By Elizabeth Coston McCluskey and Tasha Seitz
Global grocery spend is approximately $7.5 trillion annually, and sales of fresh products (produce, meat, seafood, bakery) are rising as a percentage of that spend. Just under half of a shopper’s cart consists of fresh products. However, existing technology solutions focus on “middle of the store” non-perishable items. Because fresh food is perishable, non-uniform, and merchandised in an extremely dynamic fashion it is difficult for stores to predict and manage their inventory. This leads to 10+% “shrink”, or waste, in fresh categories. Produce waste alone is estimated to cost $10B a year in the US and close to $100B / year globally. In addition, significant (harder to quantify) waste occurs in consumer households due to food spending excessive time in the supply chain — losing precious days of shelf life that could be given to consumers. With supermarkets’ thin net margins of 2–4%, they are looking for solutions to help them reduce waste and improve profits.
Solution
Afresh’s AI-powered software enables department managers to generate waste-minimizing and profit-maximizing order quantities for items in fresh departments. The company’s machine learning model takes into account factors that drive demand such as weather, day of the week, mix of items in store, promotions, and competitive activity. It also accounts for supply considerations such as shelf capacity, shipment frequency, and existing inventory. Afresh’s tablet-based app guides the manager through an ordering workflow for each item, whereas they had previously ordered based on the produce department manager’s best guesses recorded using pen & paper. Afresh is currently serving produce departments, with plans to support meat and food service in the near term, and distribution centers in the future.
Why We Invested
Afresh has demonstrated the ability to sell to large, regional chains including Fresh Thyme, headquartered in Chicago. Early customers are committing to chainwide rollouts, with expansion from produce departments into meat and bakery products. Leaders in the industry have validated Afresh’s solution, and are demonstrating their support by investing in this round. In addition to a sizable market opportunity estimated at over $10B per year, we believe there is substantial impact potential, and the team has a strong commitment to impact.
In these challenging times, we are critically examining the potential impact of the COVID crisis on both our portfolio companies as well as new investments, and we believe that Afresh will continue to be a valued solution in the event of a protracted recession. We expect grocery retailing to see steady demand through difficult economic times. Because Afresh enables grocers to reduce waste and thereby increase profitability, we believe the company has the potential to improve the financial health of grocers during a downturn in the economy. Current customers are pushing to accelerate their deployment of Afresh’s solution, which is a positive indication of the company’s value and potential.
Impact
Food waste in the US consumes 21% of all freshwater, 19% of all fertilizer, 18% of cropland and 21% of landfill volume. Retailers throw away 40+ billion pounds of food annually, equivalent to 10% of the total food supply at the retail level. This problem is most pronounced in fresh produce, which consistently sees 12% losses. Afresh has been able to demonstrate 25% food waste reduction with initial customers, which at scale could have massive environmental impacts. Additionally, if the Afresh solution can enable retailers to make better margins on fresh food, it should become more available and affordable to consumers.
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