Avantium’s ambition and commitment to innovation have enabled it to produce a sustainable plastic that could revolutionise food and drink packaging and benefit the environment.
Scientific breakthroughs often require a certain amount of space and time for wide-ranging research to be conducted that may – or may not – result in a product with business applications. Avantium, which was spun out of Royal Dutch Shell in 2000, had considerably leeway to develop its ideas, partly because it already had a successful business model performing experiments for other companies. Now, given the time to refine its discoveries, Avantium’s innovations have the potential to transform food and drink packaging used by billions of people around the world.
“But over time we ... came up with the idea of using renewable feedstock instead of petroleum to make plastics.”
“When Avantium was set up the objective was to accelerate and exploit the application of high-throughput catalysis R&D – which uses automated equipment and parallel experiments to accelerate research – for the chemical and pharmaceutical industries using fossil-based feedstock,” explains Tom van Aken, Chief Executive Officer of Avantium Technologies. “But over time we saw an additional opportunity for proprietary development using our experimentation expertise and came up with the idea of using renewable feedstock instead of petroleum to make plastics.”
Scientists had been searching for a way to use bio-based feedstock for plastics for many decades and while there had been some successes, no economically viable process had been discovered. “Looking at over 100 years of chemical R&D, there was a clear constant: water was always used to dissolve the bio-based feedstock, which produced underwhelming results,” says van Aken. “We realised that using alcohol to dissolve the feedstock would open up a spectrum of possibilities. Our eureka moment came one Friday afternoon in 2005 when we dissolved some sugar in ethanol and opened a new, more efficient, pathway to a versatile chemical: 100% bio-based polymer polyethylene furanoate (PEF)”
Tom van Aken
“We recognised that the feedstock should instead inform the product. As a result, we produced a bio-based polymer with superior properties over those used today. That is what differentiates PEF: it is not only bio-based, it has better properties.”
Adopting a different mindset
Avantium’s scientific breakthrough came about because of its ability to think creatively and discard conventional wisdom. “Our scientific predecessors made little progress because they tried to make a product identical to polyethylene terephthalate (PET) using bio-based feedstock and consequently created an inferior product,” notes van Aken. “We recognised that the feedstock should instead inform the product. As a result, we produced a bio-based polymer with superior properties over those used today. That is what differentiates PEF: it is not only bio-based, it has better properties.”
PEF offers a number of important advantages over the PET currently used for food and drink packaging, including barrier properties – the ability to retain CO2 in carbonated drinks or keep out oxygen from beverages such as juice or beer – that exceed those of PET by five to ten times. Existing drinks and food packaged in PET or other plastics have a limited shelf life because over that period the fizz is gone or oxygen permeates through the packaging to degrade the product: PEF offers possibilities for a significantly longer shelf life. Moreover, it allows for thinner bottles or packaging, reducing weight and lowering transport costs. This also makes PEF competitive to packaging materials such as beverage cans, glass beer bottles, or aluminium wrappers.
It is PEF’s superiority as a material that Avantium – and its potential clients – focus on. “Initially, in 2009 and 2010, our discussions centred on the environmental benefits of PEF but now clients are equally interested in its cost and operational implications,” says van Aken. “The business climate means that people are not willing to pay a green premium. But our extensive discussions have shown that, given the advantages offered by PEF, it has a potential as a next generation packaging material in many product areas where the barrier is needed, where it can command a small price premium compared to conventional plastics and other materials.”
Developing YXY, Avantium’s technology to convert plant-based carbohydrates to building blocks for making bio-based chemicals, materials and fuels, has taken many years and has required the company to overcome numerous scientific hurdles. “During that period, we were driven by our vision, which is that through our chemical catalysis technology and know-how we can bring transformational new processes to the market that enable the large scale use of renewable chemicals in an economic way,” says van Aken. Of course, Avantium was also able to draw on the talent, technology and stable income provided by its contract R&D work.
Perhaps more challenging for Avantium – especially in period immediately after the breakthrough – was convincing the petrochemical industry of the potential of PEF. “When Avantium first made its discovery there was widespread industry scepticism, both about the viability of our technology and its potential applications,” recalls van Aken. To a large extent, industry resistance to PEF was – and continues to be – driven by concerns about the disruptive effect it will have. “The way the chemical industry operates and is organised will have to change when its raw materials come from a variety of decentralised agricultural sources and bio-refineries instead from centralised oil wells and oil refineries,” he adds.
Initially, that scepticism was shared by the major consumer brands that are the largest users of plastics for packaging. But by 2009, interest began to build as companies such as P&G and Coca-Cola started to take an interest in improving the sustainability of their packaging, prompted by consumer demand and growing awareness of climate change. “When The Coca-Cola Company was introduced to PEF, they had some doubts whether it could really be 100% renewable, recyclable and offer a better performance,” notes van Aken. “But they carried out extensive tests to validate Avantium’s claims and were really excited with the results. Yu Shi, Director of Next Generation Material and Sustainability Research at Coca-Cola, describes PEF as a next-generation material that brings them the functional performance they require and is 100% renewable.”
Financing the future of plastic
Avantium began as an international consortium of strategic, financial and university partners when it was spun out of Shell and has since been through multiple rounds of funding. In 2008, when Shell sold its stake, Avantium completed a €18 million private financing round, in which ING Corporate Investments, Aescap, Capricorn Cleantech Fund and Navitas Capital participated. In 2011, it raised €30 million to advance its YXY technology from Sofinnova, De Hoge Dennen and Aster Capital.
“An IPO could well be part of our financing strategies, as it would provide access to new sources of equity that could help to accelerate our growth ambitions.”
Most recently, in 2014 Avantium closed a financing round of €37 million from a strategic consortium comprised of packaging company ALPLA, The Coca-Cola Company, Danone, Hong Kong conglomerate Swire Pacific, and existing shareholders. “Attracting strategic investors showed that Avantium’s initial risk profile has been reduced and that commercial deployment is within reach,” notes van Aken. Proceeds from the most recent funding will be used to complete the industrial validation of PEF and finalise the engineering and design of the first commercial scale plant, which will be located in Europe and is scheduled to begin operations in 2018.
“Further rounds of investment will be required to build and operate the facility,” explains van Aken. “Once we shift to a period of earning income from selling products in the market and selling licenses to our YXY technology, an IPO could well be part of our financing strategies, as it would provide access to new sources of equity that could help to accelerate our growth ambitions.”
Throughout its history, Avantium has also benefited from public sector support. A credit loan from the Dutch government, which is repayable only if the project is financially successful, enabled it to build a pilot plant where a team of about 25 work 24 hours a day, seven days a week to produce the building blocks needed to make PEF. Avantium also has several new R&D programmes which are receiving significant national and European funding. “We’re always looking for funds and are eager to investigate the so-called Juncker funds that are being made available for innovative technologies, especially in renewables, in Europe,” says van Aken.
A bright outlook
Avantium is the first company worldwide to make a 100% bio-based plastic which has superior properties to petroleum-based products. That superiority is critical to the company’s future because it means that Avantium is not just competing on price or its environmental credentials. “The recent drop in the oil price affects the pace of adoption of bio-based materials since it makes the petroleum-based products cheaper. But because PEF is a better product they won’t affect its longer term potential,” says van Aken.
“Avantium will continue to face challenges,” concedes van Aken. “As the production of PEF is scaled up, it will become necessary to establish a stable local supply of raw materials of sufficient size, for example. Equally, when the commercial facility is in place, and we have shown that there are no risks created by scaling up production, we will begin licensing the product – we will not be able to meet demand. That change in business focus will necessitate new skillsets. At the same time, while we have robust patents in place, it would be naïve to think that chemical companies are not doing R&D in this area: we will face competition.”
Despite these challenges, Avantium is confident that it can deliver on its technical and economical promises and take its YXY technology from an R&D dream to a commercial reality. “Our scientific breakthrough means that Avantium will retain a leadership position in bio-based polymers: we have created something with blockbuster potential.”
The View is the online magazine of ING Wholesale Banking