Peeling Back Food Waste

According to the U.S. Environmental Protection Agency food is the single largest discarded item in American landfills.  Indeed, looking at data on food thrown away from the table as well as agriculture waste at the farm, as much as 40% the food produced in the U.S. is thrown away.  Reporting on the topic three years ago, The Guardian described Americans as part of a ‘cult of perfection’ that throws away edible but flawed food at every step in the supply chain from farm to fork. 

The U.S. agriculture sector contributed $132.8 billion to the U.S. gross domestic product in 2017.  Any savings from the vast amount of food waste would be a net positive for the U.S. economy and not an inconsequential savings at that.

Privately-held Apeel Sciences has a solution for food waste at the ‘upstream’ end of the food supply chain.  The company has crafted a plat-based coating for perishable produce.  Called Edipeel the coating is made with the same lipids and glycerolipids that already exist on fruits and vegetables.  Edipeel works with the fruit or vegetable natural defenses to lock in moisture and block out oxygen.  This keeps the produce naturally plump and free of spoilage for almost twice as long.  The U.S. Food and Drug Administration has recognized Edipeel as safe.

Applying Edipeel to produce after harvesting can reduce refrigeration needs, lower handling costs and minimize harvest loss.  It could even increase nutritional content by reducing pressure on farmers to harvest before the produce is fully ripened.  The value proposition is clear  -  savings on spoilage and higher quality harvest means increased revenue and higher profits.

Edipeel is a powder and mixed with waste prior to use.  Customers can spray it on produce or dip each fruit or vegetable as needed.  Costco is reportedly spraying Edipeel on avocados and producers of citrus and asparagus have also tried the coating.  Apeel is reportedly generating revenue in the low single digits.

Apeel received seed money from the Bill and Melinda Gates Foundation and eventually raised a total of $110 million in venture funds to support development and commercialization of Edipeel.  It is clear investors have taken the company seriously.   The food industry may be taking note as well.  Reportedly a senior executive with Whole Foods is joining Apeel’s board of directors.

Expect the venture capital providers to continue exerting strong influence over Apeel’s future.  Two of the board members are representatives of the company’s venture capital backers.  That could be a boon for minority investors who would like to get a share of a food waste solution provider.  Venture funds continue to embrace the initial public offering as an exit route.  However, do not discount acquisition by an agribusiness or food chain player.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.