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BFD Expert Voices - Retail Deals

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American families generated more than half of all the food waste produced in the U.S. in 2021, per data from the nonprofit ReFed.

Why it matters: The sector-by-sector breakdown of where food waste occurs in our society helps illustrate where startups may achieve the most impact — and, in turn, where investment dollars should flow, Alan writes. 

Of note: Roughly 40% of all food is wasted in the U.S., per Feeding America, a Chicago-based organization working to improve food access.

The vast majority of that food is discarded because of confusion over expiration labels.

Meanwhile, restaurants throw away about a half pound of food for every meal they serve due to inefficiencies in ordering or food preparation, and from patrons simply ordering too much food.

1 big thing: Spotlight on the source 

Seattle startup Ryp Labs raised an $8.1 million Series A to get its food waste-fighting stickers on more fruit and vegetables in retail outlets, the company tells Katie exclusively.

Why it matters: Food waste is a massive climate and economic problem and tools to reduce waste could save businesses money, feed more people, conserve water, and lower greenhouse gas emissions.

Details: Ryp Labs, founded in 2017,  raised the round from lead investor King Philanthropies, and with participation from Good Investors, BCP Ventures, Argosy Foundation and the Ocean Born Foundation.

Ryp Labs CEO Moody Soliman says the 12-person company will use the funds to continue to develop the product and for a wider commercial launch next year.

How it works: The company's stickers release plant-based compounds that mimic how the plant naturally protects itself and can prevent premature rotting, stimulate the plant's immune system, and extend shelf life.

Different combinations of compounds are used for different groups of fruits and vegetables, and Ryp Labs can also make the compound product in different formats, like little satchels.

Zoom in: Ryp Labs is conducting pilots with retailers, including a recent paid-for-pilot for strawberries with a large unnamed U.S. retailer.

Soliman says the results of the three-month pilot were that the retailers had a 50% to 66% extension of shelf life for the strawberries.

The retailer also surveyed customers who bought the strawberries with the stickers on the inside of the packaging and found that the customer was more satisfied with the strawberries that stayed fresher for longer in the fridge.

The big picture: Food waste is a tricky problem, and there are inefficiencies all along the supply chain from farm to table and beyond.

When food waste rots in landfills it emits methane, a greenhouse gas that's more potent than carbon dioxide.

The bottom line: It'll take a combination of lots of different types of solutions — from tapping digital technologies to converting waste into energy, to changing regulations — to tackle the problem.

2.  $8.1M for food-waste fighting stickers

an illustration of a person holding an apple with a snail sticker on it 

As the restaurant industry embraces AI, stakeholders are hoping the technology can solve the costly problem of food waste, Kimberly writes.

Why it matters: Commercial kitchens typically waste 4% to 10% of the food they buy before it reaches a customer's plate.

Consumer-facing restaurants and retail represent the second-largest source of wasted food — or about 29% of the total, according to the Natural Resources Defense Council.

What they're saying: "Many restaurants don't even capture how much they're wasting," says Ingo Stork, CEO of kitchen management software company PreciTaste.

"There's a lot more complexity and kind of navigating how much do I actually need to produce and prepare, which is not necessarily part of the intuition of an existing restaurant team," Stork says.

What's happening: The challenge really "starts with the back of the house" — the kitchen, says Jim Balis, managing director of the strategic operations group at restaurant-focused investment firm CapitalSpring.

There's also a labor component, says Melitas Ventures partner Michael Steib.

"Many of their [kitchens'] processes rely on untrained labor," largely because of high staff turnover, Steib says.

"That model creates inefficiencies in the sense that not everyone in the restaurant always knows exactly how much food to produce," especially when there are "peaks and troughs in demand," he says.

What we're watching: This is where technology can step in.

PreciTaste, for instance, has software that adjusts kitchen workflows to make cooking and ingredient preparation recommendations that ensure order accuracy and freshness.

Predictive analytics from AI will hugely impact restaurant waste, Balis says.

"You know almost exactly the amount of food that you would need, and it limits the amount of waste that you would otherwise incur if you didn't have that tool available to you," Balis says.

Restaurants can also create new dishes with the leftover ingredients using AI.

"Automation is really where it's at because there's even an element of food waste that you're not aware of," Balis says

Yes, but: "Restaurants need to be open to the opportunities that technology can present. I also think they need to do their due diligence," Steib says.

"Nothing is worse than implementing a piece of technology and then it ends up not working right, or it just doesn't generate the return that is hoped for," Steib says.

Meanwhile, companies like McDonald's and Chipotle are investing in robotics to solve supply chain inefficiencies.

But that is often difficult to scale due to the space, training and trialing you need to do with staff.

Of note: Advances in kitchen equipment, cooking equipment and oven equipment have made cooking more efficient.

You will have less undercooked or overcooked meat with the right tools, Balis says.

The bottom line: For food waste technology solutions to scale, proving out the economics is key.

If vendors can do that, "a lot of times operators are willing to make the investment," Balis says.

3. Tackling waste in restaurant supply chains 

Illustration of a person pushing food from of a plate.

Startups working to reduce food waste are still finding relatively warm reception among venture investors, even if deal-making in the sector has slowed.

Why it matters: Wasted food is a multibillion-dollar problem that also generates 6%-11% of global greenhouse gas emissions, Alan writes.

Of note: Decomposing food is responsible for nearly a quarter of emissions from U.S. landfills and equivalent to the emissions from 37 million cars.

It represents $280 million in lost value.

The big picture: Venture investors have backed food-waste startups spanning logistics software, online marketplaces, fuel production, and hardware offerings.

Between the lines: The food-waste space is exceptionally broad, encompassing even animal-feed startups that are developing sustainable alternatives to conventional feeds like corn.

State of play: Deals this year include...

Matsmart, a Swedish startup that sells food and consumer products that might have otherwise been thrown away. It announced it had raised a €40 million (~$43.7 million round) this week.

Winnow, a U.K.-based startup that detects and measures food waste in commercial kitchens, closed a $10 million Series C in June.

Divert, a Concord, Massachusetts-based software maker that raised $100 million and closed another $1 billion in project financing this spring to build food waste processing facilities.

Agroloop, a Hungarian maker of sustainable feed and fertilizer to recycle pre-consumer food waste, closed an €18 million Series A last December.

4. Venture capital pours in dollars to cut waste

Finnish renewable fuel provider Neste will triple the amount of used restaurant oil that its subsidiary collects to be used as a feedstock for powering planes and trucks, the company tells Katie.

Why it matters: There's a global shortage of sustainable aviation fuel made from bio-waste.

Details: Over the last three years, Neste has been on an acquisition spree to expand its on-the-ground logistics for collecting used cooking oil from restaurants.

The company first bought Mahoney Environmental, which subsequently snapped up SeQuential Environmental Services.

The result is that Neste, via Mahoney, is now collecting used cooking oil from 85,000 restaurants (including airport, theater and stadiums kitchens) across the U.S., representing a sprawling network of 700 employees and 500 pump trucks.

Most of Mahoney's drivers start their day at 2am, trying to beat traffic and drive to over a dozen restaurants daily to pick up cooking oil from large tanks.

"It's a really complicated logistics puzzle," explained Mahoney Environmental CEO Dave Kimball.

Zoom in: Once the used cooking oil is collected from the tanks to the pump trucks, Mahoney cleans and ships it to Neste refineries, like a recently expanded one in Singapore.

Kimball says Mahoney will end 2023 having collected about 400 million pounds of used cooking oil and will increase that amount to 630 million pounds by 2025, and over a billion by 2030.

Neste's focus on waste and residues (which includes animal fats) has evolved over the years. Originally Neste included palm oil as a feedstock, but today waste and residue account for over 90% of Neste's feedstocks.

Today, Neste's sustainable aviation fuel production capability is at about 365 million gallons globally, and by early 2024, that number is expected to reach 515 million gallons of sustainable aviation fuel per year.

The big picture: The market for sustainable aviation fuel is still severely constrained.

Neste sells every drop of sustainable aviation fuel it can produce.

But the current volume of sustainable aviation fuel represents only 0.1% of jet fuel use, according to Bloomberg New Energy Finance; a drop in the bucket filled with petroleum-based jet fuel.

If global sustainable aviation fuel isn't scaled up to meet demand, many in the aviation sector won't be able to meet proposed net-zero goals.

5. A well-oiled machine

A Neste tanker truck carrying sustainable aviation fuel at an airport

A Neste tanker truck carrying sustainable aviation fuel at an airport. Photo courtesy of Neste

Here's what's happened this (short, yet news-filled) week. Stay tuned for some more alerts before we go dark for the holiday. 

Zespri launches $2M fund to kick-start kiwi innovation

McDonald's pays $1.8B to buy back Carlyle's China stake

Private equity to buy eBay-backed classifieds business Adevinta for $13 billion

Subway-Roark deal reportedly faces FTC probe

Scoop: Swander Pace selling Patriot Pickle

6. Catch up quick

🍽️ Today we have a special joint newsletter with Axios Pro Climate Deals authors Alan Neuhauser and Katie Fehrenbacher: a deep dive into food waste.

Thanks for reading! We'll be back in your inbox on Monday, setting the stage for the week ahead.

🙏 Big thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece for today's edits.

November 22, 2023

1 big thing: Spotlight on the source