If you ask Otis Tucker how he likes the recycling businesses these days, he'll tell you plain and simple: It's never been harder to make a buck.

The owner of RecycleMania, a small recycling center in South Central Los Angeles, said he has had to lay off most of his help and is now doing much of the grunt work himself.

And he squarely blames changes in state law, which this year expanded the types of containers included in the beverage recycling program, while at the same time raising a subsidy paid to his competitors at supermarket recycling centers most of which are run by large companies.

This double whammy, Tucker claims, has forced him to pay out cash redemptions to customers who bring in plastic sports bottles and other containers with no scrap value and has given the supermarket centers an unfair competitive advantage.

Secondary markets have developed for certain types of recyclable plastics, like soda bottles, which companies buy, melt down and use to make everything from carpeting to insulation to fabric. But secondary markets have not yet developed for the grades of plastics found in some sports bottles and other containers that just this year became eligible for redemption.

The result has been mountains of the empty containers sitting on recycler lots with nowhere to go.

The other new challenge hurting Tucker and small recyclers like him is that the state has been paying their primary competitors supermarket recycling centers an annual subsidy of up to $2,300 per site if they meet certain volume criteria.

That subsidy, Tucker and other small operators claim, is enabling supermarket centers to pay premium redemption rates on beverage containers, an illegal practice called predatory pricing.

"It's kind of hurt my business. I've had to work it by myself," said the 35-year-old Long Beach resident, who now retains only one assistant. "We are investing time in a commodity that is not really worth handling, but we have to accept it. (And) the supermarket recyclers kind of use their handling fee (state subsidy) to outbid our consumers."

State involvement

Officials with the State Department of Conservation, which runs the state's beverage container recycling program, said they are aware of the situation.

"We are keenly aware of the predatory pricing issue, and when we have complaints of it, we investigate" said Mark Oldfield, a conservation department spokesman. "(But) the handling fee is designed to encourage recyclers to set up in convenient areas, and what is more convenient than taking it back to where you bought it?"

Supermarket recyclers, a market sector dominated by a few large companies, deny they are engaging in any such predatory pricing practices.

They note that under the latest changes in state recycling law, they too are forced to accept the unmarketable new beverage containers including plastic bottles for water, tea and coffee drinks as well as fruit juices if they want to remain in the program.

And they maintain that their predicament is even more precarious than that of the recycling yards because supermarket centers don't have enough room to handle newspapers, cardboard and other materials that have scrap value.

They further contend that the state's overall recycling program, established in 1988, works for everyone, including "old-line" recyclers like Tucker.

"The law that was put in place has increased the recycling rate (for beverage containers) significantly, from 50 percent to approximately 70 percent across all materials," said Mike Centers, vice president of the commercial division of Tomra Pacific Inc., which is the largest recycler in the state with 450 sites.

"The market share, at least for the last five years, for old-line recyclers has not changed, while the material buying has significantly increased, so this has had a positive impact on the old-line recyclers."

State law requires recyclers to redeem containers for which consumers are charged a California Refund Value, or deposit.

That deposit, 2.5 cents for containers under 24 ounces, has been successful in encouraging recycling, officials said. The state recycling rate for beverages reached a high of 82 percent in 1992 but had dropped to 74 percent as of last year.

Recycling outlook

With the number of containers in the pool of recyclable materials expanded this year, department officials expect the recycling rate will drop further. But they hope that in the long run the rate will rise as consumers realize they are paying deposits on their favorite drinks.

As for the controversial state subsidy to supermarket centers, the state is conducting a study to determine whether they should be reduced or eliminated. The study is expected to be completed in December.

And as for the fact that there are not yet any buyers for the new types of plastic that recycle centers are being required to redeem, Oldfield said that problem will hopefully disappear over time.

"You want there to be a market for every recyclable. The hope is that, if there is enough of the (recyclables) out there, the market will find a use for it," Oldfield said.

Joe Massey is an industry consultant who runs a group called the Coalition of Independent Recyclers, which he said has a membership of 50 small- and medium-sized recyclers statewide, including Tucker and some smaller supermarket recyclers.

Massey said that, while the state may want to create new recyclable markets, his membership will suffer as they struggle to compete in the marketplace.

"When this program first started, there was no market for (plastic soda bottles), and it took us 13 years to develop that market," he said.

"Now, we have to hold (these new containers) until we give them away to somebody who may or may not be able to use it, or they landfill it as a last resort, which is defeating the whole purpose of the program."

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