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Valorization of rice crops by-products into compostable food packaging

Periodic Reporting for period 1 - HORTOMOLD (Valorization of rice crops by-products into compostable food packaging)

Reporting period: 2017-02-01 to 2017-06-30

What is the problem/issue being addressed?

The total rice-growing area in the EU is approx. 450.000 ha, located mostly in Italy, Spain, Greece and Portugal, corresponding to an annual rice production of 3.1 million tons. For every 1 ton of rice grain, 1,5 tons of straw are produced. A third of the straw is left in the fields after harvesting and it is more often burned, as a means of clearing land rapidly and inexpensively, but environmentally very harmful.
Rice straw burning is a major source of air pollutants, including CO2 and CO, contributing to the global climate warming, as well as particulates and other elements such as dioxins and furans. For the EU rice annual production, total annual emissions of 0,6 million tonnes of CO2 are produced by rice straw burning. Furthermore, burning causes a negative impact on the soil (loss of major nutrients including N, P and K), as well as on flora, fauna and their habitat, in addition to a risk of fire spreading out of control.
Currently, legislation within the EU has mainly outlawed the practice of field burning agricultural wastes. However, the lack of commercial uses for rice straw is jeopardising a change in farmers´ habits, as they are reluctant to run with the cost of harvesting a product that they cannot valuate.

Why is it important for society?

HortoMold has the potential for a high positive environmental impact by exploiting the use of crops by-products, reducing the use of non-renewable raw materials and non-compostable packaging, and reducing the practise of burning in the rice growing fields. Currently, rice straw is an agricultural residue that generates multiple problems. Taking as an example the Albufera's Natural Park in Valencia, Spain, both to the inhabitants of the towns bordering the crop area (due to the smoke generated in the burning), and to the fauna of the Albufera Natural Park (due to putrefaction of the waters, generated by the straw left in the fields) are suffering the consequences of the lack of management of these residues. Given the complexity of rice cultivation in the Natural Park of L'Albufera in Valencia, where diverse interests such as hunting, fishery, tourism, environmental and agricultural activities coincide with the meteorological ones, it is necessary to interact with the various groups, although especially and mainly with the agricultural sector.

There is an opportunity for a commercial solution that can achieve sustainability on the reuse of rice straw, by delivering a value added product, while dealing with the big related challenges of:
1. Securing public authorities support in order to ensure a long-term and free-of-charge access to the raw material (rice straw left in the fields) so that the only cost related to raw material is for harvesting, transporting and storage.
2. Delivering a processing methodology that limits the need of storage and transportation of this bulky material (rice straw), thus reducing production costs.
3. Designing an added-value product that makes the business model economically feasible, building on key advantage (i.e. compostability and sustainability).

What are the overall objectives?

Contrerina team has worked to deliver a detailed feasibility assessment of the HORTOMOLD technology. During the period February to June 2016, our team has worked on a thorough feasibility assessment of our business idea of valorization of rice crops by-products into compostable food packaging.
To this aim, the main actions that we have undertaken are:

1. Technical and Operational Assessment.
2. IPR Assessment.
3. Market Assessment.
4. Promotion and Commercialisation.
5. Financial Assessment.

Conclusions of the action

The conclusion from this study is that our business idea has an enormous commercial potential and our project shall continue with a Phase 2 project that co-funding actions needed prior to Hortomold market entrance. The main actions to be undertaken in a Phase 2 project are:

- Investment to finalise the building of the pilot plant, located in Valencia, in the border of the Albufera, a major rice-growing area.
- Investment to build our pulping and moulding equipment, using a proprietary design for the use of wet rice-straw as raw material.
- Investment to adapt self-propelled machines, as used by the local farmers for rice harvesting. These machines have to be customised with mower systems to cut and chop the straw as well as with self-loading system so that straw is collected in the mowing, instead of left on the field.
- Undertaking a complete characterisation of the Hortomold packaging properties, including standard characterisation of packaging material, characterisation of food-compatible packaging and certification as a biodegradable and compostable packaging
- Validating the harvesting and packaging production process, under real operational conditions in the pilot plant, once all required equipment is being acquired, installed and tuned.
- Undertaking additional development works towards the next generation products, where special coatings need to be applied to tailor different functionalities (p.e. coffee capsules with excellent sealing; trays for fresh food preserved in a modified atmosphere)
- Initiating ambitious promotional actions, including presentation of our packaging products in the main fairs in Spain, Germany and UK
- Tech watch of any related technologies and determination of our IPR strategy to reinforce our competitive advantage over time.
- Revision and updating of financial forecasts
- Seeking of additional funding from private investors inn Spain or alternatively, in other European nations.
Contrerina team has worked to deliver a detailed feasibility assessment of the HORTOMOLD technology. During the period February to June 2016, our team has worked on a thorough feasibility assessment of our business idea of valorization of rice crops by-products into compostable food packaging.
To this aim, the main actions that we have undertaken are:

Technical and Operational Assessment: These works have included

• The assessment of the pilot plant, by refining the definition of the required equipment for rice-straw pulping and for wet-pulp moulding, as well as their acquisition costs.
• The assessment of the rice-harvesting process, where a detailed plan has been defined, working together with representative of the region farmers. Required modification on harvesting equipment have been specified and a pilot testing will be undertaking in September 2017, as the annual period for rice harvesting (only one harvest per year).
• The definition of a complete testing plan to fully characterise HORTOMOLD packaging properties, and to certify its biodegradability and compostability

IPR Assessment:

A thorough assessment of the patent protected solutions has been used, using multiple keywords, under a professional patent search tool, for worldwide searching. A detailed analysis of retrieved results was undertaking in order to determine the presence or not of differentiating factors. This action is supplementary to our patent protection for our rice-straw pulping process and design protections for our moulding equipment. The freedom to operate globally is fully confirmed.

Market Assessment:

These works have focused on a detailed characterisation of the Fruits and Vegetable retail and distribution sectors, in our target geographic markets. Contrerina has a plan for strong market launch, which builds on strong advantages of our location. Our plant is located in one of the main rice-growing regions of Spain, for obvious reason, which happens to be the main exporter region of Fruit and Vegetables to other European countries. Our efforts so far, have mainly focused on characterising the F&V producer sector in our neighbour region, as our direct customers. During this project, we have now analysed the retail sector in Germany and UK (introduction phase), and overview the generalities of the European (next stages). F&V retailers are not our direct customers, but they are known to be the decision makers regarding the packaging that fruit and vegetables use in their supermarkets´ lines and shelves. Therefore, they are key players for us.

Promotion and Commercialisation:

We have reviewed our prioritising of promotional actions, in order to ensure the most effective use of resources. We have ensured that our actions are targeted to our key actors: F&V producers, major retailers of F&V in our target geographic countries and also to the general media, mainly in our region, in order to ensure public support to our business, as a sustainable manner of avoiding rice straw burning in the fields. During this period, we have progressed on our preliminary commercial actions with some of the main F&V distributors in the neighbour regions. We are refining how we present our solutions and also how we manage timing, as we need to create expectation for our solutions, but also to handle the reality that a major investment and a 2-3years time to market is needed, for a commercial supply.

This assessment, has confirmed the following action lines types as the core of Hortomold Promotion Plan:
- Direct commercial actions targeted to the main supermarket chains in Germany and UK: Contrerina will establish a commercial office in the UK and in Germany, initially with one delegate at each, in order to undertake commercial actions (visits, email and telephone follow up), targeted to the responsible of fruit and vegetables purchase. Initial visits aim to present the product concept and provide demonstration kits.
- Participation in industrial fairs: Contrerina will present Hortomold products in the main national fairs at UK and Germany for packaging. In cooperation with our commercial delegates in these nations, we need to identify the most appropriate fairs, which may be in the field of packaging, or in the area of fresh products and organic products.
- Direct commercial actions targeted to large F&V producers in the target region of Valencia and Murcia: Our promotional actions will focus on the retailers, as decision makers. However, also some actions with the main F&V exporters in Valencia and Murcia regions will be undertaken, to also explore the approach of offering our package as a differentiating factor to leading exporters who already have excellent communication channels with the leasing retailers in Germany and UK.
- News and posts in specialised media (agriculture) and general media: Contrerina has to initially focus on the regional media, with the aim to raise awareness of our technology among the rice growers of the Albufera Region and the fruit and vegetable producers of the region of Valencia and the neighbour region of Murcia. Contrerina will also target the general public on this action, in order to leverage public knowledge on a local technology which can help to preserve our ecosystem.
- Web, Blog and social media: Contrerina needs to redesign their website and to launch a blog and social media (linkedin and twitter) as effective communication channels with clients, endusers, investors and general public.

Financial Assessment:

We have revised our financial forecast, using the more precise data on production and harvesting costs. We have also included a third commercial product, corresponding to coffee capsules, as it is a very attractive market, and its moulding is technically feasible. Our financial assessment has been refined to schedule subsequent up-scaling of our production capabilities, to meet demand. According to market data on expectable demand, we deliver an ambitious but achievable forecast, which evidences an excellent business opportunity.
HortoMold packaging is produced by wet compression moulding using proprietary equipment that concatenates the processes of pulping, moulding and drying. The process has been optimised to preserve high levels of lignin in the pulp (compared to typical levels in paper cellulose pulp), an essential advancement for the technical feasibility of using rice-straw packaging for fresh fruit. The moulding and drying process has been subsequently optimised for our high lignin content pulp, succeeding in lowering material porosity and enhancing its strength. The process is planned for a production rate above 23.000 units/day.

We have identified a clear commercial opportunity in the market segment of compostable packaging as the European consumers are becoming more and more aware of the high environmental impact of plastic packaging (a total plastic waste of 30,7 M tonnes produced in EU-2015, near 50% landfilled) and retailers increasingly demand environmental friendly packaging, also promoted by the EU Directive on packaging waste.

Hortomold material has the following advantages:

- It is natural, made 100% from rice by-products.
- It is compostable, and environmentally friendly product.
- It absorbs moisture produced by water condensation on the fruit, thus improving the fruit preservation and appearance.
- It is breathable, thus preserving the fruit freshness for longer.
- It is shock absorbent, thus protecting the fruit from bruising in storage and in transit

As opposed to most of current bioplastics (made from starch extracted of maize, rice, sugar cane or potatoes), our solution has the clear advantage of being made from crops by-products. Therefore, the highly disputed issue of competition between production of crops for bioplastic and production of food, does not apply to bio-packaging from crops by-products, as HortoMold.

HortMold project relates to the challenges addressed by H2020 Societal Challenge 2.4 ' Sustainable and competitive bio-based industries and supporting the development of a European bioeconomy', in particular to “Creating added value from waste and by-products generated on farm and along the value-chain”. HortMold is aligned with the EU action plan for Circular Economy, the Circular Economy Package, in particular to the target on reducing packaging waste, by contributing to promote the use of compostable packaging, and on putting greener products on the market.

This feasibility assement has evidenced that there is also an excellent business opportunity on the product line of coffee capsules, whic was not initialy contemplated. Our business concept requires of an initial investment of 2M€ (new plant, pulping and moulding equipment, machinery for rice straw harvesting in the fields, and silage), and subsequent investment to progressively increase production capacity to meet expected demand. An excellent gross profit of >3,7M€ is expected in year 5, corresponding to a total tunover of >18M€ and 98 employees.