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Company plans to give birch bark products another try
PHOTO: Pavel Krasutsky
In an era when forest products have been in a state of steady decline, the mantra of “next generation forest products” has often been heard but not as often sent to market.
There’s frequently a great deal of lag time between the research and development stage of forest products innovation and selling those products profitably on a commercial scale.
Sappi’s $170 million conversion of its kraft mill to produce cellulose fiber for textile manufacturing is this region’s most prominent example of matching innovation to demand. That conversion, announced late in 2011, will go into production this year.
While investments the scale of Sappi’s garner headlines and attract media attention, there is a small but growing number of companies in the region that also are putting innovation into the marketplace. This year their numbers will increase by at least one when The Actives Factory begins production in Two Harbors’ North Shore Business Enterprise Center.
The firm intends to commercially market nutritional supplements, pharmaceuticals and cosmetics derived from naturally occurring chemicals found in birch bark. A startup licensed exclusively by the University of Minnesota Office for Technology Commercialization, The Actives Factory plans to begin production later this year, said CEO Brian Garhofer.
The use of birch bark chemicals dates back hundreds of years. Native people in North America as well as Europeans have long understood the positive qualities the bark possessed. Modern American culture, however, wasn’t as quick to embrace alternative uses.
“Mostly, right now, birch is used as a source of paper or heating fuel,” said Pavel Krasutsky, who as director of the chemical extractives program at the University of Minnesota Natural Resources Research Institute (NRRI) has been conducting birch bark research for more than 15 years. “But, to use birch bark as a fuel is to burn an invention of nature.”
The research, said Garhofer, “is exploring what was once considered a waste product.”
Over time, birch has developed strategies to fend off disease and death – not unlike the immune system of animals. Those chemical defenses can be extracted and used as natural sources of cosmetics and medicines that could promote human health. In the last decade, birch compounds have been cited as a possible treatment for herpes, HIV and melanoma. It’s also been used in Russia to fend off liver damage in alcoholics.
“The birch tree is the oldest of all species of trees and it grows in the most severe of climates,” Krasutsky said. “Over hundreds of thousands of years, the birch has evolved to use chemicals to protect itself from bacteria, fungus and viruses. Its first barrier of defense is its bark. Use of natural chemicals is well established in Europe and Asia, but use in the United States is just beginning to develop.”
Researchers plan to extract and utilize three compounds found in birch bark for health and cosmetic products – betulin, lupeol and betulinic acid.
“All contain anti-inflammatory properties which have been shown to reduce cholesterol and blood pressure, treat fungal and bacterial infections, stimulate the immune system, and more,” according to information from the NRRI.
Although other areas of the world may have a significant jump start on birch product manufacturing, this isn’t the first venture into commercialization of birch bark products locally. Potlatch, Minnesota Power and the University of Minnesota were the initial funders of local birch research. They collectively launched NaturNorth Technologies in Two Harbors to extract betulin on a large scale and commercially market its products.
The joint venture didn’t last, said NRRI Director Michael Lalich, because the “Potlatch business model changed,” as it moved into a role as a real estate trust company rather than an active wood products producer.
The technology was later licensed to a pharmaceutical company, Myriad, which like NaturNorth, decided to not pursue the research after a change in its business model. Lalich said the intellectual property was returned to the University of Minnesota, which then granted exclusive licenses to The Actives Factory.
Lalich said The Actives Factory might, in fact, be a better fit to bring the birch products to market.
“Brian Garfhofer is an individual entrepreneur, which makes a slower growth model possible,” he said, adding that larger companies sometimes need to demonstrate results quickly.
While commercial pharmaceutical use is a future possibility, The Actives Factory CEO said current plans are to produce cosmetics and nutrition supplements first.
While the products derived from birch bark are generally, at present, more expensive to produce than traditional products, Garhofer believes their natural qualities and sustainability will easily attract a niche consumer.
Availability also is on the side of the upstart.
“Birch bark is a waste stream by-product that can be obtained in large quantities from regional paper mills,” reported NRRI officials in a news release. “The startup will obtain bark from sustainably managed and harvested resources in northern Minnesota and Wisconsin.”
Although pilot production is slated to begin in late spring or early summer, Garhofer estimates it will take about one to two years for full-scale market adoption. When full-scale production is underway, the CEO estimates The Actives Factory will employ between five and 12 FTEs. To date, the company has been self-funded, but is now in the process of raising $1 million in operating capital “to expand sales and production capacity.”
In addition to the jobs the company would create, Garhofer said it’s rewarding to participate in a venture that is taking science to the market.
“I think this is pretty exciting,” he said. “There’s a future in this and other products (derived from wood waste) that have benefit.”Previous BusinessNorth Exclusives Articles:
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