The food production industry creates tonnes of surplus food and ‘waste’ by-products every year – but for CPG and F&B companies with the right supply chain, there’s an opportunity.
According to UN statistics, as much as a third of all food produced globally is discarded. But it’s not just down to consumers throwing away their out-of-date cheese or mouldy vegetables – much of that edible product loss happens before it even reaches a fridge or cupboard. A significant amount of waste is caused along the manufacturing, distribution and retail chain.
As companies work to cut the amount of waste generated through production and logistics, many are overlooking a key aspect of food processing that could be adapted both to reduce waste and create a new revenue stream: ‘upcycling’.
There are a whole host of different types of ‘waste’ generated every day throughout the industry – from fruit that’s not aesthetically pleasing enough to sell, to by-products from ingredient processing – that can be used as secondary ingredients for other products, or even the base of a whole new product.
This is a vast untapped resource for food companies, whether it’s finding a new way to use their own waste, or sourcing by-products from other organisations.
To do this successfully, however, companies need to take a careful approach to supply chain management. Otherwise, turning waste into sellable products could cost more than it’s worth.
The types of food ‘waste’ – and what they’re good for
Most reusable waste products are created in one of three ways:
- Fruit and vegetable processing produces a lot of waste at every stage, from farming to sales. This is either down to ‘wonky’ items, which are rejected due to being damaged, misshapen or oddly sized, or to the high levels of trimming and chopping required to make the products uniform and appealing.
These fruits and vegetables, most commonly apples and carrots, are ideal for any products that use blended ingredients, such as soups or smoothies.
- Dairy processing such as cheese and yoghurt manufacturing produces huge amounts of whey.
As a flavourless, high-protein ingredient with probiotic properties, whey is an ideal base for drinks, and can be used for protein powder.
- Storage and transport generate waste through ‘shattering’, where pieces of fruits and vegetables are left behind from damage during transit.
These fragments can be used for other food products, such as smoothies and freeze-dried fruit mixes, and even pet food.
There are several opportunities here for companies to reuse goods that would otherwise be written off – but simply knowing this isn’t enough to turn it into a marketable product.
How to turn by-products into sellable products
Some businesses are selling ‘wonky’ fruit and vegetables as they are, appealing to a general appetite for reducing waste. However, others are taking full advantage of the opportunity to create completely new products.
There are three ways to make this work: use another company or industry’s by-product, upcycle your own food waste streams, or process the potential waste in a way that makes it usable.
Take US company Regrained for example. It uses the by-products from brewing to create a high-fibre flour, which it then turns into bread and snack bars. In the reverse, Toast Ale takes leftover bread – a major waste stream globally – and brews it into beer.
There are simpler ways to upcycle waste, too. Ocean Spray turns leftover cranberries from juice production into a product it calls ‘Craisins’ – dried cranberries that are sold as a snack. Similarly, FoPo freeze-dries fruits and vegetables that are near expiration to make nutritional fruit powders with a shelf-life of two years, and sells them as recipe ingredients.
In increasingly eco-conscious times, companies that upcycle waste streams into different products will have a very effective USP to set them apart in an industry known for high wastage.
It’s a potentially lucrative proposition, too: research has shown that consumers consider an upcycled product to be closer to organic. This means there’s opportunities for premium pricing, making even larger revenues from ingredients and components that would otherwise have gone into landfill or fertiliser.
But you will still need to be careful about how you market this upcycled product – ‘waste’ can be a difficult sell.
The importance of the supply chain
If you want to repurpose waste streams successfully, you need an efficient procurement model – and that means examining your supply chain in detail. The first step is to consider carefully exactly what you intend to produce, and then plan how you’re going to make it happen.
You’ll need to take into account key factors including:
- Availability (including seasonality)
- Transport logistics
- Perishability and special handling requirements
- Food safety
If you’re planning to buy waste ingredients from another company or industry, it’s best to target the large food processing businesses that consistently produce huge volumes of waste through their everyday operations. Developing a direct relationship with these companies helps you cut out middlemen, which can reduce your costs considerably, and ensure you have a reliable ingredient stream available.
If you can find companies that are already waste-conscious, there’s even an opportunity for public partnerships that pull on the growing ethical and ecological sentiment among consumers, to generate positive PR.
Finding your path to waste stream evolution
Working out which companies to collaborate with – or how best to make use of your own waste streams – requires an in-depth understanding of the market, and how upcycling can factor into your operations.
Interested in exploring options for turning a waste stream into a revenue stream? Our Procurement and Supply Chain solutions provide actionable market and supplier intelligence to inform optimal sourcing strategies, while our Revenue Growth Management solution leverages advanced analytics to enable CPG category managers to plan and execute effective growth strategies.
Please get in touch to discuss how we can help.