TOP LINE SUMMARY 1. INTRODUCTION: Summary Briefing Sustainable Beverage Cup Solutions

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1 Summary Briefing Sustainable Beverage Cup Solutions Wednesday 25th March 2009, 1600 GMT / 1200 EDT Moderator: Jake Backus, Customer Sustainability Director, Coca-Cola Europe Panelists: Jocelyne Ehret, Head of Innovation and Packaging, IPL Perseco Micheal Meyering, Sustainability Manager, University of Washington, Seattle Storm Hodge, Assistant Director of Food Services, University of Washington, Seattle Market overview: why retailers and brands need to be taking this seriously Case Study : Pret a Manger and McDonald's Case study : University of Washington Purpose The purpose of the call was to have a broad level discussion on the subject of beverage cups and sustainability in order to expand understanding of the considerations and to make progress towards knowing which are the best avenues to be following, based on consumer acceptance, practicality, cost and sustainability. Who attended the discussion? Coca Cola, Perseco, University of Washington WRAP, International Paper, NatureWorks Burger King, Starbucks, Sara Lee, Kenco, Holmes & Marchant, Diageo RBS, AEA, etc. TOP LINE SUMMARY There are potentially a number of different sustainable cup options depending on the available recovery systems. The economics should be viewed holistically, i.e. if there is a premium for a sustainable cup, there may be savings from avoidance of commercial waste or the material value to offset it. Perseco outlined the different approaches of McDonalds and Pret a Manger. The University of Washington has demonstrated leadership and an economic model through a compostable solution. Much of the discussion was around compostable solutions. o In the U.S. there may be some issues with organic composting companies not taking compostable plastics. Prohibited under NOP is (a), and this may require resolution, but apparently fine in Washington State. o In the EU if it is certified compostable then that should be fine. 1. INTRODUCTION: Why take this seriously? For many consumers, packaging and recycling is top of their agenda. It is highly visible and is part of a consumer s brand experience. Most beverage packaging is recyclable and amongst the most recycled products. However, beverage cups are not readily recyclable.

2 Coca Cola s broad strategy on packaging is that packaging should be seen as a resource and not a waste product. We want to get it back and use it again. 1. Reducing the amount of material it takes to make a beverage package. 2. Recover packaging material by supporting systems to collect post consumer packaging. 3. Recycle inspire consumers to recycle our packages. 4. Re use the packaging: either by increasing the recycled content in product packaging or to make other useful products substituting virgin materials. Almost all our packaging is recyclable; glass, aluminium and PET. Beverage packages are amongst the most recycled products in the world. The issue is that as we try to find holistic solutions to recycling and working with our customers, fountain cups stick out as a problem area. Currently they are not recyclable nor readily bio degradable. Fountain cups account for 12% of Coca Cola s global volume and nearly a third in the U.S. It is mostly Coca Cola s customers, who purchase the beverage cups, and we want to support them in their thinking and to find sustainable solutions. So the objective is to find affordable sustainable cup solutions, which are acceptable to consumers, and which minimise the impact on the environment. See Coca Cola slides for: 1. Stakeholders Consumers, retailers, supply chain and local authorities and waste stream collectors. Each of these will have their own needs to be satisfied. 2. Consumer use and product performance 3. Material options / considerations 4. Sustainable cup options what is a sustainable cup? It seems that there are a number of options, and there may need to be a number of options depending on which are most suited to the situation. 5. Situational issues storage, consumer interaction, contamination, value, out of outlet issues etc. 6. US favour compostable solutions 2. CASE STUDY IPL PERSECO IPL Perseco Jocelyne Ehret Head of Innovation and Sustainability Jocelyne Ehret, IPLPerseco: Sustainability is becoming a key lifestyle priority and impacts customers attitudes towards packaging: that is why we must INTEGRATE it in our packaging development. IPLPerseco has 2 main customers in Europe: McDonald s and Pret a manger. Perseco defines sustainability though 3 pillars: economic value, brand image, and social and environmental value.

3 In other words, a sustainable cup should: be cost effective, reflect the brand and build trust with consumers & NGO s, and reduce the environmental impact. And of course, it still need to meet all of the normal functional and product quality criteria. If we look at the market, there are 2 key questions what is available and what is acceptable to the consumer? It s a competitive landscape and we buy for McDonald s around 2 billon cold cups per year. The first choice is a market choice: We have 2 types of cups: transparent and opaque with different types of materials, Classically we have paper+ PE coating or plastic cups + a lid. There is a new trend which consists of having Biodegradable cup (with petrol based biodegrable plastic such as Ecoflex or with bio based material such as PLA). There are also other bio based materials but there a challenges from a cost and availability perspective we are working to improve. The question is: Should we prefer biodegradeable materials or recycled material? For example, PLA or RPET? We are not so much in favour of PLA for several reasons. In our experience we have had several issues, including composters not being able to differentiate PLA from other plastics, contamination of the PET recycling stream and in Europe we must also consider potential negative perceptions caused by using material coming from GM crops. The best proposal for a sustainable cup could be to find the best balance between virgin certified fibres and recycled fibres and having a coating which comes from non food crop bio based material. For e.g : Pret hot cups are made with 100% certified fibres and for McDonald s we are testing in store a double wall hot cup made with recycled fibres ( PIW and PCW) + certified virgin fibres. Regarding In Store Operational issues : There is no one solution, depends on country, region, waste type and waste sorting facilities available, the fraction of packaging use in store or in take away and consumer education. 3. University of Washington Sustainable Cups, Coca Cola and the ecotainer Since mid November 2008, University of Washington Food Services has been utilizing the ecotainer, the world s first paper based compostable cold beverage cup produced from renewable resources. Before its introduction, we had already introduced a compostable hot drink cup and hot soup cup, from International Paper s ecotainer line, and the clear PLA cold drink cup from Fabrikal s Greenware line. The ecotainer was the last big piece in our compostable products line and required a collaborative effort with International Paper and Coca Cola North America. Complete compostables line We know that to avoid contamination of the compost stream it is critical to have a 100% compostable line of products. The ecotainer needs to have a compostable lid and be served with a compostable straw. This is the case for all compostable cups that require lids. The customer should

4 be able to place the cup and its lid (and straw, if applicable) into the compost bin, instead of having to place the cup in one bin and the lid in another. The package should be complete. If the lid (and straw) is not compostable, and the entire package is placed in the compost bin, contamination occurs. This is the case with all of our compostable products: when the customer is finished eating, the goal is that he/she can compost the leftover food and beverage, along with the compostable dish/bowl/cup/etc., with nothing at all going into the landfill waste bin. This is the most effective way of capturing food and packaging waste. Economics Solid waste costs continue to increase for food service operations. The cost to municipalities is rising as well, as they search for more landfills, which continue to be located farther and farther away and in remote areas. Our landfill site for Seattle is over 250 miles away, whereas our composting site is just 35 miles away. The cost to the environment of sending food waste to landfills is a cost we can no longer ignore. Food waste, when decomposed, produces methane gas, which is 23 times more potent as a greenhouse gas than C0 2. Our compost pickup costs equate to $126 per ton, whereas our solid waste costs have risen to $200 per ton. As major metropolitan areas continue to look for ways to reduce the need for more solid waste transfer stations and additional remote landfill sites, these costs will continue to be passed on to food service operators as cities drive businesses to participate in recycling and compost collection. Zero waste goal Our goal is to send zero waste to our regional landfills by using the power of purchasing to buy renewable resource products that are compostable, as well as continuing to provide and capture recyclable packaged products. We support a cradle to cradle model, in which compostable, renewable resource products are used, the infrastructure is available to capture the compostables and educate the customer, the program is monitored for contamination, and valuable resources are captured and sent to our local composting facility to support a sustainable nutrient cycle. Sustainable supply chain We have been working with local and national distributors and packaging producers to carry an entire line of compostable products, not just for our campus but for the entire region. Our continued success is based on a healthy and robust supply chain that supports a growing demand for sustainable living in our region of the globe. As more and more national food service distributors source and build up inventory levels of renewable resource products, and solid waste product use diminishes, compostable product lines will decrease in cost, continuing to drive the food packaging industry to provide products that support sustainable living. Measures of success During our first full year of front of the house compost collection, we collected over 240 tons of compost. Just this past year we have more than doubled compost collection to over 500 tons of compost that was collected and picked up. As we add more sites and close all the loopholes in waste collection, and as more members of the campus community participate, we will continue to divert more and more to the compost and recycling streams and away from landfills. Campus participation We serve over 30,000 customers a day in our 36 food service operation on campus. Our entire customer base reaches over 70,000 people within the campus community. The opportunity to reach this many people on a daily basis and have them participate in a highly visible program that impacts the environment leads to a significant amount of pride for our campus.

5 Discussion Points Jeffrey Foote, Coca Cola Reduction is use of toxics in manufacture, bleach free Jeffrey Foote, Coca Cola Can the University of Washington provide data on how much weight reduction resulted from adding the Ecotainer? What happened to the diversion rate on campus? Jake Backus, Coca Cola How much are consumers prepared to recycle in outlet? Should it all go into one waste stream? Peter Skelton, WRAP If materials are certified then they can be used in compositing mix. Examine how to get material to the composter. Unless you have a closed system, can you guarantee that the materials are being composted? If 70% of cups are being taken out of the outlet onto the street, will they go to landfill or incineration? What is the impact in landfill / anaerobic digestion give off methane etc? Fundamental to the solution is to understand where the impact is. Gary Henrich, Kenco Seattle city legislation for all packaging to be compostable? 3 bins: garbage can, recycling can, garden waste. Seattle has seen lots of success in Seattle with composting. Closed loop system whether in restaurant or taken home. Need some designation on packaging to say it s compulsory. Eg. Use colours Brown goes to the ground. Will Bakx, Sonoma Compost I have a compost facility and cannot/will not accept PLA. Will California is moving towards listing PLA as non recycleable. No organisation can have standards lower than N.O.P. Review standard of compostable plastics not acceptable for organic agriculture. Can t differentiate between compostable plastics and regular plastic. Compostable plastic listed as non recycleable. PLA lining on cups likely to be an issue NatureWorks or International Paper Chris Roeder Intl Paper not aware of any problems Peter Skelton, WRAP Separating polymers by infra red. PLA from PET is now advanced, but paper will probably come out best. Mixed plastics in UK coming on well at household level. Waxed paper is a no no for paper mills. Paper & 1 side laminate is not ideal but some mills will take it. What issue are you trying to advance reduce environmental impact? Divert from landfill? Different solutions for different issues. Peter Skelton what is the impact in landfill are they going to biodegrade and the impact of methane? Look at holistic / environmental impact of the different options maybe composting with food waste is an option but only if it stays in the outlet. Coca Cola Coca Cola s broad approach is cradle to cradle and not cradle to grave.