business case

The Ugly Veggie
A multi-sided platform for
class 2 vegetables & fruits.
A business project written by
Christian Juhl Hübbe &
Rasmus Kyster Iversen.
All Rights Reserved.

Christian Juhl Hübbe & Rasmus Kyster Iversen, Specialization Project
Digital Technology and New Business Models, Spring 2016
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Table of Contents
1.0 INTRODUCTION AND RESEARCH QUESTION 3
2.0 LITERATURE REVIEW 5
2.1 THE ECONOMICS OF MULTI-SIDED PLATFORM STARTUPS 5
2.2 NETWORK EFFECTS AND CRITICAL MASS 5
3.0 CONCEPTS, FRAMEWORKS AND THEORETICAL BASIS 7
3.1 THE ENVIRONMENT MAP 7
3.2 VALUE PROPOSITION CANVAS 8
3.3 BUSINESS MODEL CANVAS 8
4.0 METHODOLOGY 9
4.1 A STARTUP IDEA AS A CASE 9
4.2 PRIMARY DATA 10
4.3 SECONDARY DATA 12
4.4 VALIDITY OF THE DATA 12
5.0 FINDINGS & ANALYSIS 13
5.1 THE ENVIRONMENT MAP 13
5.1.1 MARKET FORCES 13
5.1.2 INDUSTRY ANALYSIS 15
5.1.3 KEY TRENDS 16
5.2 THE BUSINESS MODEL CANVAS 17
VALUE PROPOSITIONS 17
CUSTOMER SEGMENTS 18
CUSTOMER RELATIONSHIPS 18
CHANNELS 18
REVENUE STREAMS 18
KEY ACTIVITIES 18
KEY RESOURCES 19
KEY PARTNERS 19
COST STRUCTURE 19
5.3 VALUE PROPOSITION CANVAS FOR CUSTOMER SEGMENT 1 – FARMERS FIGURE 5 - VALUE
MAP FOR FARMERS 20
5.4 VALUE PROPOSITION CANVAS FOR CUSTOMER SEGMENT 2 - COMMERCIAL KITCHENS,
INDEPENDENT CANTEENS AND HOTELS & RESTAURANTS 22
5.5 OBTAINING THE CRITICAL MASS 24
5.5.1 PRICING STRATEGY FOR REACHING THE CRITICAL MASS 25
5.5.2 TARGET THE “RIGHT” MEMBERS 26
6.0 DISCUSSION 27
7.0 CONCLUSION 29
8.0 LIMITATIONS & FUTURE WORK 29
9.0 BIBLIOGRAPHY 30
APPENDIX 34

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APPENDIX 1 34
APPENDIX 2 35
APPENDIX 3 36

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1.0 Introduction and Research Question
Food waste is a serious problem. On a worldwide scale roughly one third of the food produced
for human consumption – approximately 1.3 billion tons – gets lost or wasted (fao.org). In
Denmark alone the amount of edible food wasted every year is over 700.000 tons (”Danmark
uden affald II”, 2015).
The food waste is distributed between several different actors as illustrated in table 1 (“Danmark
uden affald II”, 2015):
Table 1 - Food waste in Denmark (“Danmark uden affald II”, 2015)
Actor Tons of food wasted per year
Households 260.000
Service sector 227.000
• Retail 163.000
• Hotels and restaurants 29.000
• Institutions and commercial kitchens 31.000
Primary production 100.000
Food producers 133.000
What can be concluded from these numbers is that the blame of the huge amount of wasted
food cannot be contributed to one sole actor.
However, as households represent the largest share of the waste, many of the solutions in the
area has been aimed at minimizing this type of waste. These solutions include movements that
try to influence policies and regulations regarding food waste, and create more awareness among
consumers (e.g. stopspildafmad.dk & mindremadspild.dk).
Other solutions are more focused on building a bridge between the waste created by the service
sector and the consumer. These solutions include YourLocal (yourlocal.org) and Too Good To
Go (toogoodtogo.dk). Both of these models are based on an online platform, where the business
(cafe, supermarket, bakery, etc.) can create offers on products that are nearing their expiration
date, which are then targeted at the consumers, who are also users of the platform.

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Thus, it seems that there is a lack of solutions focusing on minimizing the waste problems in the
earlier stages of the value chain – primary production (100.000 tons) and food producers
(133.000 tons) – even though one third of all food waste is created during these stages.
This problem has also been recognized by the Danish Environment and Food Ministry who, in
a report from May 2015, described how farmers’ lack of knowledge about possible buyers of
class 2 vegetables and fruits is one of the internal barriers faced by the industry (Identificerede
Barrierer, 2015) - thus, resulting in more food waste.
Based on this knowledge and drawing inspiration from a U.S. startup company called Food
Spoiler Alert, whose service is an online platform that creates a real-time, B2B marketplace and
collaboration tool for surplus food and organic waste for farmers, food businesses and nonprofit
organizations (foodspoileralert.com). The business model of Food Spoiler Alert is to provide
matchmaking between farms and businesses with surplus edibles (nrdc.org), offering a secondary
market for discounted food sales, which enables new revenue streams for the users
(techcrunch.com), while Food Spoiler Alert themselves take a transaction fee
(foodspoileralert.com).
Drawing inspiration from Food Spoiler Alert, the focus of this paper will be to analyze whether
or not a similar platform could provide a viable business model on the Danish market. More
specifically this paper will focus on the waste created by the primary production, and how
farmers can gain new revenue streams by using a multi-sided platform to sell their otherwise
wasted foods e.g. class 2 fruits and vegetables, and what a business model would look like for a
multi-sided platform business, providing such a service.
Thus, we propose our research question for this project:
Can a viable business model be built around a multi-sided platform for class 2
vegetables on the Danish market?
• Which actors should be on each side of the platform?
• How would a business model(s) look like for such a platform?
• What factors are key for a multi-sided platform business to be aware of in terms of attracting users and
reaching a critical mass?

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2.0 Literature Review
As this paper will deal with a hypothetical example of a platform-based startup company, we
find it relevant to conduct a literature review on academic literature dealing with the subject of
platform-based businesses and related subjects like network effects and critical mass.
2.1 The economics of multi-sided platform startups
The foundation of our business idea is a multi-sided platform that connects farmers with buyers
of class 2 vegetables and fruit. We are a digital platform builder:
“The digital platform builder creates his own digital platform on the internet (Eisenmann et al., 2006). The
digital platform builder exploits the scalability and the low marginal costs by offering services to a group of users,
then require payment from another group of users to connect with the first group. There can be several groups of
users.” (Andersen & Damsgaard, 2014, p. 9)
Evans (2009) argues that entrepreneurs wanting to create a startup based on a multi-sided
platform face more difficult problems than the problems faced by the one-sided startup. Such a
startup will only be able to deliver value to one side of the platform if there are participants on
the other side as well. Thus, they need to figure out how to get both suppliers and buyers on
board their platform.
Furthermore Evans (2009) argues that a multi-sided platform can be regarded as an economic
catalyst by creating value by bringing two or more groups of customers together and getting
them to interact. More specifically catalyst innovators are innovators who can perceive the
possibility of creating economic value by connecting two or more economic agents on a shared
platform (Evans, 2009). Eisenmann et al. (2006) agrees in other terms when they describe that in
“two-sided networks, cost and revenue are both to the left and the right, because the platform has a distinct group of
users on each side. The platform incurs costs in serving both groups and can collect revenue from each, although one
side is often subsidized” (p. 2). This is different from the traditional value chain, where the value
moves from left to right - to the left of the company is cost, to the right is the revenue.
2.2 Network Effects and Critical Mass
The topic of network effect and critical mass is highly relevant for multi-sided platform
businesses. The incentive for two types of users to join a platform is the fact that they are
attracted to each other. This is what is called the network effect (Eisenmann et al., 2006). The
essential features of network effects are mentioned throughout the academia, and specifically

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described by McIntyre & Chintakananda (2013) as “when consumers desire interaction and compatibility
with others, one company often ends up dominating the market for a given good” (p. 118).
The network effects can be split up into two categories; 1) direct network effects 2) indirect
network effects. The direct network effects occurs when the buying side of the platform value a
large network of sellers of a given product – the larger the network, the more value it offers to
the buying side (McIntyre & Chintakananda, 2013). Evans (2009) argues that indirect network
effects are the key aspect of multi-sided platforms. He argues that the indirect network effects are
the source to much of the value created by the platform (Ibid.). The indirect network effect takes
place when one type of economic agent value a product more if more of another group of
economic agents uses that product as well (Ibid.). Eisenmann et al. (2006) argues that the
presence of direct and indirect network effects are an advantage for the early leaders in the
marketplace, since having an early, large installed base of sellers will tend to be favored by
buyers – as this seller base grows, it becomes more attractive to potential buyers. However, it is
not always ideal to be a first/early mover in the market. When a market evolves slowly, it might
be an advantage to the late mover, as they can e.g. avoid the first movers’ mistakes, take
advantage of newer technology, etc. (Ibid.).
Afuah (2013) argues that much of the literature on networks treat them as black boxes whose
size is the only important factor. Afuah argues that “two factors influence the value a network member or
provider can derive from network effects: network structure (of which size is only one component), and network
conduct.” (Ibid., p. 258). Backing up this argument Afuah presents both factors within the
structure of the network and conduct of the users in the network (illustrated in figure 1) that can
shape network value, thus having strategic implications for platform providers. The structure
factors that Afuah presents are transaction feasibility, centrality of the platform member in the
network, structural holes between platform members, weak and strong ties that the platform
members has with other members in the network, the number of critical roles the platform
member has, and the distinctive capabilities the platform members has (Ibid.). The conduct
factors are opportunistic behavior, reputation of the platform member among the network, and
the trust between the platform members (Ibid.). Afuah also describes some basic conditions for
the platform’s value creation and capture. These basic conditions are the nature of the
transactions, and the macro-environment in which the platform operates (Ibid.)

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Figure 1 - The role of structure, conduct, and basic conditions in network-related value creation
and capture (Afuah, 2013)
Thus, this conceptualization of how a platform and its members creates and captures value is
much more comprehensive than the arguments grounded in neoclassical theory in which the
network size has been treated as the only critical element for a multi-sided platform business to
succeed (Ibid.)
3.0 Concepts, Frameworks and Theoretical Basis
3.1 The Environment Map
It is essential to build up a good understanding of the environment in which an organization has
to operate. It supports in conceiving a stronger and more competitive business model
(Osterwalder & Pigneur, 2010). Furthermore, understanding the ongoing changes in the
environment can help an organization to adapt their business model more effectively to the
changes in the external environment (Ibid.). The Environment Map is an analytical tool
developed by Osterwalder & Pigneur (2010), and includes four areas to be analyzed:
- Market forces
- Industry forces
- Key trends
- Macroeconomic forces

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3.2 Value Proposition Canvas
Developing a Value Proposition that creates value for a specific Customer Segment is essential
for a company. The Value Proposition is the reason why customers turn to one company over
another (Osterwalder & Pigneur, 2010). The Value Proposition Canvas (VPC) is a tool
developed by Osterwalder et al. that can support one in understanding the patterns of value
creation, leverage the experience and skills of your team, and avoid wasting time with ideas that
won’t work (Osterwalder et al., 2014). Thus, the VPC will help you design, test, and deliver what
customers want (Ibid.).The VPC makes the value proposition visible and tangible and therefore
easier to discuss and manage for the organization. Furthermore, the VPC perfectly integrates
with the Business Model Canvas (BMC). The VPC is split up into two sides:
1. The Customer Profile
2. The Value Map
In the Customer Profile a clarification of one’s understanding of the customer is described. This
is done through describing the customers Gains, Pains, and Jobs (Ibid.). In the Value Map it
must be described how one’s business intend to create value for that customer, which is done by
describing the Products and Services delivered, the Gain Creators, and the Pain Relievers
(Ibid.). The goal of the VPC is to achieve Fit between the Customer Profile and the Value Map.
3.3 Business Model Canvas
The BMC is a strategic management and lean startup template for developing new or
documenting existing business models. The concept of the BMC is that it allows one to describe
and think through the business model of an organization, competitors, or any other enterprise
(Osterwalder & Pigneur, 2010). The BMC is build up around nine building blocks that show the
logic of how a company intends to make money (Ibid.).
These nine building blocks are:
1. Customer Segments
2. Value Propositions
3. Channels
4. Customer Relationships
5. Revenue Streams
6. Key Resources

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7. Key Activities
8. Key Partnerships
9. Cost Structure
Together these nine blocks cover the four main areas of a business: customers, offer,
infrastructure, and financial viability (Ibid.)
4.0 Methodology
Our research method for our this project is inspired by the lean startup method, as articulated
by Steven Blank:
“Second, lean start-ups use a “get out of the building” approach called customer development to test their
hypothesis. They go out and ask potential users, purchasers, and partners for feedback on all the elements of the
business model, including product features, pricing, distribution channels and affordable customer acquisition
strategies." (Blank, 2013: p5)
So, we went out of the building and started meeting up with relevant actors to get feedback on
our hypothesis in relation to a platform for class 2 vegetables and fruits.
4.1 A Startup Idea as a Case
Our case is a startup company, which offers a multi-sided platform connecting farmers with
possible buyers of class 2 vegetables and fruits. The difference between class 1 and class 2
vegetables is quite vague and aesthetic; class 1 is more uniform in size and has almost no
damage, class 2 is more heterogeneous in size and with minor injuries or does not meet the
standards of class 1 (Lynnerup et al., 2016). Right now, farmers don’t have any sales channel at
all for class 2 vegetables and fruits, and that’s the problem we are trying to solve for the
customers.
We hope this project will provide a strong argument for setting up a test and a pilot program.
Therefore, our method was to go out and present the idea to different relevant stakeholders that
could provide us with indispensable knowledge when designing such a platform. Hence, we will
have a strong outlook when we make our analysis of the food industry by using the frameworks:
The Environment Map, Business Model Canvas and Value Proposition Map.

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4.2 Primary Data
We have conducted a series of semi-structured interviews with various people that have unique
knowledge about platform technology, primary production and class 2 vegetables in Denmark.
This qualitative method has been used to gain insight and knowledge in order to build the right
multi-sided platform for class 2 vegetables. Before the interviews were conducted, our knowledge
about food waste, agriculture and platform technology only stemmed from articles and reports.
The semi-structured interview relies on open-ended questions that will start a conversation with
the interviewee and end up in a rapport of useful data (sociology.org.uk). In table 2 is provided
an overview of the different interviews conducted.
Table 2 - Conducted interviews
Name Company Length Type of
interview
Purpose with interview Date
Jan
Algreen
CEO at Søris 15 min. Semi-
structured/
Telephone
Gain insight about sales
channels
in relation to class 2
vegetables
April 2
2016
Henrik
Knudsen
Studying to be a
farmer
22 min. Semi-
structured/
Telephone
Gain insight about class 1
and class 2 vegetables in
relation to sales channels
March
27 2016
Dorthe
Lynnerup
Senior
Specialist at
Agrotech
16 min. Semi-
structured/
Telephone
Gain insight about class 2
vegetables in relation to
commercial kitchens and
wholesale
May 9
2016
Anders
Knudsen
Founder of
FarmBackup
53 min. Semi-
structured/
Telephone
Gain insight about
agricultural community
in relation to platform
technology
March
31 2016
Jan Algreen is the CEO at Søris is a 120 ha farm in the north of Sealand growing and selling
carrots and other vegetables. They have a partnership with Coop and have a lot of class 2
vegetable going to waste, because no foodservice (wholesale) business is buying them.
Key points from interview:
“During the winter we throw out 20-25% of our carrots. That’s a lot of money.”
“Give us a sales channel and I’m all for your platform, but I don’t see any buyers of crooked and class 2
vegetables.”
“The food producers have machines that are not made for processing crooked vegetables.”

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Henrik Knudsen is studying to be a farmer and was fond of the idea of a platform for class 2
vegetables and fruits.
“Farmers care about the money before they think about being ‘green’ and environmentally friendly, so if you give
them an entirely new sales channel they will be happy.”
“There is a need in the market. Food waste is very different from vegetable to vegetable - don’t mix apples and
oranges. Restaurants are potential customers.”
“Often, farmers don’t know how many vegetables and fruit they have left after they’ve sold it off to the wholesale
market. I know that for a fact when I’ve been working at farms producing fruits and vegetables. That applies for
both class 1 and class 2 vegetables.”
Dorthe Lynnerup, an employee at Agrotech, which is a consulting firm working for The
Danish Ministry of Environment and Food Products to research on solutions that will minimize
food waste in Denmark by using class 2 vegetables.
“It’s difficult to sell class 2 vegetables and fruits to commercial kitchens as they have long-term contracts with
wholesale corporations, who are only selling class 1 vegetables and fruits.”
“Wholesale corporations need to guarantee that they can deliver fruits and vegetables to their customers any time of
the day, any day of the year. That’s why they import so many fruits and vegetables from Southern Europe, so they
don’t rely entirely on the Danish farmers.”
Anders Knudsen is the founder of FarmBackup, which is a multi-sided platform for rental of
agricultural machinery in Denmark. An Uber app for farmers. He has great insight about the
agricultural community.
"Farmers in general do not have a clue about how to sell goods. They will hate to deal with it if they have products
which are in surplus. They will not know what to do. Therefore, they will end up discarding them. It's a funny
business because they are not particularly innovative in this regard, so it (the platform ed.) must be very user
friendly."
"It’s totally random if the farmers will sell all of his products. If the harvest has been good, and he has grown
many good strawberries, then he can sell many of them. If they are bad, he will throw many of them out in the end.
The same thing applies to apples."
“Fruits and vegetables are seasonal products, and that fact must be taken into account.”

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“Bryan (a farmer) sells potatoes to some large supermarkets around the country. All these class 2 equivalent he
would like to sell to locals who live around him. So he helps the environment, the local community and everyone is
happy, and he earns money on it. It is difficult to be mad at such a business model."
4.3 Secondary Data
An extensive amount of secondary data has been collected for this paper. The sources of this
secondary data includes include academic papers, government reports, newspaper articles,
websites with a focus on food waste, ted talks, and podcasts.
Especially two government reports have been principal for this paper.
First, a report about food waste in the primary productions tells a one-sided story that backs up
our hypothesis considering a multi-sided platform for class 2 vegetables and fruits. According to
The Danish Ministry of Environment and Food farmers need a network/platform to sell these
products. This is what they concluded as identified barriers considering food waste in agriculture
(Identificerede Barrierer, 2015):
"Regarding internal barriers for limiting food waste in primary production. Structure:
- Difficulties in relation to the marketing agreements due. Fluctuating quantity and/or quality.
- Missing a platform/network for marketing of such odd sized for catering or for alternative food."
Second, The Danish Ministry of Environment & Food Products have written a report about an
experiment, where commercial kitchens use class 2 vegetables when preparing food to find out if
it’s more time consuming than using class 1 vegetables. They found out that class 2 onions are
faster to prepare and half the price of class 1 onions (Lynnerup et al, 2016). That tells us two
things. The Ministry of Environment and Food Products is trying to solve the issue with class 2
vegetables and it is worthwhile using them in a commercial kitchen.
4.4 Validity of the data
One can always argue the validity of the data collected – especially regarding the secondary
data. However, we have strived towards an acceptable level of source criticism, not including
sources with extremist views. Thus, we believe that the data collected gives a precise picture of
what the market looks like.

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5.0 Findings & Analysis
In this section we will conduct our analysis based on the primary and secondary data. That will
include an analysis of the environment in which our business will operate in, a canvas for the
business model, and a canvas for the value proposition. The finishing part of this section will
analyze what factors a multi-sided platform business must be aware of in the pursuit of reaching
the vital critical mass.
5.1 The Environment Map
The Environment Map presented by Osterwalder and Pigneur (2010), is a comprehensive
methodology for analyzing the macro– and microenvironment in which a business operates.
The analyzed aspects of the Environment Map are the ones deemed most appropriate for this
paper.
5.1.1 Market Forces
The focus on food waste has been increasing in recent years. This can be perceived as being a
natural outcome of the increasing focus on the environment in general, but nonetheless the
mentioning of the phrases “food waste” or “food loss” in journals has increased 70 percent since
2010 (see figure 2 below). This increase in attention on the problem of food waste has also
brought with it an increase in patenting within the area. A 50 percent increase in patents within
“food waste” or “food loss” has been registered between 2010-2014 (see figure 2). Thus, a lot of
innovation seems to be taking place within the area of food waste.
Figure 2 - Innovadatabase graph (innovadatabase.com)

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The topic of food waste is also of great concern for the food & agribusiness here in Europe.
According to a report created by Rabobank (far.rabobank.com), the European food &
agribusiness is currently losing EUR 60 billion of value each year through food that never
reaches the consumer.
Food waste in the primary production in Denmark
As previously mentioned the amount of food waste in the primary production in Denmark is
100.000 tons per year (see table 1). Without knowing the specific value of this waste, it must be
considered to be a significant loss for the farmers. The exact share of the 100.000 tons that are
wasted because they are class 2 vegetables is difficult to say. However, a major Danish farm
claimed that the amount of carrots they waste each winter, because they are class 2, is about 20-
25 percent (Interview with Jan Algreen). Lynnerup et al. (2015) mentions in their report that “the
amount of class 2 vegetables are plentiful…root manufacturers (carrot, beetroots, etc.) has up to 30 percent waste
in their production of class 1 products”.
One of the major challenges within the area of food waste in the primary production according
to several of the reports developed in recent years (Mindre Madspild i Danmark Report, 2015;
Identificerede Barrierer, 2015), is the lack of incentives and a lack of a platform/network for
selling class 2 vegetables.
Thus, the market forces indicates that a high amount of value is lost by the primary producers
because there is a lack of knowledge and transparency in the market about potential buyers of
class 2 vegetables.
Experiment with class 2 fruits and vegetables
The Danish consultancy firm Agrotech (a part of The Technological Institute), whose business
covers the areas; environment, plants, and food, conducted an experiment from October-
December 2015, where commercial kitchens should use class 2 vegetables such as carrots,
onions, and leek instead of class 1 vegetables (Lynnerup et al. 2016). The purpose of this
experiment was to document the benefits and drawbacks of using class 2 fruit and vegetables,
including the economic perspectives by using class 2 products (Ibid., p. 9). The conclusions were
very positive for the use of class 2 vegetables in commercial kitchens e.g. they found that there
can be saved 23 percent in time used, utilization and commodity price, by using 1 kilo class 2
onions compared to the normal class 1 onions (Ibid., p. 26). Furthermore, it could be concluded

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that the commercial kitchens had limited knowledge about the existence of class 2 products, but
that there is an interest and a willingness to test and challenge attitudes towards the usual
processes in commercial kitchens (Ibid., p. 35).
It can be concluded that the market forces points towards an increased focus on the area of food
waste created in the early stages of the value chain. More specifically, there has been shown to
be a focus on finding solutions that utilize class 2 vegetables so they are not just considered
waste.
5.1.2 Industry Analysis
Some major wholesale corporations primarily supply the foodservice industry. The two largest in
the industry are Catering Engros A/S and Hørkram Foodservice A/S, whose revenue were
DKK 3.9 billion (proff.dk A) and DKK 2.1 billion (proff.dk B) respectively.
Thus, they sit heavily on the market, and many businesses in the service sector are using these
type of companies as their supplier. However, as a report analyzing the foodservice sector in
Denmark developed by the Food & Agriculture Administration (2014) describes “there is generally
differences in how freely each decision maker can choose between the food suppliers, because of centralized
agreements. It is typically commercial kitchens and the health sector that are subject to centralized agreements.
Among the canteens it is about half of them.” (p. 3). The factor of centralized agreements between the
commercial kitchens and the major food suppliers was also pointed out by Dorthe Lynnerup
from Agrotech who said during the interview that “it’s difficult to sell class 2 vegetables and fruits to
commercial kitchens as they have long-term contracts with wholesale corporations, who are only selling class 1
vegetables and fruits.” (Interview with Dorthe Lynnerup).
Therefore, it is especially independent canteens that can choose freely which type of food
supplier they prefer to use.
Corporations like Catering Engros A/S and Hørkram Foodservice A/S, can be perceived as
being competitors to a multi-sided platform that sells class 2 vegetables, as the awareness about
these two major companies are so high in the foodservice sector. Thus, it can prove to be a big
challenge to convince the foodservice companies to buy directly via a multi-sided platform.

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5.1.3 Key Trends
The Sharing Economy
A multi-sided for class 2 vegetables would be a part of what is called the sharing economy. The
sharing economy is described as “...allowing individuals and groups to make money from underused
assets…” (The Sharing Economy PWC Report, 2015). The trend of the sharing economy has
also made its impact on the farming industry. In the U.S companies like Machinery Link
Solutions – a platform for renting and listing farming equipment – (machinerylink.com) and
Food Spoiler Alert (foodspoileralert.com), which has been previously described in this paper, are
the type of digitizing multi-sided platforms that can be regarded as being a part of the sharing
economy.
A very similar company to Machinery Link Solutions exists in Denmark, which is called
FarmBackup (farmbackup.dk). These examples illustrates that the farming industry are seeing
innovations being made that digitizes processes that were previously analogue. This indicates
that the farmers are aware of the benefits digitization can provide to their businesses. However,
as Henrik Knudsen said during our interview “farmers care about the money before they think about being
‘green’ and environmentally friendly, so if you give them an entirely new sales channel they will be happy.”
(Henrik Knudsen interview, 2016). Thus, the farmers don’t necessarily care whether or not a
new business service is a part of the sharing economy. They care about whether or not such a
solution can provide them with a new market, thus, new revenue streams.
The Platform Network and the Collaborative Commons
Already, we have seen hugely successful examples of sharing economy flourishing because of
digital platforms like Uber and Airbnb turning consumers into flextime freelancers or as
economist Jeremy Rifkin calls them - “prosumers”:
“The IoT enables billions of people to engage in peer-to-peer social networks and co-create the many new economic
opportunities and practices that constitute life on the emerging Collaborative Commons. The platform turns
everyone into a prosumer and every activity into a collaboration.” (Rifkin, 2014, p. 21)
Below is a visualization of the Collaborative Commons on our multi-sided platform. We co-
create new opportunities together with farmers and the buyers of class 2 vegetables and fruits.
Thus, we want to contribute and join the trend within the sharing economy.

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Figure 3 - Illustration of a multi-sided platform for class 2 fruits and vegetables
5.2 The Business Model Canvas
Value propositions
We offer commercial kitchens, independent canteens and hotels & restaurants a network, where
they can sell and buy class 2 vegetables and fruits that would otherwise go to waste.
They will have a platform where they can enhance their Corporate Social Responsibility by
helping minimizing waste. The local Danish products are also an important value proposition
for the kitchens, canteens, hotels and restaurants, because the wholesale corporations are
importing so many products from foreign countries. However, Kitchens are more likely to prefer
local Danish products and fruits:
From other projects, Agrotech has gained knowledge that the commercial kitchens’ purchases of fruit and vegetable
the last 20 years has changed from primarily consisting of Danish products to foreign products in 2015. This
means that wholesalers are buying more and more products in foreign countries (reference 1), and therefore the
Danish producers are under pressure to create profitable businesses. At a time when conversion to organic (Reference
6), sustainability and local food is important for some kitchens, there is therefore an obvious dilemma: kitchens
would like to contribute to local sustainability (local here defined as in Denmark), but they can not access and test

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local products that can create more sustainability for actors in the fruit and vegetable value chain. (Lynnerup et al.,
2016)
Thus, we offer them a value proposition that wholesale foodservices are not capable of. The
farmers are under pressure by the wholesale foodservices, because they import so many products
from foreign countries. With our platform the Danish farmers will be able to compete with the
wholesale foodservices, and sell otherwise wasted vegetables and fruits. This will create a new
revenue stream for the farmers while increasing sustainability.
Customer segments
Our primary customer segment is farmers, kitchens, canteens, hotels and restaurants.
The secondary customer segment is retailers, food producers, greengrocers and non-profit
organizations, but we don’t have any data backing it up.
Customer relationships
The goal is that users can utilize self-service through the multi-sided platform. Personal
assistance through the platform, email or phone.
Channels
Multi-sided platform will be the primary channel for the business model.
Customers can download the platform as an application from Apple App Store, Google Play, or
use the platform website depending on the preferences of each customer segment.
Revenue Streams
There will be a monthly subscription fee from farmers. The other groups on the platform are
not paying a subscription fee, as we want to get as many customers as possible buying class 2
vegetables and fruits onto the platform.
Key Activities
The management of the multi-sided platform will be a daily key activity. Furthermore, obtaining
a critical mass of members on the platform is key to a sustainable multi-sided platform business;
thus, attracting members is a key activity.

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Key Resources
The multi-sided platform is our key resource.
Additionally, we have a team with a network in the tech startup community, at the IT
University in Copenhagen and in the agricultural community.
Key Partners
Agrotech has offered us to work with them on their next project about class 2 vegetables and
fruits. We need to partner up with a cloud-computing company and a software developer.
Cost structure
IT maintenance, payment provider, cloud service and software development of application and
website are costs inherent in our business model.
Below is the Business Model Canvas visualizing the nine cornerstones of our business.
Figure 4 - Business Model Canvas

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5.3 Value Proposition Canvas for Customer Segment 1 – Farmers
Figure 5 - Value Map for Farmers
In relation to the pain relievers, our data collection has shown that the harvest of vegetables and
fruits is very unpredictable (interview with Anders and Henrik Knudsen), and subsequently the
volume of class 2 products is also unpredictable for each farmer. Our platform will provide them
with a real time marketplace, where they can inform potential buyers about the volume and
price of a particular class 2 vegetable or fruit instantly and sell them off at a daily basis. Thus,
the availability of class 2 vegetables and fruits will be more transparent and open for all buyers
and sellers on the platform. In order for them to get used to the platform and create a network
we will offer the farmers 3 months free subscription.

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Figure 6 - Customer Profile Farmers
As mentioned earlier in several reports and interviews, class 2 vegetables are not marketable
right now, because there are no sales channels. No wholesale corporation are buying and selling
them.
Jan Algreen from Søris expressed his frustration of not having any buyers of his class 2
vegetables because he threw so many edible vegetables out (Jan Algreen Interview). In the end,
he missed out on a lot of money. So, we are offering to help him with his job of selling the
vegetables.
Today, wholesale corporations are only buying the farmers class 1 vegetables. Anders Knudsen
from FarmBackup said that farmers don’t want to deal with the hassle of selling his products and
they “are not very innovative” (Anders Knudsen Interview). That’s why we included it as a pain
in the value proposition canvas - not very “tech-wise”. This is a problem for us to solve by
developing a platform that is very intuitive and user friendly.

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5.4 Value Proposition Canvas for Customer Segment 2 - Commercial
kitchens, independent canteens and hotels & restaurants
Figure 7 - Value Map for Customer Segment 2
We offer free access to the platform for customer segment 2. Simply, because we want as many
buyers of class 2 vegetables and fruits as possible. Right now, they are forced to buy class 1
vegetables and fruits via the wholesale foodservice corporations like Hørkram and Catering
Engros. With our platform they will have more freedom of choice because they are able to buy
the cheaper class 2 vegetables and fruits. Buying class 2 fruits and vegetables will furthermore be
economically beneficial for segment 2, as class 2 fruits and vegetables will have a lower price
than class 1 vegetables (Lynnerup et al., 2016).
Every time a farmer has class 2 vegetables available, he can post it on the platform and potential
buyers on the other side of the platform will receive a real time notification about the instant
offer on an application on a mobile device or on our website. The platform also offers customers

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segment 2 a more green CSR profile, and we know for a fact they would like to contribute more
to local Danish sustainability and buy Danish vegetables and fruits (Ibid.).
Figure 8 – Customer Profile for Customer Segment 2
Today, our customer segment 2 is dependent on the service of the wholesale corporations. Some
of the big commercial kitchens have long-term contracts with them, so they are tied down to
them. What a pity when many of them actually want to buy local Danish products, and don’t
have access to them. Our platform offers only local Danish products from farmers and at the
same time, the kitchens will gain an opportunity to save money. This will create a new
marketplace that is not as rigid as the wholesale businesses, and the kitchens will enhance their
corporate social responsibility joining the fight against food waste at the same time.

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5.5 Obtaining the critical mass
There is no magic way to obtain the much essential critical mass on a multi-sided platform, but
being aware of the factors that can influence the business and how it attracts users is of high
importance. Furthermore, there are factors other than the size of the platform that influences
the value a platform generates for its users. This section will cover what a multi-sided platform
marketplace for class 2 vegetables has to be aware of, drawing on data gathered from the
academic literature as well as our primary data and secondary data.
A multi-sided platform like our hypothetical platform for class 2 vegetables, can deliver value to
either side only if there are participants on the other side of the platform (Evans, 2009). Thus, it
is essential to provide value to both sides. Evans and Schmalensee (2010) framework describes a
multi-sided platform business as an economic catalyst as “catalysts reduce search efforts, facilitate matching,
and make it easier for the two groups of economic agents to exchange value between each other” (Evans, 2009, p.
4). As catalyst innovators, we have perceived that there is a possibility to create economic value
by getting farmers and our customer segments together on a shared platform with the incentive
of selling and buying class 2 fruits and vegetables. One of the major challenges for multi-sided
platform providers is reaching the critical mass. Evans (2009) provides a useful model for the
illustration of how the process of reaching the critical mass looks like (see figure 9). The goal of
gaining the critical mass is to “ignite” the multi-sided platform business so the the business
reaches a state of long-run equilibrium, a point where the multi-sided platform has reached a
more stable state (Ibid.).
Figure 9 – Catalytic Ignition and Critical Mass (Evans, 2009)

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Evans (2009) argues that the optimal growth path to critical mass and to long-run equilibrium is
well away from the horizontal and vertical axes in most plausible cases, and that relatively
balanced growth is necessary. In figure 9 the optimal path is illustrated within the triangle from
point O to point C`and C``. Having too many users on one side compared to the other will lead
to failure (Ibid.). For our platform this indicates that we should balance the number of farmers
and the number of buyers being integrated on the platform. Having too many farmers
compared to buyers could result in a decrease in the platform’s value for the farmers because the
market would be too small. On the other hand, if there were too many buyers compared to
farmers on the platform, the value of the platform would also decrease for them as the supply of
class 2 fruit and vegetables would be very limited.
5.5.1 Pricing strategy for reaching the critical mass
One of the most complicated issues when starting a multi-sided platform business is the pricing.
Evans (2009) argues that many of the multi-sided platform businesses that fail makes the mistake
of symmetric pricing structures that seeks to earn revenue from both buyers and suppliers.
However, in the early phases of a multi-sided platform business it is essential for the provider of
the platform to be able to persuade both buyers (kitchens) and suppliers (farmers).
In our business model the chosen pricing strategy is that the farmers must pay a subscription
based fee to gain access to the platform, but they will initially receive 3 months of free access to
try it out. The buying side of the platform (kitchens), are not paying any money amount, but
must provide their “personal” data in order to receive a login to the platform. It is a common
strategy for multi-sided platforms to have a “subsidy side”. Eisenmann et al. (2006) describes the
subsidy side as “a group of users who, when attracted in volume, are highly valued by the “money side”, the
other user group.” (p. 3).
The goal of such a strategy is to create cross-side network effects (Ibid.). By giving the access to
the buyers of the class 2 fruit and vegetables to the platform for free, the possibility of attracting
them increases. This in turn makes the platform more valuable for the farmers as there is a
higher possibility of matching with a buyer, thus increasing the value it provides for them to
subscribe to the platform.
Once a platform reaches a large enough amount of users and the value of the platform is great
for both buyers and sellers, it is possible that a symmetric pricing strategy could work (Evans,
2009). This would open up the option of charging the buying side a fee for access to the platform
as well.

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5.5.2 Target the “right” members
One thing is the size of the platform and reaching the critical mass, as much of the literature is
about. But there are several other factors that play a part in building up a successful multi-sided
platform business. Based on Afuah’s (2013) arguments, that two factors significantly influence
the value a network member or provider can derive from network effects, we argue that a multi-
sided platform business for class 2 fruits and vegetables must consider the network structure (of
which size is only one component) and network conduct which is illustrated in figure 1 below
(Ibid.) (For a full explanation of figure 1 see appendix 1).
Figure 1 - The role of structure, conduct, and basic conditions in network-related value creation
and capture (Afuah, 2013)
This model describes what Evans (2009) also argues in his paper, that not all members are
created equal for multi-sided platforms, as there exists heterogeneity among them. Considering
Afuah’s model, it can be argued that a multi-sided platform for class 2 fruits and vegetables
should pursue non-opportunistic members on both sides of the platform (farmers and buyers)
who are centrally located or who bridge structural holes as these types of members adds more
value to the platform (Afuah, 2013). The term centrality refers to how centrally located a
member of the platform is i.e. user L in the illustration below have a high degree of centrality is
the illustrated network (Ibid.):

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Figure 10 – How structure can determine the value a member has to a platform (Afuah, 2013)
Furthermore, user L also provides a bridge between the left and the right side of the network. It
would be essential for a multi-sided platform for class 2 fruits and vegetables to target these types
of members initially, as these can increase the speed of the diffusion. An example of such an
initial target for a multi-sided platform for class 2 fruits and vegetables is the farm Søris A/S.
Søris A/S is a higher than average sized farm with an area of 120 hectares (søris.dk A). Only 19
percent of the Danish farms has a size over 100 hectares (see appendix 2), as well as having the
distinctive capability (Afuah, 2013), of only producing organic fruit and vegetables as well as
producing a large variety of different fruit and vegetables (søris.dk B) (see appendix 3 for full
assortment list). During our interview with CEO of Søris Jan Algreen he said “give us a sales
channel and I am all for your platform” (Jan Algreen Interview). Thus, Søris has already indicated
interest in such a platform if it can provide them with buyers of class 2 vegetables.
Therefore, we argue that Søris can be categorized as what Evans (2009) describes as a marquee
member. Marquee members are members of a platform who are valued more by members on
the other side of the platform (Ibid.). By having farms attached to the platform with similar
characteristics as Søris A/S, it will both increase the total value of the platform as well as
increase the attractiveness of the platform for the buyers of class 2 fruits and vegetables, which in
term also help stimulate product diffusion on that side (Ibid.).
6.0 Discussion
One problematic issue within our business model is the expectation of “perfect” fruit and
vegetable in wholesale, commercial kitchens, and hotels & restaurant. “Ugly” class 2 vegetables
and fruits need to be accepted as edible food products. This of course also reflects back on the
private consumer adjusting from class 1 to class 2 vegetables.

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The majority of the focus regarding food waste is based on the excessive consumption by
households. There is a lack of focus on the earlier stages in the value chain where farmers and
food producers produces a high amount of food waste each year.
It could prove to be a difficult task to find any potential buyers of class 2 vegetables due to the
massive barriers in the food industry e.g. the powerful foodservice businesses. If those firms start
buying and selling class 2 vegetables and fruits, our business model could crumble, since they
can scale it up much faster than we can due to the difference in financial power and vast amount
of customers. As Reid Hoffman, co-founder of LinkedIn, says “First-scaler advantage beats first-mover
advantage.” (Blix, 2015, p 14). So even though we get our platform to the market first, they could
easily beat our first-mover advantage.
Nevertheless, it is interesting to look at the possibility of including food producers on the
platform, since 133.000 tons are wasted every year in this area. Selling class 2 food products on
the platform could also be a way to minimize waste, help the environment and expand the
customer segment, thus scaling the business model up. Interestingly, it could also be worthwhile
to find out if Jan Algreen is right about them not wanting to buy class 2 vegetables, because their
manufacturing machines are only able to process straight class 1 vegetables.
In relation to spoiler alert we don’t have the same tax rules, when it comes to donations of food
in Denmark as in New England, USA. Therefore, the incentives to donate food for the primary
production and food producers are not very strong in Denmark compared to New England
(Identificerede Barrierer, 2015). In New England the food companies and the farmers have tax
benefits when they donate food products to nonprofit organizations (foodspoileralert.com). This
is not the case in Denmark. Thus, Spoiler Alert offers a value proposition to the customers on
the platform, that we are not capable of. If the farmers and food businesses in Denmark get the
same tax benefits when donating, then our platform would offer more value and attract more
users. This is a political question and is therefore not in the scope of this paper. But it is an
interesting thought how such legislation could possibly be beneficial for all stakeholders
associated in the area of food waste.
The fact is that farmers in Denmark are having an historically difficult time. A brand new
forecast made by the Agriculture and Food Administration shows that 2016 will be a terrible
year for the farmers who on average will have a deficit of DKK 140.000 (dr.dk). Thus, it would
seem that providing them with new business opportunities through new types of business

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models, that could open up the possibilities of new revenue streams, would be welcomed and of
very high value to the farmers.
7.0 Conclusion
This project has shown that our business model consisting of a digital platform for class 2
vegetables and fruits might be viable, although barriers in the food sector have to be crossed.
Further research is required before we start any software development of the platform.
Our data has shown there’s a need in the agricultural community for a sales channel for class 2
vegetables and fruits and we have identified some of the relevant actors within this area. The
waste of edible vegetables and fruits is creating a significant loss of profits for the farmers.
Furthermore, the environment is suffering from it and the responsibility for being sustainable is
neglected. However, the powerful wholesale corporations are only buying class 1 products from
the farmers today.
With our platform we can offer them a value proposition that is not a possibility in the present
market. On the other side of the platform, we have proven that commercial kitchens are willing
to buy local Danish products instead of products from foreign countries, which are offered to
them by the wholesale corporations. Furthermore, it can be economically beneficial for the
buyers to buy class 2 fruits and vegetables as they have a lower price and in some cases even a
higher degree of utilization. In the future, it could prove to be a risk for our business model if the
wholesale corporations begin to buy and sell class 2 vegetables and fruits from our customer
segments, as they already possess the necessary resources to scale up the market for class 2
vegetables and fruits.
8.0 Limitations & Future Work
Our market research has shown that a business model could prove viable and therefore we are
going to test the idea in practice. Of course, we could have talked to a lot more people to obtain
more primary data and get more feedback from different stakeholders. The magnitude for this
project limited our scope because we only have interviews with 4 people. To get a more full
picture we would need to talk to more farmers, chefs, independent store owners selling food
products, people in the wholesale/foodservice business, commercial kitchens, The Ministry for
Environment and Food Products, supermarkets, etc.

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Also, it could be interesting to look into the possibility of including food producers’ second grade
products on the platform. However, the focus of this project had to be narrowed down and that
is the reason, why we only included the class 2 products from farmers.
For the test, Søris is going to be the farmer on one side of the platform and we will set them up
with kitchens - hotels, restaurants and independent canteens - on the other side of the platform,
every time Søris has class 2 vegetables available for sale. Søris will call us up, then we will call a
kitchen to see if they need that particular vegetable. This way we hope to prove that the kitchens
will see the advantage in buying and using class 2 vegetables.
If we succeed with the testing, our master thesis could be another stepping stone to investigate
how to bring class 2 vegetables into the market with a digital platform. Additionally, we could
research if the food producers are willing to sell second grade products on a digital platform.
The food waste within this area is even larger than in the primary production. So, the potential
of adding them to the customer segment could be beneficial for our business model.
For now, we have been invited to a meeting with Agrotech, where all the stakeholders from the
food sector will be present to discuss the potentials of using class 2 vegetables & fruits.
9.0 Bibliography
Articles & Books
Andersen, Kim Normann & Damsgaard, Jan (2014). Department of IT Management (ITM),
Copenhagen Business School. Analysemodel til segmentering af digitale virksomheder.
Analyseopgave for Erhvervsstyrelsen.
Afuah, A. (2013). Are network effects really all about size? The role of structure and conduct.
Strategic Management Journal, 34(3), 257-273.
Blank, S. (2013). Why the lean start-up changes everything. Harvard Business Review, 91(5), 63-72.
Eisenmann, T., Parker, G., & Van Alstyne, M. W. (2006). Strategies for two-sided markets.
Harvard business review, 84(10), 92.
Evans, D. S. (2009). How catalysts ignite: the economics of platform-based start-ups. Cheltenham,
UK and Northampton, MA, US: Edward Elgar.

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Evans, D. S., & Schmalensee, R. (2010). Failure to launch: Critical mass in platform businesses.
Review of Network Economics, 9(4).
McIntyre, D. P., & Chintakananda, A. (2014). Competing in network markets: Can the winner
take all?. Business Horizons, 57(1), 117-125.
Osterwalder, A., Pigneur, Y., Oliveira, M. A. Y., & Ferreira, J. J. P. (2010). Business Model
Generation: A handbook for visionaries, game changers and challengers. African Journal of
Business Management, 5(7).
Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value Proposition Design: How to
Create Products and Services Customers Want. John Wiley & Sons.
Rifkin, J. (2014). The zero marginal cost society: the internet of things, the collaborative commons, and the
eclipse of capitalism. Macmillan.
Reports
Landbrug og Fødevarestyrelsen. (2014). Foodservicesektoren i Danmark. Markedsanalyse.
Landbrug og Fødevarestyrelsen. (2015). Madspild i Danmark: Et overblik over undersøgelser og
igangværende projekter om madspildet i Danmark.
Lynnerup, Dorthe & Gravgaard, Anette & Gotfredsen, Mette & Ottesen, Henrik &
Skytte, Elena Sørensen. Mindre madspild ved anvendelse af 2. sorterings grøntsager i
storkøkkener - Undgå affald, stop spild nr. 11, 2016. Miljøstyrelsen.
Miljøministeriet, Regeringens Strategi for affaldsforebyggelse ”Danmark uden affald II” – tal fra
2015.
Miljøstyrelsen. (2015). Identified barriers.
Mårten Blix. (2015). The Economy and Digitalization - Opportunities and Challenges. The
Confederation of Swedish Enterprise.

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PriceWaterhouseCooper. (2015). The Sharing Economy. Consumer Intelligence Series.
Websites
Bloomberg (2014). ”These first year MBAs are trying to solve America’s food waste problem”.
http://www.bloomberg.com/news/articles/2014-03-25/these-first-year-mbas-are-trying-to-
solve-america-s-food-waste-problem
Danmarks Statistik (2015).
https://www.dst.dk/da/Statistik/emner/landbrug-gartneri-og-skovbrug/bedrifter
DR (2016). “Ny prognose fra landbruget: 2016 bliver et rædselsår”
http://www.dr.dk/nyheder/penge/ny-prognose-fra-landbruget-2016-bliver-et-raedselsaar
Farm Backup (2016).
https://farmbackup.dk
Food and Agriculture Organization of the United Nations (2016).
http://www.fao.org/save-food/resources/keyfindings/en/
Food Spoiler Alert (2016).
http://www.foodspoileralert.com
Innova Market Insights (2016).
http://www.innovadatabase.com
Machinery Link (2016).
https://www.machinerylink.com
Mindre Madspild (2016).
http://www.mindremadspild.dk
Natural Resource Defense Council (2016). “New technology could take a bite out of food waste,
one click at a time”.
https://www.nrdc.org/onearth/new-technology-could-take-bite-out-food-waste-one-click-time
Proff A (2016).
http://www.proff.dk/firma/catering-engros-as/thisted/engroshandel/13514226-1/
Proff B (2016).
http://www.proff.dk/firma/hørkram-foodservice-as/hørning/-/50130953-0/
Rabobank (2015). ”Innovation can turn around food waste”.
https://far.rabobank.com/en/sectors/fa-supply-chains/innovation-can-turn-around-food-
waste.html

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Sociology Central (2016). “Sociological Research Skills: Focused (Semi-structured) Interviews”
http://www.sociology.org.uk/methfi.pdf
Stop Spild af Mad (2016).
http://www.stopspildafmad.dk/madspildital.html
Søris A (2016).
http://www.soeris.dk/i-marken/
Søris B (2016).
http://www.soeris.dk/wp-content/uploads/2015/08/Foodservice-sæson-2015-16.pdf
Techcrunch (2015). ”Spoiler alert app makes donating surplus food as easy as tossing it in the
dumpster”.
http://techcrunch.com/2015/07/06/spoiler-alert/
Too Good To Go (2016).
http://toogoodtogo.dk
YourLocal (2016).
https://www.yourlocal.org

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Appendix
Appendix 1
Full explanation of figure # (Afuah, 2013)

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Appendix 2
Total number/size of farms in Denmark (dst.dk)

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Appendix 3
Søris A/S’ full assortment list (søris.dk B)

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