How China's ban on plastic waste imports led Europe's biggest grocery chain to buy a waste management company

The German Schwarz Gruppe (e.g. Lidl, Kaufland), world's fourth-largest and Europe's biggest grocery chain, announced the acquisition of Tönsmeier, one of the largest waste management companies in Germany (3000 employees, €500 million revenues in 2017).

What some see as diversification strategy, could also be seen as representative example for the beginning transition to a circular economy in mass markets. What motivates Schwarz Gruppe to insource the handling and recycling of their own waste instead of paying waste management companies to do the same job?

Since January 2018, China prohibits the import of 24 sorts of post-consumer plastic and paper waste. Last year alone, members of the European Union exported 60% of all plastic waste and 13% of all paper scrap to China. The impact of this political decision surfaces more and more. China's waste import ban created more momentum for the circular economy than any regulation (Eco Design Declaration) or subsidy program (Horizon 2020) in the last decade.

In the last years, German plastic recyclers experienced a downfall in plastic waste quality, due to high-value streams going to China, driving packaging waste prices to unprecedented levels. Now, as waste management companies are running out of options to deal with their piles of waste, specialized and domestic recyclers get the upper hand in the market. Qualities of plastic waste increase, prices decrease.

The overall strategic implications become obvious. Waste producers begin to realise that value creation after point-of-sale is evolving into a risk, if companies do not turn it into a profit or at least risk mitigation center.

Looking forward to similar transformations in construction, chemicals, automotive or electronics.