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Apeel Tackles Food Waste in America and the World

June 16. 2020. 7 mins read

More than 35 startups have already joined the increasingly less-exclusive unicorn club this year, despite the fact that most people are home doing Zoom conferences to prove how much they’re working while not actually working. There are the usual hardware tech startups, such as ultrasound medical device company InSightec and smart security camera startup Verkada, along with AI cybersecurity startup SentinelOne and even an autonomous urban air mobility manufacturer in Lilium Aviation. And then there’s Apeel Sciences, a green tech startup which is tackling food waste in America and around the world in a very big way after raising a megaround Series D of $250 million to reach a valuation of $1 billion.

Food Waste in America

There will be upwards of 10 billion people on the planet by 2050 and feeding all those mouths will be a challenge, which is why scientists are developing new ways to grow crops more efficiently and startups want to feed us fake food and edible bugs. Others have suggested all we really need to do is quit wasting so much food.

Food waste in America accounts for between 30% to 40% of the food supply, according to the U.S. Department of Agriculture. About a third of that occurs at the retail and consumer levels, which works out to be about $160 billion worth of food – and those are 2010 numbers. The U.S. Environmental Protection Agency estimated that in 2017, we sent more than 38 million tons of food waste to landfills or combustion facilities that turn some of that waste into energy. Global food waste is a problem as well. One oft-quoted stat from the Food and Agriculture Organization (FAO) of the United Nations is that about one-third of food is wasted

The FAO recently made the distinction between food loss versus food waste. The former usually happens early in the supply chain before food hits store shelves or restaurant kitchens. The latter category mainly concerns the retail side of food. Generally speaking, poorer countries, which lack infrastructure for properly storing and tracking food inventory, suffer more from food loss. Richer countries have the supply chain technology but are more likely to experience food waste. Santa Barbara, California-based Apeel Sciences is trying to solve both problems by developing a protective food covering that keeps freshies fresh longer.

An Agtech Unicorn

Click for company website

Founded in 2012, Apeel has raised about $360 million in funding, including that $250 million Series D just last month. The round was led by GIC, Singapore’s sovereign wealth fund, which has made more than 125 investments since it was established in 1981. As you might expect, Apeel also appeals to ESG types who want to invest in planet-saving technologies, so celebrities like Oprah Winfrey and Kate Perry also kicked in a few bucks during the latest round. Ditto for nonprofits like the Rockefeller Foundation and the Bill & Melinda Gates Foundation. We did a brief profile of the company in our list of top-funded agtech startups a few years ago, noting that Apeel had attracted interest from top VC firms like Andreessen Horowitz. Another investor, S2G Ventures, focuses on investments in food and agriculture. S2G had previously invested in Beyond Meat (BYND) before its successful IPO

Update 10/27/2020: Apeel Sciences has raised $30 million in funding to finance their international rollout. This brings the company’s total funding to $390.1 million to date.

The Appeal of Apeel

Victor Friedberg, co-founder and managing director of S2G Ventures, previously talked to one of our writers for a different publication about his firm’s investment in Apeel. We figured Victor is eager to get the word out about his firm and its portfolio, so we decided to include a few words of his wisdom here. 

Friedberg explained the appeal of Apeel to venture funds: “The venture funds saw a disruptive technology with profound implications for opening up Chinese markets for avocados and decreased energy needs for refrigeration during transportation, etc.” The foundations saw something completely different, he added. “They saw that small shareholder farmers in places like Nigeria and Kenya … could use Apeel to move their crops into urban markets that would allow them to fully realize the value of the crop.”

Apeel founder and CEO James Rogers helps farmers in Kenya apply Apeel to their produce.
Apeel founder and CEO James Rogers helps farmers in Kenya apply Apeel to their produce. Credit: Apeel Sciences

In fact, Apeel was partly the inspiration behind Friedberg’s moonshot nonprofit called FoodShot, an investment platform looking to back big ideas on soil health and other agtech-driven solutions to tackle big problems like climate change.

Apeel represented to me a company that could potentially transform an entire large sector of the food system – lowering food waste, lowering energy usage, improving nutrition, improving the lives of small [farmers]. Apeel was global, it was disruptive, it was addressing large issues in both the developed and the developing world and [I] said, ‘let’s do more of those.’

Victor Friedberg, co-founder and managing director of S2G Ventures

So how exactly is Apeel’s technology accomplishing all that?

How Does Apeel Keep Fruit Fresh

Apeel founder and CEO James Rogers is one of those people who makes you question the worth of your existence on this planet. The dude was a double major in materials science and biomedical engineering, and conducted his PhD research at Lawrence Berkeley National Lab. He often tells the tale of how he heard a story about global hunger and then researched the issue of food waste in America. A big part of the problem is that many fresh fruits and vegetables are highly perishable, with spoilage mainly caused by water loss and oxidation. Rogers reached back to his studies in material sciences and recalled that steel has a similar problem: iron atoms react with oxygen to form iron oxide, better known to those of us who skipped chemistry class as rust.

Graphic illustration of Apeel Sciences technology.
Credit: Apeel Sciences

Some other big brains have figured out that by mixing other atoms into steel they could effectively create a barrier that protects the iron in the metal from rusting. Rogers figured how hard could it be to develop a natural barrier that would prevent oxidation of fresh fruits and vegetables from occurring. Well, five years and about $8 million in R&D later, Apeel discovered a way. Apeel formulations use ingredients found in the peels, pulp, seeds, and stems of fruits and vegetables and repurpose them to create a thin, edible, tasteless barrier for both conventional and organic produce. Food science nerds can read a deep dive into the technology at Wired.

How Apeel Contributes to Sustainability

The company claims that its protective barrier – a powder mixed with water that is then applied to the produce – can extend the edible life of market-ready fruits and vegetables by two to three times. Longer shelf life means more time on the grocery store shelves. Since 2018, for instance, Apeel claims it has saved more than 4.5 million avocados from ending up in the landfill. There’s also a huge environmental impact on reducing food waste in America and elsewhere. The company produced a 51-page report that showed how its technology could cut down carbon emissions and water usage, as well as address other environmental issues on six different kinds of produce:

The environmental benefits of Apeel Sciences.
Credit: Apeel Sciences

An organic food barrier also means there’s no reason to wrap produce like cucumbers in all that plastic wrap. A new partnership with greenhouse grower Houweling’s will eliminate 60,000 pounds of plastic shrink wrap from their cucumbers each year, according to Apeel. That’s the equivalent of 85 million plastic straws – about what an average Cracker Barrel goes through in about a week. 

How Apeel Uses Machine Learning

They say a picture is worth a thousand words. So far, Apeel has taken about four million pictures of fruits and vegetables as part of an ongoing series of experiments that illustrate how its produce can withstand the test of time. (We’ll let you do the math on how many words that adds up to.) Below you can see how treated avocados fare.

Time lapse of avocado rotting.
Credit: Apeel Sciences

The company uses what it calls the Apeel Time-Lapse Machine to monitor new formulations or sell clients on the efficacy of its solution. The main man behind the machine, Apeel software engineer Tim Cronshaw, explained how the device works using machine learning in a recent company blog post: 

The hardware consists of a camera mounted on a track above a shelf that holds produce samples, a stepper motor that slides the camera between samples, and a Raspberry Pi mini-computer that controls the hardware and maintains the time-lapse sequence. An internal server computer pulls images from the Raspberry Pis to automatically produce analytical reports with estimated volume loss, color change, and finalized videos.

Tim Cronshaw, Apeel software engineer

The time-lapse machine also uses Google’s open-source software for machine learning, TensorFlow, for image analysis. The company’s research teams first manually notate thousands of individual images as either acceptable or unacceptable examples of desirable traits in a particular fruit or vegetable. The AI model learns over time what makes a good apple from a bad apple, for instance, and then automatically distinguishes them in new images. Cronshaw doesn’t explicitly say how Apeel uses this information, but we assume it has something to do with tweaking its formulations based on the image analyses.

Conclusion

Apeel Sciences appears to be on a roll, with new financing to further its R&D, grow its supply chain, and expand to new markets. The Apeel avocado is just the first application. It already has five solutions on the market with more to come:

Five types of produce that Apeel Sciences' technology addresses to help stop food waste in America.
Credit: Apeel Sciences

The startup has also amassed an impressive list of clients, including names like Kroger, Del Monte, and Nature’s Pride, among more than 20 ag food companies. What has our foodie MBAs most excited, however, is that crops could potentially stay in the ground and ripen naturally, delivering more nutrients and a better taste while also cutting down food waste in America.


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