Upsize Forecast: Twice around

UPSIZE FORECAST :: PROFILE

Twice around

Materials Processing exploits recycling niche to grow
by Sarah Brouillard

WHEN IT COMES to electronic gadgets, Americans are wired to the hilt.

At home and at the office, they spend billions of dollars a year on computers, personal digital assistants, television sets, cellular phones, printers and other devices. And each year, they throw out approximately 2 million tons of used electronics, often in a haste to replace pass? products with the newest makes and models.

As the piles grow higher, so do the market opportunities. Materials Processing Corp. (MPC), an electronics recycling company based in Eagan, has experienced rapid growth over the past year as consumer and commercial customers search for turnkey ? yet environmentally friendly ? solutions to get rid of their items.

Unlike other waste, it?s illegal to dump electronics in a landfill; violators risk hefty fines. And electronics contain relatively small quantities of materials that may be potentially hazardous, such as lead, mercury and cadmium.

For a nominal fee, MPC handles the entire process, from pickup to disposal.

MPC was one of 231 companies that responded to the Upsize Small-Business Forecast survey. Co-owners David Kutoff and Todd Schachtman say business conditions for their particular market will be more favorable in 2008, compared to 2007.

Upsize asked them to augment their outlook to illustrate a common theme from this year?s respondents. While overall economic conditions don?t look positive, many individual small-business owners nevertheless gave a rosy forecast because they?re nimble enough to take advantage of conditions in their niches.

Clients are eager to free up space used to stash old electronics. But security is also at stake. Improper disposal leaves companies vulnerable to data theft.

Employees at MPC completely destroy the information-bearing parts, such as the motherboards and hard drives. They?re sent through a shredder, which breaks them apart into Doritos-sized pieces, ensuring nothing can be salvaged for unlawful purposes.

Everything else is torn apart by hand, and separated into  elements, such as plastic, steel and aluminum, all of which can be reused.

The company generates revenue by charging a fee to its commercial clients. The amount varies: Devices with screens, such as television sets, cost 35 cents per pound; computers cost 15 cents per pound.

Occasionally, clients are the ones making money. Precious metals, wiring and cabling can be recovered and sold, for anywhere between 5 cents and 85 cents per pound. The proceeds are then given back to clients in the form of credits.

?The material mix could be such where we?re not even sending them an invoice. We?re sending them a check,? says Schachtman, president of global sales.

While the extra cash is an added bonus, what clients really want is a certificate of recycling or destruction of all assets that come in on a given load. They keep the documentation to prove they don?t have any environmental liability down the road.

Russ Reger, operations manager at Veit Cos., a Rogers-based waste recycling company, pays e-cyclers to take electronics off his hands. In his experience, however, most e-cyclers don?t stick to just one main waste-stream source. They may also recycle fluorescent light bulbs, and contaminated or hazardous wastes.

E-cycling isn?t a new market. But it?s definitely one that?s seen an enormous amount of growth in the past couple years.

For several decades, the driving force behind the e-cycling industry had been the commercial sector, says Kutoff.

Now, e-cycling has also gained mainstream appeal, as consumers ? taking their cue from global warming pundits like Al Gore ? become more conscientious of their impact on the environment.

Increased demand for the latest technology isn't the only drive to buy new. In some cases, consumers are also getting backed into a corner. Federal lawmakers, for example, plan to shut down analog broadcasts by February 2009, forcing consumers to purchase digital television sets or use a converter box.

Besides an increased volume of recyclables, there?s increased accountability across the industry.

Over the past year, a patchwork of state regulations has gone into effect that requires electronics manufacturers to facilitate recycling programs for residential consumers.

Some of these manufacturers are meeting their quotas by working with established electronics recyclers, such as MPC. The company is coordinating pickups at residential homes through municipalities and cities.

Others are coming up with new internal programs to address the growing problem. Motorola Inc., maker of cellular phones, recently launched a ?trade-up? program, encouraging U.S. consumers to turn in their used phones ? any make or model. In exchange, the company promises in-store credit that must be used toward a Motorola product of equal or more value than the trade-up value.

?You?re seeing a lot of people recycling electronics that have been stockpiling them for years because they simply didn?t know what to do,? says Schachtman.

CEO Kutoff began his recycling career by joining his family?s business. His grandfather founded a lead-acid battery recycling company in Eagan in the 1940s.  It still operates today.

Kutoff spent his 20s running its division for recycling the plastic casings. He headed up sales and marketing, and oversaw the implementation of quality standards and International Organization for Standardization (ISO) systems.

Schachtman initially worked as an investment advisor.

While their grandfathers were good friends, it took a Friday night dinner at Kutoff?s sister?s house for Kutoff and Schachtman to meet. They quickly dis