06 Oct 2023 | Blog | by Nupo Ventures Team

Businesses Combatting Food Waste: Mapping the Global Innovation Landscape

Food waste has evolved from a mere inefficiency to a major global issue with environmental, social, and economic implications.

Annually, approximately one-third of all food produced for human consumption, totaling a staggering 1.3 billion tons, is lost, or wasted, with a market value approaching $1 trillion

It arises at every supply chain stage, driven by overproduction, strict aesthetic standards, poor distribution, and consumer behavior. This waste not only emits significant amounts of methane (the decomposition of discarded organic matter releases methane contributing about 8% of total anthropogenic GHG emissions) but also represents a wasteful use of resources used in food production. Furthermore, the resources invested in growing, harvesting, transporting, and processing discarded food are squandered, escalating the strain on ecosystems. Socially, it highlights the stark contrast between widespread hunger and food abundance. Economically, it inflicts substantial losses on producers, retailers, and consumers alike.

According to a report by Food and Agriculture Organization (FAO), Global food loss and waste generate annually 4.4 GtCO2e

However, there's hope. With dedicated efforts, innovative approaches, and global cooperation, we can manage supply chains more efficiently, increase consumer awareness, and creatively repurpose excess food, addressing this critical issue.

Key players in this endeavor are businesses, particularly innovative startups that are reimagining how the food supply chain operates and provide solutions to food waste. Our comprehensive analysis, of over 300 such startups, sheds light on their contributions and strategies. This article will delve into the key findings and insights from our study, offering a deeper understanding of the emerging trends in combating food waste.

Handling it versus preventing it

In food waste management, startups are split between two key strategies: handling existing waste and preventing waste from occurring. About 32% of startups focus on the former, developing efficient, sustainable methods for disposing of, repurposing, and managing food waste. Their goal is to reduce food waste's environmental impact and its accumulation in landfills.

Conversely, 68% of the startups are engaged in prevention, aiming to stop food waste before it happens. This proactive strategy involves a series of interventions across the food supply chain, from production to consumer behavior. These startups are innovating in areas like supply chain management, inventory optimization technologies, consumer education on how to reduce food waste, and sustainable practices in food production and packaging. The emphasis on prevention highlights the broader understanding of the multi-dimensional benefits — economic, social, and environmental — of tackling food waste at its source.

Business model innovations

In our analysis of startups tackling food waste, we identified five main categories of business models based on their core functions.

When looking at the numbers,

Recycling Startups (46%): These form the largest segment, focusing on turning food waste into sustainable solutions. They handle excess food produced, food scraps and uneaten food and turn them into food items (pickles, powders etc.) or into non-food items (leather, textile etc.) or into biogas.
E-Commerce Startups (18%): They link consumers to surplus or imperfect produce via digital platforms. They also provide platforms to connect grocery stores or food outlets directly to customers. These platforms help sell food which are nearing their expiration dates at discounted price.
Hardware Startups (15%): These companies develop innovative technologies & equipments to reduce waste in the supply chain. These startups manufacture smart bins for home kitchens and for food outlets, or sensors and cameras to monitor food during their storage stage or at the grocery stores.
Software as a Service (SaaS) (13%): These startups use tech to optimize various supply chain aspects. At the level of food production, these startups help farmers predict demands, at the level from processing to stores, these help managers in inventory management, and at the level of consumers, these startups help manage shopping list thus, preventing from buying excess food and saving money. Some of these startups also focus on altering consumer behaviour by helping them preparing meal plans aiming to reduce food waste while ensuring healthy meal.
Redistribution (8%): This category focuses on efficient networks for distributing surplus food, highlighting collaboration. These connects business to one another and to NGOs.

Food waste sources targeted by startups

A study by McKinsey and Company reveals that of total food produced, 30% is wasted at all the stages of the global supply chain starting from loss at the farms till it reaches our tables.

In our analysis, we found that different categories of start-ups are sourcing food waste from different parts of the supply chain. Recycling, and redistribution startups adopt a holistic method by sourcing waste across the entire value chain, acknowledging the comprehensive nature of food waste. In contrast, e-commerce platforms focus on the consumption and point of sale stages, aiming to influence consumer behavior and reduce retail waste.

Similarly, we have seen hardware companies focus across the food value chain, ranging from farms to tables and SaaS (Software as a Service) companies predominantly operate at the point of sale and consumption. They are using technology to enhance inventory management and consumer awareness at retail outlets, hotels and restaurants.

Notably 20% of the recycling and e-commerce platforms are also starting to operate at the production level, sourcing excess food (and waste) directly from farms. This approach helps minimize waste right from the start, contributing to a more efficient supply chain.

3. Food Waste - source by business model

This variety in approaches reflects a nuanced understanding of the food waste problem and a comprehensive effort to tackle it across the supply chain.

Global landscape in tackling food waste across continent

In analyzing the global landscape of food waste solutions, distinct regional variations in entrepreneurial engagement become apparent. North America stands out as a frontrunner, hosting 103 startups, most of which are concentrated on recycling efforts. It has been seen that in the US, highest proportion of food waste does come from consumers as well. This growing number of start-ups in the region indicates that awareness among consumers is starting to grow and there is a heightened awareness of sustainability issues and a strong commitment to responsible consumption.

Europe presents a robust startup ecosystem in the food waste domain, largely underpinned by evolving governmental policies and a significant rise in consumer awareness about food sustainability issues. This is becoming ever more obvious with growing water stress issues in places like Spain in the last couple of years. This combination of regulatory support and public consciousness has created a fertile ground for startups to thrive and innovate in tackling food waste.

On the other hand, regions like Oceania and Southeast Asia present a different picture, with a notably smaller number of startups dedicated to addressing food waste challenges. The limited presence of food waste-focused startups in these regions may highlight a lack of awareness about the issue, insufficient investment in sustainability ventures, or a need for more strategic interventions. This gap underscores the necessity for enhanced efforts in raising awareness, channeling investments, and implementing policies that can encourage and support the growth of startups focused on combating food waste, tailoring solutions to the unique needs and challenges of these diverse regions.

Evolution over time

The landscape of startups tackling food waste has evolved significantly from 2003 to 2023. Hardware startups, which focus on tangible technologies to minimize waste, have shown a consistent presence since 2010, with a notable peak in 2015. Recycling startups, emerging as early as 2003, have seen substantial growth over the years, though recently in 2021, they were surpassed by the emergence of 13 new E-Commerce startups compared to 10 in recycling. This shift, coupled with increased funding, reflects a growing trend towards digital solutions in sustainable waste management.

Redistribution startups, while smaller in number, have been rising since 2016, highlighting increased efforts in efficiently donating and redistributing surplus food. The SaaS sector first made its mark in 2004 and reached its peak in 2017 and 2018, primarily serving customers like hotels, restaurants, and supermarkets with software and sometimes sensors for inventory optimization and demand prediction.

E-commerce startups have been significantly impactful since 2012, with a substantial increase in activity peaking in 2022. The growth in E-Commerce, SaaS, and Redistribution startups since 2012 demonstrates the profound influence of digital technology in the food waste sector. However, a noticeable decline in the founding of new startups post-2018 suggests a shift in the sector's dynamics, the underlying causes of which remain to be explored.

Analyzing funding trends globally

Analyzing the funding dynamics reveals diverse regional approaches. Europe, a leader in sustainable initiatives, has seen substantial investment in E-Commerce and SaaS with 42% and 39% of total investment in Europe in these two categories respectively, and less in Recycling (12%). This funding trend is not reflected in the fact that Europe has 43% of startups in the Recycling category. This also stresses Europe’s strategic response to evolving consumer behaviors and the increasing role of digital platforms in reshaping the food distribution landscape.

North America's approach focusing on Recycling with highest number of startups (59 out of 103 startups) and maximum funding (37% of total funding in North America) in this category, is contrary to that of Europe's. Also, Africa and Central Asia have emphasized Recycling and SaaS, balancing environmental sustainability with technological innovation.

Oceania's focus on Hardware and Recycling points to a tech-driven approach, while Latin America shows a few under-funded initiatives in E-Commerce, Recycling, and SaaS. The lower funding in Latin America may be attributed to several factors, including lower awareness, limited access to investment opportunities, and potentially fewer initiatives or policies supporting such ventures. Industrialized Asia’s (eg Korea, Japan) funding trends demonstrate inclination towards Recycling and E-Commerce models, and less on SaaS and Redistribution, and the same trend is also visible in the number of startups founded within these models. The focus on Recycling and E-Commerce shows the region’s commitment towards both the digital and non-digital solutions. South and South East Asia received least amount of funding, indicating very low maturity on this topic.

This evolving narrative highlights each region’s unique strategies in the collective fight against food waste, underscoring the importance of regional nuances in addressing this global challenge.

6. Food waste - business model funding by region

Conclusion

Food Waste, contributing significantly to food insecurity on a global scale, is an important problem to solve. Our analysis of over 300 startups reveals varied strategies, from recycling and prevention to digital platforms for redistribution, reflecting the multifaceted nature of this issue. Regionally, North America and Europe lead in initiatives, driven by consumer behavior and policy support, respectively, while areas like Oceania and Southeast Asia highlight a need for increased focus and investment. The evolving funding trends going into different categories, and decrease in number of new startups post-2018, suggest shifting priorities and underscore the need for ongoing support and adaptation in strategies. These collective efforts are crucial in building a more sustainable and efficient global food system and require continued commitment and innovation to ensure long-term success.