Finding a Solution for Food Waste with Organix Recycling’s Rick Shipley

July 27, 2015

 
John Shegerian: Welcome to another edition of Green Is Good. We are so excited. This is the Houlihan-Lokey edition of Green Is Good in beautiful New York City, New York – where I’m from actually – and we’re so honored to have today with us Rick Shipley. He is the COO and the co-founder of Organix Recycling. Welcome to Green Is Good. Rick Shipley: John, it’s my pleasure. What better place to be than New York City. It’s wonderful. A little cloudy today but all right. It’s sunny in here, right? John Shegerian: And before we get talking about Organix Recycling and what you’re doing here today at the Houlihan-Lokey Conference can you share a little bit about the Rick Shipley story before the Organix story? Rick Shipley: I’m a Midwestern kid. John Shegerian: OK. Rick Shipley: I don’t show it sitting down, but I am six foot eight, so I am a sports guy. Every sport, if it has a ball involved, if it has competition involved, I loved it growing up. I grew up just a typical Midwestern kid playing sports – a normal story – and as my life moved on and I got into a professional world, I started moving towards the recycling world just by accident almost and some awareness around recycling and the importance of it and the value that we’re bringing beyond just the dollars and cents. It has really changed the way I look at the world, and as I’ve had kids, all of those things have been very transformative and have come to center. John Shegerian: Wow. Rick Shipley: So I’ve got kids that are now becoming teenagers and I think now about what the world is going to be like for them as we go forward. So my mind as a kid growing up, I don’t want to say it was wasteful, but I wasn’t conscious. And now as I’ve grown and I’ve had kids, I’m becoming much more conscious of the world around me and so I’d like to think I’ve matured. Some say 0:01:40.8 to losing my hair but I would say I’ve matured over the years. John Shegerian: And what year did you have the “aha” moment and the epiphany to start Organix? Rick Shipley: It was late 2009. Organix is a food waste recycling company. John Shegerian: OK. Rick Shipley: We take product that is not sold, not eaten, not utilized and we recycle that. But that was about late 2009-early 2010 an idea was created that there is a major problem with this country and being from a background of logistics and recycling other types of commodities. John Shegerian: OK. Rick Shipley: It was kind of a natural fit for my partner and I to start this company and we’ve now taken it to new levels that haven’t been seen in this country yet in this sector, but it’s one of those things that you don’t think about, John. When somebody says, “food waste,” you say “Well, what is food waste?” John Shegerian: Right. Rick Shipley: And then when you explain it to people and they say, “I’ve never thought of that,” you know you’re on to something when you give them that “aha” moment and they say, “I never thought of that.” John Shegerian: For our audience members that just joined us, we’ve got Rick Shipley. He is the COO of Organix Recycling and to learn more about Rick’s great company, go to www.OrganixRecycling.com. So 2009 you and your partner come together to start this. Did you just put your own money in? Did you raise some money? You have an idea. We have so many audience members in the United States and around the world that want to make the world a better place like you’re doing with Organix but they want to understand how you’re doing it and not only how the business operates but how do you start a good idea. Rick Shipley: It is. It starts from an idea. John Shegerian: Right. Rick Shipley: And some of it is right place right time. Some of it is the background you come from. Obviously money is a key catalyst to any of those things. John Shegerian: Right. Rick Shipley: Fortunately, we come from a background of recycling of the types of commodities that you mentioned. John Shegerian: OK. Rick Shipley: So there was some familiarity with what it would take both structurally, operationally and then financially. So we were able to raise that money privately. John Shegerian: OK. Rick Shipley: And start the company and it just exploded from there. But the foundation of any company is an idea and meeting a need. I don’t care if it’s recycling. I don’t care if it’s product based. I don’t care if it’s service based. It’s meeting a need that someone has. John Shegerian: OK. Rick Shipley: Sometimes people aren’t even aware that they have that need until you bring that opportunity to them and again it’s back to that “I didn’t realize that, you’re correct, let’s talk.” And that’s kind of how this thing took off in the early years. John Shegerian: What city did you start it in? Rick Shipley: We started in Chicago and we just branched out from there. Now we’re in 34 states, the whole Eastern Seaboard. John Shegerian: Wow. Rick Shipley: Midwest, the South all the way up to the Southwest. John Shegerian: So 34 states and approximately how many cities now? Rick Shipley: Cities. John Shegerian: A lot? Rick Shipley: Essentially, every city in the states that we can. I don’t have a map here so. John Shegerian: Hundreds of hundreds of cities. Rick Shipley: Yeah. Thousands, if you will. John Shegerian: Thousands of cities. Rick Shipley: We provide service to more than two-thirds of the population of the United States. We have the ability to service that. John Shegerian: So talk about what Organix Recycling’s proposition is. I am the city manager of XYZ city in America. You come in and you say, “Hey. I’m Rick Shipley. I’m with Organix.” Give me the pitch. Rick Shipley: There are two or three different areas we hit. John Shegerian: OK. Rick Shipley: First of all, financially, we’re creating value from what traditionally has been a waste product. John Shegerian: Wow. Rick Shipley: That has been thrown into a landfill to die forever. Not just die but emit methane gasses and all the harmful things that organic material can. John Shegerian: And fill up a landfill. Rick Shipley: Absolutely. So, first of all, we’re creating value from what was previously a waste. So financially, we bring a proposition that says, “We can do the same thing that your traditional waste hauler was doing, but we can do it for less money for you.” John Shegerian: Wow. Rick Shipley: That’s number one. John Shegerian: OK. Rick Shipley: Number two, environmentally. It’s very harmful and damaging products, very acidic products when you talk about food waste. John Shegerian: OK. Rick Shipley: It has strong odors. It attracts insects. There is a lot of badness – if you will – to food waste. John Shegerian: OK. Rick Shipley: Let us take that away and control that and handle it in a more appropriate manner and not just have it running out of your leaky compactors and out trucks and things like that as they’re running down the street. We control that. Thirdly, from a social aspect. It’s not just the right thing to do. That’s a very generic statement. But the social awareness that we have in this country – and really around the world now – with social media and just the availability of information. Socially, when people become aware of what the problematic issues are with this waste and what the recycling processes can do to eliminate those, there is no one that says “no.” We just now have to put the puzzle pieces together on the desk to make it work, but no one ever says “no” to that proposition. It’s just putting those puzzle pieces together. John Shegerian: Wow. And in terms of waste streams, how big is the waste stream in the United States, and how big is your opportunity? Rick Shipley: It’s staggering. We throw away in the United States on an annual basis, and it grows every year, 35-38 million tons of food waste goes into a landfill every year. For perspective, every man, woman and child – even the baby that was just born two seconds ago… John Shegerian: Wow. Rick Shipley: On average is throwing away 220-225 pounds of uneaten wasted food into a landfill every year. John Shegerian: Wow. Rick Shipley: Now there are large amounts that are recycled every year. Organix will recycle somewhere in the neighborhood of 450 to 500 thousand tons of material this year, but we’re still throwing 35-38 million tons into a landfill. So the problem is two-fold. We are a wasteful society in general because we are a wealthy society in general. John Shegerian: Right. Rick Shipley: We also are very particular shoppers when it comes to supermarkets. We shop with our eyes. So when we walk into a supermarket, we want the pretty produce, right? We don’t want the ones with blemishes. John Shegerian: Right. Rick Shipley: So the ones with blemishes go uneaten, unsold and go to waste if they can’t be donated. John Shegerian: Wow. Rick Shipley: They’re very good. You cut the bad part off, they’re still able to be eaten. There is nothing wrong with the dates on them. They just have a small bruise on them. So it is a societal issue. It’s a shopping issue from a consumer standpoint. But it’s also we’re a wasteful society in general. So a long-winded 35-38 million tons still goes into a landfill every single year. John Shegerian: So, truthfully, in terms of your business proposition – and we are here at Houlihan-Lokey’s big environmental services conference. You’re speaking today and you are speaking to a group of media, you are speaking to potential investors, potential partners all around the United States. Even potentially around the world. It’s really the top of the first inning for your company, even though you’re so successful already at what you’re doing. Rick Shipley: To use you baseball metaphor, I would say we’re still in batting practice. That’s the way we really look at it. When I tell people, I say I don’t want to do an injustice to the phrase of “scratching the surface.” I’m not sure we’re even scratching the surface yet. We’re doing marvelous things with the product we’re collecting. John Shegerian: Right. Rick Shipley: Marvelous things for the customers and the clients that we service. But the world of this food waste is so big. We are an environmentally conscious company, we are a transportation company, we are a recycling company – at the end of the day we’re a problem solving company. John Shegerian: Right. Rick Shipley: This is a problem John Shegerian: That’s right. Rick Shipley: In this country and around the world really. John Shegerian: That’s right. Rick Shipley: Hunger is a major issue and we’re throwing away massive amounts of food in this country alone. John Shegerian: Wow. Rick Shipley: So there are ways to take this product and not just reduce waste – that’s number one, reduce what we waste – but after that what can we do with the product that we are wasting to benefit those in need? And one of the things we try to do outside of just straight donation programs is we take a lot of this product and we feed it to animals that ultimately feed people. John Shegerian: Ah. Rick Shipley: Whether it’s proteins, whether it’s milk, different kind of animals, but we try to put that back in the food chain indirectly and make sure that that food stays available to people that need it from a hunger standpoint. John Shegerian: So from a circular economy standpoint, which seems to be the new buzz-term in things of that such, you’re really taking a problem and putting it in the whole circular economy. You’re making another solution out of that problem. Rick Shipley: Solving two problems. You’re right. John Shegerian: Right. Rick Shipley: We’re hoping to solve a waste problem and then hopefully we’re making some dent in some way into the hunger problem at the same time. Correct. John Shegerian: If you’ve just joined us now we’re got Rick Shipley. He’s the COO and co-founder of Organix Recycling. To learn more about Rick’s great company, go to www.OrganixRecycling.com. Rick Shipley: How about that originality? Put that “X” in there just to throw them off right? John Shegerian: I mean, just to throw us off, so I would say that and people remember that. Rick Shipley: You have to say it so people remember it. John Shegerian: Exactly. So, Rick, you are now the No. 1 company in this space. Talk a little bit about when food comes in. Because there are going to be people who are watching or listening to this show who are going to be the socially aware or socially conscious restaurant owner, city manager, ecopreneur who wants to bring you to their community. How does the whole system work? How do you pick up the food? Is it different in each state and different in each city? How do you pick up the old food waste, and then where does it go? Do you have one facility? Do you have 20 facilities? Where does this stuff get processed? Rick Shipley: Good question. So let’s start at its core. John Shegerian: Yeah. Rick Shipley: The product we collect – as a rule – is 85 percent water. H20. John Shegerian: Wow. Rick Shipley: So one that makes it by definition a very, very regional business. There is no money moving water very far. John Shegerian: Got it. Rick Shipley: There is no value in that aspect. John Shegerian: Got it. Rick Shipley: So it’s a very regionally based business. But our collection model today, generally speaking, looks much like a traditional waste hauler would look. We go to a store, we’ll collect the product, we go to the next store and collected the product – and we have a route-based business. Then, we also then partner or we own/operate/partner with local recyclers within a given marketplace. Again, so we don’t have to haul it a long distance but from an economical standpoint and a carbon footprint standpoint. John Shegerian: Got it. Rick Shipley: But we want to keep that local. Then we recycle it right there in the marketplace. So what we do is we create micro-businesses all over the country. So we are a large business with 34 states plus Puerto Rico, but really what we have are hundreds of small businesses. In Dallas, Texas, we have a business and in Houston, Texas, we have a business and in Chicago we have a business and in Philadelphia we have a business. John Shegerian: That’s great. Rick Shipley: We look at each of these in the aggregate, but we also look at them on a micro level and we identify what are the uniquenesses of that market whether it’s geography, topography. What are the best recycling methods within that market? What are the weather aspects that allow us to do different things with it, cause the collection process to change? So there are a number of variables and that’s why we have to look at this on a very, very micro regional basis and make our decisions on those aspects. Certainly, there are global ways we run our business and we have certain themes that we want to cross our platform, but we run it on a very local basis because it is a local business. John Shegerian: So you bring in all this product right now and you “recycle” it. Is it using proprietary technology or some other? Without giving away your secret secret sauce, what’s the proposition to our listeners and our viewers today? Where does their old food go once it comes to Organix Recycling? Rick Shipley: First and foremost, everything we do – because of the size, scale – we have to follow a number of federal and state regulations. John Shegerian: Got it. Rick Shipley: DOT to EPA to FDA because we are in the feed business as well. So again this is geographically driven. In certain markets we’re making compost out of the product. John Shegerian: Got it. Rick Shipley: In some markets we’re making energy out of the products via [inaudible] digestion. John Shegerian: So interesting. Rick Shipley: In other markets, we’re feeding the animals where animals are prevalent. So we don’t get stuck into a hole of saying “this is the way our business looks” back to the micro aspect of our business. We give reporting back to our customers so that they know exactly what their generation to help with their purchasing practice, their handling practices to hopefully reduce that waste. We also have full chain of custody all the way through the process so they know where it starts from, where it ends up. We’re transparent in that aspect. So we are unique to traditional waste hauling from a transparency standpoint to from a reporting standpoint. John Shegerian: Which by the way, Rick, is very important because now they’re going to turn back to both if they are a public traded company to their board, to their C-suite and to their constituents and be very transparent about all the good green things they are doing because they are able to share your reporting back with them. Rick Shipley: Generally speaking, when we walk into – and I’ll call it a “client.” John Shegerian: Yeah. Rick Shipley: A municipal entity or whatever. They have no idea what they’re generating in our space, because it has never been tracked and segregated. John Shegerian: Right. Rick Shipley: Once we start feeding that data back to them, it’s surprising to them the volume that’s being generated, the constituents of the product that’s being generated and again they then can act upon that and make better business decisions at their business because of the things we’re doing on the backend. Not just the great thing we’re doing for recycling – those are all great, the social aspect, the recycling, those are fabulous. John Shegerian: Fabulous. Rick Shipley: But we also help their business at the same time. John Shegerian: Right. So and then all that – what’s measureable – is manageable, holds true. Because now you’re finally giving them a measurement they can manage this even better and report it even better. Rick Shipley: Right. John Shegerian: So you’ve got the transparent reporting and you’re saying it’s a push-pull business. You have the economic drivers and the social reasons people want to do this now, but it’s also being pushed on them from different states because the laws are different in each state. Rick Shipley: Right. John Shegerian: And then you’re modeling, you’re creating – like you said at the top of the show – specific solutions wherever you go geographically, because geographically it’s not a one-size-fits-all business. Rick Shipley: The needs are different in all aspects. Compost is more valuable in Phoenix than it is in the Midwest just by definition. John Shegerian: Wow. Rick Shipley: There are good soils – as a rule – in the Midwest. There are not good soils in Phoenix. So we look at all those aspects and I think – again – when we get pigeonholed into a very singular narrowly faced business, it’s probably the end of our business. John Shegerian: Talk a little bit then, why it’s so important for a founder, an ecopreneur, an innovator like you to come to a conference like this conference today – the Houlihan-Lokey Conference – and evangelize what you’re doing? Rick Shipley: More than anything it’s education. John Shegerian: OK. Rick Shipley: Because there is general awareness of waste problems in the United States but until you say it out loud and you hear it from somebody’s mouth you don’t realize the micro problems of food waste problems or electronics problems and all of these different sectors. John Shegerian: Right. Rick Shipley: So what we’re hoping to do is to educate the attendees today of the issues at hand and some of the solutions that we believe we’ve come up with. We don’t believe that we are the only people that have every answer or we don’t believe we have every answer, but we want to collaborate and we believe there are very intelligent people that attend these conferences both from the private sector, the public sector, the investor sector that there are collaborations that can take this to other levels that individually any of these entities can’t do themselves. John Shegerian: That’s right. Rick Shipley: So we think education at this level and education at the student level – educating our children – on being less wasteful, being wise with purchasing, being wise with usefulness. John Shegerian: Right. Rick Shipley: All along the spectrum. We’re not going to change our wastefulness overnight. John Shegerian: That’s right. Rick Shipley: You have to start with education to start turning that pendulum. John Shegerian: Speaking of education. So how much of your time is spent on the road educating, evangelizing, being a great composting organic recycling ambassador across the United States and maybe even internationally? Rick Shipley: If you ask me or are you asking my wife? I think you will get two different answers to that. John Shegerian: OK. Rick Shipley: I do spend a significant amount of time doing a number of things – speaking, educating, business development, working with our employees. John Shegerian: Right. Rick Shipley: So I do spend a lot of time on the road. All of it to the core of – this is a very simple statement – doing better with this waste. John Shegerian: Wow. Rick Shipley: And it’s reducing waste, it’s handling it more properly, handling it more efficiently, recycling it more efficiently, recycling it into better products. It’s this whole containment. The only thing that is the solution is stopping the waste from being generated. As much as we all say we’d love to have it. John Shegerian: Come on. Rick Shipley: It’s not going to happen. John Shegerian: Right. Rick Shipley: Certainly in my lifetime. John Shegerian: Right. Rick Shipley: So now we have to say “What can we do just to reduce the amount generated?” John Shegerian: Right. Rick Shipley: Knowing it’s not going away now what do we do in this other part to recycle it more efficiently into better products that are in demand and that help people’s lives. John Shegerian: How old are your children, Rick? Rick Shipley: Fifteen, 12 and 10. John Shegerian: So you have got to be the cool dad now because you are really doing. Rick Shipley: Again, who are you asking? John Shegerian: I mean, from your kids’ perspective because you’re doing something that’s really – my son and daughter are 28 and 22. They think sustainability is amazing. When we were kids, it really wasn’t on our radar. Rick Shipley: It wasn’t even a word used, right? John Shegerian: But, I mean, because you are doing something that’s so meaningful that has so much societal benefit and makes the world a better place, your kids must really be proud. Rick Shipley: I think my kids will be the first to tell you that – we could be on a beach, we could be in an airport, we could be wherever, a restaurant. John Shegerian: Right. Rick Shipley: And somebody will just generically say, “Well, what do you do for a living?” John Shegerian: Right. Rick Shipley: And they just say, “Oh boy. Here we go,” because they know the excitement I have about this and not just the business but what we’re doing. John Shegerian: Right. That’s awesome. Rick Shipley: And it’s a 20-minute conversation. When they’re at their schools and see the waste and they talk about recycling. John Shegerian: Yeah. Rick Shipley: They can raise their hand and say, “Hey. I know something that we’re not talking about.” John Shegerian: That’s really great. Rick Shipley: And so I think it has changed our family’s mindset towards waste and recycling both. John Shegerian: Yeah. Rick Shipley: Because again there are two different things. John Shegerian: Wonderful. Rick Shipley: Reducing waste is still the ultimate answer. John Shegerian: That’s right. Rick Shipley: Reducing waste is the only answer but we’re just not going to get there in my lifetime. John Shegerian: And you’ve got to deal with the problem as we know it today and that’s what you’re doing. Rick Shipley: Yeah. John Shegerian: We’re almost out of time here, Rick, but I do want you to end on the future. Where are you going? Let’s just be clear. You are the No. 1 company in this space in the U.S. right now. Rick Shipley: We are the largest collector and recycler of supermarket waste in the United States, yes. John Shegerian: Wow. And so what is the future? You are into this now six years or so. Where are you going to be going with it in the future? Rick Shipley: Well we are very narrowly focused in our business today. We collect mainly from supermarkets which only represents about 10 percent of all food waste in the United States. So first of all we’ve only penetrated about 13 percent of that market so there is a large opportunity just to continue maturing that business. But now we have to address the other 90 percent of food waste out there. So we think that ultimately with all of the things that we’re doing ultimately technology and product generation is the ultimate answer because once you make products that have real value in a given marketplace everything else makes sense financially, it makes sense socially, it makes sense. All these other things that people say “yes” to make even more sense when you’re creating real products that have value in the marketplace. John Shegerian: Wow. Rick Shipley: Financial values, social values, environmental values. All of those things have value in general. John Shegerian: Right. Rick Shipley: And so as technology catches up to logistics and some of the other aspects of our industry that would be the catalyst to making this thing not just grow rapidly but absolutely explode when technology starts transforming the products we’re generating. John Shegerian: Right. Rick Shipley: Are creating. John Shegerian: Right. Rick Shipley: Into higher values. John Shegerian: So a year from now, when you come back on Green Is Good, you’ll be in all 50 states hopefully, right? Rick Shipley: Our goal is to be world dominant now. John Shegerian: Seriously? Rick Shipley: No, we believe somebody needs to do this coast-to-coast. There are pockets that still aren’t being covered. So to your point, yes, we want to be a national company. John Shegerian: And I’m sure you get international phone calls for that matter, and is that a possibility down the road? Rick Shipley: We don’t say “no” to much and sometimes that gets us in trouble, but we say “yes” to most everything and we explore every option that’s out there. Obviously, it has got to make financial sense to us – we are still business people – but it maybe doesn’t have to make the financial sense that it might to somebody making a product only whereas we can do the right things and still make some money while we’re doing that. John Shegerian: Well, we’re going to leave it at that today, Rick. We’re going to have you back on Green Is Good to continue the story or Organix Recycling. To learn more about Rick Shipley’s company, go to www.OrganixRecycling.com. You are an inspiring innovator. You are making the world a better place. You are a sustainability superstar and truly living proof, Rick, that Green Is Good. Thank you so much for joining us today. We really appreciate it. Rick Shipley: My pleasure.