New York (CNN Business)When the coronavirus pandemic hit the United States, local governments and big companies quickly changed their tune on reducing single-use plastics. They started prohibiting cloth totes in grocery stores and rejecting reusable coffee mugs at cafes. They embraced disposables once again, seeing them as the safer, more hygienic option.
Maine delayed its plastic bag ban from April 2020 to January of next year. San Francisco in March instructed businesses to bar customers from using their own bags, mugs or other reusable items in order to promote social distancing. Meanwhile, Starbucks (SBUX) stopped allowing people to use their own mugs, and McDonald’s (MCD) decided to close self-serve soda fountains as it reopens its doors.
For Loop, a shopping service that sells items from Häagen-Dazs ice cream to Tide laundry detergent in reusable packages rather than the single-use containers that normally hold the products, consumer fears around reuse could pose an existential threat. But instead of retreating during the pandemic, the project has reported sudden increases in sales and is about to expand in a big way. Loop, which launched as a pilot last year in the Northeastern US and Paris, is planning to expand to the 48 contiguous states by July 1.
The broader launch has the potential to take Loop from a small experiment serving 10,000 customers to a much larger initiative — and it will test how committed Americans are to ditching single-use plastics. “What we’re not seeing is any consumers concerned about reuse in light of the virus, which is incredible,” said Tom Szaky, CEO of TerraCycle, a recycling company based in Trenton, New Jersey, and the driving force behind Loop. “I’m very, very happy about that.”
The Loop story
Szaky first pitched the idea of Loop — which he describes as emulating a milk man model — to the world’s largest consumer goods companies in 2017, at the World Economic Forum in Davos. They were interested: Loop could be a way for them to cut down on waste, and help repair the reputations they’d gained for contributing to global plastic pollution. In 2019, Szaky made Loop a reality, featuring a small selection of products from Procter & Gamble, Unilever, Nestlé, PepsiCo, and Clorox, among others.
Here’s how it works:
First, Loop customers have to make an account and fill up a basket on LoopStore.com. In addition to the regular cost of the products, customers must put down a fully refundable deposit for each package, usually between $2 and $5 per item. In the United States, the items arrive via UPS in a Loop tote bag. There’s a $20 flat shipping rate.
Dozens of products are available through the service, ranging from shampoos and food made by popular brands to no-name staples like coffee and oats. As customers go through products — use all the shampoo, eat all the ice cream — they fill up the totes with the empty containers. Unlike traditional recyclables, customers don’t have to wash the packages. They just drop them back into the Loop tote, which a UPS driver picks up. The empties are shipped to an industrial cleaning facility in Pennsylvania before being refilled and sent out again. Customers can keep repeating the cycle or opt out and recover their deposits.
Shopping through Loop isn’t hard, but it requires consumers to change their behaviors and mindsets: Rather than order from established e-commerce platforms like Amazon (AMZN) or FreshDirect, they have to trust an upstart. They also have to shell out for the deposit, and commit to sending back their empties. It was a big ask before the pandemic, and the crisis could have easily delivered a death blow to the service — especially now that customers are also hyper concerned about hygiene.
But people weren’t scared off by the service’s business model. In fact, Loop’s sales surged.
“March, April, May have all set records,” Szaky said.
March, April, May have all set records,"
Tom Szaky, CEO of Terracycle and founder of Loop
He has a few ideas why. First, Loop benefited from the sudden shift to online grocery shopping during the pandemic.
“We definitely have seen a benefit for eComm because of Covid,” Szaky said.
And, he said, customers have come to trust Loop’s cleaning process, which takes place in industrial clean rooms, where workers are suited up in protective gear. The process is calibrated to different types of containers and materials. The temperature for cleaning Loop’s glass containers, for example, is set differently than for cleaning its aluminum ones. The clean room’s pipes are flushed after each use to remove potential allergens.
“Unlike the durable coffee cup systems and reusable bags hibernating now, health and safety protocols and industrial cleaning processes are in place in our reuse system,” Szaky wrote in a recent GreenBiz column.
That doesn’t mean it’s been smooth sailing for the project.
Like other essential businesses that have stayed open during the pandemic, Loop has had to deal with kinks in its supply chain. In some cases, unexpected demand for a certain product — like Clorox wipes — meant that Loop ran out of stock more quickly than anticipated.
“Cleaning products have surged like crazy,” Szaky said.
As it increases its inventory, the service may have to add more of the reusable packages that contain all Loop products. Before the pandemic, that meant some of Loop’s partner companies had to order more packages from a dedicated supplier. But the pandemic took some of those suppliers temporarily offline or slowed them down as workers stayed home or called in sick. To make sure that it was able to scale up, Loop encouraged its partners to broaden their supply chains so they didn’t have to rely on one packaging plant.
The pandemic is also slowing down the growth of Loop’s portfolio of products.
“There is some pressure on enabling new supply chain,” Szaky said. Some companies that recently committed to joining Loop are waiting until the pandemic passes to actually join the platform. “Many of those brands are telling us ‘we’re in, we’re signing, we’re going to do it, but we’re going to actually start the work after corona,'” he said.
Still, Szaky is confident that Loop will be able to meet the explosion in demand he’s anticipating. Of Loop’s initial 10,000 users in its pilot program, only about 100 people have abandoned the project, he said. Now, there are about 100,000 people on a wait-list. If the pattern holds and customers remain committed, Loop may have to increase its service ten-fold.
Of course, there’s no guarantee that everyone on Loop’s wait-list will join. But “we expect a pretty big jump,” Szaky said.
Szaky has a big vision for Loop: Eventually, he wants people to be able to do most of their shopping on the platform. And though Loop is an e-commerce venture at the moment, eventually people should be able to pick up Loop products and drop off empty containers in retail locations, too.
The national rollout, which was initially slated for the end of 2020, is another step in that direction. The rollout was accelerated partially because of that jump in demand from users. And an expedited national launch means Kroger (KR) and Walgreens, which have announced plans to eventually carry Loop’s products on store shelves, can monitor the online sales to determine which regions are most interested in the service, Szaky said. That data will help inform them where and how to launch Loop in their stores.
Szaky, who has devoted his career to reducing waste, is thrilled that Loop has made it this far and is now expanding. But the service has a long way to go before it becomes mainstream.
Lisa McTigue Pierce, executive editor of Packaging Digest, said she’ll consider Loop to have shifted the broader conversation around reusables when it inspires copycat products or services. That hasn’t happened in a significant way at this point. She’s also looking for mainstream distribution of Loop products.
So far, the trends that have made Loop popular right now aren’t unique to the project.
Why it’s working
Across the board, retailers are seeing growth in their digital channels.
The change has been especially dramatic when it comes to groceries. Before the pandemic, online grocery shopping lagged behind other kinds of shopping. But people avoiding crowded grocery stores and long lines have turned to online shopping as an alternative. About 20% of shoppers surveyed by the Food Marketing Institute this spring reported shopping for groceries online “for the first time in memory.”
FMI noted that in 2019, respondents said that they bought 10.5% of their groceries online weekly. In February this year, that figure jumped to 14.5%, and by March and April it had surged to 27.9%.
Not only are people getting used to shopping online, but they’re also looking beyond Amazon, which experienced delays when demand spiked. Major food manufacturers are paying attention: PepsiCo (PEP) recently launched two new websites, Snacks.com and PantryShop.com, which sell the company’s food and beverage products directly to consumers.
That interest in online shopping helped Loop, but still, there are broader fears around reusable products right now. And it’s unclear what that means for environmental movements moving forward.
“Because of the pandemic, there is a new appreciation by consumers and industries of the hygiene advantages plastic packaging can offer that seems to be outweighing concerns about recyclability and plastic-waste leakage into the environment,” McKinsey said in a report.
The question, the report continued, is whether the attitude “marks a permanent shift, or whether sustainability performance could reemerge as a source of competitive advantage.”
Szaky, for one, is enthusiastic about his next steps.
“We’ve been preparing for this for a while so we’re very confident, he said. “All we’re doing is going a little faster… What we do expect is a little bit of strain, but the team is prepared and ready to rock and roll on it.”
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