Corporate Growth Conference 2024: The opportunities and challenges of organics recycling

A panel of speakers at the Corporate Growth Conference this November in Chicago discussed the operational complexities involved in organics processing and shared the approaches their companies have taken to find success in this space.

Riley Webb, vice president of Clairvest, a Toronto-based middle-market private equity firm, moderated the panel discussion with Bill Camarillo, CEO of Agromin; Ryan Begin, CEO of Divert Inc.; Andy McNeill, chairman of Denali Water Solutions; Mike Leopold, CEO of Convertus Group; and Harry Cohen, CEO and founder of Natural Upcycling. Webb noted that the panelists have more than 90 years of combined experience in organics, though each has different business models they have pursued.

Companies interested in handling organics must be specific about which customers and feedstocks they go after, Webb said. “Operators need to manufacture the right products using the right technologies [and]using a consistent feedstock mix. In short, there’s operational complexity,” he said. “They also need to have the right balance between volumes, tip fees, product sales and capital intensity, and not all operators get this right.”

Diversion opportunity

Food waste represents roughly a quarter of the municipal solid waste generated in the United States, Webb said. While most of this material is still landfilled or incinerated, he noted that this is changing quickly in some geographies that have targeted curbside organics collection and industrial, commercial and institutional (IC&I) food waste. “There's been a significant build-out of both composting and anaerobic digestion infrastructure, but there's tremendous white space as a significant portion of this infrastructure processes other feedstocks and or is very low volume.”

A company that is helping to process some of that of diverted food waste is Concord, Massachusetts-based Divert. The company is focused on building nationwide infrastructure to prevent food from being wasted by targeting commercial generators, Begin said, with Divert planning to construct 30 facilities within 100 miles of 80 percent of the U.S. population by 2031. The company’s facility in Turlock, California, which began operating in November, already is over capacity and flowing gas into PG&E pipeline. The Turlock Integrated Diversion & Energy Facility can process 100,000 tons of unsold food products annually, contributing nearly 225,000 MMBtu (million British thermal units) of renewable natural gas (RNG) into PG&E’s system and mitigating approximately 23,000 metric tons of CO2 emissions annually.

California is aggressively targeting organics, including food waste, for diversion, having passed Senate Bill 1383 (S.B. 1383), which requires organics to be separated from recycling and trash as of the start of 2022.

Agromin, based in Oxnard, California, is one of the state’s largest organics waste recyclers and compost producers, Camarillo said. The company manages 1.2 million tons of organics annually and serves more than 200 jurisdictions in 15 counties in the state. In early 2024, Agromin received a $10 million grant from the California Department of Resources Recycling and Recovery (CalRecycle) to convert food scraps and yard waste collected by communities into compost, expanding its composting facility at Limoneira Ranch in Santa Paula, California, to handle an additional 300,000 tons.

Natural Upcycling, Linwood, New York, is a leading regional organics collector and processor founded in 2014 serving the Northeast and Mid-Atlantic regions of the U.S.  In 2019, the company became the exclusive New York distributor for the WasteMaster conversion system, which repurposes food and organic waste as reusable resources on-site at hospitals, food manufacturers and processors, hotels, universities, long-term care institutions and hospitality providers.

Cohen said that when the company was founded, he had to educate companies on Natural Upcycling’s services and mission. Since then, demand for its services has grown, but standardization in terms of collection has taken longer.

Convertus, based in Canada, is the largest organics waste operator in that country with 13 facilities, Leopold said. The company also operates two facilities in the U.S. and processes a total of 580,000 tons annually across its 15 locations. He added that Convertus is one of the only fully vertically integrated organic processing companies in North America, meaning Convertus can design and engineer organics processing facilities with its Netherlands-based engineering group and operate, finance and maintain them.

McNeill described Denali Water Solutions, Russellville, Arkansas, as the largest recycler of organic waste in the U.S., with more than 7 million tons processed in 2023 and operations across all 50 states. He said the company has more than 50 facilities that convert organic wastes of all types, including sludges of different types, food waste and oils and greases, to compost or fuel. Denali was formed from predecessor companies with roots that trace back to the 1990s, with the “water solutions” portion of its name referring to its origin in providing services to wastewater facilities and biosolids treatment.

Diversion drivers

McNeill pointed to landfill scarcity as one reason organics have been targeted for diversion, though he later said that was a “self-made problem” as the U.S. has “plenty of land.”

“Carbon sequestration is another underlying trend,” McNeill said, adding that corporate edicts and regulations like California’s S.B. 1383 influence that. Renewable fuels, including RINs, or renewable identification numbers, also play a role in the spread of organics recycling.  

“Society is leaning into these climate policies, especially in California,” added Camarillo, who said companies want to be better environmental stewards.

Begin said that while “zero waste was the historical driver” of organics recycling, it has become about more than keeping this material out of landfills, noting that preserving food and reducing what we are producing as waste have proven to be “far more impactful.”

While the IC&I sector has led organics recycling in U.S., Leopold said Canada has taken a regulator-led approach targeted at municipalities. By the end of 2025, all municipalities or cities in Canada with 200,000 people must have a green-bin program. “That really allowed the processing to be built,” he added. “So, the infrastructure that’s in play was really led from the residential side, and the IC&I sector really lags behind compared to where we are in the U.S.”

McNeill noted that of the 235 million tons of food available in the U.S. annually, 40 percent doesn’t get to the desired outcomes. However, of the 40,000 grocery stores in the United States, 40 percent send their food waste to companies like Denali to process. “Just taking the produce isn't good enough any longer," he said. "They want to give you the freezer waste and the deli waste and other waste streams that are there that require you to add production in the form of repackaging, And then, if you take hospitals, schools, prisons, casinos, conference centers … any place that has a concentration of potentially food and compostable materials, it is a staggering amount of material.”

McNeill added that Denali tries to approach this material pragmatically.  

“Tons talk and contracts are important,” Camarillo said, adding that he has spent “a lot of time and energy developing pathways” to create demand for compost.

“Compost is not a commodity,” he said. “It hasn't been one. It doesn't have an index that tells you what it's worth, even though we know what it's worth from its nutrient base. There needs to be a commoditized product in order to create a real industry sector that has a demand pull on that product.”

Begin said Divert is “incredibly hyperfocused on commercial food waste,” which he described as “contaminated streams that shouldn’t go into compost” because they contain microplastics and other challenging materials. He adds that the energy transition is driving much of what the company is doing in organics waste.

“We take more of a backstop approach where blocking and tackling are critical,” Cohen said. “We want to be really good at collecting organics. We want to standardize the process.”

He said Natural Upcycling invested time in standardizing collection before it tackled pricing its services appropriately in each market it services. “Finding the right audience, the right anchor client, has helped us build our footprint. It wasn't 'a build it [and] they will come mentality,'" Cohen said. “We started with in Rochester, New York, and we've built out over 11 states, and we continue to build those routes, providing density [and] improved pricing partnerships, and the infrastructure play is really imperative to our growth.”

He added that Natural Upcycling wants to be a great feedstock supplier to processing companies like Agromin and Convertus. “We're really good at that.”

Opportunities for growth and pitfalls to avoid

Leopold said growth opportunities exist in the organics recycling space. “And I'm not just playing to the room because I know that this is what you guys are here for.”

He added, “When it comes to organics processing, there's a lot more infrastructure needed,” which means capital is going to need to be deployed. “We're really big on what I would call partnerships. And partnerships are what allow these types of high-dollar infrastructures to get built.”

For Convertus in Canada, municipalities typically are the company’s “cornerstone customers,” Leopold said. “Once I've got enough volume, let's say 60 percent of what my design is going to be, then I can go forward with a really good rationale as to why we need to build this infrastructure.” The contracts that form the foundation of these partnerships are 20 to 25 years in length, he said, not year-to-year.  

Webb said the organics recycling space has seen a number of “notable failures” over the years, with Begin adding, “There are absolutely a lot of dead bodies in the anerobic digestion space.”

Some common failures Begin noted were the inability to secure sufficient feedstock, lack of vertical integration and insufficient offtake agreements.  “We have multiple outlets,” he said. “We know where our feedstock is coming from.”

Begin added that depackaging is very difficult, with all plastics needing to be removed before material can be placed in a digester.

Camarillo said he was “scared to death of AD plants,” noting their operating expenses and track record of failure, adding that he was happy to leave their operation to others.

“We put ourselves on a really short leash, and every project we do is secured with tons and contracts, either from haulers and municipalities,” he said of Agromin. “Our cycle time is five to seven years to get these facilities paid off. However, they are getting way more expensive.”

Camarillo added that it’s important not to overbuild facilities in the organics recycling space because technology is changing so quickly. “We are technology agnostic. We look at that very critically, and composting is a lower-cost solution to diversion today as long as you have markets to move the material.”

For the municipalities it works with, Leopold said Convertus considers their collection strategy first and then determines the best technology.

“Organics recycling is a science,” Camarillo said, “and you have to know what your customers are looking for and how they're trying to improve soil health. We have soil scientists on staff. We understand what the farmers’ needs are, and then we go into our waste stream, and everything's about source separation.”

That means Agromin asks California residents to bag their food waste and put it in the yard waste barrel to avoid contaminating the green waste. “There are higher-value uses for food waste, like digestion, organic fertilizers, things like that, so it's all driven off the customer's needs. What are they looking for? What do we need to make for them? We make hundreds of different kinds of products, and it's all dependent on the application.”

When it comes to how the panelists are approaching PFAS, or per- and polyfluoroalkyl substances, McNeill said Denali is taking the issue seriously, though as passive receivers, he doesn’t believe the company should be held liable for these chemicals.

Leopold said his biggest fear is that PFAS will be in the compost the company produces, “and there'll be a certain standard, and you won't be able to land-apply the compost anymore, or the digestate from an AD perspective. And my personal take on it is …. [that] we're at the end of the chain. We're just the processors. We didn't put it in there, so we can't be held accountable to take it out. So, at the end of the day, that has to be pushed further up the chain.”

Waste Today’s Corporate Growth Conference was Nov. 20-21 in Chicago at the Swissotel.