-- Deborah L. Cohen covers small business for Reuters.com. She can be reached at smallbusinessbigissues@yahoo.com --

By Deborah L. Cohen

CHICAGO (Reuters.com) - Every fall Americans rake up their leaves, stuff them into paper bags and kick them to the curb without ever thinking about the business opportunity they are throwing away.

Michael Dwork used to be one of those people, but that changed during a stint in India a few years ago while the 31-year-old was completing an MBA internship program. Dwork found himself marveling at the sight of the makeshift plates local peasant women were hand-crafting from fallen palm leaves, which they pressed in crude ovens along the side of the road.

"They looked absolutely horrible, covered in mold," recalled Dwork. "I totally fell in love with them. There was no design, there was no sanitary production, there were no 50 other things, but at the end of the day, the concept was really cool."

The natural process gave Dwork the idea to start VerTerra Dinnerware, an eco-friendly maker of compostable plates, bowls and serving dishes. Fast-forward to today and VerTerra (www.verterra.com) is a growing, Brooklyn, New York-based startup that produces a million pieces of disposable dinnerware in its India factory every month. The company supplies these products to wholesale customers, such as hotels and caterers, as well as food service operators, including those serving meals in the box seats at Cowboys Stadium and the U.S. food tent at the upcoming Vancouver 2010 Winter Olympics.

In the past year, retail customers have joined the mix. Half of Whole Foods' U.S. stores now carry the plates, which retail at 50-75 cents per piece, and VerTerra has been promised distribution throughout the organic grocery chain's full system by early next year.

INSATIABLE DEMAND

Dwork seems slightly stunned by the success of his venture, having tapped into a seemingly insatiable demand for environmentally-friendly consumer products. The market for eco-friendly disposable dinnerware alone now includes a broad range of items made from the likes of bamboo, sugar cane and starches using corn and soy.

"We've gone from an idea to a company doing a pretty good run rate every month in two years," he said, noting sales grew roughly 1,000 percent from September 2008 through ‘09. While he won't disclose specifics, Dwork said sales are somewhere below $3 million annually. The U.S. staff includes three other full-time workers and a sales network that represents the line.

Despite the momentum, one of the biggest obstacles to selling into the space is convincing customers to overcome their visual concerns about a product that looks very different from the conventional, chemically-treated white plates that people associate with disposable dinnerware. Dwork admitted that VerTerra, which is sometimes mistaken for bamboo, requires a bit of an adjustment, especially for chefs.

"Their food is their art, and they want it well represented," said Dwork. "You tell someone you're making plates out of leaves and their mind gets kind of blown."

Once they try, however, they tend to stay. Repeat orders stand at 90 percent, he said.

"Customers are very receptive," said Bob Uffer, corporate general manager for Statue of Liberty concessionaire Evelyn Hill Inc., which serves organic menu items at New York's Liberty and Ellis Islands. The company switched to VerTerra from bamboo products earlier this year.

"It's got a great look to it," Uffer said. "These were just a better fit."

Dwork, who after several years in banking had planned on a post-MBA career doing private-equity work in emerging markets, becomes most passionate when he discusses VerTerra's space in the spectrum of environmentally-friendly products. "Every product (customers) use of ours is a replacement for a paper or plastic product," he said. "You're saving that resource."

The process begins in rural India, where VerTerra operates a factory some 300 kilometers from the southern city of Bangalore, employing 160 workers. Trucks scour the region to pick up cast-off palm leaves from farms and plantations, among several forms of agricultural waste that are typically disposed of by burning.

"At the very least they should be turned into paper," said Dwork.

The plates, which have won several design awards, contain no additives; they are made only from the fallen leaves and filtered water. The major difference between VerTerra and the original ‘beggars plates' that sparked Dwork's initial interest are cleanliness and uniformity.

"We make a plate on a system that uses considerably more pressure, considerably more heat," he said. "We also use multiple sterilizing techniques. You just want the highest level of sanitary standards, recognizing what the products are going to be used for."

Back in the States, composting allows the food scraps and dinnerware to be disposed of together, simplifying the waste stream and cutting down on labor. Not everyone composts, but Dwork has worked with some local institutional customers to help them find composting facilities.

While Dwork is somewhat reluctant to speculate about the future, investors in his company are more ardent. Private equity firm DFJ Gotham Ventures is one of several backers that to date have put in more than $2 million.