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Alpaca Food Supply Chain Tech Field Study

A research report by GP, Aubrie Pagano, of Alpaca VC

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Field Study:
Food Supply Chain Tech
By Aubrie Pagano
Food Supply Chain Tech is service, information and infrastructure technology that is
used to allocate food resources in a safe, efficient, reliable and sustainable manner.
1. The food supply chain facilitates the distribution of $1.77 trillion worth of food in US. (usda.gov 2019)
2. In the US, median deal size in Food Tech increased by 50% from $2M in 2019 to $3M in 2020. Total
capital raised increased from $9.3M in 2018 to $13.4M in 2019.
3. Food Supply Chain (total 389 companies): 42 deals in 2018 and 33 deals in 2019 with over $3B
capital raised in each year. Significantly more than capital investments in 2017.
4. Supply chain (total 6334 companies): $15B total capital raised in 2019, 23% increase compared to
2018, and 300% increased compared to 2017. 2020 median deal size increased by 39% from 2019.
Why Food Supply Chain?
What is Food Supply Chain Tech?
Food Supply Chain is an enormous market.
Opportunity
• Global food system accounts for 10% of the world’s GDP and employs as many as 1.5 billion people.
• Global food logistics market reached a value of $100B (2018), projected to reach around $162B by 2024 (CAGR over 8%).
• Trading margins of agriculture commodities dropped from 15% in 1998 to 9% in 2018.1 Lower returns command the ability
to be cost competitive—which today is largely achieved through technology adoption.
• Less than one-quarter of executives feel that they’ve made significant progress in developing a playbook for the future.
What’s ahead?
• Changing consumer preferences will continue to boost organic and healthier food markets.
• Food safety regulation will lead to product/menu expansion, higher standards, and a more intense focus on traceability.
• Increased appetite for convenience will catalyze innovation in packaging, and operational challenges and cost
pressures (including rising labor costs) among equipment users are set to accelerate automation.
• COVID changed 85% of consumer’s food habits. The lasting effect of the pandemic, as well as a potential economic
downturn, urge food supply chain actors to pursue robust and resilient strategies.
Source: McKinsey Corporate Performance Analytics; Bayer “Feeding the World in a Pandemic”
The Food Value Chain
The number of actors in the food chain varies greatly at each level. In the US, around 2 million farms produce agricultural products for
processing via about 36,000 plants in the food and beverage industry. The food processors sell their products through approximately
16,500 companies within the food distribution industry. In 2019, $1.77 trillion was spent on total food expenditures by consumers,
businesses and government entities. (USDA)
Actors Producers Processors Distributors Consumers Gov/Regulators
Key
Responsibilities
Farming, ranching,
research and
development
Butchering, processing
& manufacturing,
marketing and sales
Distributing and
retailing
Shopping and
consuming
Public health and
safety, policy
Challenges Market strategy and
implementation,
regulatory compliance,
access to capital
Supply chain strategy,
achieving economy of
scale
Food safety and
traceability, supply
chain management
Food availability and
safety, health and
wellness, quality and
sustainability
Food availability and
safety, health and
wellness, quality and
sustainability
Industry Wide Challenges
Challenge Facts
Food Safety and Fraud • CDC estimates about one in six American becomes ill and 3,000 die from foodborne diseases each year.
• Food recalls increased by 54% to 28 million pounds annually on average during 2015-2019 compared to 2010-2014.
• Direct cost to a food company due to a recall is estimated to be $10 million; indirect costs including subsequent litigation,
compliance penalties and damaged reputation can be even greater.
• Food fraud refers to the international deception using food for economic gain. It costs the global food industry $30-40 billion
per year.
Rapid Population Growth
and Urbanization
• Global population growth means that food production needs to increase by 70% by 2050.
• Northern America is the most urbanized region with 82% of its population living in urban areas. Urbanization is associated
with more demands for convenient and “luxury” foods, this implies our dietary shift towards more energy-intensive
production and pre-prepared food.
• Rapid rise in number, size, and diversity of megacities make the food supply chain increasingly complex to manage and move
food from farm to table.
Food Waste • One third of globally produced food is wasted. In the US, food waste is estimated at between 30-40% of the food supply.
• Food waste is responsible for 6% of global greenhouse gas emissions. Production of lost or wasted food generates the
equivalent of 37 million cars' worth of greenhouse gas emissions in the U.S.
Inflexible Distribution
System
• Just about 50 factories process 98% of the nation’s beef. “Big Four” processors: Tyson Foods, JBS, Cargill, and National Beef,
accounted for 80% of beef market and are currently under antitrust investigation.
• Heavily consolidated system results in bottleneck under the stress of COVID, with 18 processing plants in the US closed in April
2020, affecting more than a third of the country’s beef and pork supply.
Changing Consumer
Behaviors due to COVID
• Consumers, forgoing public venues and eating at home, stocked up on groceries and supplies. Boosting food sales by 29% in
April 2020 over the prior year. However, sales declined at restaurants by 27%.
• E-commerce channel represents 10-15% of total grocery spend, increasing fivefold in April 2020. This created challenges
associated with last-minute delivery. Walmart, for example, has hired 50,000 additional people, and Instacart has hired
300,000, as they navigate new COVID-19-related safety precautions.
• Forecasts are uncertain about the duration of pandemic-related demand shifts and the recovery of the food-service economy.
Technology trends driving the industry forward.
AI/ML Analytics SaaS
Enhance supply chain
efficiency and
operational optimization
through data collection
along chain, which
provides valuable insights
and facilitates data
driven-decision making.
Sample:
• Sales and Operation
planning
• Waste Prevention
• Logistic Management
Food Traceability
Systems
Trace the flow of foods
throughout production,
processing and
distribution stages. Help
food companies and
governments more
efficiently identify, isolate
respond to the source of a
food safety issue and food
fraud concerns.
Sample:
• Real-time monitoring
IoT
• Blockchain-enabled
ledger
• Food sensing tech
Food Repurpose
Add value to byproducts
or surplus ingredients
through additional
processing Reduce food
waste and support a more
sustainable food system.
Sample:
• Upcycled food
products
• Novel edible by-
product
Automation &
Robotics
Reduce labor costs,
improve ecommerce
delivery times, and
alleviate labor
constraints. COVID
accelerated automation
technology to assist
human worker, make
warehouses safer, and
ensure continuity of
operations.
Sample:
• Warehouse
automation
• Autonomous delivery
robots
Digital Marketplaces
& E-commerce
Change food wholesaling
and retailing experiences
for stakeholders.
Realize a shorter time to
market and meet buyer
demands while reducing
food waste.
Sample:
• B2B platform
• B2C platform
• Excess redistribution
Mature Less Mature
Ad

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Alpaca Food Supply Chain Tech Field Study

  • 1. Field Study: Food Supply Chain Tech By Aubrie Pagano
  • 2. Food Supply Chain Tech is service, information and infrastructure technology that is used to allocate food resources in a safe, efficient, reliable and sustainable manner. 1. The food supply chain facilitates the distribution of $1.77 trillion worth of food in US. (usda.gov 2019) 2. In the US, median deal size in Food Tech increased by 50% from $2M in 2019 to $3M in 2020. Total capital raised increased from $9.3M in 2018 to $13.4M in 2019. 3. Food Supply Chain (total 389 companies): 42 deals in 2018 and 33 deals in 2019 with over $3B capital raised in each year. Significantly more than capital investments in 2017. 4. Supply chain (total 6334 companies): $15B total capital raised in 2019, 23% increase compared to 2018, and 300% increased compared to 2017. 2020 median deal size increased by 39% from 2019. Why Food Supply Chain? What is Food Supply Chain Tech?
  • 3. Food Supply Chain is an enormous market. Opportunity • Global food system accounts for 10% of the world’s GDP and employs as many as 1.5 billion people. • Global food logistics market reached a value of $100B (2018), projected to reach around $162B by 2024 (CAGR over 8%). • Trading margins of agriculture commodities dropped from 15% in 1998 to 9% in 2018.1 Lower returns command the ability to be cost competitive—which today is largely achieved through technology adoption. • Less than one-quarter of executives feel that they’ve made significant progress in developing a playbook for the future. What’s ahead? • Changing consumer preferences will continue to boost organic and healthier food markets. • Food safety regulation will lead to product/menu expansion, higher standards, and a more intense focus on traceability. • Increased appetite for convenience will catalyze innovation in packaging, and operational challenges and cost pressures (including rising labor costs) among equipment users are set to accelerate automation. • COVID changed 85% of consumer’s food habits. The lasting effect of the pandemic, as well as a potential economic downturn, urge food supply chain actors to pursue robust and resilient strategies. Source: McKinsey Corporate Performance Analytics; Bayer “Feeding the World in a Pandemic”
  • 4. The Food Value Chain The number of actors in the food chain varies greatly at each level. In the US, around 2 million farms produce agricultural products for processing via about 36,000 plants in the food and beverage industry. The food processors sell their products through approximately 16,500 companies within the food distribution industry. In 2019, $1.77 trillion was spent on total food expenditures by consumers, businesses and government entities. (USDA) Actors Producers Processors Distributors Consumers Gov/Regulators Key Responsibilities Farming, ranching, research and development Butchering, processing & manufacturing, marketing and sales Distributing and retailing Shopping and consuming Public health and safety, policy Challenges Market strategy and implementation, regulatory compliance, access to capital Supply chain strategy, achieving economy of scale Food safety and traceability, supply chain management Food availability and safety, health and wellness, quality and sustainability Food availability and safety, health and wellness, quality and sustainability
  • 5. Industry Wide Challenges Challenge Facts Food Safety and Fraud • CDC estimates about one in six American becomes ill and 3,000 die from foodborne diseases each year. • Food recalls increased by 54% to 28 million pounds annually on average during 2015-2019 compared to 2010-2014. • Direct cost to a food company due to a recall is estimated to be $10 million; indirect costs including subsequent litigation, compliance penalties and damaged reputation can be even greater. • Food fraud refers to the international deception using food for economic gain. It costs the global food industry $30-40 billion per year. Rapid Population Growth and Urbanization • Global population growth means that food production needs to increase by 70% by 2050. • Northern America is the most urbanized region with 82% of its population living in urban areas. Urbanization is associated with more demands for convenient and “luxury” foods, this implies our dietary shift towards more energy-intensive production and pre-prepared food. • Rapid rise in number, size, and diversity of megacities make the food supply chain increasingly complex to manage and move food from farm to table. Food Waste • One third of globally produced food is wasted. In the US, food waste is estimated at between 30-40% of the food supply. • Food waste is responsible for 6% of global greenhouse gas emissions. Production of lost or wasted food generates the equivalent of 37 million cars' worth of greenhouse gas emissions in the U.S. Inflexible Distribution System • Just about 50 factories process 98% of the nation’s beef. “Big Four” processors: Tyson Foods, JBS, Cargill, and National Beef, accounted for 80% of beef market and are currently under antitrust investigation. • Heavily consolidated system results in bottleneck under the stress of COVID, with 18 processing plants in the US closed in April 2020, affecting more than a third of the country’s beef and pork supply. Changing Consumer Behaviors due to COVID • Consumers, forgoing public venues and eating at home, stocked up on groceries and supplies. Boosting food sales by 29% in April 2020 over the prior year. However, sales declined at restaurants by 27%. • E-commerce channel represents 10-15% of total grocery spend, increasing fivefold in April 2020. This created challenges associated with last-minute delivery. Walmart, for example, has hired 50,000 additional people, and Instacart has hired 300,000, as they navigate new COVID-19-related safety precautions. • Forecasts are uncertain about the duration of pandemic-related demand shifts and the recovery of the food-service economy.
  • 6. Technology trends driving the industry forward. AI/ML Analytics SaaS Enhance supply chain efficiency and operational optimization through data collection along chain, which provides valuable insights and facilitates data driven-decision making. Sample: • Sales and Operation planning • Waste Prevention • Logistic Management Food Traceability Systems Trace the flow of foods throughout production, processing and distribution stages. Help food companies and governments more efficiently identify, isolate respond to the source of a food safety issue and food fraud concerns. Sample: • Real-time monitoring IoT • Blockchain-enabled ledger • Food sensing tech Food Repurpose Add value to byproducts or surplus ingredients through additional processing Reduce food waste and support a more sustainable food system. Sample: • Upcycled food products • Novel edible by- product Automation & Robotics Reduce labor costs, improve ecommerce delivery times, and alleviate labor constraints. COVID accelerated automation technology to assist human worker, make warehouses safer, and ensure continuity of operations. Sample: • Warehouse automation • Autonomous delivery robots Digital Marketplaces & E-commerce Change food wholesaling and retailing experiences for stakeholders. Realize a shorter time to market and meet buyer demands while reducing food waste. Sample: • B2B platform • B2C platform • Excess redistribution Mature Less Mature
  • 7. Investible traits of key technologies for Alpaca VC: Asset light • Low upfront investment in hardware or physical assets Fast Growth • Short time to market • Prepared for rapid scaling in growth stage; scalability Agility • React immediately to market changes • Constant adjustment to optimize product market fit High Adaptability • User friendly UI and UX for broad user (non-technical) adoption • Retrofit solution or minimal upfront change • Easy and seamless integration with other systems Less Regulated • Focusing on market that has low regulatory barriers We narrowed away from Robotics and Food Traceability as result
  • 8. VC Investment Deal Count 0 50 100 150 200 250 300 350 2016 2017 2018 2019 DealCount Supply Chain Tech 0 50 100 150 200 250 300 350 2016 2017 2018 2019 DealCount Food Tech Source: Pitchbook Data
  • 9. Capital Raised $0 $2 $4 $6 $8 $10 $12 $14 $16 2016 2017 2018 2019 CapitalRaised Billions Supply Chain Tech $0 $2 $4 $6 $8 $10 $12 $14 $16 2016 2017 2018 2019 CapitalRaised Billions Food Tech Source: Pitchbook Data
  • 10. Capital Raised from VC Investments (Food Supply Chain) $0 $2 $4 $6 $8 $10 $12 2014 2015 2016 2017 2018 2019 CapitalRaised Billions Investments Over Time 46 Companies 187 Deals 726 Investors $5.60B Largest Deal Source: Pitchbook Data
  • 11. VC Deals in 2019 & 2020 Top deals focusing on mature technology trends Start-up Top Funding ($M) Latest Round Innovation Trend Challenge Addressed Company Description Doordash 2935 Series H Marketplace, Last mile delivery Urbanization Food delivery application Instacart 2270 Series G Marketplace, Last mile delivery Urbanization Grocery delivery application Sun Basket 140 Series E Meal Delivery Service Distribution, food waste Subscription meal delivery service Fabric 136 Series B Robotic, micro fulfillment Distribution Automated logistics fulfillment solution GrubMarket 106 Series C Marketplace, SaaS Distribution Farm-to-table food delivery Cheetah 72 Series B Marketplace B2B distribution Wholesale B2B food supplier Flexe 64 Series B Marketplace Distribution, Warehouse Warehousing space on-demand
  • 12. VC Deals in 2019 & 2020 Top deals focusing on emerging technology trends Start-up Top Funding ($M) Latest Round Innovation Trend Challenge Addressed Company Description Foodlogiq 30 2nd Round SaaS, Blockchain Food safety Supply chain transparency software Crisp 26 Series A Data Analytics Productivity, food waste Demand forecasting platform for the food industry Afresh 20 Series A Data Analytics – AI Productivity, food waste AI platform for fresh supply chain management Intello Labs 9 Series A Data Analytics – AI/ML Food safety, food waste Quality assessment of food commodity Codify 5 Early State VC Data Analytics – ML Food waste Farm to kitchen technology solution Connecting Food 5 Early State VC Food traceability – Blockchain Food safety Food tracing platform ReGrained 4.5 Early State VC Upcycle Food waste Zero waste snack
  • 13. M&A Overview Top M&A Activities 2019-2020 • Just Eat Takeaway acquired GrubHub for $7.3B • Uber acquired Postmates for $2.65B • Uber acquired Cornershop for $459M • Target acquired Deliv as the retailer ramps up its same-day delivery capabilities. • Workday acquired Scout for $540M M&A activities in the Food Tech vertical have dramatically increased over the past 3 years in terms of deal count, with a median deal size of $107M in 2019. 0 5 10 15 20 25 30 35 40 2014 2015 2016 2017 2018 2019 DealCount Corp/Strategic M&A Investments Over Time Source: Pitchbook Data
  • 15. What is a Food Digital Marketplace & E-commerce? Digital Marketplace and E-commerce solutions are online platforms designed to sell a selection of products. They can either offer a broad range of products or specialized type of products that connect B2B or B2C. Other core characteristics of food marketplaces include facilitating direct transactions among multiple sellers and buyers; often, sellers pay commission fees to gain access to a specific consumer base. Continued development of tech enablement such as payments and security, as well as a shift in consumer behavior, have fueled the growth of startups in this ecosystem. Food and beverage, still the least-penetrated category online, is expected to grow 58.5% in online sales in 2020. Restaurant Delivery E-grocery Wholesale Platforms E-Procurement & Supporting Solutions Meal Kits Virtual Farmer’s Markets Surplus & “Ugly” Product Marketplaces Description On-demand platforms connecting restaurants and customers. Aggregating restaurants, brands, and data in-app and providing delivery services to the customers. In U.S. online food delivery penetration could rise from 6% (~$19bn) in 2018 to 13% (~$60bn) in 2025. (Morgan Stanley) Online grocers provides e- commerce services for grocery items to consumers. The U.S. online grocery market was estimated to generate sales worth of about $28.68B in 2019, with sales forecast to reach $59.5B by 2023. (Statista) Wholesaling platforms eliminate legacy intermediary players in the supply chain, streamlining payments and invoicing processes and helping restaurants source from a vetted network of producers to ensure ingredient quality and competitive prices. These enterprise softwares are designed for food industry suppliers and vendors. They provide innovative solutions to meet the demand of users as food supply chain shifts to online and players participate in the digital marketplace. Meal kit subscription models provides consumers with pre-made meals or portioned ingredients paired with recipes. By 2022, this market is expected to reach 11.6 billion dollars. (Statista) Websites or apps let users order fresh produce online from local farmers and artisanal food producers. Marketplaces for ugly and surplus produce. Bridging the gap by connecting “imperfect” products to buyers who don’t need the aesthetics. Discounted pricing is often offered, and they help solve the massive food waste problem . In the US 10.1 million tons of food are left unused on farms and in packing facilities each year. Examples Doordash, Uber Eats, Grubhub Thrive Market, Peapod, Instacart, Jupiter Choco, Cheetah, Pod Foods, Pepper, Dine Market Uppler, Gwholesaler, Mercatus Blue Apron, Hello Fresh, Hungryroot, Freshly Good Eggs, OurHarvest Imperfect Foods, Full Harvest
  • 16. Three areas that interest us most Why: • Centralized, stagnant and antiquated wholesaling and distribution systems • B2B platforms reduce operation cost, markups and hidden fees, and pass on the costs to end consumers • Industry is ripe to be disrupted and repeat the B2C playbook Value Add: • Convenience and reliability of the ordering, invoicing and fulfilment process • Recommendation algorithm based on demand and market data • vertical integration from farm to table, B2B2C marketplaces, ability to pass on cost saving to users Why: • Offline to Online evolution, growth in adjacent industries (ie., Apparel) • The need and demand from incumbent companies to adapt and cope with the digital ecosystem • Competing for time and lack of internal capacity and talent Value Add: • Accelerate and complement the digital supply chain revolution • Improve operational efficiency under time constraints • Solutions include: B2B marketplace development solutions, Enterprise software platforms-- financial, inventory management, CRM Why: • 40% of the food wasted by weight occurs at consumer-facing businesses (e.g., restaurants, grocery and supermarket stores) • The food industry spends $1.3 billion a year to dispose of unsold food • Tech and data enable matching and price adjustments to help solve the food waste problem Value Add: • Real-time information about available food • Food quality control and assurance, customization at scale, end-of-life product management • Ability to deploy route planning and recurring order fulfillment to minimize last mile delivery costs and time 1. Wholesale Platforms 2. E-Procurement, Supporting Solution 3. Surplus Redistribution
  • 17. Food Digital Marketplace Startup Examples Value Prop Business Model Capital Raised to date Pod Foods Online B2B ordering platform for retailers and brands, providing real-time analytics, data solution, inventory and fulfillment management. Sales volume based commission fee. Two-tier fee structure: full-service distribution or direct ordering solution, ranging from 8%-25%. $7.27M Uppler B2B marketplace software solution provider, offering all-in-one solution, creating private and custom marketplaces and e-procurement platforms. SaaS model with fixed monthly fee. Privately Held (no-backing) Cheetah Wholesale groceries and restaurant supplies marketplace offers businesses an affordable solution for the procurement of their daily supplies. It expanded into direct-to-consumer during COVID. Facilitate the transaction between merchants and buyers. Service fee is charged based on the order placed by restaurant (buyer). $72.72M Handshake Developer of multi-channel B2B ecommerce platform (food and beverage is one of its focus areas) for wholesalers and B2B sales reps to facilitate order management, product and pricing updates, and other customization features. SaaS model. Handshake Rep pricing starting from $39.95. Customized pricing for Handshake Direct (B2B optimized web storefront/buyer app). $23.5M, acquired by Shopify in 2019 (under $100M) Imperfect Foods Online food market, sourcing ”ugly” and surplus food from farmers and selling at discounted price directly to customers, hence reducing food waste by matching supply and demand. Subscription model. Weekly grocery staples and pantry items delivery to the door, box pricing starts from $16-$24. $145.2M
  • 18. Food Digital Marketplaces: Key Drivers and Challenges Drivers • Consolidated distribution system is ripe for disruption: With physical plants and store closures, COVID highlights the vulnerability. • Evolving consumer need: Increasing importance placed on convenience, quality and personalized shopping experience. • Readily available infrastructure and technology: On-demand delivery. online payment capabilities, and e-commerce solutions. • Ecosystem maturity: Popularity of E-commerce and direct to consumer brands in retail. • Profitability and Logistics: Lower overhead cost, supply chain efficiency and wider reach. • Food and Beverage e-commerce sales is the fastest-growing and least penetrated e-commerce category. Challenges • Last mile delivery is burdensome to supply chains, as consumer behaviors change and there is increased appetite for on-demand delivery; additionally, food and cold chain delivery becomes the biggest cost driver in the supply chain. • Customer loyalty and repeat purchases: B2C marketplaces usually have low switching costs to users and hence low customer loyalty. • Balance between unit economics and growth: High customer acquisition and retention costs, while at the same time multi-sided platforms rely on economies of scale to reap the full benefit and generate operation efficiency. • Disintermediation: Due to the revenue model, which heavily reply on commission/referral fee of GMV traded via digital marketplace, buyers and sellers are likely to find ways to circumvent the marketplace.
  • 19. Food Digital Marketplaces: Differentiators Effective Data • Ability to abstract data and protect business sensitive information • Efficient usage of platform level data (e.g., purchase history, user behavior) with a customized recommendation engine • Tools and analytics to inform user decisions Competitive Pricing • Offer tiered pricing or dynamic discount by customer segmentation based on volume or number of transactions • Pass savings to the customers through scale, and streamline + standardize processes along the supply chain Product Selection • Reach the depth and desired product assortment for the target market • Clear positioning, customer segmentation and cultivation of new supply based on buyer needs Fulfilment and Delivery Methods • Identify methods that meet customer requirements (speed, convenience and price) and that are the most operationally efficient • Actively invest in long-term solutions to address the largest costs in logistics Platform-Specific Features • Meet compliance requirements -- in food trade, sellers are legally bound to display certain features of the product origin, conservation methods, traceability and freshness • Identify unique value-add features to improve user capabilities, retention, and user adoption (e.g., B2B marketplace sellers should be able to select buyers in order to maintain positioning and exclusive distribution) • APIs and SDKs to allow more integrations and give users permission to create value for themselves. Source: HBS, The Best Platforms Are More than Matchmakers
  • 21. What is big data SaaS in Food Supply Chain? The application of IoT and advanced robotics to create networks in the food supply chain management, thus enabling analytics to automate decision making and significantly improve performance and customer satisfaction. In the past 30 years, logistics moved from a purely operational function to advanced planning processes and operations between customers and producers. Using predictive and prescriptive analytics solutions to improve areas such as supply chain transparency, demand planning, pricing and end-of-life product management could bring social, economic and environmental benefits. Inventory Planning/ Demand Forecasting Waste Prevention Shipping logistics management Description Inventory stock in food industry is often perishable with heavy regulations to keep accountability checked and consumers safe. Inventory management systems can generate real-time insights on product demand and pricing, balancing stock more efficiently and reducing waste. Big data and AI solutions are used to optimize ordering, forecasting and operations. Using IoT and AI to improve data accuracy and identify food waste. Sensor based technologies enable sorting and grading systems to help food businesses to maximize yields by replacing damaged products with new ones or performing preventive measures. Uses sensors, processing and data analysis to monitor product statuses and environmental conditions, in order to optimize transportation for faster delivery and effective reaction time to supply chain issues. Examples Afresh, Shelf Engine, Spoiler Alert Winnow, Tomra, GeniCan Wise Systems, Routific, Descartes
  • 22. AI/ML Analytics SaaS: Key Drivers and Challenges Drivers • Complexity of food industry: Regulations and a demand for high quality product just-in-time. • IoT & Cloud: Data collection and management costs are lower. • Data availability: With more online business systems and more consumer data provided through social networking, more data points are available for analysis. • Proven success: Advanced data science techniques and SaaS adoption continued to be applied across industries, which creates the ability to achieve operational efficiency and streamline management processes. • Future of Work: Dashboard accessible from different devices and users. Challenges • Scale infrastructure to accommodate the large volumes of data to be analyzed. • Complex data collection and application integration. • Opaque ecosystem that results in data silos; big data will not be realized until information is shared and analyzed throughout the supply chain. • Privacy concerns. • Hard to measure financial impact and lack of immediate proven results can foster reluctance from incumbent legacy food supply chain players, hence preventing widespread adoption.
  • 23. AI/ML Analytics being used in Food Supply Chain Company Shelf Engine Winnow Routific Value Prop Shelf Engine is a guaranteed sale vendor for grocery store. Its order forecasting solution uses machine learning and probabilistic models to generate accurate orders. This eliminates inventory loss, minimizes out of stock, and improves bottom lines. Winnow reduces food waste in the hospitality industry through its object recognition AI technology. By putting a pulse on food that was thrown away, Winnow makes it easy to calculate the monetary value of the food wasted and cut food costs. Routific is a route optimization software platform that helps delivery businesses plan their routes more efficiently, saving them time and delivery cost. Description The automated prediction engine recommends what to order everyday for the specific user, based on analyzing historical POS data and machine learning based dependent models. The pricing strategy is a markup model ranging from 5%-25%, depending on the shelf life, gross margin and other aspects related to the category and SKU. Shelf Engine generates weekly report to show savings and increases in gross profit in a simple way. It has also established relationships with hundreds of vendors and distributors and continues to develop new ones to include grocer’s existing suppliers. Winnow leverages AI technology to measure waste in commercial kitchens. Food waste is thrown away and captured by cameras. After a short period of initial training of the model tailored to the specific food business, Winnow can recognize and record the weight of the food, enable data analytical tools to highlight volume, help users to make better decisions, and eliminate manual data entry. Winnow adopts a SaaS model and is used by companes such as IKEA; Helps reduce food waste by 50% and food costs by 2-8%. Routific created an algorithm inspired by the way that bees share the best routes to their food sources with other bees. Routes are planned automatically based on the proprietary algorithm which has been in development for more than a decade and takes into consideration many real-world factors. Routific offers a monthly subscription model from $39/ vehicle and is used by companies like DoorDash; Routific can save up to 40% on driving time and fuel.
  • 24. What qualities do we look for in AI/ML Analytics companies? Qualified Team • Ability to recognize the pain points and relevant regulatory requirements of the food supply chain. • Focusing on solving high-value use cases for a specific stage of players in the value chain. • Clear understanding of the risk of AI-powered solutions and the accompanying level of accuracy. • Ability to explain the value of their unique algorithm. • Qualification and deep domain knowledge • Applied AI talent pool Data Collection + Integrity • Data Collection: Data is readily available through system integrations or easy to access via cost- efficient sensors and devices. • Quality Assurance: Data is well structured, labeled in high quality manner and ready to be analyzed. Quality assessments are performed on a timely basis. • Data acquisition strategy to overcome cold start problem. • Domain-specific, proprietary dataset is a significant source of competitive advantage. Model Accuracy • Correctness. Accuracy of the model results using real world data • Speed. Time to train the initial model and flexibility to run PoC/pilot projects
  • 26. What is Food Repurpose? Food Repurpose use ingredients that otherwise would have not gone to human consumption, are procured and produced using verifiable supply chains, and have a positive impact on the environment. About 30-40% of all food produced in the United States, worth an estimated $218 billion (1.3% of GDP), is wasted. Food repurpose addresses the food waste problem directly and is one way to solve the food urgency problem as the population grows. Upcycled food makes a more sustainable and resilient food system for all players along the supply chain and can help reduce 70B tons of greenhouse gases from food loss and waste while creating economic opportunity and jobs for people around the world . Upcycled Food and Ingredients Process-Focused Tech Solution Description Upcycled food brands focusing on processing and production of food products which are novel in nature or from novel sources for human consumption. In order to extract value, the byproduct is dehydrated, then extracted, followed by alcohol precipitation to clarify target compounds, before being further processed to obtain a stable product. The byproduct then goes through further product development and processing to be formulated into finished ingredients and food items. Proprietary processes and technologies to increase efficiencies in the dehydration or extraction process, or to maintain the nutritional and aesthetic qualities of byproducts throughout processing. These technologies can be used for their own purpose or licensed to food manufacturers. Example Barnana, Ambrosia, WISErg, Regrained, Renewal Rise Products Treasure 8, Planetarians Source: Ellen MacArthur Foundation
  • 27. It’s an exciting time for the Food Repurpose space. $46 B Market Food waste is a booming business worth $46.7 billion in 2019. Ugly produce alone accounts for 40% of the food produced in the U.S. and food waste costs retailers about $18.2 billion a year. It has an expected CAGR of 5% for the next 10 years. 27x economic value increase Common upcycling byproducts, including BSG, are mostly sold as animal feed today, which loses most of its value. There is ample opportunity to recapture these ingredients and maintain a ”negative COGS” environment. Ethical Values of Consumers 62% of consumers said they would be at least somewhat comfortable eating "ugly produce.” Consumers nowadays are becoming aware about sustainable means of production and have a high regard towards food sustainably. Food-focused accelerators Accelerators such as FoodBytes! by Rabobank, Techstars Farm to Fork Accelerator, AB InBev’s 100+ Accelerator, and Food-X provide ecosystem for food upcycling startups to gain traction and foster early partnerships with corporations. Source: Future Market Insights using data published by Food Waste Through Economics and Data
  • 28. Food Repurpose Startup Examples Regrained Akua Treasure 8 Value Prop Low fat, high fiber snacks made from upcycled byproduct from beer-making. Kelp jerky snacks made from ocean- farmed kelp. A novel drying technology used on food waste or food surplus. Description Regrained uses one of the most common upcycle products – brewery “spent” grain (BSG) and processes it with its patent- pending process, creating two product lines: Bars and Puffs. It is a hybrid CPG and B2B ingredient company. Through CPG sales to consumers, the company generates awareness and builds demand, hence scaling the B2B ingredients sales and launching co-branded products. Akua use zero-input crop from the ocean to make plant-based snacks. Their products are carried by over 50 retailers throughout the nation and 5 online retailers including Thrive Market. Treasure 8 helps recover and reform food waste through patented process. The dehydration technology treats fresh produce, aspirating water vapor molecules without losing the micro-nutrients in food, extending the shelf-life and capturing the texture.
  • 29. Food Repurpose: Key Drivers and Challenges Drivers • Size & Growth: Upcycled Food Industry is worth $46.7 Billion and has an expected compound annual growth rate of 5% for the next 10 years. • Consumer Acceptance and Willingness to pay premium. • Awareness for food waste problem and greater public demand for more sustainable goods: A study said that more than half of consumers want to buy more upcycled foods. • Greater Clarity and further education: Emerging trade associations and certification programs continue to define upcycling industry and scale the segment. Challenges • Operationally heavy and very product focused. • “Greenwashing” by rebranding products that won’t mitigate the food waste problem and have been around for years. • Space is early in its development stage; most startups focused on food waste are in the pre-venture and seed stages. • High capex investment (i.e., engaging in commercial processing/ manufacturing). • Requires vertical integration, and strategic partnerships with corporations are essential for scaling.
  • 30. What qualities do we look for in Food Repurpose companies? Low Capex • Technology-driven, first • Asset-light, efficient operations • Short time-to-market product timeline Strategic Partnerships • B2B contracts with established food distributors, and/ or CPG companies • Supplier partnerships • Sourcing partners Proprietary Distribution Channels • Relationship with distributors and retailers • Clear and achievable distribution strategy Product Differentiation • First mover advantage • Novel food/ingredients • Quality assurance and testing • Nutrition value • Consumer perception, high NPS, brand equity