. HOM didn’t learn this from Serta.
“They didn’t even tell us,” says HOM’s David Blake, who buys mattresses and bedroom furniture for the company. “We basically found out through Cargill, because Cargill came and talked to us about BiOH.” At that point, in late spring 2009, Serta had been using Cargill’s soy ingredient for more than a year, not at all of its plants, but at the one that made HOM’s mattresses, Blake says. “We came to find out that our entire innerspring line already had the BiOH product in there.”
Was Blake unhappy about this? Did HOM contemplate switching to another manufacturer?
“I called Serta and told them, ‘We realize this is in your product, and we want to start taking credit for it,’” Blake says. HOM wanted to “make sure people know that if they buy a mattress from HOM and Serta, they’re able to help us reduce the environmental footprint that’s left by petroleum products.”
HOM does that now. Tags on its mattresses feature BiOH’s logo and benefits. HOM’s salespeople are trained and ready to answer BiOH questions, though they don’t press the point when they talk with shoppers. After all, Blake says, customers still make their decisions primarily on factors of price, comfort, and style.
That’s one challenge for Cargill in selling BiOH, which it brought to market in 2005. It’s not clear how consistently buyers will make “green” one of their criteria, or how heavily they’ll weight it.
But a bigger challenge might be this: BiOH is a piece of a piece. It’s an ingredient in a component—polyurethane foam—that goes into mattresses and furniture and the seats in cars. Getting any kind of marketing message all the way down the line to the end users of those products isn’t easy, as HOM’s experience shows. And in any event, says Jessica Koster, Cargill’s marketing manager for BiOH, the message has to be positioned differently for the different audiences—foam makers, furniture makers, and retailers—along the way.
Another thing is that BiOH can’t yet fully replace the petrochemical equivalent that foam manufacturers typically use. Ricardo De Genova, Cargill’s lead R&D scientist for biobased polyurethanes, says, “We still blend—not we, but the foamers—they blend our product with their normal petroleum materials to a certain ratio so that they can reach the minimum performance requirement” for their foams. Foamers substitute Cargill’s product for their petro-based ingredients in a range of 10 percent to 60 percent, depending on the type of foam. De Genova just took BiOH across the 50 percent threshold in some foams earlier this year.
BiOH is a polyol, or rather the brand name given to a group of polyols created by Wayzata-based Cargill. Mix a polyol and an isocyanate (and a few other ingredients in smaller amounts) and you get a polyurethane. Some of these compounds are used in paints, coatings, and sealants, some in adhesives, some in elastomers, but the lion’s share are used to make foams. Cargill estimates the global polyurethane market at $22 billion annually, with flexible foams alone accounting for half of that.
What Cargill has set out to do is capture a portion of that market. And before it ever faced marketing challenges, it had to overcome more fundamental ones: how to polymerize or “functionalize” soy oil to make it react efficiently with isocyanates; how to get past a history of poor quality, off colors, and unwanted odors in the industry’s first-generation soy foams; and even more basic, how to overcome the inherent inconsistency in all types of plant material—soybeans included—that makes them so difficult to use as industrial ingredients.
Yusuf Wazirzada, who heads Cargill’s BiOH business unit, says, “Until we entered this space, especially in furniture and bedding, the conventional wisdom was that you could not use biobased polyols in these applications, because there were significant technological miracles that needed to happen before you could get there.”
Cargill licensed some of its miracles: It found a promising soy-oil polymerization technology at a university in Kansas. But to solve other problems, the agricultural commodities company turned to its own experience. Cargill has a long history of handling soybeans and other oilseeds and turning them into ingredients for food. The company has had to deal with the same challenges of inconsistency, appearance, and smell in that arena.
Cargill also has an earlier business, NatureWorks, that makes biopolymers using the carbohydrates in corn. NatureWorks converts the starch to sugar, then to lactic acid, and finally to Ingeo-branded polymers. They were Cargill’s first entry into the bioplastics industry when the company introduced them in 2003.
Today, Ingeo is used in everything from food packaging to plastic cups to socks to carpeting. NatureWorks, initially a joint venture with Dow Chemical Company in the late 1990s, is now a wholly owned subsidiary of Cargill. It doubled its production capacity to 300 million pounds last year at its manufacturing plant in Nebraska.
Five years after BiOH was introduced to the market, it’s also an established product, used by at least 15 major foam manufacturers globally and found in dozens of furniture, carpeting, bedding, and automotive brands. In more than one sense, though, BiOH is still in the lab.
Plant-based substitutes for petrochemicals are still an emerging field. Experiments continue at De Genova’s lab bench, but also in the work of BiOH’s other principals. They give insight into the way a new industry is forming, and the way Cargill forms a new business.
Business Development: “You don’t know what you don’t know.”
Wazirzada was there for BiOH’s inception and even before that, when it was no more than an undefined notion. He was part of a business incubator group within Cargill whose job was to find opportunities in industrial bioproducts. They decided in the spring of 2003 that soy polyols were one place to look.
“At that point, we didn’t have the technology, we didn’t have anything,” says Wazirzada, who had worked for a British chemical company and joined Cargill in 1997 to run its vegetable oils division in Pakistan. He moved to the Twin Cities in 2000 to work in strategy and business development for the company.
Cargill didn’t have polyurethanes expertise in house, but it identified other advantages that it did have (see box below). The need to look outside the company for polymers know-how meant an early decision to develop the new business through open innovation: Consultants from the chemicals industry, academic researchers, and early customers would all play a role. There was another reason for that, too.
“In a lot of these start-up situations, one of the challenges of the business development person is you don’t know what you don’t know,” Wazirzada explains. A dozen promising steps forward might lead to nothing more than a dead end. So Cargill sunk as little as possible into long-term assets or hires until it was deep into the launch of its new business. The company not only had a product, it had customers to whom it was shipping railcars full of polyol before it ever built a plant or had more than five BiOH employees.
“Assess before you invest,” Wazirzada says. “That was the principle that cut through almost everything we did.”
Cargill did an audit of the ways other start-ups and research centers were trying to polymerize soybean oil. It chose a technology from Pittsburg State University in Kansas as the one it would license for several reasons: the patents the school held, the strength and depth of its research team, but most of all, the “optionality” of its chemistry, the potential to get multiple outcomes from it.
“If you end up with a single-outcome technology, then it’s either yes or no,” Wazirzada says. “You’ve spent two years and lots of money, and you either win or lose the gamble.”
Having options was important because Cargill was moving counter to conventional wisdom as it chose to focus its R&D on flexible foams. Consultants warned that making biopolyols for that market had never been done and probably couldn’t be done. They advised going after something else where Cargill could have a quick win and move on. Rigid foam for construction insulation would be an easier application to jump into.
“If it hasn’t been done before, maybe that’s a good reason to do it,” Wazirzada says. Staking an early claim in a new corner of the polyurethane market was risky on the front end, but it would pay off with advantages in marketing later on.
Woodbridge Foam Corporation of Ontario, a big producer of foams for automobile seats that had collaborated with Pittsburg State, was BiOH’s first customer. Hickory Springs, a North Carolina maker of furniture and bedding foams, was next.
They and others did product trials and guided development. Cargill’s polyols would have to be a “drop-in” equivalent in their manufacturing processes, they said. They weren’t willing to reformulate their products, but foam manufacturers were eager to lighten their dependence on crude oil.
That was only more true in late 2005, as BiOH came onto the market. Prices for petrochemical polyols “skyrocketed 60 percent in a couple months’ time” following Hurricane Katrina, says Mike Crowell, vice president of marketing for Ohio-based Flexible Foam Products. BiOH “came along at a very opportune time.”
Since then, BiOH’s price has stayed competitive, though it tends to move in parallel with the price of petro-based polyols, he says. Even so, it’s been valuable to have an alternative source of supply and greener products to differentiate his company, which uses BiOH in nearly all its foams, Crowell says.
Marc Hillmyer, director of the Center for Sustainable Polymers that was formed at the University of Minnesota last year, says every big petrochemical polymer company has a sustainability initiative now. Their interest in renewable resources has flowed and ebbed before, he says, but now it seems more lasting. Still, Cargill is gaining an edge. Hillmyer says partly due to the company’s “innovative” chemistry, and partly due to the range of products Cargill is working on, “I would say they’re the leader.”
Wazirzada sees competitors divided into two categories. One is those big petrochemical companies (Bayer, Dow, BASF, Huntsman), “and if they choose to make biobased polyols a major success, they can do it.” They have the means and technological ability, he says, but maybe not much incentive, given their legacy businesses making petro-based polyols. Where they have come out with biopolymers—Dow’s Renuva soy polyols, for example—they’ve approached the polyurethane market and flexible foams more “selectively” than Cargill has, he says.
Other competitors are start-ups and purely biobased, so they’re not “conflicted” in their motivations, but they don’t have the scale, infrastructure, and financial stamina to compete with Cargill over the long haul, Wazirzada says. Some have focused on rigid foams, “where the cash burn wouldn’t be as high.” BioBased Technologies in Arkansas and Urethane Soy Systems in South Dakota are two of Cargill’s smaller competitors.
Cargill, by contrast, was founded in 1865. It’s “been handling these crops for years and is always looking for new markets for them,” Wazirzada says. But will industrial uses conflict with food uses? And could volatile soybean prices present a problem? BiOH’s technology has the potential to work with other plant oils. And for as long as BiOH depends on soy crops, well, Wazirzada notes, risk management—including ag commodity prices—is another one of Cargill’s businesses.
R&D: Nature is Inconsistent
For an R&D lab, like the facility in Plymouth that De Genova leads for Cargill’s BiOH business, the central problem in creating ingredients for bioplastics is nature’s variability.
“Petrochemically derived materials are 100 percent synthetic. You can control their composition very accurately,” says De Genova, a former research scientist and polyurethanes business manager for Dow Chemical Company who joined Cargill four years ago. “You have the same thing over and over again, because it’s a manufacturing process.”
By contrast, “we are dealing with natural ingredients that have compositional changes due to climate, due to geography,” even due to the way growers and processors handle their soybeans, he explains.
Diversity in nature is good. But when the variability of soy oil shows up as changes in the look or smell or performance of polyurethane foam, buyers will reject the product. Problems like those have made foams with soy content unmarketable in the past.
Odor in particular has been an issue. Soy foams made in the 1990s gained a reputation for smelling like burnt microwave popcorn. Crowell at Flexible Foam Products says that a few years ago, when his company ran trials with soy polyols that weren’t from Cargill, the foam “made people want to go to McDonald’s.” It smelled like French fries.
Viscosity has been a problem, too. Early soy oil polymerization chemistries produced a polyol “so viscous that the existing equipment that foamers have would not be able to handle it,” De Genova says. Even Cargill’s early work on BiOH yielded something akin to “molasses,” he adds. “We basically would not even be able to make foam with it.”
BiOH had to be consistent from batch to batch. And to achieve acceptance in the flexible foam industry, it also had to be consistent with the petrochemical polyols that manufacturing plants were equipped to handle.
When Flexible Foam Products settled on Cargill as its supplier of biopolyols, “that was the nice thing about it,” Crowell says. “We didn’t have to reformulate at all.” His company didn’t have to change any of the other ingredients in its foams. “It was just, ‘Take 10 parts of this and substitute 10 parts of soy.’” In four-plus years of using BiOH, he adds, “from lot to lot to lot to lot, it’s consistent.”
There were other issues to deal with in the transition from a purely petrochemical product to one that includes biopolyols. Crowell’s company had to install more ingredient tanks in its plants, and put in lines to feed the additional polyol into the manufacturing process. “We’ve got 11 facilities across the U.S. now that make foam, so it was pretty extensive and took a little time before we could get them all up to speed,” he says.
And there was some major fiddling with product formulations, though it wasn’t to change the basic recipes. Instead, over a period of about six months, Flexible Foam’s technicians methodically tested BiOH in each of the company’s products to determine the ideal ratio of soy polyol to petrochemical polyol in each one. Put in too much soy polyol, Crowell says, and the foam’s “physical properties—the tensile [strength], the tear, the elongation of the foam—will start to deteriorate.” His company found that it could use only a little BiOH in its low-density foams for bedding, and more in its high-density foams for furniture.
A reality of making a product like BiOH—an ingredient for someone else’s process—is that Cargill doesn’t have full control of the results that customers get. Cargill tests its polyols and creates a baseline range of formulations, but then it must make a hand-off to foam manufacturers. Those foamers “do a significant amount of formulation adjustment internally” before they use BiOH in their products, De Genova says. Several of them have proprietary processes that they don’t share with Cargill.
So of necessity, they became important research partners to the company. Their guidance—about how they tweaked their process to add a little more bio content or to notch up their foam quality—is fed back into ongoing product research. For all that Cargill has accomplished so far with its polyols, De Genova says it’s only “a first step in the journey of petroleum substitution.”
Hillmyer at the University of Minnesota says the biopolymers industry has at least three big issues left to resolve when it comes to polyurethane foams. One is in thermal properties: Some types of foam containing soy will tend to harden at low temperatures. Another task is getting better control of the cell size or pore size in the foams. And the overriding puzzle is how to keep increasing the bio content until there are foams that are entirely plant derived.
De Genova is working on those things. But more than just solving problems, his goal is to insure that BiOH “is not a mere substitution” for petrochemical polyols, but “brings an added value to the final foam.” Some of what customers are reporting back to his lab is that foams with soy content are different—and for the better.
“I’ll give you an example,” he says. “By utilizing our product, the foam has more, they call it ‘hand’—a velvety feel to the touch.” Foamers and their customers who make furniture have said, “it’s easier for the covers to slip onto those foam cushions.”
“There are a few other attributes that we’re discovering,” he adds. Meanwhile, he’s working with customers on trials of new polyols for rigid insulation foams. And he’s doing feasibility studies with other feedstocks. Soy was a good starting point, but Cargill “is integrated in a number of different oilseeds,” De Genova notes. “Palm oil, rapeseed oil, canola oil—all of these veggie oils can be used, in theory, to make this product.”
The flexible chemistry that Cargill licensed has proven valuable at several turns in the R&D process. Wazirzada says there were more “sophisticated” technologies, but they couldn’t have been scaled up for customer trials using contract manufacturers’ existing plants. “It would have put us behind by many years,” he says, “and we would have to make a bigger bet to prove them out.”
De Genova doesn’t describe the chemistry—it’s proprietary—other than in contrast to what petrochemical companies are doing. They’re using plant oils in their polyols, but “basically, they have to break apart the triglycerides, do a number of chemistries with those streams, and then rebuild them,” he explains. “There are so many steps it becomes very expensive, and even with that, they cannot go beyond 40, 45 percent renewable content in their polyols.” Cargill makes polyols with around 95 percent renewable content.
Cargill “caused an inflection in the urethane technology world,” De Genova says. “I truly see here an opportunity to make history in a very mature industry.”
Marketing: A Push, Then a Pull
In the home furnishings category, “people are primarily buying on style, and they have a certain budget,” Kos-ter says. “Foam was never the reason they purchased that couch, and it’s probably not going to be the main reason they purchase that couch now.
“But we all know that when we go through a purchasing process, we’re checking multiple boxes,” Koster adds. If BiOH can be among consumers’ top three or five criteria, “it may be of influence.”
Three years ago, although BiOH was on the market, Cargill hadn’t even formulated a marketing message for consumers. All of the early focus was on selling to the direct purchasers of BiOH, the foam makers, and to their customers, the consumer-goods makers. Now the situation is reversed. BiOH’s marketing efforts “increase as we go down the channel” to retailers and consumers, Koster says, which is “maybe counterintuitive for an ingredient product.”
To make sense of it, it helps to view BiOH the way Cargill does: as a “value chain” (page 48). The chain links all the parties that add value to and take value from BiOH, from soybean growers at one end to retail consumers at the other.
“Value” is defined in different ways at different links in the chain: for soy producers and processors, it’s gaining another market for their commodity; for foam manufacturers, it’s an ingredient that doesn’t depend on the availability and price of oil. And as BiOH reached farther down the chain, Cargill could begin to turn its early push of BiOH out to the marketplace into a pull, based on what consumers value.
“Consumers are increasingly aware of environmental issues,” Koster says. They want to do the right thing, “but they’re looking for choices that require minimal sacrifice.” In other words, they’ll buy products that are better for the environment, but only if they don’t have to pay more or give up other features they care about. As a result, Koster’s approach to product manufacturers and to retailers is all about differentiation.
To manufacturers she says, “As long as you’re delivering the same great style and the same performance,” if consumers are choosing between two sofas and they like both styles, but your sofa has BiOH in it, “they would be likely to prefer yours.”
To retailers, her pitch is similar: An environmental message for customers is “a way that your store can start to differentiate, because they’re probably not going to hear it from the retailer down the block.”
Koster couldn’t say those things if Cargill had launched BiOH in some other category than flexible foams. “Differentiation” makes sense only because BiOH was an early arrival in this particular market—foams for furniture and mattresses—that others believed would be too hard to serve. That’s an advantage, but it comes with a corollary disadvantage: Most consumers just aren’t thinking “green” when they shop for furniture. It’s not a category where they’re used to thinking that way, Koster says.
“We all know light bulbs when we’re thinking green, we know energy efficiency, right?” she says. “But when you’re shopping for that sofa, it’s not necessarily top of mind.” Retailers who’ve embraced BiOH “are waiting for people to come in and ask for it, and they just don’t see waves of people coming and asking them for sustainable furniture.”
For that matter, renewably sourced foam isn’t always at the top of retailers’ minds yet, either. Hundreds of them—local independents, regional chains, and national ones including Crate & Barrel, Macy’s, and Room & Board—stock items that contain Cargill’s polyols. But like HOM Furniture, “many of them are not even aware that they carry products made with BiOH,” Koster says. Retailers and consumers are the most fragmented portion of BiOH’s value chain, she adds. They’re the hardest to reach with a marketing budget that, so far, doesn’t allow for major advertising at the consumer level.
One solution has been the Web and social media. BiOH has two sites. Bioh.com is loaded with resources and educational material for manufacturers and retailers (“Retail Event Guide: How to Create a Newsworthy Event Around Sustainability”). Experiencebioh.com is consumer oriented, with Twitter and Facebook links and blog posts.
Because social media are still relatively new, “many of the retailers and manufacturers aren’t necessarily leveraging the technology,” but they see it as a value for them to have Cargill active there, Koster says. “For us, it’s been a—‘hook’ isn’t the right word, but it’s been really well received by our manufacturer and retail partners: ‘Okay, I’ll start talking about BiOH because you’re going to talk about me.’
“If we didn’t have that social media link to consumers, we’d be pushing everything down the channel,” she adds, “versus now, we’re really going to the end and trying to create pull demand for these partners.”
Some retailers will probably still give BiOH a relatively low profile. And it’s not that they don’t believe in the product.
Room & Board was one of the first retailers that Cargill worked with to launch BiOH. Steve Freeman, the vendor resource manager who recruits the Golden Valley company’s suppliers, helped Cargill make early contacts with those furniture manufacturers, and helped persuade them and their foam makers to try BiOH.
Now, virtually every sofa that Room & Board carries is made with BiOH. But you won’t find BiOH tags or other point-of-purchase displays in the stores. For one thing, Freeman says, consumers are already overwhelmed and confused by a barrage of environmental product messages; his company likes to “answer questions when customers ask.”
In addition, Room & Board takes a “holistic” view of environmental stewardship and has for a long time. So foams with soy don’t seem so differentiating. In fact, Freeman says, his company is proud of its BiOH products, but it doesn’t carry mattresses made with BiOH because it can tell a “better environmental story” about its latex mattresses, which are sourced from rubber trees. BiOH’s story will improve, he says, if Cargill can keep increasing the soy content of polyurethane foam.
Regardless, the market pull is being felt farther up the chain, whether that’s the result of social media or of a more general consumer embrace of green products. Lee Industries, the first company to launch a line of furniture containing BiOH, introduced it at a big furniture show in 2006. Retailer Crate & Barrel responded so positively that North Carolina–based Lee changed its strategy. Rather than create a single line of green furniture, it decided to use foams with BiOH in all of its product lines.
Crowell tells a similar story about his company’s early efforts to sell BiOH foams. Flexible Foam Products had previewed its new foams to furniture makers Lane and Bauhaus prior to a trade show in 2007. They in turn introduced it in some of their pieces at the show, and the effect “was a pull-through,” Crowell says. “The next thing you know, it’s like everybody is looking for it.”