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PA Firm Grows Lessons on Green Business

Lawn clippings, leaves, and other organic debris that once would have been headed for landfills is being ground into compost and reused in landscaping, thanks to AgRecycle, Inc., a Pittsburgh, Penn., company devoted to wholesale composting. The company also offers valuable lessons for entrepreneurs on how to carve out a niche in a green industry -- and expand that niche sustainably. By Nora Goldstein, In Business magazine. Read More

Tons of lawn clippings, leaves, and other organic debris that once would have been bound for landfills is being ground into compost and reused in landscaping, thanks to AgRecycle, Inc., a Pittsburgh, Penn., company devoted to wholesale composting. The company also offers valuable lessons for entrepreneurs on how to carve out a niche in a green industry — and expand that niche sustainably.

“We are a business dedicated to the recycling and reuse of materials to enhance soils and foster plant growth,” said Carla Castagnero, president of AgRecycle.

The company operates large-scale composting sites approved by the Pennsylvania Department of Environmental Protection — one of two operations in the state granted the necessary permits to accept diverse organic residuals. These source-separated feedstocks include leaves in kraft bags, manure, newsprint, pallet pieces, yard trimmings, grocery store waste and snack food from the producer. AgRecycle maintains organics recycling centers, where local communities, school districts, golf courses, florists and other green-oriented businesses can drop off as well as purchase materials.

Getting it Off the Ground

In the 1970s, Dan Eichenlaub (now vice president of AgRecycle) cofounded Eichenlaub, Inc., a landscape construction company. By 1990, it had grown into a multimillion-dollar business with three divisions: construction; maintenance; and lawn, tree and soils care. Construction represented about half of the company’s gross sales, including paving, decks, walls, and creating nature trails.

In 1988, the soils department of Eichenlaub, Inc., began producing limited quantities of compost made from yard debris and grass clippings originating from their job sites. The matured humus performed well, and reduced the amount of organic material they needed to purchase for landscaping projects.

Also in 1988, Pennsylvania passed comprehensive solid waste management legislation, which included a ban on the landfilling of leaves. The ban was to take effect in September 1990. The value of compost in their own operation, combined with the upcoming ban, led the Eichenlaub staff to make an earnest commitment to composting as a stand-alone operation.

To help with the start-up, Eichenlaub enlisted Castagnero, a friend and lawyer who was an environmental and safety consultant for USX Corporation:

“We would work in the evenings and on weekends, investigating markets, composting technologies and financial requirements,” Castagnero said. “After about six months, we decided we either had to go for it full time, or abandon the idea.”

Raising Capital

While access to the resources of the existing landscape company helped lower start-up and operational costs, outside investment capital estimated at close to $1million was needed. Castagnero and Eichenlaub raised it through individual investors, none of whom were involved in their industry. Bank financing was sought as well. To develop an accurate pro forma statement, the partners talked with managers of more than 20 composting operations during actual site visits in 1991.

Start-up costs included $480,000 to prepare 10 acres of the 41-acre site leased by the company. AgRecycle also procured close to $600,000 of composting equipment (some leased), e.g. a grinder and front-end loaders, and a truck to transport yard trimmings to the site. Ongoing expenses include fuel and repairs, lab testing fees for raw materials and finished product, and disposal of rejects. Capitalization also needed to cover the seasonality of the compost business.

Logistics And High End Markets

Because the composting site is in a remote, rural area, AgRecycle set up three drop-off locations, one in the city of Pittsburgh and two in the suburbs. Two of the drop-off sites are operated under contract by a different landscaping firm; AgRecycle owns and operates the third. The furthest hauling distance is 25 miles from the composting facility; the closest is eight miles. Over 300 landscaping firms use these locations to drop off organic debris as well as to purchase finished compost and mulch. The company charges a tipping fee of $9 per cubic yard, or between $20 and $30 a ton. That is competitive with area landfill charges of about $40 per ton. Other feedstocks are individually priced and range from $2 per cubic yard to $24 per cubic yard — depending upon how much processing is required.

All yard trimmings are ground at the drop-off locations by a mobile grinder. “By grinding the materials first, we get significant volume reduction,” says Castagnero. “Given the distance we have to travel and the related transportation costs, we don’t want to be selling air.”

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Nora Goldstein is editor of In Business magazine, a GreenBiz news affiliate. Copyright 2001 JG Press. Inc.

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