Investment Notes: Earthodic

Estimates predict that the production and incineration of plastic will pump over 850 million tonnes of greenhouse gases into the atmosphere this year. Approximately 36% of all plastics produced are used in packaging. Even as packaging moves away from single-use plastics, alternatives often rely upon coatings that hinder the recyclability of the material beneath. The industry has yearned for a low-cost, natural coating substance for a longtime. Earthodic, our latest investment, is set to provide just that.

This Australian-based company has developed a game-changing, bio-based, water-resistant coating for pulped or paper products known as “Paperbarc™”. Led by the team of experienced chemist Albert Tietz, materials specialist Fiona Donaghey, innovation strategist Melissa Mail, and former investment manager Anthony Musumeci, Earthodic's Paperbarc™ product has received interest from some of the world's largest packaging organisations, with several undergoing pre-commercial trials.

Investible's Climate Tech Fund co-led Earthodic's oversubscribed AU$1.85m pre-seed round alongside Tenacious Ventures, with participation from investors including Twynam and Closed Loop Ventures. In these investment notes, we will share insights into the sustainable packaging market, what we love about the Paperbarc™ product, and why we backed this fantastic team.

An obsession with packaging

When you walk into the supermarket, the first thing you likely take see is all the fruit and vegetables. It's rare to find someone whose eyes focus almost exclusively on the packaging. Albert Tietz, the co-founder of Earthodic, is even rarer. He doesn't just look past the produce; he has spent most of his waking hours for nearly a decade obsessed with making it better.

When you grab a box of fish fingers out of the freezer, you throw it into your basket and move on to the next thing. Albert sees the unstainable wax or plastic coatings and goes home to invent a sustainable alternative.

This obsession came through on all our due diligence calls and with the investment committee. Albert would sit in his home laboratory and proudly show off the coatings he has invented over the past decade and breakdown boxes to teach you everything you need to know about corrugators. But, most importantly, he highlights how he has been thinking about scale since day one. For any packaging innovations, this mindset is vital because the packaging industry is massive.

Large market hunting for a sustainable solution

The total indicative market size for paper and paperboard applications with wax or other function coatings is an estimated US$915B. The global push to pursue sustainable alternatives including the Australian Government’s 2025 National Packaging Targets is, however, proving difficult. With the National Packaging Target setting their sights on 100% of packaging being reusable, recyclable or compostable by 2025, and similar commitments from several large multi-national corporates including Nestle, Walmart, Unilever and global packaging company Amcor, it’s a difficult path ahead.

Isn't sustainable packaging already a thing?

In part, yes. However, packages are coated with a thin layer of wax or plastic polymer to create a functional protective barrier when it comes to applications in wet or damp conditions. These functional barriers often hinder the cardboard's biodegradability and render it non-recyclable and non-repulpable (it cannot be turned back into its raw material form for re-use). The outcome is that the cardboard is directed to landfill, and the fossil fuel-based coatings take time to break down, all the while releasing toxic polymers into the environment.

After engaging numerous packaging suppliers during due diligence, it became apparent there needed to be a solution that could achieve recyclability and repulpability from a bio-based source.

Introducing Paperbarc™

Earthodic's solution to this dilemma, Paperbarc™, is the brainchild of technical founder Albert. After nearly ten years of research and development, Albert developed a bio-based and water-resistant coating from lignin. Lignin, along with cellulose, forms the chief constituent of wood and is second to cellulose as the most abundant organic material on Earth. Lignin enhances the plant's cell wall rigidity and hydrophobic properties, which is where Albert saw its potential in packaging all those years ago.

Paperbarc™ is a water-resistant coating derived from lignin that replaces wax and polymer film coatings, creating the bio-based, recyclable, and repulpable coating the industry has been chasing. Paperbarc™ is cost-effective, integrates seamlessly with current rod coaters abundant in the packaging industry, and has been trialled by some of the world's largest packaging suppliers for various applications. 

With water resistance that exceeds wax and is comparable to polymers, Paperbarc™ is the perfect solution for wet or damp conditions. While the coating isn't yet approved for food contact, Paperbarc™ aims to enter the market as the sustainable coating alternative for fruit and vegetable punnets while the team seeks out the necessary approvals.  

A diverse team

Joining Albert on the Earthodic team are his brilliant cofounders, Fiona Donaghey, Melissa Mail and Anthony Musumeci.

Fiona has a strong sustainability and materials consulting background, having worked with numerous large brands as the cofounder of Hyloh, a sustainability consulting brand. In addition, she spent multiple years in material science research across innovation firms and an Australian university. Fiona brings a strong understanding of the technical and economic commercial indicators that brands consider to the Earthodic team.

Alongside Albert and Fiona, Anthony and Melissa focus on the commercial development of Earthodic. Anthony's extensive experience in investment management, technological innovation, and startup development all stem from a career as a nano-plastics chemist. Melissa brings a wealth of strategic innovation and commercialisation knowledge to the table, having also worked as an investment manager and commercial partnerships advisor for several startups. Together, Anthony, Melissa and Fiona empower Albert to roll up his sleeves and focus on what he does best, solving challenging technical problems.

Preparing for scale

Earthodic recently marked a significant achievement with the successful completion of a commercial-scale manufacture run in the USA. Paperbarc™ has now received 100% USDA Bio-based Product Label certification and is eligible to participate in the USDA Bio-preferred Program. These milestones allow Earthodic to offer commercial quantities to packaging manufacturers looking to deliver a 100% bio-based coating to end-users and aid in reaching ESG targets.

The Investible Climate Tech Fund is delighted to co-lead the investment into this brilliant team and looks forward to supporting the Earthodic team as they look to boost one of the world’s largest industries over a significant sustainability hurdle.