November 19, 2022
Welcome to a special weekend edition! Today's newsletter is a collaborative Pro Deals dive into the world of food waste tech by Kimberly Chin of Axios Pro Retail and Megan Hernbroth of Axios Pro Climate, edited by Claire Rychlewski.
1 big thing: Food supply chain's waste problem
While technological innovations in the supply chain have improved access to fresh food and cut waste, solving the food waste challenge at scale remains an uphill battle, Kimberly and Megan write.
Why it matters: The issue presents a trillion-dollar opportunity for myriad startups focused on food waste — if they're able to navigate complex silos and shifting regulations.
Context: Food waste companies raised $1.85 billion in private funding as of September, per Crunchbase. (See more on major players below.)
- Around 84% of grocery retailers have plans to invest in food waste technologies over the next two years, according to a Coresight Research survey.
The big picture: The cost of incorporating food waste technology into the supply chain is high — and the current alternative (i.e., the landfill) is much cheaper, says Callie Babbitt, a Rochester Institute of Technology professor.
- The food supply chain is siloed, making incentivizing the mass scaling of new technology challenging, says Babbitt, who leads a group that works on circular economy solutions.
Zoom in: When economic incentives fail to take hold, state and local policies aligned with waste reduction may spur innovation in the supply chain.
- California passed a statewide law requiring food waste separation and management from businesses and residences alike.
- New York has passed a similar bill that calls for businesses to donate excess food and recycle scrap that can’t be donated.
Zoom out: On a national level, the Food and Drug Administration’s Food Traceability rule went into effect this week, requiring companies that manufacture, process, pack or store foods to maintain records and provide that information to the FDA within 24 hours or a reasonable time frame.
- "This is one of those infrastructure requirements that continues to be handled on paper and pen, even in large enterprise customer settings, and so this will drive tech adoption," says Noramay Cadena, a managing partner at Supply Change Capital, a venture firm that focuses on food technologies.
- Brandon Hill, CEO of Vori, a grocery digital management platform, likens accommodative policy to legislation around electric vehicles.
- "If we want to see any mass scale adoption… we might want to see a similar type of program to incentivize technology adoption at scale," he says.
Meanwhile, corporate America is working to better mitigate its carbon footprint, especially the ever elusive Scope 3 emissions.
- Scope 3, which encompasses the carbon footprint of a product's entire lifecycle from seed to landfill and often accounts for a large portion of a company's total footprint, is often hard to measure given the siloed nature of the supply chain.
The latest: That’s why software startups that help companies measure carbon through the supply chain have skyrocketed in popularity among investors.
What they're saying: "When you connect the nodes from the silo to the shelf, then everybody becomes more efficient, a lot less food gets wasted, and it saves everybody money," Vori's Hill says. "That's the importance of a connected supply chain."
The bottom line: Ironically, the most effective way to scale food waste technology is to de-scale the supply chain, says Ruben Smit, CEO of grocery e-commerce startup Sunrise Daily Goods.
- The more localized the supply chain becomes, the easier it becomes to mitigate waste, Smit says. "All of these outcomes are possible if you keep the supply chain short."