35% of all food goes unsold or uneaten in the United States. If this fact doesn’t shock you, it’s probably because you’ve heard it before. America’s food waste problem is common knowledge among stakeholders in the food and beverage industry. So are the environmental, social, and economic issues linked with this gargantuan inefficiency.
Let’s take a moment to review why food waste matters:
- Wasted Food = Wasted Land, Water, and Energy. Reducing food waste is the most powerful solution to the climate crisis, coming above plant-based diets, electric cars, and solar power.
- Wasted Food = Needed Food. Food waste from the U.S. and Europe is enough to feed the nearly one billion people suffering from hunger across the globe.
- Wasted Food = Wasted Money. Surplus food cost the food and beverage industry about $250 billion in 2019.
Uneaten Food Consumes:
If stakeholders in the food supply chain know all of this, why is food still the largest component in U.S. landfills? Let’s examine the top roadblocks to food waste prevention and learn from innovators how we can surmount them.
Problem #1: Lack of Infrastructure
When Alex Waite, co-founder of Shameless Pets, asks about the price-point of an ingredient to use in her upcycled pet food, she is often discouraged. Upcycled foods are made with ingredients “that otherwise would not have gone to human consumption,” yet they can be more expensive than their traditional counterparts.
Intuitively, this makes no sense. Shouldn’t food made with salvaged ingredients be less expensive, as producers reduce prices to sell what would otherwise be scrapped? They should be, but they aren’t—yet.
The current food supply chain is geared towards producing the most food possible, not to minimize waste.
Most stakeholders in the food supply chain have yet to develop this sort of infrastructure, so any salvaging of unwanted food is done by third parties, who face their own costs to be able to process these ingredients on site and transport them to producers like Waite. Every step of the elongated supply chain makes using surplus food more expensive.
Transforming surplus food into usable ingredients will become more affordable as co-product manufacturing technology scales, according to Dan Kurzrock, co-founder of Upcycled Foods Inc., which upcycles rescued brewer’s “spent” grain, among others, into nutritious ingredients such as ReGrained for various applications. The challenge, Kurzrock explains, is that adopting new infrastructure requires significant upfront investment, which at first seems risky, given that there is no immediate demand for novel co-product ingredients.
When Kurzrock began scaling his manufacturing process, he knew we would have to simultaneously grow both supply and demand. This is why, along with developing technology to use in partner breweries, Kurzrock built a snack brand that would drive consumer demand to match his growing supply. At Upcycled Foods Inc., Kurzrock uses what he’s learned from his snack brand to empower more innovators to develop and use foods made from “overlooked and undervalued” ingredients.
Problem #2: Stuck in the Past
It’s not just physical infrastructure that’s outdated. Often, it’s systems themselves. Millions of tons of food languish on warehouse shelves because manufacturers lack streamlined processes for liquidating excess inventory. Spoiler Alert is a Boston-based company that sells software that digitizes the liquidation process to efficiently get products from manufacturers to secondary markets.
Inventory optimization technology has long been used in other industries, but software used to liquidate apparel or furniture is poorly suited for the food and beverage industry, where the supply chain is complicated by expiration dates and temperature requirements. Given these variables, few food manufacturers already have their own systems to maximize profits by efficiently selling all possible inventory. Liquidation is a low priority for overextended salespeople using outdated technology; manufacturers see waste as an accepted cost of doing business. Without automation, it’s often easier to send excess inventory to a landfill rather than to a secondary retailer or nonprofit.
Manufacturers are primarily attracted to Spoiler Alert’s technology because of the revenue generated by increased sales. According to company data, manufacturers experience a 50% growth of liquidation revenue when they use Spoiler Alert’s technology. However, manufacturers are slow to understand the two-fold benefits of liquidation software—while increasing profits, they are also advancing their ESG goals. Ideally, all manufacturers would experience the economic and environmental benefits of waste-reducing inventory automation. For the time being, however, the time commitment and fixed costs of implementing new technology make this type of software inaccessible to many smaller manufacturers.
Problem #3: Spark for Change
60% of consumers are extremely or very concerned about food waste, and 62% are willing to pay more for food brands that are dedicated to reducing it. However, there’s a limit to how much more consumers are willing to pay for sustainable food. Foods produced with novel, waste-reducing processes are often sold at higher prices than their wasteful counterparts. Producers need capital to cover the costs of adopting less wasteful infrastructure without raising prices too high.
This is where investors come into play. To achieve the EPA’s goal of cutting food waste in half by 2030, ReFED recommends an annual investment of $14 billion. The return on investment in food waste reduction is significant—funding can produce a five-to-one return, $73 billion annually.
Investing in food waste has great potential, but it can also involve risk. It might take years for some food waste solutions to generate financial returns, as the whole food supply chain needs to improve simultaneously. Catalytic capital, which is patient, risk-tolerant, and flexible, is key to overcoming system-level barriers currently inhibiting large-scale food waste prevention.
Funding for food waste solutions often comes from a variety of sources, so it’s critical that solution providers are able to connect with the right mix of investors. New networks, such as the Food Waste Funder Circle (founded by ReFED and the Upcycled Food Association) and the ReFED Food Waste Action Network, provide the education and communication channels necessary for investors to feel confident about investing in food waste solutions.
Problem #4: Growing Momentum
While financial investment is critical to increasing the supply of less wasteful food, we also shouldn’t downplay the market-shifting power of consumer spending. Increasing demand for more sustainable food drives innovation and investment in food waste prevention.
Food waste solutions are gaining traction among consumers—searches and mentions of upcycled products increased 128% between 2020 and 2021. This could be, in part, because of the new Upcycled Certified label. As interest grows for the small, mission-driven companies that make up the majority of the Upcycled Food Association’s membership, larger brands, including US Foods and Del Monte, are also joining the food waste reduction movement.
The excitement around food waste solutions is encouraging, but consumer education is still the primary focus of Turner Wyatt, co-founder and former CEO of the Upcycled Food Association. Third-party labeling gives legitimacy to producers who are doing their part to reduce food waste, but consumers need to know to look for the label. Less than 10% of consumers are familiar with the term “upcycling,” according to Wyatt.
It’s unsurprising that awareness around food waste is just now beginning to grow—only in recent years has research revealed the true impact of waste across the food supply chain. Wyatt is confident that consumer awareness will continue to increase as a result of persistent education and marketing campaigns. Consumers are already beginning to understand that their food waste footprints extend beyond what they throw away in their own homes.
Food waste presents a challenge, but also an opportunity. Every stakeholder in the food supply chain has a chance to capitalize on the growing movement and harness the environmental, social, and economic benefits that will result.
This article was originally published on the Branchfood blog.
The views and opinions expressed in this guest blog post are those of the author and do not necessarily reflect ReFED's views and opinions.