{ "docId": "019dd923-622c-750b-8b99-1329de4989df", "docSlug": "da9f1a22e4af", "documentTitle": "Danimer Scientific (DNMR)", "authorId": "54_Spruce_Point_Capital", "authorName": "Spruce Point Capital Management", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2021-04-22 00:00:00", "orientation": "landscape", "aspectRatio": 1.3333334, "pageNumber": 49, "pageCount": 63, "prevPage": 48, "nextPage": 50, "slideType": "preempt_rebuttal", "function": "preempt_rebuttal", "density": "overcrowded", "nDataPoints": 1, "notes": "Features two distinct expert quotes (a competitor and an industry expert) to build a bearish case against Danimer's PHA business model.", "elementsJson": [ "headline_text", "paragraph", "quote_block" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b99-1329de4989df/49", "deckHref": "/decks/019dd923-622c-750b-8b99-1329de4989df", "deckJsonHref": "/decks/019dd923-622c-750b-8b99-1329de4989df.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b99-1329de4989df#slide-49", "components": [ { "bbox": null, "kind": "callout", "text": "If PHA suppliers reduce prices to compete with conventional plastic, their margins will surely take a hit.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-3f41-721f-9e50-f39217a56760", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.96, "x": 0.02, "y": 0.17 }, "kind": "paragraph", "text": "Investors behind Danimer believe this time is different for PHA because there is demand from large customer brands for ESG friendly and biodegradable products. While we agree with this trend, these Companies still need to be concerned with the reliability and cost of production. According to a Tegus interview, prices for PHA are 4-5x higher compared to conventional plastics. While short term demand for PHA may remain strong, in the long run, brands are unlikely to pay high premiums for PHA, especially as other biodegradable options scale. If PHA suppliers reduce prices to compete with conventional plastic, their margins will surely take a hit.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d32cf266-9fff-4b44-9b01-f29978a30580", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.84, "x": 0.14, "y": 0.51 }, "kind": "quote", "text": "When a CPG guy like Pepsi or Nestlé makes a decision on something like this, what are they doing? I mean from what I gather, the differentials and sort of product characteristics of the top guys is pretty minimal. What are they looking for? Are they looking for scale? Are they tendering out on a cost basis? How are they making those decisions right now?", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "28b7ad57-bf85-4ff4-b87f-322912adc748", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.38, "w": 0.84, "x": 0.14, "y": 0.59 }, "kind": "quote", "text": "It's scale, it's cost and it's a reliability of inputs. And when I say reliability on inputs, I mean, availability and quality. So the biggest thing that Pepsi is afraid of is that they go-to-market and they say, \"By the way, our place bottles are biodegradable.\" And then something happens where the central plant for Danimer goes down, and then they have to start using regular oil-based plastics. And suddenly, all their marketing is wrong and they've done false advertising. That's like one perspective that they worry greatly about. The second is that they continue down this path, but then it turns out that the bottles don't last on shelves when they're sitting in the sun at gas stations in Texas and the bottle start melting. And they don't actually have the rigidity that they were promised. And if they can pass those 2 major tests, then it comes down to, okay, well, if we're going to be producing millions and millions and millions of these bottles, how low can you get your prices? Because right now, you're 4 or 5x the price of oil-based plastics. And Danimer, as an example, will be able to get the prices down, but the cost of their inputs is already $1, just a cost. And so they're never going to get it below $1. So that's why it's going to be useful at the beginning and then it's going to be a secondary conversation where the companies like Pepsi are going to start looking for alternatives. At some point, it's really sexy at the beginning, and it's great marketing, and it's a great sales tool. But over the long run, economics are going to be king, and it's going to be much harder shareholder conversations.", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "2e9e2610-26fb-4b24-8b61-46421079c748", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.84, "x": 0.14, "y": 0.37 }, "kind": "quote", "text": "So Danimer, Full Cycle, Newlight, you name it, we can produce PHA, but how consistently can you produce the same grade of PHA day in and day out regardless of climatic conditions, regardless of any operational snafus, if the power surges or power goes out, how does that impact your consistency? So, again, if I were you, I would ask those questions of any producer, from a quality control and quality assurance perspective. And then, of course, it's price.", "attrs": null, "subkind": "testimonial", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "75c4e0fb-6bec-4c2a-8dc2-4b15f12b9637", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "\"So Danimer, Full Cycle, Newlight, you name it, we can produce PHA, but how consistently can you produce the same grade of PHA day in and day out regardless of climatic conditions, regardless of any operational snafus, if the power surges or power goes out, how does that impact your consistency? So, again, if I were you, I would ask those questions of any producer, from a quality control and quality assurance perspective. And then, of course, it's price.\" — Senior Executive Danimer Competitor; \"When a CPG guy like Pepsi or Nestlé makes a decision on something like this, what are they doing? I mean from what I gather, the differentials and sort of product characteristics of the top guys is pretty minimal. What are they looking for? Are they looking for scale? Are they tendering out on a cost basis? How are they making those decisions right now?\" — Question; \"It's scale, it's cost and it's a reliability of inputs. And when I say reliability on inputs, I mean, availability and quality. So the biggest thing that Pepsi is afraid of is that they go-to-market and they say, 'By the way, our place bottles are biodegradable.' And then something happens where the central plant for Danimer goes down, and then they have to start using regular oil-based plastics. And suddenly, all their marketing is wrong and they've done false advertising.\" — Industry Expert", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-3f41-721f-9e50-f791d8e0e6e6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.2, "x": 0.02, "y": 0.97 }, "kind": "source-note", "text": "Source: Spruce Point research, Tegus", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "975d5acf-cdd3-40b4-ac03-f930f61966c9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.25, "x": 0.305, "y": 0.04 }, "kind": "title", "text": "Why Now For PHA?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "fd0dc8ff-8907-4103-9ee1-ce328a9dab62", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }