The story began in 1989 as a Cargill research project to develop innovative uses for carbohydrates from plants. A joint venture named Cargill Dow Polymers was established in 1997 by Cargill and Dow Chemicals. It started operations in 2001 with the world’s first PLA plant built in Nebraska (USA). It felt like legend was being written and the mood was euphoric. Jim Stoppert, president of Cargill Dow Polymers at that time said: “I’m sure the production will be sold out on the day it opens.”
This joint venture brought two worlds together. Cargill was a food company and knew nothing about chemicals. Dow was an oil-based plastics and chemical manufacturer. Cargill brought its corn and biological process expertise to the table while Dow brought their polymer science and plastic supply chain marketing experience. It is important to remember the historical context in which the adventure started. In the early 1990s, the chemical industry did not believe it was possible to create bio-based plastics that would perform as well as, and be cost-competitive with fossil-based plastics. Both companies showed them wrong and played a pioneering role for this major commercial and industrial breakthrough.
However, there were problems between Cargill and Dow Chemicals. Board communications issues, the turnover of three CEOs between 1997 and 2004, and the loss of four marketing VPs reduced the joint venture’s effectiveness. There were also practical problems: two accounting books had to be kept and there were differences in the fiscal calendars and the IT systems. Dow required the joint venture to purchase and incorporate their process methods and proprietary software while Cargill asked the joint venture to pay for site management services because the plant had been built on Cargill’s property. Both companies were not aligned on other topics such as GMOs and Corporate Responsibility. Cargill was in favour of GMOs and was reluctant to engage in public dialogue regarding environmental sustainability. Dow understood the growing interest in corporate responsibility and sustainability.
Both companies were not aligned as to what they wanted to get in return of their investment and it may well be that they had ulterior motives. Cargill wanted to find a new way to generate revenue from their corn production while Dow chemicals wanted to work on their public image…creating a greener image.
Cargill Dow Polymers applied for a US trademark for “NatureWorks” on 9 Dec 1999. NatureWorks was the brand name of their PLA. When Dow left the ship and sold its shares for an undisclosed amount to Cargill in 2005, the company name was changed from Cargill Dow Polymers to NatureWorks.
Cargill entered into a new joint venture in 2007 with Japanese company Teijin who acquired a 50% stake in NatureWorks. The partnership stopped in July 2009 and Cargill became full owner of NatureWorks again. The official reason was that Teijin faced a corporate restructuring. However, it seemed that NatureWorks material was not performing enough on the market for Teijin. Seven days after selling their NatureWorks shares, Tejin announced a “substantial” technical advance in Biofront’s heat resistance and claimed that their bioplastic (Biofront) was more suitable for demanding applications such as auto parts than NatureWorks’ material.
In October 2011, PTT Chemical invested $150Million in NatureWorks in exchange of a 50% stake in the company. Marc Verbruggen, president and CEO of NatureWorks at that time said they were planning to build a second production plant worth about US$200 mln in Thailand, and was expecting the new plant to be operational in 2015.
Thailand’s Minister of Energy H.E. Mr. Pichai Naripthaphan said at that time “By attracting what could be the most advanced biopolymer processing plant in the world to Thailand, PTT Chemical has made a significant step in achieving Thailand’s strategic objectives of becoming a regional hub for green technologies and solutions.”
However, NatureWorks didn’t build the plant in Thailand and no significant step towards Thailands strategic objectives have been taken. The reason can partly be explained by the coup d’état and the related turmoil that took place in Thailand starting on 22nd May 2014. However, it’s unbelievable that during the period of October 2011 and May 2014 the works didn’t start. It seemed as if Cargill was never really over enthusiastic for building a plant in Thailand. Do not forget that one of the reason Cargill entered the PLA market was to find a new revenue stream for their corn production. Why would Cargill build a plant in Thailand that uses local sugar canes instead of US corn?
In the meantime, a new player is coming to the table. The joint venture Total Corbion is building a complete PLA plant in Thailand and will become NatureWorks biggest competitor in terms of PLA production. The plant will be operational very soon. Total Corbion is investing in the Thai economy, creating jobs in Thailand and is contributing to Thailand’s strategic objectives of becoming a regional hub for green technologies and solutions.
PTT Chemical is a state owned chemical company and here lies the problem. What is PTT doing in the joint venture if NatureWorks doesn’t build a plant in Thailand? In addition to this, PTT will be competing directly with Total Corbion who is contributing to the Thai strategic objectives and Thai economy. It looks like PTT will be in complete contradiction with Thailand strategic objectives by remaining in NatureWorks. One may assume that at some point PTT may want to leave the ship and sell their shares in NatureWorks. To whom will it sell their shares to? Does the joint venture contract forces PTT to sell their shares back to Cargill? Is there a pre-nuptial agreement? Probably. Will Cargill pay back the full initial investment done by PTT? Probably not. The chances are that heads will roll in Thailand.
NatureWorks recently assigned a new CEO and this may be a sign that Cargill and PTT are not aligned anymore. If PTT leaves the ship, it’s going to be another divorce for NatureWorks. The divorces with Dow and Tejin created the suspicion that Cargill was not delivering on its promises and doesn’t seem to be aligned with its partners.
Let’s recall the words of NatureWorks Belgian CEO Verbruggen during Innovation Takes Root in 2016: “And for NatureWorks something to get used to. I think 2 years from now, five years from now, if we think PLA, we’re no longer just going to be thinking about NatureWorks anymore. We’re gonna see competition. Some of you are in the room…. but I think we’re moving from Bioplastics is PLA, PLA is NatureWorks to PLA is probably going to be a number of players and that is good for our industry…” .
Anyway, NatureWorks is a pioneer in bioplastics and played a groundbreaking role in industrialising and commercialising PLA and should be recognised for this. NatureWorks previous partner Dow Chemical brought them the plastic and chemical experience; Tejin opened up the Asian and automotive market and PTT gave them an opportunity to produce PLA abroad with sugar cane. Who will be their next partner? A fossil-based plastic company who wants to go bioplastics? An oil company who wants to go plastics + bio? Why not go solo? They’re probably mature enough. Just hire a good VP marketing, start running the company with a start up mentality and become disruptive again.
The saga was filled with ups and downs, but Cargill should be recognised for this major accomplishment. Not only did Cargill survived and kept the boat afloat, they created this indisputable PLA leader… a proper American dream … and some may say… at the expense of their joint venture partners. Faites vos jeux and let the adventure continue….