Cereplast exits bioplastic manufacturing

Instead of manufacturing its own bioplastic, Cereplast said it will follow the semiconductor industry's business model and rely on contract manufacturing to reduce costs.

The California-based bioplastic producer said that it is exiting the manufacturing business and instead will contract with large compounders to produce its bio-based resins because of a worldwide excess of plastics compounding capacity. Cereplast will instead focus on product development and customer service.

"With increasing worldwide demand for bio-plastics driven by a movement toward sustainable solutions, we now realize that relying on our own manufacturing facilities will actually limit our growth. Building manufacturing capacity is extremely capital and management intensive and best left to those who make it their specialty."

Cereplast currently has production facilities at its headquarters in Hawthorne, California and a yet-to-be opened facility in Seymour, Indiana. The company said it is currently trying to reduce its in-house manufacturing capacity and its manufacturing-related workforce.

I do wonder if Cereplast will only concentrate on domestic plastic compounders or will it go outside the US where materials and labor are cheaper? It seems that US plastic compounders are at disadvantage especially when it comes to plastic bags as imports are flooding in from Vietnam, Taiwan and Indonesia.

According to the US International Trade Commission (ITC), the plastic bags from these countries are being sold in the US at less than fair value. Government subsidy programs also greatly benefits plastic bags producers in Vietnam making it possible for them to export cheaper plastic bags, said ITC.

[Photo from CNET Networks]