Composting is a "weird little business," according to Matt Cotton, president of Integrated Waste Management Consulting, Nevada City, Calif., and board member of the United States Composting Council (USCC), Amherst, Ohio. "You take this waste material, add value to it and try to sell it as something, and it works."
That's the composting industry in a nutshell. But as strange as that may be, composting also is serious business. It is an industry that involves developing a product, marketing, maintaining equipment and employees, and adhering to regulations and standards.
Gone are the days when people thought of compost as a pile of dirt and leaves rotting in the backyard. Today, composting is about making a high-quality product and, more importantly, selling it.
Landfill Crisis Composting itself gained popularity commercially about 10 years ago when the country perceived a "landfill crisis" - there was too much garbage going into landfills and space was running out, remembers Sharon Barnes, president of the USCC. Municipalities started passing ordinances banning yard waste from landfills. Prior to that, a few communities were composting leaves, but little was being done on a large scale, she says.
"The composting industry was born from waste generators looking to keep residuals out of landfills," Barnes says. "People realized in the early 1990s they could make some real public relations kudos by being 'green companies' [and keeping the materials out of landfills]."
While the compost industry started with waste reduction, today, it primarily is about product orientation, she says, noting that composters have to create a product that can sell in their markets. "While our feedstocks are considered waste, we're not taking feedstocks like a landfill does, to keep them out of the waste stream. We're taking them to create a [saleable] product."
The Product Means Business This is because creating a marketable product is the key to staying in the business. For example, Wayne King Sr. of ERTH Products LLC outside of Plains, Ga., processes more than 300 wet tons of biosolids a day to be sold to individuals, golf courses and retail outlets such as Home Depot. Of the company's 232 acres, 160,000 square feet is used for composting, King says. Material, including peanut hulls from the farm of former President Jimmy Carter, comes from neighboring counties.
At the plant, workers force air through static piles to aerate the mix and speed decomposition. Everything is on timers, and the facility's composting areas are temperature-controlled, King says. "We're able to compost more in a shorter time because we use [this] technology rather than just turning piles with machines."
After the material is mixed and screened, it is shipped to Cross City, Fla., where it is bagged and sometimes mixed with other products depending on its intended application. ERTH Food, as the finished product is called, is sold in 17 states.
Two years ago, the company also shipped 400 large containers of the compost to Tanzania, Africa, after the country's two-year study of the material showed it helped replenish nutrients to the badly depleted soil.
"The [country doesn't] have good soil management, and it was suggested that [government officials] look at organic fertilizers," King says. "They did research and contacted us, and we sent them the material."
But shipping overseas is expensive. "It's not for the faint of heart," King adds, emphasizing that the company received grant money for the project and was paid for the product as it was shipped. ERTH Products has another order pending from the African country.
To date, ERTH Products has won several Georgia environmental awards for its work, and the company is doing research on soil erosion. But King considers his operations a success because the company makes money from its product.
King also remains active in the industry to improve markets for his products. He is president of the Georgia Compost Association, one of the few active chapters of the USCC. The Georgia group has been instrumental in organizing the state's composting activity, including weeding out the unregulated industry, King says.
"Until recently, there were very few commercial composters here. There are a lot of people who are not really composting but just piling up organics," he explains. "You can count the number of permitted facilities on one hand, but I talk to a lot of people who say they are composting."
To identify these other composters, King says the association is attempting to get grant money from the state government. Most recently, Georgia received funds to identify what organics are being composted, who is composting and at what levels. Similar to the rest of the country, Georgia is trying to determine how much waste is compostable, King says.
"That's part of [our industry's] big problem. We only have 20 states in the United States that identify their feedstocks or put numbers on it," he says. "If you want to see the industry grow and see good things happen, you have to identify the scope of that industry. But those numbers are hard to come by."
One reason for this is a lack of definition and standardization within the industry, says Jim McNelly, president of NaturTech Composting Systems, St. Cloud, Minn. A founder of the USCC, McNelly cites numbers from the U.S. Environmental Protection Agency (EPA), Washington, D.C., stating there are 3,500 municipal composting facilities nationwide. But only about 40 facilities are part of the USCC's Seal of Testing Assurance (STA) program, which provides uniform testing procedures and certification [see "A Voice for Composters" on page 46].
The STA is designed to fill a crucial role, he says. "Hopefully, the marketplace is going to respond to this because people want a quality product. Compost definitely has a lot of value when it's properly made, so [customers] are looking to us to self-regulate."
An Undefined Industry Part of self-regulation is defining feedstocks. Compost is a controlled biological process where a pile's internal heat and energy kills diseases and weeds. So although it may look like it, a pile of leaves or grass left to rot is not compost, McNelly notes. Nevertheless, the word "compost" often is used as a blanket term for all feedstocks.
"We've had lots of problems with definitions," McNelly adds. "We need to come up with new definitions or clearly define what we think composting is. We in the industry want to distinguish ourselves from the uncontrolled process of decomposition, which most people use interchangeably."
What may make that easier is creating product-specific mixes, a route the industry recently has begun taking. Different feedstocks are used for different applications, many of which require distinct nutrients, Barnes says. These products are made by using different-sized screens or proportions of feedstock, or using other materials such as ash and manure.
Rexius, Eugene, Ore., has been customizing its compost products for about 50 years, according to Jack Hoeck, vice president of production. When the company began, it processed waste from sawmills. By the early 1990s, Rexius was incorporating manure and other organics into its existing products, which changed them considerably and spawned more materials in more market niches.
"That really caught us off-guard," Hoeck says. "We thought the material was just another [type] of organic matter, but it really has unique benefits."
One material that instantly added value to the product was yard waste, which is biologically diverse and has added many more nutrients to its topsoil, Hoeck notes. Today, the company manufactures and markets its products to specific end-users, including homeowners, wholesalers and landscapers. Each material has different uses, such as topsoil or turf applications, and the compost is sold based on the type of microbes present in the mixture.
"It's not just the chemical or physical requirements that you sell to; the biological requirements often have been the missing link" in marketing, Hoeck says. When the proper biological material is in place, "the plants are healthier because [the compost mimics] their natural environment. We've essentially replicated it."
Another feedstock, food waste, also adds significantly to compostable material. As food packaging is becoming more environmentally friendly, commercial composters are noticing, Barnes says.
"Five years ago, you couldn't go into grocery stores and restaurants and talk about separating [food waste and its packaging] because there weren't linings [in composting cans for food waste]," she explains. "Now, there's material that will enable food waste to be captured."
To absorb food waste successfully, the collection process has to be relatively easy for both the consumer and the composter, Cotton says. Biodegradable packaging and utensils, such as those manufactured by Biocorp, Redondo Beach, Calif., are helping to ease some of food waste composting's intricacies and costs. The California Integrated Waste Management Board (CIWMB), Sacramento, also is trying to help. It recently awarded $150,000 in grant money to five high-volume generators of food waste in the state, including three school districts to encourage food waste composting.
With the planet stretching some of its natural resources thin, organic material could, in the future, become a critical resource, Cotton says. "It makes a lot of sense to get organics out of landfills. [The composting industry] is going to look more and more at this material as a valuable resource and do something with it."
Regulation Issues Organic materials comprise most of the municipal solid waste stream, typically 60 percent to 70 percent, according to a paper published by the Cornell Waste Management Institute, Ithaca, N.Y. But to completely compost this volume, some form of standardization is essential, say many compost experts. Yet so far, the federal government does not regulate the compost industry - so it is up to composters to come up with the rules themselves.
California is home to some of the most stringent composting regulations in the country, Cotton says. The state houses approximately 100 permitted composting sites, including one of the largest facilities in the world. This well-known facility near Bakersfield processes about 1,000 tons of compost per day on 100 acres. With such facilities across the state, California can be used as an example for other states trying to set standards for large-volume, as well as smaller, operations.
For example, in 1990, the state legislature passed Assembly Bill (AB) 939, which requires every city and county in California to divert 50 percent of its waste from landfills by 2000. The CIWMB issued proposed guidelines for diverting the waste, including composting. After a contentious and controversial few years, the CIWMB issued in 1995 Title 14, which required several tests for every 5,000 cubic yards of any feedstock.
Composters must test their material for heavy metals such as lead and cadmium, which, in great quantities, can be detrimental to plant growth. The EPA has set certain limit levels (parts per million) for these metals, while Canadian and European levels are a bit lower.
Based on California's findings, any commercial compost is well-below the maximum level for heavy metals, so the test is "no big deal," Cotton says. California also requires another test for dangerous pathogens that could cause sickness in humans. And companies are subject to monthly inspections by county environmental health departments.
Cotton says the state has been "very successful" getting companies to test their materials. The facilities pay for the tests, which can cost a few hundred dollars.
Although California has not met the 50 percent diversion rate set a decade ago, diversion itself has been successful according to Cotton. The state collects more yard waste at the curb than any other recyclable material.
In the meantime, the CIWMB currently is revising the testing requirements to include food waste issues, which in the early 1990s was not considered a larger part of composting, Cotton says.
One reason the compost process is regulated is to ensure compost piles are maintained properly to prevent dangerous substances from entering them, says Cotton, who heads the USCC's standards and practices committee. Although high heat from compost piles will kill pathogens and other harmful organisms, end-users are more likely to buy compost that they know has been tested, he says.
"If you're going to make commercial compost [in California], you've got to do the testing," Cotton continues. "Ultimately, testing is good for compost because it provides a market edge. Anybody making a tested, quality product is not having a problem selling it."
To that end, the USCC STA sets a code of ethics for the industry. "The quality of the compost depends on its use," Cotton says. "We're not saying, 'Your pH [level] has to be seven;' we're telling [composters] that they really should disclose the pH [of their products]."
Testing adds more than piece of mind to compost. "It adds value to the product," McNelly says. "If a producer can add a bit of value, they can get a premium price."
Pricing the Product Obviously, to make money, a composter must sell his product for a price higher than his costs. But how does the industry know how to price this product, one that has so many layers and variations?
According to McNelly, the STA guarantees a premium price. For example, if a company typically sells its compost for $30 a ton, once it is certified, demand for the product should go up. In some cases, the company can sell it for 50 percent more, "and the customer will pay it," McNelly says. "[Customers are] getting more per yard than what they were getting with the other stuff that [is not certified but] looks the same."
However, even before certification and standards began playing roles in compost pricing, the environment was. In 1990, high-performance compost cost about $50 per ton to $70 per ton, McNelly says. By 1993, flow control issues and court cases meant that composting suddenly had to compete with landfill costs, which were lower.
"We had to drop our cost down to $30 per ton to $40 per ton, which meant we had to change how we approached business," McNelly says. It was an open marketplace with even more competition.
Municipalities and private companies in the new marketplace had the option of sending the organic material to a landfill for around $20 a ton. So why would they compost for $30 per ton? McNelly asks. "They'd say, 'To heck with composting.'"
Consequently, the industry got smarter with its pricing, looking for money from other areas, such as the STA. And today, the industry is working on lowering prices to be on par with regional landfill tipping fees.
For instance, in Washington state, where Landfill Recovery Inc., Puyallup, Wash., manages a landfill and two composting facilities, it's a lot easier to compete with disposal prices, says Jeff Gage, director of recycling services. It costs about $35 per ton to $50 per ton to dispose organics, and it costs $56 per ton to $92 per ton for garbage, he says. Prices for compost are around the same per ton as disposal of organics, but gradually, prices for the product are starting to increase.
"There's a huge demand for our products, but people are loath to raise prices for fear of losing market share," Gage says. "So prices have been flat for more than 10 years. Prices are all over the board for product, which has to do with whether there are any other products available [in the region]."
On the other hand, in western Washington, competition drives prices. In this area, there are about a dozen small composting facilities and four larger ones, which means competition among products can be a challenge, Gage says.
A company's reputation is at stake when another composter sells what looks like a similar product for a much cheaper price, but the quality is lacking, he adds. "Where is the ability to take a material and improve its quality and then find value in that improvement?"
Ron Alexander, who runs R. Alexander Associates Inc., Apex, N.C., a compost market development and facility startup company, has been working with a West Virginia firm on similar pricing issues. To determine what the market could bear, Alexander says he researched the market and spoke with other composting companies to find out competing costs, then developed a trial price. Ultimately, he developed a sliding scale program in which the more compost a customer buys, the lower the price.
"That's where the industry is going," he says, noting that a sliding scale creates competition and helps market development.
But the only way a company would know the trends in pricing is by doing market research, says Alexander, who surveyed the 42 companies involved in the STA program. In his research, Alexander found that to set pricing, 68 percent of the companies used in-house marketing, 16 percent used brokers or distributors, and 16 percent used in-house marketing and outside expertise. The average wholesale price for the end-product was $9.87 per yard. "That's good compost," Alexander says. "These companies see the marketing value of their product."
For retail, which typically can be a trickier area to set a price, the average was $17.08 per yard, Alexander says. However, the survey found that more composters are selling both retail and wholesale. According to Alexander, this was not done in the past because sellers believed consumers would not buy a product at retail if it was selling for less at wholesale.
Fortunately, pricing is more mature and sophisticated in the industry today than 10 years ago, Alexander says. New pricing strategies are due to more mainstream thinking and a general maturing and sophistication of the composting industry. Some of that comes from more private companies getting into the composting game, he says.
"In the past, people would pull a number out of a hat. We've gotten better but there is [still] some of that," Alexander says. "The privates have come in and made the publics rethink the way they do business. I don't mean that as a dig - I think it's excellent. [Composters] are treating the industry more like a business."
To Market, To Market As part of running a business, beyond price, how compost is marketed makes all the difference, according to industry experts. With a drastic shift during the past decade from depending on tipping fees to depending on product revenues, marketing has become even more vital, says Rod Tyler, a consultant to the industry.
"Because tip fees on landfills are lower [than they used to be], someone has to make up for lost revenue," he explains.
Consequently, success in composting means adding what Tyler calls the left side and the right side of the industry. The left side is tipping fee revenue; the right is product revenue, he says.
In Boston, for example, where tipping fees are high, "you could practically give [compost] away" because companies can make money on the right side, Tyler says. But in Cleveland, where fees hover around $20 per ton, composters rely on product revenue. Composters must decide how to balance their profits on both sides, he says.
"You need to determine where that line is," he says. "If you add both revenue sources together and they don't cover costs and give you some profits, there's something wrong."
That something typically is how the product is marketed, Tyler adds, noting that compost often is advertised generically. "Compost is compost is compost," he says.
"We need a Starbucks of the organic waste industry," he continues, explaining that consumers know and appreciate a brand and therefore do not mind spending extra for it. "Starbucks does a good job on quality and presenting the product well, and that is what [the composting industry] needs to do. If everyone searches for a product by name, the value goes up. We haven't done that with dirt; dirt is only so exciting."
Rexius has begun its own branding: Turf Start for turf applications is the company's new designer product, Hoeck says. "It's amazing how universal [compost] is, and how many opportunities and markets there are," he says.
Tyler says STA could help end-users flock to a certified product, which could increase compost's value.
Companies are realizing that their long-term success is based on whether or not they can market their finished product, says Alexander of R. Alexander Associates. As a result, they "are putting more time and effort into [branding], focusing more on market development, trying to figure out what the market wants and giving it to them," he says.
To figure out what the consumer wants requires conducting market research, which may require manufacturing different products for different markets, Alexander says. "Know what people are going to buy and what's going to maximize your value," he says. "Go to trade shows, go to landscapers, and show them how [your product] is better than what they're using now."
Building this customer base will cost money, but the investment will pay off, Alexander says. "Compost has become a much more mainstream product today than it ever was before. It's a better-understood science now. It's very exciting."
Compost also is becoming more mainstream because there is higher demand for it, says Barnes of the USCC.
"If we composted every piece of organic [waste], we still couldn't make enough compost for the markets," she says. "Our soils are degenerating and depleting at a faster rate than we can recoup them."
Because compost is in demand, profits can be made from it, Barnes emphasizes. But often, how much profit depends on the environment around the business, she cautions. For example, California has a higher demand for compost than other areas of the country because the industry there is strong. Other factors to consider are competitors and prices, as well as which type of feedstock is sold, she says.
"If you can sell your products to the highest end-market, that is going to make a difference," Barnes says. "If you are making products for a specific market and being consistent, your profits will be good."
However, Barnes asks, how quickly do you get your product to the end-user? "You can have the best products in the world sitting on your blacktop, but if you're not getting them to customers in the time frame they need [it], you're dead."
Equipment-Intense A composting business also could be killed because of insufficient or poorly maintained equipment. Creating basic compost requires front end loaders and grinders, plus the machines specific for your composting method, such as windrow turners or aeration systems.
While each piece of equipment adds more control and sophistication to the operation, the cost of doing business can rise accordingly.
Rexius, as an example, originally invested in wheel loaders, grinders, and a turner to mix the windrows. That system worked, but the company decided to install a pipe system to blow air through the material and aerate the piles. In Washington, an area with high rainfall, Hoeck says the company realized it needed a better system for keeping moisture out of the piles. And now, Rexius most likely will use a combination of the two systems.
Tipping fees are low near Rexius - about $12 per ton to $15 per ton - and upgrading equipment is expensive, Hoeck admits. Fortunately, the company can rely on the fact it has successfully marketed so many products to justify higher production costs, he says.
Odor Control While it may seem secondary, equipment to control odors can be among the most costly. Fully enclosing Landfill Recovery Inc.'s newest compost factory a year and a half ago, "cost us a lot of money," Gage says. "We had to treat the air in the pile, which means an acre of concrete pipes. It was pretty expensive, but it was necessary."
Composters such as Gage have begun creating extensive odor management plans to prevent community relations problems.
"It's important to us to be a long-term facility, not a short-term one," Gage says, noting that he does not want to be run out of town because of odor complaints from his neighbors. "We needed to have a system in place, as well as the ability to keep improving on odor management and be adaptable to future methods."
Composters that take in food waste and manure must be especially attentive to potential problems. While these feedstocks may be the "wave of the future," a lot of the product will be land-applied, so the industry has to educate consumers on their benefits, costs and potential problems. For example, there is more than 100 times more manure generated in this country than biosolids, says Barnes of the USCC. "That's going to be a huge market for materials," she says. However, so far, the USCC has not addressed standards for manure.
Whatever feedstock or material is used to create compost, the industry has to work on one crucial issue for the business to work: marketing so that the consumer is educated and aware of the product, Barnes says.
The industry rests on how the business of compost will heat up years into the future, Gage says. "There's a value there to the public that hasn't been recognized [yet]," he says.
"The long-term goal is that the quality of products should be able to increase to the point where the industry is supported by the value of the end-product."
One of the U.S. Composting Council's (USCC) most important contributions is its "Test Methods for the Examination of Composting and Compost (TMECC)." The Amherst, Ohio-based council was formed 10 years ago to "achieve maximum conservation, composting and utilization of organic materials in an environmentally and economically sustainable manner." The organization also works to develop technology for the industry, and serves as an advocate in legislative and regulatory matters.
The TMECC, which at press time was to be released in late July, "identifies how to take a compost sample and process it based on certain standards," according to USCC Board Member Wayne King Sr. of ERTH Products LLC, who also is president of the Georgia Composting Association. "This will add value to the product, and it's going to create a demand. That's what is going to make a difference [in composting] - otherwise, we'll continue to compete with the landfills."
The 1,000-page document will set uniform testing methods throughout the industry, so no matter what lab is testing a soil sample to determine its nutrient content, the results would be the same, says Sharon Barnes, USCC president and an operator of two composting facilities in Ohio.
The TMECC is part of the USCC's Seal of Testing Assurance (STA) program, which was launched in March 2000. The STA program requires disclosure of test analyses and product ingredient data, as well as end-use instructions to compost customers.
Barnes calls the STA the first step in creating quality standards for the composting industry. "If you don't have industry standards, you don't have an industry," she says. "Compost is not one size fits all - there are certain products suitable for one application that wouldn't be suitable for another. So you can't have the government setting standards for products, it's up to the industry [to develop and market them]."
Because of the difficulty in coming up with general compost stability or maturity standards, the council is working with about 40 compost producers, who test the product and certify it for specific end-uses, such as tree mulch, says Jim McNelly, president of NaturTech Composting, St. Cloud, Minn., and one of USCC's founders. This forms the basis of the STA program.
"Our goal is to address one problem we see in the marketplace, which is consistency or uniformity," McNelly says. "The industry has had a problem in helping its members standardize their composting practices so they're not producing one-size-fits-all compost."
And the 200-member USCC wants to do more than help with standards. Barnes, who recently became president, has lofty goals for her term.
"For the Compost Council to be successful, it has to become a strong voice of the industry. We need to prove ourselves to those [composting] companies across the country and show them that by joining forces, we can move the industry forward," she says. "What can we offer the composter to improve [his or her] bottom-line and operations and make them better?"
Barnes says she hopes to attract more individuals such as consultants, academics and equipment manufacturers to the council, as well as build a stronger advocacy group in Washington, D.C., as ways to raise the council's voice. She also wants the USCC to develop operator training programs and materials, and develop a chapter system with state organizations such as the active Georgia Composting Association.
Overall, Barnes says, the USCC should help with compost marketing, setting standards and guidelines, serve as a clearinghouse for information and training, educate the public, and strengthen its resources.
While small-scale food composting is occurring across the country, the city of San Francisco is proving that it can work in major metropolitan areas. Begun in 1996 as a pilot to collect fruit and vegetable cullings from about 25 wholesale produce distributors at the San Francisco Produce Terminal, the city's full-scale effort now turns more than 10,000 tons per year of food scraps into compost.
The city of San Francisco Recycling Program places a high priority on recycling its organic waste stream, especially food scraps, according to Jack Macy, organics recycling coordinator. Consequently, to encourage produce waste generators to separate their trash, businesses receive a discount off their regular trash rate.
Participating businesses separate their food scraps, wet/waxed cardboard, non-recyclable paper, wooden packing crates, and landscape trimmings into an organics container. Norcal Waste Systems' two San Francisco-based subsidiaries, Sunset Scavenger Company and Golden Gate Disposal, collect and deliver the organic material to Norcal's transfer station in San Francisco. The city and county of San Francisco administers the overall program, and Norcal provides collection, transfer, and processing services. Collection is supported through a negotiated rate administered by the city and county of San Francisco. Applied Compost Consulting Inc., Berkeley, Calif., provides technical assistance.
According to Macy, most types of food scraps are accepted, including baked goods, meat, dairy, fish, coffee grounds and spent grains. The majority of the food scraps consist of pre-consumer material, although post-consumer food scraps also are accepted.
Frank Sandoval, owner of El Balazo Restaurant in San Francisco, said separating organics makes him and his workers more vigilant. "Separating the components of the trash allows you to see what is being thrown away, giving you better control over your costs and your bottom line," he says. "Above all that, it is gratifying to know that you are doing your small part. If the system supports and encourages them, they [business owners and employees] will do it."
Once the food is consolidated at the transfer station, Norcal's B&J Landfill provides composting services in Vacaville, approximately 60 miles a