Business feasibility study for the national 'Out and About' Recycling and Litter Initiative

1. Executive summary

2. Introduction

3. Background to the Initiative

4. Market and competitive environment

5. Financial drivers

6. Business case options

7. Financial assessment

8. Facility needs analysis

9. Management and governance

10. Environmental analysis

11. Risk analysis

12. Bin design requirements

Appendix I: Cranleigh's terms of reference

Appendix II: New Zealand and international advertising bins

4. Market and competitive environment

The success of turning the Out and About Initiative into a commercial business will depend upon meeting the needs of three distinct markets:

• advertisers
• recyclers
• consumers.

Each of these markets is reviewed below.

4.1 Advertising market

4.1.1 Market segments and trends

The advertising market is typically divided into nine key segments:

• newspapers
• television
• radio
• magazines
• outdoor
• cinema
• addressed mail
• unaddressed mail
• online.

The Out and About concept bins generally qualify as an outdoor or ambient advertising medium, although some bins (such as those in the Botany trial) will be located indoors or in enclosed spaces. This places the bins on a par with advertising methods such as Adshel's bus stops, billboards, bus exterior advertising and banners.

Trends in the New Zealand advertising market suggest that the Initiative's core concept of advertising on recycling bins will be a worthwhile exercise.

According to the Advertising Standards Authority (ASA), the outdoor advertising sector has seen robust growth over the last decade: revenue returns from outdoor advertisements rose from a mere 0.7% of total advertising turnover in 1996 to 3.2% by 2005. Over the same period, the outdoor sector market size grew from $9 million to $72 million per annum, an 800% increase. By comparison, total advertising revenue over the decade increased by only 69%.

There is some divergence of opinion, however, with Nielsen Media Research indicating that spending on outdoor advertising declined marginally (~2%) last year. The variances between Neilsen and ASA's data suggest they define their categories somewhat differently (e.g. Nielsen's results do not feature online or mail advertising, instead using a generalised 'other' category).

The outdoor 'supersite' segment has shown some indications of softening demand this year, with increasing availability of large billboards; however, this trend does not appear to be affecting smaller types of outdoor media.

4.1.2 International examples

The use of recycling and litter bins as advertising media is not a new concept. There are many examples overseas of both the private sector and government-led initiatives utilising various advertising bin designs to promote recycling, reduce litter and generate advertising revenue.

Examples of bins used in a number of schemes overseas can be seen in Appendix II. The following international examples clearly demonstrate that advertising on recycling and litter bins is a proven and effective commercial concept.

Britain

Greener Media Limited is a Cheshire based company which sells and leases advertising recycling bins (manufactured by AuWeKo of Germany). Greener Media also sells advertising space on behalf of bin owners/tenants, taking a share of the advertising commission. The company has been active since 2004 and operates using an interesting cooperative business model with bin/site owners.

Ireland

Launched in mid-2000, City Box Advertising operates a large-scale advertising bin business throughout Ireland, using triangular litter bins situated in public spaces such as malls, cinemas and education campuses. The company currently owns nearly 1,800 advertising panels nationwide (on approximately 800 bins), with an estimated pedestrian footfall passing City Box bins in excess of 10 million per fortnight.

City Box has a number of high profile clients, including Coca-Cola's Fanta brand, Pepsi brand 7up and often displays promotional posters for feature movies. The panels on the bins are leased to advertisers at €65 per fortnight. In Cranleigh's interview with Adshel, it was mentioned that Ireland is a particularly high-value market for outdoor advertising and should not be taken as a benchmark for New Zealand pricing strategies.

United States

In Baltimore, Maryland, a public recycling initiative has recently been established via a partnership between Baltimore City Public Works Department and advertising company Outdoor Partner Media (OPM). OPM provides free recycling bins to the city which are located in public spaces with high foot traffic, generating revenue from sales of advertising space on the bins. City of Baltimore staff collect the recyclables and in return the City receives free advertising on 12% of the bins. The bins themselves are made by Victor Stanley Inc. of Dunkirk, Maryland, manufacturers of public site furnishings.

A trial project was initiated in February 2006, with 26 bins sited in and around the Baltimore downtown area. This proved highly successful and was expanded by a further 30 bins within a month. The project continues to progress well with high recyclable yields. Although initial contamination issues were noted, the City is attempting to rectify these through improved labelling. OPM is now working with the City of St Louis to roll out a similar scheme.

Germany

AuWeKo GmbH is a German firm which manufactures a range of high-quality stainless steel public waste bins for a variety of clients, including:

• city authorities (e.g. Berlin, Hamburg)
• universities (e.g. Koln, Dusseldorf)
• corporate clients (e.g. Volkswagen AG, BMW AG)
• airports (e.g. Frankfurt, Dresden)
• trade fairs and event centres
• private street furniture companies.

The bins are designed so that panel advertisements can optionally be displayed on the sides. Several partitioned designs of varying shapes and sizes are available, all of which feature clear labelling and colour coding for recyclables. Advertising space on the bins is used as purchasers see fit, for commercial or promotional purposes.

France

JC Decaux Group is a Paris-based, multinational advertising group, specialised in outdoor advertising, billboards and street furniture. The company is the second largest outdoor advertising specialist in the world and market leader in Europe and China.

The inventor of the "street furniture" advertising concept in 1964, the JC Decaux Group is the only company worldwide to focus exclusively on outdoor advertising and develop activities in all three outdoor market segments: street furniture, billboard, and transport advertising.

JC Decaux provides standalone litter and recycling bins, as well as combined bin facilities for civic use. The company generates revenue through sales of advertising on these fixtures, as well as other street furniture and billboards. A wide variety of bin designs are used according to local conditions, availability of suppliers and requirements of local authorities. For instance, JC Decaux of London use over 30 different litter and recycling bin styles throughout the city.

4.1.3 Benefit analysis

Using recycle bins as an advertising medium offers several key benefits to advertisers:

• The method is highly cost-effective, as bins can display multiple advertisements (potentially up to four) at once, for a fairly modest outlay cost when compared with other types of outdoor media such as large billboards and bus stops.
• The strategic placement of bins in high foot traffic areas represents a cost effective way of reaching a wide range of potential customers, along with a medium frequency of viewing when located at sites that people visit often, such as supermarkets, fitness centres and key thoroughfares.
• Unless permanently fixed, bins may be easily relocated to adjust to changing foot traffic patterns and maximise advertising reach.
• Geographically based targeting of bins allows advertisers to capture fairly specific consumer groups, for instance, travellers at petrol stations, students at tertiary campuses and specific socioeconomic groups at local shopping sites. Various products may thus be marketed at different locations to specific groups, maximising both the value of the advertising space and the revenue returned.

The issue of whether or not to advertise has been raised by a number of parties Cranleigh consulted. The main reason for advertising is, of course, to raise revenue. The issue for this bin project is whether there should be advertising and, if so, what form should it take. The opinions vary widely from a 'purist' view that there should be no advertising to one where there is support but that the type of messaging should promote recycling rather than being more commercially driven, as set out below:

• The issue of advertising is confusing in that recyclers would obviously prefer to have their own logo advertised and this is in direct competition with the existing model.
• Streetsmart believe the business model is advertising dependent, but feel that key messaging around encouraging recycling is important.
• Advertising that the Initiative is supported by the local council may assist in getting a council's involvement but councils are unlikely to become potential investors over time.
• Some stakeholders expressed concerns regarding the concept of advertising on the bins. They do not think advertising will be viable over the long term and feel that it will confuse consumers and detract from the recycling message.
• If the scheme went national, Coca Cola would look at it as part of its branding strategy.
• Foodstuffs are concerned that advertising on bins may conflict with in-store promotions from time to time so would need some power of veto. Furthermore, because all of their stores are owner operated, they believe these owners may also want a power of veto.

The philosophical question of whether there should be advertising and, if so, what form of messaging should be allowed needs to be agreed between the sponsors of the project. However, without advertising the Initiative would not be a viable business and would require substantial ongoing financial assistance.

4.1.4 Target market

Several factors identify potential advertisers who would make suitable candidates to support the Out and About Initiative:

• Companies already active in ambient and outdoor advertising market, such as advertising space providers (e.g. Adshel and iSite) or users (e.g. automobile companies and TV stations).
• Companies/organisations focused on developing a sustainable branding image, particularly those keen to associate themselves with the positive connotations of recycling (e.g. Hubbards and Toyota).
• Companies with an interest in marketing to specific consumer groups where bins are located (e.g. retailers within malls and sports drink vendors outside fitness centres).

4.1.5 Competitors

There are several competitors to advertising on the Out and About bins, particularly other operators in the outdoor advertising sector. These include but are not limited to:

• Ambient Media - active in alternative public place media such as moving billboards, projected images, barrier arms, public ashtrays etc
• Adbinz - manufacture bins and advertise on outdoor ashtrays
• Oggi & Target - billboard advertisers
• iCorp and Ultimate Media - illuminated panels and light boxes
• iSite Media - billboards, advertising on buses, plus other alternative media
• Adshel - advertising on bus stops, has exclusive contract street furniture advertising on council controlled public space in many areas
• other companies active in selling space on buses, taxis, parking buildings, washrooms, etc.

However, the smaller, more targeted nature of on-bin advertising means there is little overlap with other forms of outdoor marketing, indicating that none of the aforementioned should constitute a serious competitive threat at this stage.

4.1.6 Strengths and weaknesses

Key strengths of this advertising medium include:

• The bins are not fixed, meaning they may be easily relocated to exploit changing foot traffic patterns.
• They can feature multiple advertisements, making best use of space.
• They provide additional brand value through the positive connotations of recycling.

Key weaknesses include:

• The bins are not as large as many other forms of outdoor advertising.
• There is potential for vandalism due to their location in public space.
• There is potential for odour problems (as with any bin) in the event of contamination.

4.2 Recycling market

4.2.1 Market segments and trends

There are five key groups of recyclable material in general consumer waste:

• glass
• paper
• plastics
• steel
• aluminium.

Of these, only plastics and aluminium are likely to prove viable for the Out and About bins, as glass is worth very little at present, little steel packaging is used in public areas, and paper presents difficulties in terms of contamination with non-recyclable paper types and bulkiness relative to weight.

A global commodities market exists for recyclables, with substantial cross-border trade in recyclable products. Rapid economic growth in China, India and the Pacific Rim countries in recent years has substantially increased the prices of various commodities, such as recycled plastic and aluminium, because of their uses as manufacturing inputs.

Key drivers of value in the global recyclables market include:

• volume of recyclable materials available (aggregate supply)
• demand for specific recycled commodities (aggregate demand)
• location of recyclables relative to processing facilities (transport costs)
• perceived value of recycled products (e.g. recycled paper) versus generic products (e.g. virgin fibre) (consumer tastes)
• price of substitutes (e.g. virgin glass versus recycled)
• underlying economic trends and cycles.

The global recyclables market directly influences New Zealand's local market. For instance, the low value of glass in New Zealand is a direct outcome of:

• high availability of recycled glass worldwide, driving down the global price
• significant distance between the source of glass in some areas, e.g. South Island and the location of processing facilities (Auckland), meaning high transport costs. Investment in a third glass furnace in Auckland has recently been announced. This may increase the demand for and price of glass in the Auckland area
• perception of recycled glass as an inferior product, due to inconsistent colour between batches
• low cost of virgin/imported glass.

4.2.2 Benefit analysis

The key benefits identified from the perspective of recyclers are:

• increased available volumes of recyclable material, meaning greater revenues.
• centralised collection points at key sites, providing easy recovery.
• pre-sorting of rubbish by consumers, reducing processing costs (provided contamination levels are not excessive).

4.2.3 Target market

The major recyclers in New Zealand include Envirowaste, Waste Management, Streetsmart, Paper Reclaim, Allbrite and Tetranova, although many smaller, local service providers exist.

• Envirowaste have the contract for Timaru District Council. They believe that this innovative contract is the way of the future. It is a 15-year 'don't waste' contract in which Envirowaste is incentivised to reduce waste going to landfill. Targets include a 60% reduction in the first three years rising to a total 80% reduction over the 15 years. There are three separate bins for curb side, household collection including one for organics and one wheelie bin for other recyclables. They use a German system to compost the green and kitchen waste.
• Waste Management have recently established Recycle New Zealand as they are currently recycling about 250,000 tonnes per annum and wanted a division to focus on recyclables.

4.2.4 Competitors

The only significant competition to recycling companies is recycling schemes provided by local councils, as people may choose to take recyclables home and dispose of them there rather than in public recycling bins.

4.2.5 Strengths and weaknesses

Key strengths of this recycling Initiative include:

• a nationally focused campaign which has the potential to educate people about recycling and raise recycling volumes across all channels
• the bins can have advertising to reinforce the recycling message
• forms a part of other national recycling initiatives.

Key weaknesses include:

• the quantity of recyclables yielded per bin is low
• the recyclables are costly to collect given the relatively small size of bins and geographical dispersion.

4.3 Consumer market

4.3.1 Market segments and trends

Key potential users groups for the Out and About bins are:

• tourists and travellers
• local residents
• diners, fast food users and shoppers
• event goers.

The extent to which consumers will use the Out and About bins in preference to the existing recycling options (e.g. kerb side home collection) is yet to be determined, but the main advantage is convenience in terms of providing a appropriate means of recycling consumer packaging where these products are being consumed. Accordingly, we see this Initiative as supplementing and supporting other primarily council measures to recycle products in the home.

4.3.2 Benefit analysis

There are two key benefits for consumers using a recycling bin. Firstly, it is a convenient means to dispose of unwanted recyclable rubbish, provided the bin is appropriately located. Secondly, many consumers "feel good" for having done the right thing by recycling (as opposed to littering or putting waste in a conventional bin).

A key point that has been raised by a number of stakeholders is that the value of this Initiative would be significantly enhanced if the recycling bins could either be co-located with (existing) general on-street rubbish bins or, alternatively, that a new bin be designed that has separate recycling and rubbish disposal options to increase the usage and encourage greater waste separation by consumers at source.

The other key factor is that the cost of emptying bins is significant and if the collection can be done in one place as against two then this would potentially reduce collection costs significantly.

4.3.3 Target market

The Initiative is targeted at consumers who have small quantities of recyclable materials to deposit in public areas.

There are two potential competitors for the use of Out and About bins for disposal of recyclables: consumers using standard litter bins provided by council or facility owners, or quite simply, consumers littering on the ground.

Use of Out and About bins could be promoted through:

• labelling of nearby litter bins, suggesting that people make use of the recycling facilities available.
• signage and policing of litter where possible to ensure the public are aware that littering is not acceptable and that receptacles for their waste are available.
• instructing all staff in premises, such as shopping malls, on the use of recycling bins.

4.3.4 Strengths and weaknesses

Key strengths of this Initiative include:

• a nationally focused campaign which has the potential to educate people about recycling
• provides a convenient opportunity for people to responsibly dispose of recyclables
• the bins can have advertising to reinforce the recycling message
• forms a part of other national recycling initiatives.

Key weaknesses include:

• the bins will not be available in all areas, due to commercial constraints. Some sites will not generate sufficient advertising revenue to justify locating bins there
• advertising on the bins may confuse consumers as to the purpose of the bins.