To be sure, the Canadian company known best for commodity plastics and industrial chemicals isn't trying to become a beverage container producer. But the cup technology does represent part of a broad initiative to find new applications for its traditional plastics in high-growth consumer markets such as takeout food containers or industrial goods such as plastic trash bins, lightweight concrete and residential wall foam.
Nova's focus on so-called "performance products," said Beth Eckenrode, vice president business development, will help it "add business that won't fall prey to cyclical dynamics." Such products would provide more predictable demand and pricing regardless of the economy, eliminating swings that - combined with unforeseen production problems at some facilities - have caused Nova to post losses four straight quarters.
Earlier this month, Nova unveiled a new line of its Dylark resins that it says make microwaveable food containers stronger while keeping the food inside hot during transport from restaurants or supermarkets to consumers' tables. Dylark is manufactured at Nova's plant in Monaca.
Nova, which maintains its headquarters and 400 employees in Moon though it's incorporated in Calgary, is banking on new performance products and business developments to generate $300 million in annual earnings by 2008. That could be a much-needed boost for the company as it tries to recover from a net loss of $104 million last year, down from net income of $252 million in 2004.
Last year's decline was mainly the result of charges for facility problems and skyrocketing energy prices. This year also got off to a sluggish start: In the first quarter, Nova lost $5 million including $51 million in unusual charges, although Chief Executive Officer Jeff Lipton said Nova had "put a long series of negative developments behind us."
The technology Nova is testing for high-quality cups taps one of its longtime core products: expandable polystyrene resin, which is produced at its Monaca plant. The resin is used not only in building, construction and packaging materials but also in traditional foam beverage cups.
"The fat, foam cup had not changed for years," said Antonio Torres, Nova's vice president business development-styrenics. So Nova "scanned the world" for a joint venture partner to help make a better performing cup that also would have bright designs to appeal to consumers, he said.
Nova ended up teaming with Autonational BV, a Dutch company that specializes in making polystyrene production machines. Nova owns the technology and the patents for the cup.m.anufacturing process.
At its Leetsdale plant, Nova uses a patent-pending machine that manufactures and adds colorful labels to the cups in one step. The labels are made of polypropylene film that provides stiffness as well as insulation to keep the drink hot or cold.
Since it can be held comfortably without a protective sleeve, "It's a better drinking experience," said Debra van Holst, Nova's global development director, packaging.
Cups in standard coffee shop takeout sizes - 12-ounce, 16-ounce and 20-ounce - also are being tested for leaks on the production line.
Nova is in discussions with quick-service restaurants and coffee shops that would license the process to produce cups with customized labels. The potential market is huge, with worldwide sales of fresh coffee totaling about $22 billion last year, according to research firm Euromonitor International. That figure doesn't include other hot, to-go beverages such as tea and cocoa.
The Leetsdale facility has capacity to produce 84 million cups a year, but Nova maintains it is not eyeing cups as a new business for itself. "The objective here is to license the technology, not make cups," said Ms. van Holst.
Beverages served in the cups shouldn't cost consumers any more than what they pay for drinks at such high-end coffee shops as Starbucks or Seattle's Best Coffee, she said.
