Ethanol maker in deal with P&G for green packaging

posted - MAY 31, 2011

(Reuters) - Procter & Gamble Co. (PG.N) has inked a deal with cellulosic ethanol start-up ZeaChem Inc to convert plant material and other biomass used for ethanol into chemicals for household products and packaging.

The multiyear joint development agreement between the world's largest household products maker and the biofuel company is keyed to a trend among top consumer products players to try to make packaging more environmentally friendly, and thus more appealing to consumers.

"If you can make green to replace brown at a cost less than brown ... there is no limit to that market," said ZeaChem Chief Executive Officer Jim Imbler in an interview with Reuters.

Procter & Gamble -- maker of an array of household products that include Pampers diapers, Tide laundry detergent, Bounty paper towels and Pringles potato chips -- has set a goal of replacing 25 percent of its petroleum-based materials with renewable materials by 2020.

The company has already announced a shampoo bottle made with sugar cane.

Beverage and snack company PepsiCo Inc (PEP.N), recently unveiled a new bottle made from switch grass and other natural materials.

"As part of its long-term environmental sustainability vision, P&G is committed to using 100 percent sustainably sourced renewable or recycled materials for all products and packaging," said Len Sauers, P&G's vice president for global sustainability, in a statement.

"Novel innovations from our suppliers ... are critical to us achieving this vision," Sauers said.

ZeaChem plans to use a 250,000 gallon-per-year cellulosic biorefinery currently under construction in Boardman, Oregon, to manufacture the bio-based chemicals for Procter & Gamble, as well as laboratory facilities in Menlo Park, California, and a pilot facility in Golden, Colorado.

The agreement calls for Procter & Gamble and ZeaChem to jointly research, develop and commercialize the new bio-based chemicals.

The deal should accelerate development of ZeaChem's product platform for the commercialization not only of fuel but also chemicals and other products, said Imbler.

"It is a pretty exciting development for us," said Imbler.

He declined, however, to peg a revenue figure to the deal or to outline any specifics regarding products or packaging.

ZeaChem's process uses renewable feedstocks such as poplar trees and agricultural residues for biofuel development.

(Reporting by Carey Gillam, editing by Gerald E. McCormick)

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