Getting Bioproducts Out to the
Marketplace
Dr. Jacquelyn-Danielle McNutt
The Center for Paper Business & Industry Studies
At the Georgia Institute of Technology
IBC ~ Syracuse, NY – October, 2009
Preliminary Observations
„
The opportunities and challenges of deploying emerging
bioproducts technology to effectively connect to and reach
the market place are many and complex – where we must
understand the –
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Market readiness emerging technologies;
Market conditions of the bioproducts portfolio and competing
products (both current and new);
Competitive landscape of the new marketplace and the new
competitors we will face there;
Approaches required to focus on and manage the value chain
(supply-chain management, alliances /partnerships); and
Core policy, economic, social, and environmental factors related to
the bioproducts portfolio – today and tomorrow…
An Overview & A Caveat….
„
„
Caveat – a comprehensive exploration of all of these key
factors is not possible in the time available & with the
need to keep you all awake and focused!
As such – My intent today is to take a two pronged
approach – and focus on the last two –
„
„
A brief look across the value/supply chain with a view to the
marketplace to stress key understandings needed to achieve success
in moving bioproducts across the value chain to the marketplace;
and
A discussion of one key social/political aspect that will impact
significantly our ability to reach out successfully to the consumer
(and the politicians and special interest groups) in the marketplace
with a new family of a myriad of bioproducts…
Part 1 – Talk Component…
A Look Across The Value/Supply Chain With A View
To The Market Place…
„
This first main component is adapted largely from
a published paper produced with my colleagues
from École Polytechnique – Paul Stuart and
Virginie Chambost –
„
“Guided Tour – Implementing the Forest Biorefinery
(FBR) at a Pulp and Paper Mill”
4
Discussion Key Points
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Key Bioproducts Production Questions
Identifying the Right Bioproducts production
platform configuration
Core Market Place Drivers
Bioproducts Portfolio and method for its
determination
Key Takeaways
Intent
To discuss how bioproducts’ companies must
embrace a value chain that is market centric
and utilizes a market-driven product selection
process for establishing and pursuing
bioproducts strategies that will be successful
Key Bioproducts Production Questions
„
What biochemical, thermochemical and chemical
bioproducts production processes will enable –
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Product diversification to generate the right products for the
right markets with the best long term returns potential? What
does the marketplace tell us?
What are the key factors regarding bioproducts selection,
that will provide a sustained return over the short and
long terms?
„
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What value/supply chain management changes are implicated
for product delivery and the targeted new market(s)?
market(s)
Who are the best partner(s) for a winning business strategy
toward new markets and new products?
products
Identifying the Right Bioproducts Production
Platform Configuration is Key and Complex…
Enterprise Transformations Is Essential…
Two Views – both with the marketplace in mind…
„ Inside-out –
„
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Transform the enterprise by changing processes within the
existing organization, including changes in manufactured
products – but with a renewed focus to the marketplace…
Outside-in –
„
Core vision, mission and strategies are changed to create a
new focus to outside markets that is sustainable,
sustainable using new
and integrated delivery techniques and with vastly
improved bottom-line results
Can Forestry Companies Adopt A Market Centric
Enterprise Transforming Culture?
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3
Core business(es)
transformation – by product 204 Years of Innovation
portfolio adjustments
Maturity
related to market evolution
Maturity
Cyclical adaptation with the
markets to reinvent the
business and transform the
enterprise – while avoiding
declining revenues
Maturity
Growth
Growth
Birth
Growth
Birth
Birth
Chemistry,
Energy
Chemistry,
Biology,
Materials Science
Explosives
1802 1830 1850 1900 1925 1945 1990 2000 2050 2090
19 Sept 06
Bioproducts Production Platform Definitions
Waste
Chips
Biomass
Pulp
and
Paper
Mill
P&P
Products
Co-products or wastes?
Yield?
Yield?
Building
Block
Yield?
Derivative
Derivative
Reducing Volumes, Flexible Throughputs…
Increasing Process Complexity
$$$
‘Product Portfolio’
$$$
Product Portfolio Definition
Process Product
Platform Platform
Bioproducts
Product
Portfolio
structure
1
A
2
B
3
C
Product
Families
Market
Segment
…
…
…
…
…
…
…
Value Chains need to consider long term bioproducts sustainability –
Unique supply/value chain is key for competitive position over the longer term
„ Production flexibility (supply/demand) – that is driven by the marketplace
„ Margins stability, risk mitigation and operational changes challenges must be
systematically addressed while diversifying the product portfolio
incrementally to match market needs….
„
Establishing the Bioproducts Product Portfolio
How to establish a
sustainable
product portfolio
structure?
Market
Requirements
Inspired by Ref:
M. Muffatto &
M. Roveda,
Product
architecture and
platforms: a
conceptual
framework
Typical
product
portfolio
structure
Process Design
Functionalities
Process
Platform
Product
Platform
1
A
2
B
3
C
Product
Families
…
…
…
…
…
Market
Segment
Technological
Viability
Process
Flowsheets
Solution
Architecture
Process-Product
Platforms
Product
Opportunities
Multi-Product
Strategy
Product Structure
Product Strategy
Product Portfolio for Bioproducts
we
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s co ?
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u
rod acture 4
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Wh manu EL 200
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Innovation
Wh
a
w e t p ro d
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e.g. anufa cts sho
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Pen
uld
ner ture?
20 0
6
Substitution
Novel
CHALLENGE
For product
selection
Technology
Push
Substitution
Market
Pull
Replacement
Processcentric
Adaptation
Market &
Productcentric
Methodology Needed To Drive Bioproducts’ Design
Overall Product/Process
Opportunities
Outcomes ~ Product Value
Chain Opportunities Driven
by the Marketplace
Product/Process Details
Analysis
Business Plan & Production
Platform Decision
-Making
Decision-Making
Chambost, V.,
Eamer, B., Stuart,
P., ‘Systematic
Methodology’
PAPTAC 2007
Implementation Considerations
Selecting the Most Promising Building Block
Bioproduct…Marketplace Realities
Today!
„
Is cellulosic ethanol the most promising bioproduct building block for success?
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Large commodity market – supply/demand structure – many players/options
Technology know-how is relatively well-developed – lower cost needed
Fierce market volatility…
Ethanol Price Volatility
In 6 months: ethanol prices dropped
by more than 50% - Price is not the
challenge – price volatility and
competition are
Peak at ≈ $3/gal
Can we plan on stabilized operating
margins in a context of high market
volatility and uncertainty?
Source: Gulf Ethanol Corp
Know your market, know your
product competitive environment
and know the product/price
behavior in the marketplace
14th January <$1.25/gal
Source: Gulf Ethanol Corp
Key Issues
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Market-based Value Chain Analysis – assessment of the
bioproduct family commercial potential and needed
marketplace partners along the value chain
Risk assessment of the product family – process, technoeconomic & marketplace issues must be identified and
mitigated
Logistics systems are also key – Will our new products be
more economical to produce and transport as a liquid or as
a gas and be collected in tank cars, carried through lengthy
pipelines, or hauled by trucks? Who will run the logistics
sytsem?
Take-Away Messages – Part 1
„
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Identifying the right bioproducts production platform configuration is
key and complex…
Enterprise transformations is essential…
Can forestry companies adopt A market centric enterprise transforming
culture?
Bioproducts production platforms must be market centric…
A key tool will be market-based product “portfolios”
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What array of products should we make, not can we make…
We must focus on marketplace realities to drive the production process
as well as the ultimate outcomes…
Selecting the most promising bioproducts options is tied directly to
marketplace behaviors – such as competition and volatility…
Marketplace partners, risk assessments, & logisitics systems are
essential…
Part 2 – Talk Component…
A discussion of one key social/political aspect that will
impact significantly our ability to reach out…
„
This second main component is adapted largely from
work done for a workshop that focused on a key
social dimensions of sustainable bioproducts (largely
biofuels)
„
The focus here addresses the question – Bioproducts (Biofuels)
and Land Use Changes – Myths & Truths – How do
Misconceptions Drive the Consumer and the Market?
20
Intent
To discuss how bioproducts’ companies must embrace
the responsibility to debunk myths and deliver truths
about key aspects of the emerging bioproducts arena
in an effort to help shape the marketplace... In
essence participate in driving the marketplace realties
that will shape our success in these endeavours...
Biofuels are used as the proxy here...
[But remember solid wood products and pulp and paper
products are also bioproducts....]
Discussion Key Points
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Context
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“The View From John Sanderson’s Farm”
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Today’s World Biofuels Direction & Potential
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Perceptions of Truths and Myths
Potential Implications For Land Use Change
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A little history on Truths and Myths
The Conflict of Truths and Myths
The US Midwest Story
The Brazilian Story
The Borneo Story
Where Does This Leave Us & Where Are We Headed?
Context
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World’s Growing Reliance On Alternative Fuels Is
Driving Substantial Shifts Toward Biofuels
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This shift will grow in scale and momentum globally
Will result in changes in land use allocation world-wide
Driving Forces – Political/ Policy Arena Responses to
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Climate change
Local energy security
Changing costs/ availability of traditional energy sources
Special interest groups’ power struggles
Corruption and abuse…
Context
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Considerations
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Policy arena must be better addressed to minimize
destructive land use change impacts in some regions
Misconceptions /Myths – confuse this already jumbled
arena and will cause poor marketplace responses
There is a sense of urgency to recognize and advance
the Truths as we know them
Absent global policy directions based on Truths and
not Myths – major destructive dislocations and
marketplace confusion are highly likely
This will take proactive help of biofuels producers…
“The View From
John Sanderson’s Farm”
“The View From John Sanderson’s Farm”
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Hugh Raup ~ Journal of Forest History, 1966
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Classic treatise of New England land use history
A review of Petersham, MA since the 1740s
Now known as The Harvard Forest
Provides A history lesson about the dynamics
of land use and land use change
„
That will help us understand how to
communicate that “producers” are not “evil”
Clearing of a Homestead by an Early Settler 1740
Photographs by
John Green,
courtesy Harvard
Forest Dioramas,
Fisher Museum, and
Harvard Forest
Archives – Harvard
Forest, Petersham,
MA
Height of Agriculture 1830
Farm Abandonment 1850
'Old Field' White Pine
on Abandoned Land 1910 & Lumbering
Third Thinning – White Pine and Hardwoods
Tom Swamp Tract – Early 1900s
Tom Swamp Tract – After 1938 Hurricane
Forest Cover and Population Trends in New England
From David Foster et
al., Wildlands and
Woodlands: A Vision
for the Forests of
Massachusetts
(Petersham, MA:
Harvard Forest, 2005.
What Does This Historical Review Of Land
Use Changes Tell Us?
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Myths –
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Land use change is a “today” phenomenon
We can predict and manage all land use change with
policy
Truths –
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Policy can affect and drive land use change, but…
Land use change is largely a product of societal growth,
changing societal needs, the role of technology, and the
forces of nature + man’s nature – and not just the role
of production systems forcing unwanted changes…
Today’s World Biofuels
Production Potential
World Biofuels Production Potential
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Understanding the challenges to meeting the US renewable
fuel standard
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September, 15, 2008 – Office of Policy Analysis, Office of Policy and
International Affairs – US DOE
Estimates worldwide potential to produce biofuels
Assessed over the 2010-2030 timeframe
Addresses other factors relevant to economic competitiveness of
worldwide biofuels production use and trade
Assumes –
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EISA Title II RFS fully implemented [36 B gal per/year of renewable fuels
by 2022 + other policies in place
Cellulosic ethanol, biomass-to-liquid fuels, sugar derived ethanol, and
fatty acid methyl ester biodiesel would all meet EISA advanced biofuels
requirements
Enough US corn ethanol grandfathered to reach 15 B gal/year
World Biofuels Production Broad Based/ Projected To
Grow Four-fold 2005 To 2020
World biofuels production by country in the reference scenario
(Source: World Biofuels Production Potential, DOE 2008)
US Is/ Will Continue To Be Biggest Biofuels
Consumer Worldwide Through 2020
World biofuels production by country in the reference scenario
(Source: World Biofuels Production Potential, DOE 2008)
Cellulosic Biofuels Projected To Grow Rapidly – Grain Ethanol
Plateaus – Feed-fuel Competition With Corn Is Overtaken
World biofuels production by country in the reference scenario
(Source: World Biofuels Production Potential, DOE 2008)
Selected Socioeconomic Issues
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Using food crops for biofuels production might
disrupt food markets
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Emissions from diesel combustion for using farm
equipment, pumping water, and producing fertilizer
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However – this has allowed building a first step domestic
biofuel industries and gearing up for transition to
advanced technologies/ diversified feedstocks
Will erode carbon benefits of biofuels
Competition with other land uses
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Might put further pressure on land availability
Potential Implications
for Land Use Change Related
to Biofuels…
The Conflicts of Truths and Myths
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Clear heads and proactive behavior are essential to
sort out –
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Is land use change rampant globally as related to
the recent emergence of the biofuels arena and –
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What is true and
What is not true related to land use issues and the
emerging biofuels arena
As such creating the need for global land use policies?
Or is land use change related to the biofuels arena
variable around the world and –
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As such in need of carefully selected regional based land
use policies and proactive intervention to clarify reality?
The US Midwest Story
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Corn to ethanol is creating major land use changes
in the US Midwest –
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Major policy interventions are required related to
corn to ethanol in the US Midwest to manage
unacceptable land use change –
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Truth or myth? … Myth
Truth or myth? … Myth
The markets and economics will sort out corn to
ethanol land use change issues in the US Midwest –
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Truth or myth? … Likely truth
The Brazilian Story
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Sugar cane & soybeans to ethanol are creating
major land use changes in Brazil –
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Major policy interventions are required related to
sugar cane and soybeans to ethanol in brazil to
manage unacceptable land use change –
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Truth or myth? … Myth & truth (truth = land quality
impacts)
Truth or myth? … Myth
The markets and economics will sort out sugar
cane and soybeans to ethanol land use change
issues in brazil –
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Truth or myth? … Confused ~ land use control/other
uses
Sidebar Questions…
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What country is now the leading contributor
to greenhouse gas emissions?
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What country is now number 2 in this regard?
The Borneo Story
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Oil palm to ethanol is creating major land use
changes in Borneo –
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Major policy interventions are required related to
oil palm to ethanol in Borneo to manage
unacceptable land use change –
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Truth or myth? … Truth
Truth or myth? … Truth –very problematic
The markets and economics will sort out oil palm
to ethanol land use change issues in Borneo ~
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Truth or myth? … Myth – local issues will dominate
Land Clearing and the Biofuel Carbon Debt –
“A” Land “Use” Change…
Region
Feedstock
Land conversion
from…
Years to repay
carbon debts
Indonesia and
Malaysia
Palm Oil
Lowland tropical
rainforest
86 years
Indonesia and
Malaysia
Palm Oil
Tropical peatland
rainforest
420‐840 years
Brazil
Soybean
Amazonian
rainforest
320 years
Brazil
Sugarcane
Cerrado sensu
stricto (woodland
savanna)
17 years
Brazil
Soybean
Grass dominated
Cerrado biome
37 years
US
Corn
Central
Grasslands
93 years
(Fargione et al.
2008)
Take-Away Messages – Part 2
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Social impacts of biofuels are real – however they are
fraught with a myriad of Myths and Truths…
Truths
Allowing the Myths to be carried forward will pollute
consumers’ perceptions and impair the markets to be
served by biofuels (bioproducts)…
Not being proactive about the Truths will also undermine
our success in serving the markets at hand…
If we are to be effective in taking biofuels (bioproducts) to
the marketplace we must become proactive in helping
shape these realities toward the consumers and the market
place…
Just becoming product and market centric are not
enough…
Wrap Up…
Questions ~ Answers ~ Discussion
Dr. Jacquelyn-Danielle McNutt
Executive Director CPBIS
Jacquelyn.McNutt@CPBIS.gatech.edu
910-253-1208