This past year, the world lost $1.2T due to 1.6B tons of wasted food, even as over 860M people in the world are undernourished. This number is forecast to rise to over $1.5T and 2B tons of food by 2030 — and entrepreneurs have noticed. The world’s food waste provides a massive opportunity to reconfigure the food supply chain to reduce waste and optimize costs. In fact, NewtonX research indicates that in first world countries alone there’s a $600B opportunity in repairing collaboration, infrastructure, and efficiency in the food supply chain around the world.
Thus far in 2018, VCs have invested over $2B in food tech. The opportunity in the industry goes beyond fiscal pay-off: as public trust in tech companies and VC money wanes, ethical investments provide an opportunity not only to maximize profits but also to reduce greenhouse emissions and help feed the massive undernourished global population.
NewtonX analysts surveyed the rotten food economy to determine the potential market, impacts, and payoffs for VCs.
The insights from this article are sourced from NewtonX surveys, panels, and expert consultations. To gain access to these services visit newtonx.com.
Genetic Modification, Incentivization, and ‘Ugly’ Produce
Food-tech startups including genetic modification to increase the shelf life of produce, building marketplaces to sell ugly or unsold food, and programs to improve incentivization for reuse have all received substantial investment from heavyweights including Andreessen Horowitz and Spark Capital this year. This marks a significant shift in interest: in 2015, just $93M was invested in waste tech, accounting for less than 2% of the total $4.6B investment in the agriculture-tech sector that year. In 2018, however, with the rise of precision agriculture startups, interest in food waste and optimization has gained traction.
For instance, a startup called Full Harvest just raised $8.5M to facilitate a supply chain between the excess produce that farms throw away because it doesn’t meet the aesthetic standards of grocery stores, and retail juice franchises that want to make their products more affordable. Currently, farms that provide produce to grocery stores typically only sell 75% of their harvest; now, with Full Harvest, they can use the reject produce to serve a different industry at lower cost to the juice retailers.
Similarly, a startup called Imperfect Produce recently raised $30M to deliver “ugly” vegetables to consumers. It joins several other startups around the country doing the same or similar things, including Perfectly Imperfect Produce, Hungry Harvest, and 412 Food Rescue. These companies “rescue” perfectly good, but aesthetically displeasing food, and send it in weekly batches to consumers — thereby solving the exact same problem as Full Harvest, but re-distributing the food to consumers rather than retailers.
Finally, one of the largest foodtech investments of the past year was in Apeel Sciences, a company developing a plant-based spray-on second skin for produce that prolongs its shelf life by up to three times. The company recently raised $70M in Series C, led by Viking Global Investors with Andreessen Horowitz. Since the company introduced its avocados to Harps Food Stores, the store saw 65% increase in margin and a 10% increase in avocado sales, in large part because the store is wasting so much less.
A $700B Philanthropic Opportunity
Because the food industry currently has so much waste at every stage of the supply chain — farming, retailers and grocery stores, consumer waste, and restaurant waste — companies that successfully repair even just one part of the supply chain will see high adoption and large efficiency savings. Additionally, consumers and retailers in the U.S. and certain other European countries are increasingly mindful of waste and open to eating imperfect looking produce. It’s no wonder that so many startups delivering ugly produce have seen success around the country.
In Sweden, a startup called Karma has even raised $12M in Series A to provide restaurants and grocers with a marketplace to sell unsold food at a discount to consumers. The average consumer is more aware of waste and the environment than ever before, and that has launched a new generation of food tech startups aimed at using as much edible food that is produced as possible. Startups that can repair food supply infrastructure, efficiency, and collaboration will successfully tap into a $700B opportunity — and help the planet and other people in the process.