Venture capitalists and large-scale investors are warming up to the business opportunities in reducing food waste. Throwing out food is similar to flushing money, and food waste adds up to a $1 trillion annual drain on the global economy, according to the U.N. Food and Agriculture Organization. The losses from food waste extend beyond the costs of production when considering the 800 million people who go hungry every day around the world.
Viable solutions that simultaneously solve these financial and socioeconomic issues have perked the interest of big-money investors. Companies dedicated to solving food waste secured $125 million in venture capital in 2018, according to a recent report from ReFED, a nonprofit that leverages data to reduce global food waste. Let’s take a closer look at some of the companies attracting investor attention right now—and break down what their ideas could mean for the future.
Food waste occurs at all levels of the value chain, but most of it happens in household trash cans. Households contribute 43 percent to total food waste in the U.S., and the average four-person family spends $1,500 on wasted food each year. This is an open door for businesses looking to help individuals reduce their food waste.
Smart fridges provide several solutions: Models from the likes of Samsung and LG have the capability to send expiration date notifications, create grocery lists, and provide views of their contents on mobile phones. Some of the newest models can even create recipes based around food that is about to expire.
While smart fridges may help to reduce waste, their high price tags restrict who can buy them. Prices exceed $2,000, at least double the price of a conventional refrigerator. Families confronted with this purchase decision likely consider whether waste savings will offset the price difference—and for many, smart fridges are out of budget.
An alternative exists in FridgeCam, a product sold by the U.K.-based company Smarter. It is far less expensive at about $196 and can be easily installed on any refrigerator. It has mixed reviews, though, drawing many complaints on its finicky camera. Users must individually tag the contents of their fridge and strategically place items to be recognized by the camera. The technology is simply not smart enough yet to make FridgeCam a convenient solution for most users.
Are last year’s venture capital investments a harbinger of future tech improvements? The jury is still out, but there are plenty of players in the game vying to make tech-driven solutions to food waste a reality at scale.
Other businesses are focused on reducing waste further up the supply chain. Grocery stores likely present the greatest opportunity to cut waste. Food waste in grocery stores is associated with multiple costs, including lost sales and disposal fees—creating a bottom-line incentive for companies to take action, infers Deena Shanker of Bloomberg.
Walmart, the world’s largest retailer, has taken the approach of reducing prices on produce with upcoming expiration dates. Anything that is left unsold is donated to food banks. The company is also prolonging product freshness by cutting the time it takes for produce like strawberries to travel from suppliers to its stores, Bloomberg reported.
Walmart’s size gives the company high bargaining power with its suppliers, a strategy that may not be an option for smaller grocery stores. Still, the Internet of things may help other large grocery stores mimic Walmart’s model. Installing sensors on product pallets can help suppliers predict freshness and make necessary adjustments. For example, a sensor can detect unfavorable temperature changes and alert the supplier before quality has been affected. Additionally, large suppliers can coordinate product expiration dates with their destinations. If a pallet of berries has been detected to expire soon, for example, the supplier can reroute the shipment to a closer destination.
The influx of capital into these business opportunities shines optimism on food waste issues, but it still remains to be seen if tech businesses can keep up with the challenge. If 2018 venture capital investments foreshadow future cash flows, we can expect to see significant growth in this industry coming soon.
Jenna Ammann is a student finishing her senior year studying Corporate Finance and Hospitality at UMass Amherst. She has a focus on investigating environmentally and financially sustainable food service business models. Jenna is from Westport, Massachusetts.