‘Buy one get one free on selected wines!’, ‘5p per litre off petrol’ – PVC advertising banners are everywhere. And they don’t come cheap.
Sainsbury spends £400,000 per year on its PVC alone. And once these banners have been torn down they go to landfill – which is now becoming a very expensive business. Planned hikes in landfill tax mean that by 2014/15 it will cost £80 to dispose of a tonne of waste in the ground, and this is being passed on to the supermarkets.
The problem with PVC is that it is an oil-based plastic. PVC is durable. But at about 50p per square foot, it is also very expensive, and users are reluctant to use cheap Chinese PVC – which is reputed to contain heavy metals and toxic plasticisers.
Another problem is that these banners do not hang for very long. Every two or three weeks the store alters its offers, the existing banners get chucked out and a whole new set are minted and hung up.
So PVC is expensive and it’s bad news for the environment. But shops use a lot of it. That is just the sort of problem that could produce serious profits for a determined entrepreneur. And last week I met one seeking to do exactly that.
Sooner or later, supermarkets might have to contact this man
This is the opportunity spotted by Alex Dowdeswell, a former finance director. He believes that these banners should be made of biodegradable materials instead of PVC.
I met him in the City last week, put on my best intimidating Dragon’s Den inquisitorial manner and grilled him. I must admit that he answered every question with clarity and conviction. He is an impressive entrepreneur and he may well have spotted a gap in the market and have the product to fill it.
The problem for shops, for petrol stations, for airports, railway stations and any other venue that needs to display advertising is not confined to the costs of PVC and landfill. There is a new consideration. They need to be seen to be green.
There is plenty of regulation in this area, but this is not necessarily the driving factor. The best companies know that their customers want them to respect the environment. They know that sooner or later they will be forced to use materials that need not go to landfill and they are already making the shift.
Three criteria for the perfect material
If they are offered an alternative to PVC they will take it. Dowdeswell has defined three essential criteria for a replacement product.
The material must be 100% biodegradable. It must be no dearer than PVC. Finally – and this is where many new innovations founder – it must to able to slot seamlessly into existing methods of production.
In this respect the key is to find a material that can be printed on existing printing machines. This is no small matter. Printing machines run fast, the ink must be applied accurately, and any breakdowns are expensive.
Dowdeswell is confident that he has answered all these criteria and to prove the point he showed me his alternative materials. The first was a thicker, heavier material made from woven jute. The next was a medium-weight material made from woven cotton backed by latex. The third was a lightweight, thin, cellulose film. Upon all of these were printed images in striking colours and I am sure that they would look fine hanging in a shop window or anywhere else.
Dowdeswell has applied for patents, found manufacturers in India and Europe, and is now ready to sell. The products go under the name of NatureWoven and are owned by CERES MEDIA (CMI) – which came onto AIM earlier this month.
Already, Ceres has worked with London Zoo, the Victoria & Albert Museum and English Heritage. Beside the UK market, it has seen interest from the USA where it has signed four distributors and opened an office in Los Angeles.
Ceres raised £1m on its stock market debut through a share placing at 18p – since then, the share price has almost halved. At 10.75p Ceres is valued at just £3.4m. If NatureWoven takes off, that will look seriously cheap. This is a company that I will be following very closely in the months ahead.
• This article is taken from Tom Bulford’s free twice-weekly small-cap investment email The Penny Sleuth. Sign up to The Penny Sleuth here.
Information in Penny Sleuth is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Penny Sleuth is an unregulated product published by MoneyWeek Ltd.