NEXE Innovations Inc (TSX-V:NEXE, OTC:NEXNF) aims to disrupt the single-use plastics market with its innovative compostable materials, starting with coffee pods.
“We want to eliminate single-use plastics from everyday life,” NEXE president Ash Guglani told Proactive.
Guglani founded NEXE recognizing the unique opportunity presented by developing innovative compostable materials. He had previously worked in capital markets and media, including at a national investment bank for 12 years.
“The vision is a lot bigger than just K cups. There are opportunities in cosmetics, dairy, and medical,” he said.
The company’s first product is a compostable single-use coffee pod. Single-use coffee pods are rising in popularity as they are a very convenient way to consume coffee. More than 80 billion single-serve plastic and aluminum pods are used by coffee consumers every year and this market is growing at a rate of about 8% per year.
However, a major drawback for many consumers is that these pods cannot be recycled or need to be recycled through a program run by the company that produces them. Compostable packaging, on the other hand, benefits the environment by reducing landfill waste, enriching soil through natural decomposition, lowering carbon emissions, and appealing to eco-conscious consumers.
In addition to environmental considerations, consumers are also concerned about their consumption of microplastics, Guglani highlighted. “End customers are looking for more sustainable packaging around everything they buy,” he said.
NEXE is positioned at the forefront of the compostable single-use coffee pod segment, with coffee pod giants Keurig and Nespresso in the earlier stages of development for their own versions. Keurig is beta testing this year using a new machine that also allows consumers to continue to brew plastic capsules, while Nespresso is piloting their paper-based pods in select European markets.
A BPI-certified compostable coffee pod
NEXE’s flagship product is a Biodegradable Products Institute (BPI)-certified compostable single-serve coffee pod made of its proprietary resin, developed over years of testing.
Guglani noted it was challenging to develop a product that can handle water, heat, and pressure, as is required for a coffee pod. “It took years to perfect it and even now, we still find ourselves working on it to make it not just a stronger capsule, but produce a better-tasting coffee,” he said.
“It’s one thing to have a capsule that is good for the environment, it’s also a plus if the capsule makes a delicious cup of coffee that is similar to a pour-over style.”
The BPI certification confirms that NEXE’s pods meet high international standards for compostable materials. This includes AS 4736 (Australia), ASTM D6400 (equivalent to European EN 13432), International standard ISO 17088, and ISO 18606.
Notably, NEXE’s pods are one of just a few hard-bottom, fully enclosed coffee pods to be certified by the BPI Institute. Of the 32 compostable pods that are BPI certified, 84% are soft-bottomed and the remaining hard-bottomed pods have premium pricing and capacity limitations.
Ahead of securing BPI certification, an independent industrial composting study was carried out at the Surrey Biofuel Facility, the first closed-loop organic waste facility in North America, that confirmed the compostability of NEXE’s pods.
“We knew by the time we were going to go for the certification that we should pass with flying colors,” Guglani said. “Having a certified compostable capsule is something that our clients want. It’s something their end customers are asking for.”
Scaling up with strategic manufacturing and partnerships
A key aspect of NEXE’s strategy is being fully integrated, meaning it carries out the end-to-end component manufacturing at its 54,000-square-foot facility in Windsor, Ontario. The company produces its proprietary resin, doses and seals the coffee pods, and ships them off to their clients.
NEXE’s investment in this facility offers scale, with a capacity to produce 500 million pods per year, and is strategically positioned for easy access to US markets. It also aligns with the company’s values, as having its manufacturing process chain primarily in North America reduces NEXE’s carbon footprint.
The company has chosen to pursue a co-manufacturing model when it comes to its partnerships with coffee producers. “Being a third-party co-manufacturer is the best opportunity for us to become disruptive in the space,” Guglani told Proactive.
Collaborating with coffee brands brings multiple benefits, including a shorter product development cycle, fewer resources than required to grow a new retail coffee brand, and the ability to leverage existing distribution channels. The savings achieved through this approach support NEXE’s ability to price its compostable coffee pods in line with its plastic competitors, Guglani highlighted.
“It’s easier for us to work on the B2B angle, where distribution is already established, versus doing something ourselves, which would cost a lot of money and add another brand into the market,” Guglani said. “While there is this massive outreach of 80 billion plus pods consumed every year, it makes no sense. There’s enough established distribution and brands out there.”
The company has recently announced several significant partnerships with coffee brands. Through its collaboration with EKOCUPS, NEXE is entering the US market, which is the largest market for single-serve pods. Its initial delivery to EKOCUPS included five Keurig-compatible pods, with more products set to follow.
The company has also revamped its partnership with Vancouver, British Columbia-based ecoBeans, which is targeting both retail and office coffee services, and launched a new collaboration with Ottawa, Ontario-based Bridgehead Coffee, a wholesale partner of major grocery chains in Canada including Costco, Whole Foods Markets, Sobey’s and Farm Boy.
What’s next for NEXE
NEXE’s near-term focus is continuing to establish relationships with other coffee partners while innovating its compostable technology. “We’re always improving what we’re doing with the capsules, as well as some of the other products we may be getting into next,” Guglani said.
Its priority is executing on coffee pods after which it plans to focus on other innovations, looking at a range of markets. “There are a couple that excite us, and maybe you’ll see some news on that in the next few months,” Guglani said.
“We’re producing on the coffee side then figuring out what’s the next best opportunity where we could be super disruptive.”