While essential to modern life, plastic products are an ongoing environmental concern due to their longevity and therefore the pollution that results. Despite nationwide efforts to recycle plastics, only 8.5% of plastics waste in the U.S. is being recycled, according to a study by the U.S. Environmental Protection Agency.

Danimer Scientific (tkr: DNMR) has developed a method to make plastic products that are 100% biodegradable and compostable without compromising on functionality. The company sells its PHA-based plastics under the brand name Nodax and is currently the only viable commercial-scale offering.

Danimer uses canola oil to create 100% biodegradable and compostable biopolymer, PHA, through a completely waste-free process. PHA biodegrades in both anaerobic (without oxygen) and aerobic (with oxygen) environments, and unlike other biodegradable plastics, it does not need heat, moisture, or an industrial composting plant to break down. PHA-based plastics can effectively biodegrade in a waste treatment facility, the ocean, or even in home compost piles within 12-18 weeks after the product is discarded.

PHA plastics are versatile, adaptable and heat and UV-resistant. They have been FDA approved for food contact and are comparable in functionality to many products produced using petrochemicals. The formula can be customized to create many types of plastic resins for a multitude of purposes. The range of applications for products made with PHA is enormous and includes straws, cups, lids, bottles, produce bags, shopping bags, utensils, diaper linings, plates, wipes, toys, trash bags, seals, labels, glues and much more.

With an impressive customer base, including PepsiCo, WinCup, Walmart and Nestle, and several strategic partnerships with other well-known companies, Danimer’s Nodax could soon become a staple for consumer-packaged goods. Danimer is working with PepsiCo to design, develop, manufacture, and evaluate PHA-based resins for individual layers suitable for flexible food packaging. Nestle and Danimer are developing a biodegradable water bottle for Nestle’s PureLife brand. Bacardi teamed up with Danimer to create biodegradable spirits bottles which should fully degrade within 18 months. Most recently, Mars Wrigley, the snack giant, announced a two-year partnership with Danimer Scientific to advance home compostable packaging. Mars Wrigley said it will soon introduce Skittles candy packaged in Danimer’s Nodax material in U.S. stores.

Danimer went public in late 2020 via Special Purpose Acquisition Company (SPAC). As a newly public company, Danimer’s stock price tends to be rather volatile, but we bought a small position for the long-term opportunities it offers. Demand for PHA plastics is likely to accelerate over the next several years as corporations and the public become increasingly concerned about the environmental impact of wrappers from consumer-packaged goods. More government regulation of single-use plastics has pressured large corporations to adapt. Additionally, the Biden administration has a strong emphasis on climate change and sustainability which will provide a near- to mid-term tailwind for Danimer. As the leading PHA innovator with over 125 patents across 20 countries, Danimer is well-positioned to benefit from these trends.

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