Get ready to start drinking from paper straws

Today (7/2/18) a plastics ban goes into effect in the Seattle that would prevent local food service businesses from using plastic straws, utensils, and cocktail picks in their establishments. This move comes as researchers continue to provide estimates that roughly 8 million pounds of plastics find its way into our oceans and water each year.

Trailblazer

Seattle is the first metropolitan area to ban the use of plastic utensils, but follows California on a statewide ban of plastic shopping bags (like the ones you find at checkout). While the Seattle ban does not look like it includes the cups and actual serving containers, there is a real possibility that the ban could be amended or another resolution could be put in place that would expand the scope.

Alternatives

Right now, food service operators have to offer products that are now made from “compostable” compressed paper, or compostable plastic. This is a good thing for the environment, but expect this move to impact the businesses as widespread manufacturing is limited to a few major players, and could drive COGS up as operators now face higher costs.

Some food service operators such as McDonalds have already committed to moving away from traditional plastics in their UK and Ireland stores, so we are starting to see a growing shift towards voluntary changeover vs forced regulation. One company to watch is Precision Products Group, who has had to increase lead times to nearly double what they were before, due to growing demand from SME’s, as well as large companies for their biodegradable straw products. While they are a private company now, increased demand could lead to being listed publicly if need for capital outstrips capacity.

Who this effects

This isn’t just a ban within smaller companies, this is a major ban affecting some major retailers, who would face fines of up to $250 per infraction in Seattle. Companies that are affected are McDonalds ($MCD), Starbucks ($SBUX), Yum Brands ($YUM) (Taco Bell, Pizza Hut, KFC), Wendy’s ($WEN), Restaurant Brands ($QSR) (Tim Hortons, Burger King, Popeyes), Dunkin Donuts ($DNKN), Papa Johns ($PZZA), Dominoes ($DPZ), Darden Restaurants ($DRI) (Olive Garden, LongHorn Steakhouse, Capital Grille), Chipotle ($CMG), and Buffalo Wild Wings ($BWLD).

While this ban may not have an effect company wide, or on the latest earnings report, keep an eye out on proposed legislation at local, state, and federal levels as it would indicate more regulations, as well as increased costs for items on a massive scale, which could start to eat into margins.

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