December 28, 2011 by Terence Lee
Long ago on television, a certain Captain Planet rescued our planet by defeating eco-terrorists with his superpowers. In real life, saving the earth requires much more patience.
For Singapore entrepreneur Alan Yeap, he’s doing it by painstakingly building a company from the ground up and making it profitable. He started New Quantum Holdings in 2010, which is in the business of — among other things — developing and selling oxo-degradable and biodegradable plastic bags.
Alan doesn’t have the flamboyance of Captain Planet or environmental activist Al Gore. Quite the opposite. He’s mild-mannered and soft-spoken, but calm and self-confident. He knows plastics well — prior to starting the company, he was in the plastic trading and distribution business in an MNC for 20 years.
I met him twice: The first time was incidental, I bumped into him while reaching for that dim sum platter in between sessions at the recent World Entrepreneurship Forum. Deciding he was interesting enough, I met him again in his office a few weeks ago. Seating in his conference room, Alan begins by showing me some slides from his iPad, through a projector.
New Quantum is doing big business, despite being a young firm. It’s generating an annual revenue of US$10M from selling plastic bags in ten countries, including US, China, and Indonesia. That’s just a fraction of its entire business, which amounts to US$30M in revenue.
The company has its feet in numerous product lines, from providing commodities like chemicals, fertilizers, and polymers to finished products like automotive parts, houseware, and office stationary. Through a subsidiary, they produce authentication labels for items like passports and identity cards.
“We’re doing both a horizontal and vertical business,” he says. And only with a core staff strength of eleven.
Alan added that New Quantum’s strategic partner, investor, and stakeholder is the one that manufactures these goods, leaving his team to do the intangible stuff.
“It’s a mistake to think we’re into manufacturering — we’re not. We’re in the business of researching, branding and marketing our products. That’s exactly what companies like Nike and Apple are doing.”
New Quantum is even getting into the consultancy business. It’s in the midst of seeking clients to engage in CSR work — by developing a program to teach firms how to lower their carbon footprint. By offering these services in addition to their products, it is setting itself apart from competitors.
Our attention returns to the plastic bags. He’s getting a little more excited as the interview wears on, fishing out sample plastic bags from a couple of large files he brought into the room.
The company offers two kinds of plastic bags: Oxium and Ecoplas. Ecoplas bags are manufactured from scratch out of Tapioca starch. It will biodegrade after one year or less depending on micro-organism activities.
Oxium, on the other hand, is made using an additive to enhance the existing manufacturing process of normal plastic bags, turning them oxo-degradable. Unlike biodegradable products, Oxium will only start disintegrating in a landfill once the additive breaks down the plastic bag after a preset period of time.
While traditional plastic bags take hundreds of years to disintegrate, Oxium plastic bags take only months.
I hold an Ecoplas plastic bag in my hand. It feels thicker than Oxium, weightier and stronger too. It’s something you would use for a luxury product — that indeed is the intent. Brands like Raoul, Billabong, and Club Monaco have taken to using Ecoplas bags.
Oxium feels exactly like a normal plastic bag, and it’s been used by supermarket chain Giant as well as health and beauty chain Guardian.
Concerns have been raised over how using food crops like Cassava, which tapioca is derived from, for purposes other than feeding hunger may lower food security and cause rising food prices.
Alan responds: “Cassava is not a main food staple in many parts of the world. My company also has a strategic plan with farmers to start a replanting program, and we plan to work with governments and NGOs to support these farmers. 200 metric tons of Ecoplas will benefit 2,000 farmers by giving them a revenue stream.”
He adds that since biodegradable bags are costly to produce and consists of only three percent of the total plastic bags market, consumption will not drive cassava costs up and result in a food crisis. The volume of Ecoplas produced will be much less than Oxium since it is aimed at the luxury market, and hence the impact on food supply is minimal.
Both Ecoplas and Oxium are more expensive than traditional plastic bags, although as far as Alan knows, New Quantum is a cost leader amongst green plastic bags of the same quality. Ecoplas is priced 30 to 50 percent more than non-green variants while Oxium costs three to five percent more.
Would potential customers hesitate to take up New Quantum’s products due to the heftier price tag?
Alan doesn’t think so. He says that many companies support sustainability and would accept a minimal cost increase if it means turning greener. Luxury brands, which has high profit margins, also have no trouble switching since many of them use paper bags — which costs about the same as Ecoplas bags. Furthermore, the company is working towards lowering their costs further by engaging plastic raw material producers in the Middle East.
He is optimistic that New Quantum’s plastic bag business has good long-term prospects, especially since other green solutions are not as practical. While some have advocated for the use of reusable bags in supermarkets and retail stores, Alan contends that very few people actually use them more than once.
“I myself have a lot of them in my house, and I don’t touch them. While it’s great to reuse something, remolding consumer behavior takes time.”