Market Development For Crumb Rubber Products

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Table of Contents Section
Executive Summary........................................................................................ Introduction .................................................................................................. National Crumb Rubber Industry ........................................................................ Market Research Process and Response ........................................................ Market Organization .............................................................................. Regional Crumb Rubber Markets ......................................................................... Market Development Strategy............................................................................. Marketing Tools ................................................................................... Molded Rubber Products ........................................................................ Public Relations Focus ........................................................................... National Perspective............................................................................... Funding ............................................................................................. Organizational Structure.......................................................................... Planning and Implementation ....................................................................

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6 8 8 8 9 10 11 11 11

Firmres and Tables
Figure 1: Manufacturers Using Ground Rubber ......................................................... Figure 2: Marketing Association Prospects ............................................................... Table 1: Table 2: Table 3: Table 4:

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Survey Respondents by Category................................................................ 3 Product Types ..................................................................................... 5 Ground Rubber Products by Sector ............................................................. 5 Scrap Tire End-Users .............................................................................. 6

Atmendices
Appendix A: Sources Appendix B: Survey List of Identified Manufacturers

Desktoppub/ishing and technical writing senicesprovided b Bohlsen Business Solutions. (402) 493.6268 . y

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List of Products Made From Crumb Rubber

Playground matting

E2 Dock
Floating Dock and 1 3 2 systems

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tires 7

nff-road tires.
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Fricdm Materials brake manufacturersuse in compoundingof friction materials. ----

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” 1 Leachare sewage systems
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Elastomeric Technologies, Inc.

I Mold cast Droducts I-Iighway ExpansionJoints
Humpei I’ads/Roat Dock Pads - bound rubbcr products

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Mini-Patw

Hoses/Sub-surface Soaker Hoses

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II Truck Bumpers Pick-up i i d Liners
Interlock& Safety Deck Tiles
lhibbrr Shccts Carpet Undercushions (:ushion ’1 urf

ThnrMats

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Bulletin Boards/Message Bar
Unity Creations Ltd. Rubber Cushion Tile Rust Inhibitors and Sealers

1 Resin modifier in asphalt cement

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Scientific Development Custom Molded Products

Dynamatrix, Inc. Dynunmt Daiy COUJ Mat

Rubaturf Sports Surfaces Co. Rzrnnilzg Track

Executive Summary
State and local governments have implemented successful scrap tire collection programs. This report proposes a nationalmarketingpartnership find markets for the steel, fiber, and rubber that can be recovered from to these tires.

To begin, the partnership would concentrate on building demand for existingproducts that contain ground rubber from scrap tires. A demand strategy is consistent with the State of Nebraska’s position on recycling
market development. The proposed marketing partnership would be headed by manufacturers from the private sector and affhated with the National Recycling Coalttion, the U.S. EPA, and state recycling organizations. This report is based on market research that was funded by the State of Nebraska and managed by the Nebraska State Recycling Association.

Section I: Introduction
Although demand for ground rubber has been increasing in recent years, the supply has outpaced demand largely because asphalt paving markets did not develop as anticipated.’ Low prices for crumb rubber now threaten the viabhty of some local collection programs while adding costs to al tire management programs. l The market development strategy discussed in this report is consistent with the “pull through” approach to recycling market development that was recently adopted by the State of Nebraska.2 As such, the proposed strategy is tied to increasing the sale of products that contain scrap tire crumb. With this approach, demand dictates supply. Building demand at the consumer level is a long-term proposition. In the meantime, supply reductions are bound to occur simply because it is less expensive in some markets to landfill scrap tires or use them in energy and civil engineering applications. However, these applications lack the visibility of value-added consumer products. Without product visibdity, recycling market development wdl continue to be hampered. Consumers must be able to see the connections between local collection programs and high quality recycled-content products. With consumers in mind, this project had the following objectives: Identify value-added products that could be manufactured with high quality crumb rubber in Nebraska and the region. Find manufacturers that make consumer products containing ground rubber. Locate promising markets in Nebraska and in the region for these products. Identify the main barriers to expanded markets for scrap tire crumb. Develop a marketing strategy to overcome the barriers. Sections I1 and I11 in this report provide an overview of the crumb rubber industry in the nation and in Nebraska. The proposed market development strategy is presented in Section IV.
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BioCvcle, “What’s New with Ground Rubber,” by Michael Blurnenthal, March 1998, page 40. Markets for Recyclables, Nebraska’s Blueprint for Action, January 1998,page 2.

June 1998, Page 1

Section 11: National Crumb Rubber Industry
The original research design and work plan for this project were based on the assumption that crumb rubber markets are organized around regonal economies. That is to say, it was assumed that crumb rubber processors and the manufacturers that buy crumb rubber are located in close proximity to one another. In fact, processed crumb moves nationally with little regard to the proximity of the buyer and the seller. Finished crumb rubber products are equally as mobile. National distribution is the norm. As a result, it was not possible to draw a market profile of the Nebraska and regional crumb rubber industries. A national perspective was required from the outset. A five step work plan was used to develop this perspective: 1) Identify manufacturers that buy scrap tire crumb, 2) Gather available product and market information, 3) Evaluate findings, 4) Describe the industry organization, and 5) Propose a market development strategy.

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Market Research Process and ResDonse
Over 300 manufacturers were contacted by telephone to determine if they buy scrap tire crumb. These telephone calls were followed by a written survey on product offerings. Interested readers can obtain copies of the survey instruments by contacting the Nebraska State Recycling Association. In developing the call list for this project, there is no doubt that some manufacturers were missed because of the turmoil in the industry. There are many small start-ups and an apparently high failure rate. Appendix A shows the sources used to develop the call list for the project. Appendix B lists over 200 manufacturers that responded to the telephone and mail surveys. Figure 1 (below) maps their relative locations by state. As shown, most are located on the east and west coasts, around the Great Lakes, and on the Gulf Coast. All use scrap tire crumb and/or tire buffings (from tire retreading) in consumer or industrial products.

Figure 1: Manufacturers Using Ground Rubber

During the course of the project, NSRA asked manufacturers if they were interested in a market development association. NSRA indicated that the association would work on increasing sales of existing products that

June 1998, Page 2

contained scrap tire (post-consumer) crumb and/or tire buffings (post-industrial crumb). Table 1 lists the manufacturers that expressed at least some interest in the concept. Figure 2 on page 4, maps their locations.

Table 1: Survey Respondents by Category Asphalt

Molded Products

Tires

S ~ o r Surfaces t

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Construction

Other

Figure 2: Marketing Association Prospects

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Marketing Association Prospects

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Market Orpanization
Table 2 (below) organizes the crumb rubber industry by market sector. Each of these sectors represents a separate and distinct market with its own specifications for crumb rubber feed stocks and vastly different manufacturing processes.

June 1998, Page 4

Table 2: Product Types
Asphalt Paving Molded Rubber Products Tires/ Automotive Sport Surfaces Plastic Products Construction Brakes/Friction Other Total 150 million pounds 140 million pounds 45 million pounds 34 million pounds 10 d i o n pounds 10 d o n pounds 18 d o n pounds 4 million Dounds 411 million pounds 3

The above table also shows the relative size (in pounds) of each sector. Table 3 (below) describes the main product types from each sector. A list of common products is located in the front of this report.

Table 3: Ground Rubber Products by Sector

In reviewing information sources prior to the survey and in tallung with manufacturers during the project, NSRA made an interesting discovery. Apparently no one tracks sales of products that contain scrap tire crumb or tire buffing. Nor were there any estimates on annual sales for processed crumb rubber sold at wholesale to manufacturers.
Manufacturers and their suppliers (crumb rubber processors) need a method of estimating demand in order to plan and manage production and distribution capacity. Careful analysis of historical sales data is one of the best means of estimating future demand.

The Scrap Tire and Rubber Users Directory, 1997 page 60.

June 1998, Page 5

Table 2 (above) shows how much ground rubber was used across the country, but it is silent on three critical points: 1) The best market sectors in terms of volume and dollar sales, 2) The best selttng products in each sector, and 3) The top selling firms. If crumb rubber processors, their investors, and state regulators had reasonably accurate sales data, they could begin to make investment decisions that would link supply and demand in the real world.

Section 111 Regional Crumb Rubber Markets
Four firms in the region make new products from crumb rubber. Data was not available on the number of tires recycled into new products or the relative percentages burned for energy, recycled, or disposed.

En-Tire Recycling, Nebraska City, NE JaiTire Industries, Denver, CO Mid-Continent Resource Recovery, Wichita, KS Recycled Rubber Resources, Macon, MO
These firms compete on a national basis with the manufacturers listed in Appendix B. collectors supply the discarded tires. State-licensed

Consumers and elected officials receive very little or no information on scrap tire recycling in Nebraska and the region. Continued support among legslators and the general public for local collection programs may well depend on linking these programs in the public eye with approved recycling efforts. Consumers are more likely to support local collection programs if they approve how the tires are used. Table 4 shows the end-users of scrap tires as reported by collectors licensed in Nebraska. For example, tires collected by Bill Area are used exclusively in civil engineering applications, while those collected by Central American Tire of Kansas City are all delivered to Recycled Rubber Resources in Macon, MO. Data was not available from Nebraska or other states in the regon on the number of discarded tires that are bumed as fuel, disposed in landfills, or recycled into new products.

Table 4: Scrap Tire End-Users

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Source: Nebraska Department ofEnuimmmentalQua&y
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The tire industry and state tire program officials should start work on a standard method of estimating the number of tires consumed in the above applications. The information should be used to build and maintain support for local tire collection programs.

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Section IV: Market Development Strategy
This section explains the need for a national marketing association for products that contain scrap tire crumb. The mission and organizational structure, marketing tools, and alternative strategies are discussed.

Marketinp Tools
Understanding how and when marketing tools should be used will help every organization (public or private) to reach its goals. The following is a brief summary of common marketing tools and terms. Basic research looks for solutions to environmental, social, and economic problems. Private firms, government agencies, and academic institutions all conduct basic research. Product development refers to the design process for new products and services. Market research is focused on identifymg buyers for new and existing products and services. Market development introduces new or existing products into established or new markets (geographical areas). Promotion includes personal selling and advertising (print, electronic, billboards, etc) for specific products. Public relations keeps the name and purpose of an organization in the public eye, without directly promoting a product or service. Distribution involves warehousing, delivery, and display. The warehouse could be a computer (for information products) or a conventional building for consumer or business products. Delivery might be accomplished via the Internet, through a conventional r e t d outlet, or directly to the home or office. Since there are few clear divisions between and among these activities, an example might be helpful. The Chicago Board of Trade, the National Recycling Coalition, and other groups are developing a market information service. The goal is to make it easy for manufacturers to buy high quality post-industrial and postconsumer feed stocks at reasonable prices. This new “information product” is being subjected to an extensive research and development process that is s d l under way. The product is being promoted in print and by speakers at national and regional recycling meetings. Distribution is through the Internet (htttx//www.cbotrecvcle.com). Depending on the strategy and available resources, some or all of the above marketing tools could be used to increase demand for crumb rubber and crumb rubber products. However, assuming limited resources, the proposed strategy is built around a professionally prepared public relations campaign. Product and market research and promotion are discussed within this context.

Molded Rubber Products
The manufacturers of molded rubber products should take the lead in building the association. They have the most to gain in the short term if sales can be increased. As discussed below, funding should come from the U.S EPA and the state tire programs. The primary marketing mission should be to build demand for products that contain recycled rubber from scrap tires and tire retreading. The goal is to build sales and profits for these products in order to increase crumb rubber production and prices.

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Establishing a recycling identity is critical. The association should be formed in cooperation with the National Recycling Coalition, the U.S. EPA, and interested state recycling organizations. The recommendation to organize around molded rubber products is based on the following considerations: There is a long list of established products. Many of these products are visible at the consumer and business levels and could be made available by linking them to successful tire recycling programs. The industry is economically diversified. Existing products consume a large percentage of the annual ground rubber supply. There are many small manufacturers, some presumably with growth potential. It could be argued that asphalt paving or new tires offer more growth potential for crumb rubber processors. However, technical and political barriers surround these markets. Without a clear federal mandate to use ground rubber, highway engineers are hesitant to change specification^.^ Tire manufacturers are also hesitant to increase recycled content in their products. They indicate that too much ground rubber (fder) increases rolling resistance and heat retention, thereby reducing tire life and fuel e~onomy.~ Others will argue for more investments in sport surfaces and soil amendments. But, these products cannot possibly consume current scrap tire supplies, and no one knows how much money and time d be needed to develop the required demand. None of this suggests that the new marketing association bind itself inextricably to molded rubber products for al time. As products and markets change and resources become avdable, the organization will be able to l expand.

Public Relations Focus
Initial activities should be limited to public relations on a national basis. There are countless precedents for coordinated public relations efforts. Schools, state and local governments, manufacturers, and labor organizations all use associations to bring their respective messages to carefully selected audiences. In recycling, the manufacturers of food and beverage containers have used various association models for years to link their company names and products to state and local recycling programs. Such “image advertising” builds sales without directly promoting the products of the individual members. Once established, the association could modify or replace its public relations program. Product and market research could be emphasized. For example, manufacturers of soil conditioners or asphalt modifiers might join the association if they could participate in a nationally recognized product or market development initiative that was tailored to their industry. The association could also conduct advertising campaigns.

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BioCycle, March 1998, page 40. BioCycle, March 1998, page 42.
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Catalogue(s), for example, could be aimed at selected markets, such as agriculture, automotive after-markets,
or public purchasing. Each member firm would develop its own advertising content and pay for space in the

publication. As discussed in Section 11, state regulators, tire collectors and processors, and manufacturers need more and better market information in order to plan and develop local collection programs. Section 111 points to a need for better market information at the consumer level. A national association of recycled product manufacturers would be the ideal group to collect and manage national tire recycling data. Once established, the association could take any (or al of the above paths. Nevertheless, the temptation to be l) “all things to all people” should be avoided. The proposed association should not expand its services until it has established a national presence in the recycling market place. The best and least costly path to national recognition is a well defined and executed public relations program, one designed around existing molded rubber products that contain recycled rubber.

National Permective
In recognition of the national scope of ground rubber markets, association services must be offered on a national basis. There are many small manufacturers (discussed in Sections I1 and III) that are directly impacted by national market forces, including public policies on scrap tire collectioii and management. As individual entities, these firms do not have the resources to design and conduct an effective market development campaign. A coordinated nation-wide effort is essential and mblic funds arc required to start thc Drocess. State and federal officials and recycling organizations may be tempted to take a wait-and-see position on national marketing of recycled content products. But, continued delay will not improve the supply situation. A strong economy and growing consumer interest is pouring millions of pounds of material into local recycling
centers.

The need to match the supply of post-consumer materials with a wide array of consumer products is a relatively new development in our economy. Although post-industrial and post-consumer metal and fiber recycling are ancient enterprises, soft markets have always been managed by reducing collections and/or storing the material. These options are not readily available for the managers of residential and small business recycling programs. In only twenty years these programs have become large-scale, multi-material enterprises. Demand-oriented market management is needed to help consumers make the connection between their local recycling programs and recycled content products. This complex task can only be accomplished by pooling resources within defined manufacturing sectors (molded rubber products in this case) and by carefully matching products and markets. For example, when consumers purchase new tires (and pay the recycling fee on their old tires) they should receive a flyer on locally avdablc products that contain scrap tire crumb. These national campaigns must be tailored to the needs of consumers. Some will want to read about saving local tax dollars with rubberized asphalt while others wlll be interested in soaker hoses that reduce water bills. Saving money is not an abstract concept. Products have to be visible, available, and competitively priced. The connections between saving money and natural resources must be continuously reinforced in local markets. Obviously, (‘buy-recycled” is not a new idea. However, the need to couple profit-oriented buy-recycled marketing with local collection programs is new. Unlike post-industrial recycling, post-consumer recycling is highly visible and politically charged. There are millions of people involved every day. Collections cannot be easily suspended and materials cannot be stored or disposed. It must a l be sold. Under these conditions, state l and federal funds are essential. It is unrealistic to expect manufacturers to organize themselves.

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Funding
Start-up funds should come from state tire programs, the U.S. EPA, and membership dues. There are many other possible funding sources, however organizers should avoid groups and firms that do not have a strong financial incentive to develop and sell recycled content products. Affiliations with landfill and waste-to-energy interests should be avoided.

Organizational Structure
The association should function as an independent entity with its own board of directors, staff, and corporate identity. However, to maintain a recycling orientation, it should a f f h t e with interested state recycling organizations, the U.S. EPA, and the National Recycling Coalttion. The packaging association models are instructive in this regard.

Planniny and Imdementation To begn, this report should be mailed to prospective members along with a brief cover letter that summarizes the need for the marketing association. Prospective members are listed in Appendix B. Leadership by manufacturers is essential if the association is to become an effective marketing tool for recycled-content products. The mailing should be followed by phone calls to determine if there is enough interest to warrant further action.
Assuming sufficient interest among manufacturers, the next step is to approach the U.S EPA and state tire program managers on funding an organizational meeting(s). Since these groups do not have the required marketing experience, a full-service advertising agency should be retained to coordinate the organizational meeting and design of the public relations campaign. A professional quality presentation is essential for membership development. Participants in the organizational meeting(s) should concentrate on developing the basic content of the national public relations campaign. Target markets, preliminary budgets, and schedules should be in place by the time the meeting(s) are concluded. Membership dues should also be established and operating funds secured for at least three years. Since state scrap tire collection programs are driven by public policy, state tire programs should carry the main burden with participation by the U.S EPA. Finally, any effort to involve other recycled-content products (glass, plastic, steel, etc.) should be strongly resisted. Marketing plans for other products can be developed once the association-based marketing model is proven. Given limited resources, the association should concentrate on one or two national markets (automotive after-markets, farm, etc). The choice of product categories (see Table 2) depends on which manufacturers take the lead in developing the association. Ideally, there would be several competing manufacturers in each product category. Again, the association should showcase product types or categories (not brands) and forge strong links with state and local recycling programs.

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Appendix A
Sources

Personal Contacts
Manufacturers as Listed in Appendix B. State Tire Program Officials: Kaiisas, Iowa, Missouri, and Kansas. Scrap Tire Management Council. Rubber Association of Canada. Selected Board Members, National Recycling Coalition.

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Documents
Proceedings, Heartland Regional Scrap Tire Management Conference, May 27-28,1998, Council Bluffs, Iowa.
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The Scrap Tire & Rubber User Directory, 1997 Edition, published by the Recycling Research Institute, 133 Mountain Road, Suffield, CT 06078 (860) 668-5422. Bell Atlantic Electronic Commerce Services, Database America Companies Tnc., 1997 Nebraska Recycling Resource Directory, 1997-1998, Nebraska Department of Environmental Quality, PO Box 98922, Lincoln, N E 68509 (402) 471-4210 Nebraska State Recycling Association, 1941 S. 42nd Street, Suite 512, Omaha, N E 68105 (402) 444-4188. Includes the following documents from the resource library:

Scrap Tire Management Couficii Marketsfor Scrap Tires Scrap Tire Market Development Meeting, Developing End-Marketsjir Scrap Tires Nebraska Statewide Scrap Tire Program, Current Regditag Markets Tire Business, A Directory ofSmp Tire I'rocessors k State y Most Promising End Markets, Size-Reduced Cmmb Rubber Cmmb Xztbber Modzj'ier Tecbnology, The lise of C R i Highway Applications Catalog t a Assessing the Future ofthe Scrap Tire Market Development, Results ofjoint Planning Environmental Processing $stems, Inc., The Marketfor Fine Mesb C R Lzst o f National Manzafactzrrers Using Rubber in Products

Appendix B
Survey List of Identified Manufacturers

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