Shopping for Success: The Future of Grocery Sustainability
$40,280,000,000. This was the food waste management industry's valuation in 2022. Despite this astounding number, nearly 40% of all food in America continues to be wasted every year. No matter how much money is invested in waste reduction, these trends have barely budged. The problem is so large that the United Nations even included it as #12 on its list of Sustainable Development Goals, urging countries to support sustainable consumption and production patterns. Of the top 5 countries with the most food waste contributions per capita, 60% of them — the United States, Australia, and New Zealand — have increased their waste since 2015. In China and India, 92 million and 69 million tons of food is wasted yearly. These numbers underscore that the food waste problem is colossal, and the organizations involved have yet to find an efficient way to use their $40,280,000,000 value.
However, in the past 5-7 years, major food waste startups have made considerable progress. Ranging from streamlined delivery logistics to AI waste management applications, these companies aim to eliminate waste at every stage of the supply chain. There are 3 dominant segments within this space: grocery waste startups, AI startups, and restaurant waste startups. With unicorn-status IPOs, investments from Amazon, and $1.9B in venture capital investments, the food waste management space is one of the most exciting and transformative in the market.
The M&A Method Behind the Madness
Food waste startups leverage technology and unique delivery methods to create leaner grocery and restaurant supply chain systems. One of the most successful examples is Misfits Market. Misfits Markets is a platform for buying “ugly” produce that farmers would otherwise throw out, and selling it for 40% less than traditional retail prices. The company boasts an impressive $2B valuation — but something hindering stronger progress is the lack of an economy of scale. Despite being founded in 2018, Misfits Market has yet to become profitable. However, in 2022, Misfits Market acquired its competitor Imperfect Foods, hoping to use its formidable logistic networks of 450+ vans to become profitable by 2024.
This is a huge driver for successful food waste startups that can sustain the environment and themselves. Through increased consolidation, food waste startups can leverage M&A synergies to decrease prices, attracting more customers to switch to sustainable consumption. Grocery industry startups, in particular, are a major part of the food waste equation. They provide access to otherwise wasted merchandise and healthier ingredients at lower prices. However, these benefits cannot be realized until these companies become profitable — which industry consolidation is needed to accomplish.
AI and Apples
If grocery startups are one part of the food waste equation, AI FoodTech is another. Unique AI applications help stores predict expiration dates, reducing waste. Demand forecasting technology offers automated ordering and dynamic pricing software, reducing store waste. For example, AI applications like Crystal from Neolithics allow grocery stores to assess the ex’ exact moisture and acidity levels to estimate their expiration dates. Offerings like GK Software provide dynamic pricing tools that use AI to calculate discounts on perishable foods, maximizing sales before expiration.
Historically, grocery chains have been the slowest to pick up on technological trends. For example, many grocery stores still utilize newspaper ads, have limited online operations, and engage in minimal digital marketing. When retail stores began switching to e-commerce, department stores, bookstores, and furniture stores followed suit. Grocery stores, on the other hand, were the latest to the party. With the new AI revolution, they can reverse that trend and be at the forefront of innovation with these FoodTech solutions.
A School in Sustainability
There is also a third part to the food waste equation: the waste created by food establishments. Startups like Too Good to Go and Karma are leading the fight against waste in this arena, providing critical lessons for what the future of food waste reduction could look like. The only way to get restaurants and other establishments to adopt anti-waste practices is to attach savings to it. Too Good to Go alone saved 146M meals from ending up in landfills while earning restaurants at least 30% more revenue than they would have otherwise. To be successful, food waste startups need to increase profits for food establishments and provide value to customers. This is a perfect example of an industry where social good and profits are not mutually exclusive. In fact, most studies show that companies that incorporate Corporate Social Responsibility into their business models achieve higher profitability and returns on their investments. In a world where the UN SDGs are impossible to achieve without help from corporations, the grocery industry offers a positive example of success.
Pushing Forward
Still, success in this space has slowed. The statistics regarding waste growth still hold despite the rise of these waste management startups. While tech is a powerful force for change, stronger consumer and political support is needed to drive progress. Governments can help spur innovation and encourage new entrances through tax incentives. Large companies can leverage their size to engage in consolidation that creates profitable economies of scale. On top of this, consumers must change their existing biases towards traditional grocery methods. By leveraging food waste startups and FoodTech solutions, grocery stores could practice sustainability while becoming more profitable in an industry with already thin margins. The future of the food waste industry is more than smart-carts and AmazonFresh. With the right tailwinds, tech-enabled solutions can be a revolutionary driver for sustainable consumption and climate justice within food waste.