Sustainable & Thematic Investing
Food Waste: Ripe for Change
We waste an unsustainable one third of the food
we produce globally, valued at $1 trillion pa and accounting
for 8% of GHG emissions. This report proposes that
the time is ripe to execute change through collaborative
action across the food value chain.
Emily Morrison
+44 (0)20 7773 9080
emily.morrison@barclays.com
Barclays, UK
Equity Research
4 March 2019
Hiral Patel
+44 (0)20 3134 1618
hiral.p[email protected]om
Barclays, UK
Anushka Challawala
+44 (0)20 3134 2326
anushka.challawala@barclays.com
Barclays, UK
Barclays Capital Inc. and/or one of its ailiates does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware that the firm may have a
conflict of interest that could aect the objectivity of this report. Investors should consider this
report as only a single factor in making their investment decision.
This research report has been prepared in whole or in part by equity research analysts based
outside the US who are not registered/qualified as research analysts with FINRA.
Please see analyst certifications and important disclosures beginning on page 68.
SIGNATURE
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4 March 2019 2
CONTENTS
EXECUTIVE SUMMARY .................................................................................... 3
THE PROBLEM WITH FOOD WASTE ............................................................ 6
It's a global issue and it’s expected to grow ............................................................................................ 6
A greatly overlooked driver of climate change ....................................................................................... 9
WHY SHOULD INVESTORS FOCUS ON FOOD WASTE? ........................ 11
5 key factors to consider ........................................................................................................................... 11
WHAT CAN BE DONE ABOUT THE PROBLEM ......................................... 14
A collaborative approach is key ............................................................................................................... 14
Calls to action – Government, Consumers, Industry ......................................................................... 15
All players in the food value chain will need to take action ............................................................. 20
Emerging innovation can help accelerate change ............................................................................. 21
INVESTOR GUIDEBOOK – SECTOR IMPLICATIONS ................................ 25
Dissecting the food value chain .............................................................................................................. 25
Contributing Authors ................................................................................................................................. 27
Food Retail ..................................................................................................................................................... 28
Food Manufacturing ................................................................................................................................... 34
Agribusiness .................................................................................................................................................. 37
Leisure ............................................................................................................................................................ 41
Packaging ...................................................................................................................................................... 47
Energy ............................................................................................................................................................. 52
Chemicals ...................................................................................................................................................... 55
Food Delivery & Meal Kit Solutions ......................................................................................................... 58
Transport ....................................................................................................................................................... 59
APPENDIX 1 – EXPERT & START-UP INTERVIEWS ................................. 60
APPENDIX 2 – UK/US SUPERMARKET SCORECARDS ........................... 66
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EXECUTIVE SUMMARY
We currently waste 1.3 billion tonnes of food per year, about one-third of all food produced for human consumption. This
represents a loss of around $1 trillion dollars annually, a figure estimated to hit $1.5 trillion by 2030. Such massive waste is
simply unsustainable in a world far off course from our two-degree climate change limit and one where an expanding
population is putting ever-increasing pressure on resources. We think food waste is a greatly overlooked driver of climate
change, accounting for as much as 8% of global greenhouse emissions, and an area ripe for transformation. The UN’s
Sustainable Development Goal 12.3 targets halving food waste by 2030, but without decisive action, the world risks failing
to meet this goal. Companies are starting to see food waste as an opportunity, rather than simply a by-product of doing
business, and this is particularly true in the developed world where most waste occurs at the consumption stage. We
question the current dynamics of the food value chain and see the need for collaboration across key stakeholders, with a
clear role for innovation to accelerate change.
Food waste is forecast to rise to 2.1 billion tonnes per year by 2030, at a yearly value of $1.5 trillion dollars, according to BCG
(Figure 1). Food waste per person is significantly higher in the developed world, where the majority occurs in the later stages
of the value chain with significant sources including restrictive appearance standards and over-reliance on expiry dates.
Whereas in the developing world, the majority of food waste occurs at earlier stages due to inadequate storage and
infrastructure. Similar to the current spotlight on plastics, we believe food waste will be a key focus in the coming years and
see awareness continuing to grow.
We believe that a collaborative approach is necessary with specific calls to action from key stakeholders: governments,
consumers and industry. We argue that change is necessary all along the food value chain and draw on numerous
discussions with futurist NGOs, disruptive start-ups and VC firms. Furthermore, we see the increasing use of emerging
innovation to tackle the problem of food waste (page 21) such as shelf life extension technology, AI, innovative packaging
and surplus food platforms.
Our Investor Guidebook (page 25) assesses the impacts of increasing food waste awareness on a wide variety of sectors,
following discussions with our sector analysts. We see Food Retail and Leisure as the sectors most at risk due to regulatory
change and consumer pressure. Whereas we see greatest opportunity in the Food Manufacturing and Agribusiness sectors
due to brand perception and cost opportunities, respectively. We think food waste also has implications for Packaging,
Energy, Chemicals, Food Delivery and Transport. Refer to Figure 2 for our sector overview and key company mentions. Our
current food system is synonymous with waste, but we think growing awareness has the long-run potential to redefine the
balance of power across the food value chain and hence promote the shift to a leaner society.
Why read this report?
Viewing companies through a sustainable lens, investors should ensure that food waste is firmly on their radar. If a company
does not take appropriate action on food waste, its relevance in an ethical and sustainable long-term portfolio may come
into question. We argue that increasing awareness around food waste highlights the risks of significant regulatory change
and consumer backlash. As such, investors should be putting pressure on companies to prioritise efforts to tackle this
problem.
In the wider discussion around the move to a lower-carbon world, this report adds to the series of Barclays research on the
topic (European Energy: Value in a lower-carbon world 21/11/18, European Mining: Decarbonisation - an opportunity not a
threat 17/1/19, Global Agriculture: Winds of change: the next environmental debate 11/2/19). Importantly, this report also
highlights food waste as an area of significant opportunity that we think is greatly overlooked when it comes to combatting
climate change – if food waste was a country, the FAO estimates it would be the third-largest contributor of GHG emissions.
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4 March 2019 5
FIGURE 2 Sector implications around growing food waste awareness
Source: Barclays Research
Sector Impact
Key company
mentions
Food
Manufacturing
Opportunity
• Create innovative product offerings
• Adapt existing products
• Develop sustainable brand image
• Re-engineer manufacturing processes
• Kellogg
• Mondelez
• Kraft Heinz
Emerging
innovation
• Shelf life extension
• Repurposed products
• Assortment
management system
Food Retail
• Review promotions strategy
• Increase flexibility of supplier contracts
• Optimise order forecasting
• Promote food waste awareness
• Tesco
• Walmart
• Kroger
• Sainsbury
• Carrefour
• Upcycled products
• Innovative packaging
• Ethical supermarkets
Agribusiness
• Benefit from more flexible supply contracts
• Invest in technology around yield, storage
and demand forecasting
• Tyson
• JBS and PPC
• BRF
• Hormel
• Supply management
• Repurposed products
• Land analysis
• Produce monitoring
Leisure
• Invest in waste analytics
• Increasing use of demand forecasting
• Embrace consumer waste initiatives
• Carnival
• Sodexo
• SSP
• JD Wetherspoon
•Greggs
• Data analytics
• Smart waste
management system
• Excess food platforms
Energy
• Increasing demand for renewable fuels
• Food waste as feedstock
• Neste
• Covanta
• Energy recovery
Chemicals
• Leverage agrochemical solutions
• Improve consistency of food production
• Facilitate transport and prolong shelf life
• BASF
• Croda
• Covestro
• Seed enhancements
• Biostimulants
• Shelf life extension
Food delivery &
Meal kit solutions
• Shift towards flexible eating
• Pre-portioning of ingredients
• HelloFresh• Demand analytics
• Intelligent logistics
• Modified atmosphere
packing
Transport
• Increasing demand for supply chain
management
• Demand for in-transit shipment monitoring
• DPDHL
• Kuehne + Nagel
• DSV
• Hapag-Lloyd
• Remote monitoring
• Spoilage reduction
Risk
Packaging
• Improve shelf life stability
• Reformulate to meet sustainability goals
• Enhance supply chain efficiencies
• Enable consumers to waste less through
portion control and re-sealability
• Sealed Air
• Bemis
• Sonoco
• Avery Dennison
• High barrier film
technology
• RFID and smart labels
• Atmospheric control
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THE PROBLEM WITH FOOD WASTE
We already waste 1.3 billion tonnes of food each year and this is expected to increase
to 2.1 billion tonnes by 2030. Fresh produce presents the biggest problem, with almost
half of the world’s fruit and vegetables being thrown away each year. The scale of the
problem is also greatest in the developed world, where an over-reliance on expiry dates
and lack of understanding over the value of food means that consumers waste around
10 times more than in poorer regions. Food waste is not only a serious market
inefficiency, but also a major contributor to greenhouse gas emissions throughout
food production and disposal processes. We believe the developed world holds the
greatest potential in terms of tackling food waste in the medium term through
improved technology and awareness in the later stages of the value chain.
It's a global issue and it’s expected to grow
Each year roughly one-third of the food produced for human consumption globally is
wasted (FAO). This equates to around 1.3bn tonnes of wasted food and in monetary terms
represents around $1 trillion (c$680bn in developed countries and c$310bn in developing
countries). Food waste is expected to continue growing, and is forecast to reach 2.1 billion
tonnes by 2030, worth around $1.5 trillion (BCG).
Looking at the composition of food waste, fresh produce is the biggest contributor with
fruits, vegetables, roots and tubers having the highest rates of wastage (Figure 3).
FIGURE 3 Proportion of food wasted is highest in the fresh produce section
Source: FAO 2011
Food waste per capita is greater in the developed world
Per capita food wastage from all stages of the supply chain is generally higher in developed
countries – at 280-300kg per capita per year in Europe and North America compared with
120-170kg per capita per year in sub-Saharan Africa and South/Southeast Asia. The
proportion of food waste relative to total food production is, however, similar at 31-33% in
Europe and North America and 26-37% in sub-Saharan Africa and South/Southeast Asia.
FIGURE 4 Food wastage per capita is higher in the developed world
Source: FAO 2011
0
50
100
150
200
250
300
350
Europe
North
America &
Oceania
Industrialized
Asia
Sub-Saharan
Africa
North Africa,
West &
Central Asia
South &
Southeast
Asia
Latin America
Per capita food losses and waste (kg/year)
Production to Retailing
Consumer
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Consumer waste is more prevalent in developed countries
There is wastage all along the food supply chain, from the initial production stages all the
way through to final consumption. However, wastage at the final consumption stage
represents a greater proportion of the total in more developed countries – Figure 5. The
FAO estimates that per capita food waste by consumers in Europe and North America is 95-
115kg per year compared with only 6-11kg per year in sub-Saharan Africa and
South/Southeast Asia. In the UK, the Institute of Mechanical Engineers highlights that food
wastage by consumers costs the average household around £480 per year.
FIGURE 5
Food waste from later supply stages (and consumption) is higher in developed regions
Source: FAO 2011, WRI 2013. 100% = 1.5 quadrillion kcal.
Expiry dates, multi-buy promos and pack sizes
One factor likely driving this consumer waste is the developed world’s over-reliance on
expiry dates and best-before dates. The Institute of Mechanical Engineers finds that
between 30-50% of the produce that reaches the supermarket shelf is thrown away by the
consumer, “often at the direction of conservative ‘use by’ labelling.” This presents an
opportunity to reduce food waste through innovative packaging that enables consumers to
more accurately determine whether the food is safe to eat – we explore this later in the
report (see our Mimica interview, page 62). Another reason for food waste in the home is
due to grocery retailers’ prominent use of multi-buy promotions such as ‘buy-one-get-one-
free’, encouraging consumers to purchase more than is required. Consumers are also
constrained by pack sizes – i.e. it is often difficult for a consumer to purchase only the
quantity of food they need.
Some produce doesn’t even make it to the consumer
Other dominant sources of food waste in developed countries include the introduction of
appearance quality standards – i.e. grocery retailers have set strict produce specifications
that farmers and manufacturers need to meet. This is particularly prevalent in the fresh
produce space such as fruits and vegetables (which is also the commodity group with the
largest proportion of waste – Figure 3). The result is a significant amount of produce that
ends up being wasted because it is not accepted by the grocers. In the UK, the Soil
Association estimates that 20-40% of fresh produce doesn’t make it to the supermarket
shelf due to aesthetic reasons.
In contrast, in developing countries, food wastage generally occurs in earlier stages, with
difficulties in harvesting, storage, infrastructure, packaging and transport systems. Figure 5
shows that in developed nations, food waste in the distribution and consumption stages
10%
9%
2%
5%
28%
14%
15%
2%
7%
7%
24%
24%
4%
12%
35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Production
Handling and
Storage
Processing and
Packaging
Distribution and
Market
Consumption
Developed Countries
Developing Countries
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4 March 2019 8
makes up a greater proportion of the total than in developing nations where a greater
amount of waste comes from the production and handling stages.
Scope for change all along the food supply chain
There are a variety of factors influencing the food supply chain that can lead to food waste;
we outline some of the main reasons in Figure 6.
FIGURE 6 Factors contributing to food waste – a lack of awareness along the value chain
Source: Barclays Research
A focus on the developed world
We acknowledge that many families in developing nations rely more heavily on agriculture,
while also living closer to food insecurity, hence a reduction in food wastage could have
larger benefits for their standard of living. We see scope in the long-run for governments of
developing nations to improve infrastructure and for companies to embed suitable
technology to improve harvesting techniques and storage conditions.
However, in the medium term we see the largest opportunity to reduce food wastage in the
developed nations. This is due to the larger scale of the problem in developed nations per
person and the greater opportunities to improve technology and awareness in the later
stages of the value chain. Due to our focus on the developed world, we have included some
statistics for the scale of the problem in the US, Europe and the UK (Figure 7).
FIGURE 7 The problem of food waste in the developed world
Source: ReFed, NRDC, Fusions, WRAP
Agriculture Manufacturers Food Retailers Consumers
• Inadequate storage
• Lack of cooling facilities
• Harvesting difficulties
• Overproduction
• Inadequate storage
• Loss in transport
• Waste from product
processing
• Over precise product
specifications standards
• Packaging
• Stock rotation
• Over-ordering
• Inadequate forecasting
• Multi-buy promotions
• Confusion over
expiry dates
• Over-buying
• Undervaluing food
• Not knowing the
environmental cost
• Pack size constraints
Most prevalent in developing countries Most prevalent in developed countries
US
Europe UK
• 63mn tonnes of food wasted yearly
• Represents 40% of food in the US
and c$165bn in value
• 40% of food waste comes from
restaurants and grocery stores
• Reducing fruit and vegetable waste
is an $18bn opportunity for retailers
• A 15% decline in food waste could
feed 25million Americans yearly
• c88mn tonnes of food waste per
year, or 20% of the food produced
for human consumption
• The associated cost is cEUR143bn
• Food waste of around 2.5x the
average body weight for every
person, per year
• Households generate over 50% of
the food waste
• c10mn tonnes of food waste annually
• Represents c25% of the food
purchased in the UK
• Represents over £20bn in value
• 25mn tonnes of greenhouse gas
emissions are associated with
the waste
• c70% of food waste from
households and 18% from food
manufacturing
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A greatly overlooked driver of climate change
It is clear that food waste is a serious market inefficiency – the $1 trillion value of global
annual food waste represents c1.2% of global GDP. But food waste also poses a significant
environmental challenge in terms of its carbon footprint as well as land and water use.
Food waste’s significant carbon footprint
The FAO estimates that if food waste was a country, it would be the 3
rd
biggest emitter of
greenhouse gases at 3.6 Gtonnes of CO
2
equivalents, behind only China and the USA
(Figure 8). This means that food waste contributes around 8% of global greenhouse gas
emissions, almost equivalent to global road transport emissions (IPCC). Producing the food
we waste causes GHG emissions all along the value chain from farm-to-fork and also leads
to emissions when it is sent to landfill, releasing methane when it decomposes
anaerobically. ReFED, a US coalition to reduce food waste, estimates that a 20% reduction
in US food waste over the next 10 years would avoid almost 18 million tonnes of
greenhouse gases annually, recover c1.8 billion meals per year and save over 1.6 trillion
gallons of water annually.
FIGURE 8 If food waste was a country, it would have the third-largest carbon footprint
Source: WRI's Climate Data Explorer 2011 data, FAO for 2011 food waste estimate
Wider environmental costs
A land mass larger than Canada and India combined is needed to grow the food that we
waste each year (FAO) and the water and energy used to produce this food are wasted as
well. Agriculture is the world’s largest user of fresh water and it is estimated that over 25%
of fresh water use in the US is accounted for by wasted food.
FIGURE 9 Food waste is a significant burden on the environment
Source: ReFed
Reducing food waste can help the shift to a lower-carbon world
Barclays has already published on the move to a lower-carbon world – see European Energy:
Value in a lower-carbon world (21/11/18), European Mining: Decarbonisation - an
opportunity not a threat 17/1/19, Global Agriculture: Winds of change: the next
environmental debate 11/2/19). However, we think food waste is an often over-looked, and
yet solvable, factor and presents an opportunity to dramatically improve the environmental
outlook. Project Drawdown’s researchers found that reducing food waste could lower
0
2
4
6
8
10
12
GHG emissions - Gtonnes CO2 eq
18%
of cropland
19%
of all fertiliser
21%
of landfill volume
In the US, food waste consumes:
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4 March 2019 10
emissions by 70 Gtonnes over the next 30 years and ranked reducing food waste as the
third most impactful action to targeting climate change, behind only refrigerant
management (90GT) and onshore wind turbines (85GT).
Consumer food waste presents largest opportunity for reducing carbon footprint
In terms of the food value chain, the highest carbon footprint is generated from the
consumption stage because of the cumulative effect from previous stages (Figure 10). As
an example, a single tomato wasted at the harvesting stage will have a much lower carbon
footprint than a consumer wasting tomato sauce because the harvesting, transportation
and processing accumulates additional greenhouse gas emissions. As most food waste
occurs at the consumer level, this suggests that reducing food waste in the consumption
stage is likely to have the biggest impact in terms of carbon footprint.
FIGURE 10 Consumption stage contributes most to carbon footprint
Source: BIO Intelligence Service, Presentation of the Footprint 2013, FAO 2011, WRI 2013. Note: Food waste by energy.
Animal products – low wastage rates but high carbon footprint
Animal products contribute significantly towards the global carbon footprint, much more so
than their contribution to food waste (Figure 11). This is because of the intensity of GHG
emissions to produce meat, specifically beef products. For further details see Global
Agriculture: Winds of change: the next environmental debate 11/2/19.
FIGURE 11 Animal products contribute more to carbon footprint than wastage
Source: BIO Intelligence Service, Presentation of the Footprint, 2013. Note: Contribution to food waste by volume.
As awareness around agriculture’s impact on the environment has grown, investor pressure
has also become more apparent. On 29 January 2019, over 80 investors supported a letter
sent to some of the largest global fast food companies including McDonald’s and Burger
King urging them to take swift action on climate change. We think similar investor pressure
could emerge as awareness around food waste continues to grow.
0%
5%
10%
15%
20%
25%
30%
35%
40%
Agricultural
production
Handling &
storage
Processing
Distribution
Consumption
Contribution of commodity to food waste and carbon footprint
Food waste
Carbon footprint
0%
5%
10%
15%
20%
25%
30%
35%
40%
Cereals
Vegetables
Starchy
roots
Fruits
Milk &
eggs
Meat
Oilcrops &
pulses
Fish &
Seafood
Contribution of commodity to food waste and carbon footprint
Food waste
Carbon footprint
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WHY SHOULD INVESTORS FOCUS ON FOOD WASTE?
Tackling food waste should be seen as a significant investment opportunity that not
only champions long-term sustainable business practices but also offers a way to
develop additional consumer brand value. Over $125 million of private capital was
invested in food waste start-ups in 2018 and we believe that, with growing awareness
around the issue, companies that ignore their responsibilities on food waste could be
labelled ‘unethical’ and ‘uninvestable’ when viewed through a sustainable lens.
Whereas we think firms that are proactively tackling the problem through innovation
and collaboration are likely to be viewed more positively by both investors and
consumers. Similarly to how society is being dramatically reshaped by the plastic
movement, we argue that food waste should be firmly on the investor radar given the
growing risks attached to regulatory action and the potential for consumer backlash.
5 key factors to consider
We acknowledge that food waste fits within the much broader discussion on food
sustainability and climate change, and thus we have included sustainability factors within
our five key factors for focusing on food waste – Figure 12 – as we think food waste is a
powerful driver that is often overlooked. Consumer awareness continues to be a key
catalyst in addition to the UN’s Sustainable Development Goals, forcing companies and the
government to shift their viewpoint on food waste away from a by-product of doing
business to an opportunity to improve efficiency.
FIGURE 12 A summary of the 5 key factors to consider on food waste
Source: Barclays Research, ReFED, FAO 2011
Sustainability factors
Greatly overlooked driver of climate change
As discussed already on page 9, we think food waste is a greatly overlooked driver of
climate change contributing around 8% of global greenhouse gas emissions. Investors are
taking note of the carbon footprint of certain activities and we think this will be the case
with food waste also. The letter on 29 January 2018 from over 80 investors to some of the
largest global fast food companies (McDonalds, Burger King, Domino’s Pizza) about the
carbon footprint in their supply chain shows the growing awareness around sustainability
factors within investment decision making.
The UN’s Sustainable Development Goal 12.3 target to halve food waste
Food waste is emerging as a critical global issue with the UN including a specific target for
food waste as part of its 2015 Sustainable Development Goals. SDG 12: Responsible
Consumption and Production seeks to “ensure sustainable consumption and production
patterns” and the third target within this goal (SDG12.3) calls for “halving per capita global
food waste at the retail and consumer levels and reduce food losses along production and
supply chains, including post-harvest losses” by 2030. We think it is therefore important for
investors to be aware of the action needed to achieve this goal.
1. Sustainability
factors
5. Investment
opportunity
2. Policy
momentum
4. Private capital
investments
3. Consumer
awareness
• Climate change driver
• UN’s SDG 12.3 target
• Increasing population
• Misuse of resources
• Mandatory
measurement, taxes,
fines or incentives
• French-style regulation
• Consumer driven
campaigns
• Risk of consumer
backlash
• >$125 mn of private
capital invested
in 2018
• Larger funding rounds
• $1trn global annual
value
• $1.9bn per year
in business profit
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4 March 2019 12
Increasing population puts pressure on resources
In a world where the population is predicted to reach 9.8 billion by 2050 (UN 2017),
increasing pressure on resources requires urgent action to tackle the problem of food
waste. Interestingly, we are already growing enough food for 10bn people, according to the
Journal of Sustainable Agriculture, but the problem is that we are wasting a third of it.
Unsustainable food practices are creating hunger and inequality around the world.
Food waste highlights a misuse of resources
Even though we produce enough food to feed everyone, the World Food Programme
estimates that around 800 million people in the world are undernourished, representing
around one in nine people. If we can reduce food waste by even 25%, this would save
enough food to effectively end world hunger (also achieving SDG 2: Zero Hunger).
Policy momentum – risk of restrictive policy changes
Food waste is moving up the policy agenda. The EU and US have committed to the SDG
12.3 target and a group of around 40 CEOs, government officials and NGO leaders have
launched a coalition called Champions 12.3 to mobilise progress towards the SDG’s goal.
The Champions 12.3 have produced a 2018 Progress Report for the SDG target. The report
indicates some impressive progress made by the industry on food waste, with nearly two-
thirds of the world’s 50 largest food companies participating in programmes with a food
waste reduction target and more than a quarter measuring their waste. However, the report
indicates that there is still a way to go for government action on food waste. We explore the
government’s role in the solution to food waste in more detail in the next chapter.
We have seen some governments prioritising food waste, for example France’s law
prohibiting supermarkets from sending excess food to landfill, hence we see a risk of future
regulatory change whether in the form of mandatory measurement, taxes, fines or
incentives. We think voluntary, collaborative company action has the potential to shape
future regulation around food waste and is therefore a more positive outcome than waiting
and risking intrusive regulation.
Consumer awareness is growing
Consumer awareness around the issue of food waste is growing and we think this will
continue – Figure 13. There have been a growing number of consumer-driven campaigns
around food waste, for example Isabel Soares founded Fruta Feia (Ugly Fruit), a co-op in
Portugal that has rescued 300 tonnes of blemished produce, and Italian chef Massimo
Bottura set up a soup kitchen at the Rio Olympics using excess food from the Olympic
Village. Selina Juul is also a notable food activist who has driven significant change in the
food waste culture in Denmark through the Stop Wasting Food movement (see page 18).
FIGURE 13 The increase in interest over time for the term ‘food waste’
Source: Google Trends, Note: Numbers represent search interest relative to the highest point on the chart for the given region and time.
0
20
40
60
80
100
Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-18 Feb-19
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4 March 2019 13
A survey conducted for Zero Waste Week in the UK found that over 75% were concerned
about food waste; in the US this figure was 89%, according to the American Frozen Food
Institute. WRAP also find that concerns around food waste increase with more information
that is given about food waste, so we think that as awareness grows the risk of consumers
putting significant pressure on companies will increase. There is also the risk of consumer
backlash on social media, for example, similarly to what we have seen with plastics.
VC and PE investment in food waste start-ups
In 2018, over $125 million of private capital was invested in food waste start-ups according
to ReFED. This includes Apeel Sciences ($70m), WISErg ($19m), Full Harvest ($9m),
FoodMaven ($9m), TeleSense ($7m) and Blue Cart ($5m) Jan-Sept 2018. With ever-
increasing funding rounds, we think investors should be paying close attention to the space.
A significant investment opportunity
We also see significant value to be had from investing in companies tackling food waste.
Using the FAO’s estimate of the value of food waste per year of $680 billion in the
developed world and $310 billion in the developing world, we have broken down the value
by stage of the supply chain in Figure 14 (see page 25 for our detailed sector analysis). We
highlight that, although we do not see food waste falling to zero, as there will always be
some unavoidable waste, the values in Figure 14 indicate a significant opportunity from
even a small change in food waste.
FIGURE 14 Reducing food waste holds significant value
Source: Barclays Research, FAO 2011, WRI 2013
In the US alone, ReFED estimates that an $18 billion investment in its proposed 27 solutions
to reduce food waste by 20% over a decade has the potential to deliver an expected $100
billion in societal economic value. It is also estimated that the 20% reduction in food waste
could generate $1.9 billion in potential annual business profit as well as $5.6 billion in
potential annual consumer savings.
In the next chapter we look at the relevant stakeholders around the problem of food waste
and highlight what can be done to unlock some of this untapped value.
“In the same way that child labour used to be endemic in the fashion industry but is
now completely unacceptable, I believe the same is happening to food waste.”
Tessa Clarke, Co-founder of OLIO
~$126bn
~$113bn
~$25bn
~$63bn
~$353bn
~$96bn
~$103bn
~$14bn
~$48bn
~$48bn
~$222bn
~$217bn
~$39bn
~$111bn
~$401bn
$0bn
$50bn
$100bn
$150bn
$200bn
$250bn
$300bn
$350bn
$400bn
$450bn
Production
Handling and
Storage
Processing and
Packaging
Distribution and
Market
Consumption
Value of food waste along the value chain per year
Developed Countries
Developing Countries
Barclays | Sustainable & Thematic Investing
4 March 2019 14
WHAT CAN BE DONE ABOUT THE PROBLEM
We see increasing awareness as a first step towards collaborative action, followed by
improvements in the infrastructure and efficiency of the supply chain. We provide calls to
action from three key stakeholders: governments, consumers and industry. The recent
wave of newsflow in this space is encouraging, from countries introducing specific
regulation around food waste to companies making food waste pledges. We also see the
increasing use of emerging innovation to tackle the problem of food waste such as
artificial intelligence, shelf life extension, innovative packaging and surplus food
platforms.
A collaborative approach is key
In the long term, we think a collaborative approach across the value chain is key to tackling
the systemic problem of food waste. Businesses at each stage must realise that food waste
is a risk to the entire system and work together to implement solutions. We believe the
solutions put in place should prioritise prevention given this is likely to deliver long-term
sustainable change, followed by recycling, recovery and then finally disposal.
We acknowledge the current difficulties of full collaboration – it is a tall order to bring all the
relevant players into the same room. Management teams are under scrutiny to provide
shareholder value and hence investing in tackling food waste may not be a top priority.
However, as we have discussed (page 12), awareness around food waste is growing and
consumers and governments are putting increasing pressure on companies to take action.
Awareness is the first step, with the supply chain close behind
We therefore argue that improving awareness around food waste is crucial as a first step
towards collaborative action, highlighting the longer-term rewards of acting now. We spoke
with BCG, whose work estimates that improving awareness could save 190 million tons of
food waste per year by 2030, representing c$260 billion in yearly value (Figure 15). We also
think the supply chain is another key area in which collaborative action can reduce food
waste. BCG estimates that improving infrastructure could save 225 million tons of waste per
year and that improving supply chain efficiency could save 105 million tons per year.
FIGURE 15 Action needed across the value chain
Source: BCG Analysis
Barclays | Sustainable & Thematic Investing
4 March 2019 15
Calls to action – Government, Consumers, Industry
We see the problem of food waste as a collective responsibility and hence provide calls to
action from 3 groups: governments, consumers and industry.
FIGURE 16 Calls to action from three groups
Source: Barclays Research
1. Governments – enabling regulation is certainly helpful
Europe – France sets a good example
France has been recognised for its action against food waste through its number one
position in the Food Sustainability Index for both 2016 and 2017. In 2013, France launched
its National Pact against Food Waste target of halving food waste by 2025 and then in 2016
passed a law requiring grocery stores over a certain size to donate unsold food, with a fine
of €3750 for each violation. The law also made it simpler for food manufacturers to donate
excess products, requires restaurants to recycle excess food and offer ‘doggy bags’, bans
expiry dates on products like wine, baked goods and sweets and ensures food-waste
education starts at primary school.
Following France’s move, Italy created regulation in 2016 to incentivise restaurants and
grocers to donate excess food rather than waste it. The regulation enables retailers to
donate food past its sell by date and pay a lower amount of waste tax.
UK – moving in the right direction
The UK does not have any formal legislation to require retailers to stop wasting food;
instead it has focused on a voluntary agreement. The Courtault Commitment 2025 is a
voluntary agreement to bring together organisations across the food system to progress
towards more sustainable production and consumption of food and drink. However, we do
see some moves in the right direction:
• The Mayor of London has adopted the UN’s SDG to help cut food and associated
packaging waste by 50% by 2030.
• A £15 million pilot scheme set for 2019/20 to promote awareness and work towards
eliminating food waste sent to landfill by 2030 (as part of the 25 Year Environment
Plan).
• Publication of the Resources and Waste Strategy in December 2018, with key proposals
including the introduction of mandatory reporting of food waste statistics by businesses
and the potential for future food waste targets if progress should be “insufficient”.
US – some way to go
The US has attempted to tackle food waste through a set of bills called the Food Recovery
Act, introduced in 2015. The legislation establishes programmes to educate consumers
about food waste, aims to improve cooperation amongst the industry and help schools to
use food that would otherwise go to waste. The bill also expanded tax deductions that
could be made for the donation of food to charities as well as stipulating the language to be
used for ‘sell-by’ dates. Despite this, we see the US as lagging behind Europe in terms of
regulation on food waste. The US comes in 11
th
place in the November 2018 Food
Consumers
IndustryGovernments
Targets
Mandatory measurement
Penalties & Incentives
Education
Attitude
Embrace innovation
Aesthetic standards
Collaboration
C-suite support
1
2
3
Barclays | Sustainable & Thematic Investing
4 March 2019 16
Sustainability Index data when looking only at food loss and waste in high-income countries
(Figure 17).
FIGURE 17 France leads the way on food waste, US lags behind
Source: Food Sustainability Index by The Economist and BCFN, Nov 2018.
Actions to take:
− Targets: We think governments should primarily ensure an official target has been
set on the topic of food waste. A number of developed countries have decided to
adopt the UN’s SDG 12.3 target to halve food waste by 2030, but others have taken
less aggressive targets. From this first step, companies can then be asked to set their
own targets on food waste alongside proper measurement and data disclosure.
− Mandatory measurement: We think that mandating standardised measurement of
food waste could be one of the most important roles for governments in the
developed world. The UK’s Waste & Resources Action Programme (WRAP) has
produced guidelines for reporting and measurement as part of its Food Waste
Reduction Roadmap. Its core recommendations include measuring and quantifying
the tonnage of food sent to various destinations, separating out the food
redistributed to charity, sent to animal feed or bio-based materials.
− Penalties & Incentives: We think governments should be actively pursuing
comprehensive policies that change consumer attitudes towards food and dissuade
retailers from rejecting produce due to aesthetic conditions. We think France’s
approach of making it illegal for supermarkets to throw away food is a bold one,
which has significantly boosted its food waste credentials. We think fiscal penalties
for food waste are likely to have greater impact than incentives, which can be seen
from government policy around issues such as the sugar tax and plastic bag charge.
50
55
60
65
70
75
80
85
90
95
Food waste rankings - Top 20 high income countries
France sets an example
US lags behind Europe
Barclays | Sustainable & Thematic Investing
4 March 2019 17
2. Consumers – education required to raise awareness
Consumer power through social activism
We see consumers as an important driver of change as awareness around food waste
continues to grow. Consumers can pressure companies through their purchasing decisions
as well as through their ever-increasing social media influence (we refer to Generation Z as
social activists in our report Generation Z: Step aside Millennials, 28.6.18). We have seen
this phenomenon with plastic waste, with younger consumers using hashtags such as
#StrawsSuck and #SkiptheStraw on social media to highlight their commitment to limit
plastic use. A variety of foodservice, retail and leisure companies have since responded by
cutting their availability of plastic straws. Jacob Hansen at BCG agrees that “if consumers
put pressure on companies, the industry will become more conscious of the problem”,
adding that “similarly to what has happened in plastics, companies will try to differentiate
themselves on their food waste actions”.
Expectation of abundance and perfection
Consumers in the developed world have become detached from the process of producing
food and many now have the expectation of being able to buy anything they want, at all
times. This expectation of abundance puts a burden on supermarkets and restaurants to
over-order to ensure sufficient availability, in turn leading to food waste. The Institute of
Mechanical Engineers estimates that the catering industry wastes around one-third of its
food as restaurants frequently over-order. Although we see this problem reducing in the
future as forecasting systems become more accurate (we highlight innovative solutions
using big data/AI such as Tenzo and Winnow on page 24), we still see a need for
consumers to be more conscious about their expectations on availability.
There is also a tendency for consumers to expect perfect produce, which has led
supermarkets to impose strict aesthetic produce standards on farmers and contributed to
significant amounts of waste.
What about a sugar-style tax?
Although some may argue that a sugar-tax style tax on food would be an effective solution
to change consumer behaviour around food waste, we think this type of solution would be
difficult to apply globally and politically unpopular with lobby groups. Similarly to a GHG tax
to reduce the consumption of meat (discussed in Global Agriculture: Winds of change: the
next environmental debate 11/2/19), a tax of this nature would likely have a regressive
impact, hurting lower income families the most. This is particularly significant given that
most waste comes from fruit and vegetables and hence a tax to reduce food waste would
likely disincentivise the purchase of healthy produce, particularly problematic given growing
concerns around obesity. We think a more plausible policy would be to charge consumers
for the amount they waste. In South Korea the recycling rate of food waste rose from 2% in
1995 to 95% in 2009, driven by its ‘pay-as-you-throw’ solutions. Municipalities could
choose between 3 solutions: paid-for standard plastic bags, attaching paid-for stickers to
food waste bins, and bins that weigh food waste in order to calculate a household’s charge.
Shift to convenience shopping could be helpful for food waste
Modern lives are busy and likely to get even busier – the IGD estimates that 71% of 18-24
year olds believe their lives will be busier in 5-10 years’ time. This has meant that the food
retail market has seen consumer behaviour shift away from large weekly shops, towards
more frequent but smaller shopping trips. We discuss the growth in convenience grocery
shopping in our thematic note Future of Food Retail: Long Live Clicks and Mortar (12.10.18).
We argue that this shift to convenience-style shopping could help with the problem of food
waste as consumers buy their food as and when it is needed, reducing the chance that food
is forgotten about/goes off and is hence wasted. On the other hand, some may argue that
planning and scheduling meals in advance is the best way to reduce waste.
Barclays | Sustainable & Thematic Investing
4 March 2019 18
Case Study: Denmark’s change in attitude towards food waste
Denmark has reportedly cut its food waste by 25% in the past 5 years, according to the
Danish Agriculture and Food Council. This has been achieved in large part due to a
change in consumer attitudes towards food waste, driven by numerous waste
reduction initiatives and innovative start-ups. Denmark has a wide variety of awareness
campaigns around the topic whilst also hosting food waste supermarkets (e.g. We
Food) and cooking schools for food waste.
We think there are a number of factors influencing the rapid change in mindset: 1) the
small population size means it is easier to spread the message, 2) food is expensive
(Danes spend almost twice what Americans spend on food) a cultural expectation of
knowing how to cook (according to Rikke Bruntse Dahl at Copenhagen House of
Food).
Actions to take:
− Education: We think educating consumers around the scale of the food waste
problem, the impact this is having on the environment (and their wallet) as well as
informing them on practical solutions is important to help tackle the issue. Specific
programmes around food waste and the food production system in general could be
included in national curriculums rather than sporadically taught through charity
programmes. In the UK, for example, WRAP’s Love Food, Hate Waste campaign
contributed to a 21% reduction in food waste over five years.
− Attitude: Consumers should recognise the pressures they put onto supermarkets
through their expectations of abundance and perfect produce. Buying ‘wonky’
produce sends signals to retailers that these products are demanded and hence
should not be wasted. There is also an opportunity for consumers to impact the
restaurant and leisure industry – ask to take excess food home, ask for smaller
portions and hold to account those companies that waste food.
− Embrace innovation: Many options now exist for consumers to use technology in
order to reduce food waste – we explore some of these in our emerging innovation
section on page 21. Consumers can make use of excess food sharing platforms such
as OLIO and Too Good To Go, support ethical supermarkets such as HISBE and buy
items produced using excess food such as Snact’s fruit jerky.
Barclays | Sustainable & Thematic Investing
4 March 2019 19
3. Industry – revenue vs. responsibility or simply bad for business?
Although it may at first appear that tackling food waste represents a trade-off between
revenue and responsibility, growing awareness about the issue, as well as innovative
solutions (page 21), suggest that food waste is simply bad business. Food waste presents
opportunities for businesses on many levels including cost savings, enhancing their
reputation, boosting margins and improving staff retention.
Revenue opportunity
Tackling the issue of food waste presents numerous revenue opportunities for existing and
potential new businesses. Excess food that would otherwise have been wasted can be
turned into new products (see examples in our emerging innovation section on page 21) or
sold as ‘imperfect’ produce. We do acknowledge there is a risk to the industry if consumers
purchase less due to growing awareness of food waste. However, we think this is likely to
be partially offset through both product substitution by consumers and the use of emerging
innovation across the industry to protect profitability.
Margin opportunity
We see significant margin opportunity for companies tackling food waste. After analysing
data for 700 businesses across 17 countries, the WRI and WRAP found that for every $1
invested in reducing food waste, companies on average saved $14 or more. BCG also
estimates that companies that lead in reducing their environmental footprint tend to boast
margins 3.3pp higher than competitors.
Case Study: Apeel and Harps Food Stores – interview on page 61
We spoke with Head of Marketing at Apeel, Michelle Masek, about their work
extending the shelf life of avocados at Harps Food Stores using their plant-based
coating. “Harps have reduced their food waste in the Hass avocado category by over
50%”, this led to a “10% sales lift in avocados” and hence a “65pp increase in margin.”
Investor pressure
Alongside consumer pressure to tackle food waste, we think the issue will increasingly
appear on the investor radar as awareness continues to grow. We think food waste will
increasingly impact investment decisions and believe that companies ignoring their
responsibilities could fall short on certain sustainability measures. We spoke with Geraldine
Gilbert at Forum for the Future, who told us that investors are showing “more interest for
ethical and ambitious companies”, and that investor pressure “would likely help the issue”.
Actions to take:
− Aesthetic standards: In an attempt to combat strict aesthetic standards, ‘wonky’ veg
has been introduced by several of the mainstream food retailers. We see ‘wonky’
produce as still relatively niche but think this can help adjust consumer expectations
of perfect produce – particularly if they can buy the imperfect produce cheaper.
− Collaboration: We believe industry should increasingly engage in collaborative
initiatives with non-profits and industry organisations. We also see the need for
network and knowledge sharing along the supply chain – for example, the largest
grocers should be encouraging farmers to not waste produce by linking up farmers
with other industry players who could use the excess produce.
− C-suite support: We think senior support is significant when it comes to driving
change in the food waste agenda. Tesco’s CEO Dave Lewis chairs the Champions
12.3 group and we think this has been instrumental in Tesco becoming one of the
leading companies on food waste.
Barclays | Sustainable & Thematic Investing
4 March 2019 20
All players in the food value chain will need to take action
We argue that there is scope for action on food waste at all stages of the food value chain
and that significant progress towards SDG 12.3 will require all stakeholders to work
collaboratively towards the goal. We highlight the value chain in Figure 18 below and offer
potential actions that each stage could take in order to improve food waste. Some of the
actions available can be adopted immediately; however, in the next section we highlight
emerging innovation that could help each stage tackle the problem of food waste.
FIGURE 18 Possible approaches for reducing food waste across the food value chain…
Source: Barclays Research, Champions 12.3 2018 Progress Report
Barclays | Sustainable & Thematic Investing
4 March 2019 21
Emerging innovation can help accelerate change
There are many factors behind the problem of food waste and hence we do not believe
there is one solution. But it is clear that innovation can help improve awareness around the
issue as well as provide solutions to reduce food waste along the food value chain.
Following our discussion with the start-up community and specialised VCs, we highlight
examples of innovation and companies along each stage of the value chain in Figure 19-23.
Production – Farming & Agriculture
Within Farming & Agriculture, we believe there are five key areas of innovation: harvesting &
supply management, storage & transportation, alternative business models, product
innovation and repurposing waste – Figure 19. The increased use of AI and big data analysis
has led to a variety of smart imagery and crop management software, as well as the greater
use of autonomous robots for both data collection and field management.
For example, Trace Genomics (VC backed – $19m funding) uses machine learning to
analyse soil samples and can help farmers increase yield and see potential threats long
before they are visible in the field. Taranis (VC backed – $30m funding) is an international
precision AgTech start-up. Its AI platform combines high-resolution imagery and sensors to
derive real-time and historic insights with over 90% accuracy. Taranis is currently targeting
commodity crops (corn, cotton, sugarcane, soybean, wheat, and potatoes) and charges $5-
$20 per acre per season. It is claimed that Taranis’ suite can boost crop yields across-the-
board by as much as 7.5%. Pivot Bio is a synthetic biology company working on nitrogen-
producing microbes (VC backed – $87m funding). It will offer the first in-field solution to
biological nitrogen fixation available to farmers for 2019 planting in selected US states.
Within Barclays partnership with Unreasonable Impact, AeroFarms is a data-driven vertical
farming company on a mission to enable local production at scale. They propose an
alternative business model given that they enable local farming at commercial scale all-year
round, using 95% less water and with yields 390 times higher per square foot annually.
FIGURE 19 Emerging innovation in the production stage
Value chain
stage
Area of
innovation
Example Companies Description
Farming &
Agriculture
Harvesting &
supply
management
Farmers Edge
Trace Genomics
Vultus
Taranis
AgCode
EarthSense
Small Robot Company
Scott Technology
Smart imagery & VR: Monitoring crops and grid soil sampling
Disease prevention: Agronomic insights using soil DNA
Reduce fertilizer waste: Offers satellite based fertilizer prescriptions
Precision air-scouting: Aerial surveillance imagery to avert crop yield loss
Specialty crop management software: Harvest scheduling
Autonomous robots: Data collection and field management
Autonomous robots: To monitor, weed and plant
Automation and robotics: Used in meat cutting
Storage &
transportation
TeleSense
PICS
Wireless monitoring: Sensors collect data about grain/cold storage & transport
Hermetic storage: Low-cost crop storage bags that preserve food longer
Alternative
business
models
AeroFarms
Plenty
Local Roots
Vertical farming: Aeroponic technologies reducing environmental impact
Vertical farming: Hydroponic tech at farms just outside major urban centres
Modular farming solution: 24/7 sustainable crop production
Product
innovation
Inari
Rootility
Indigo
Pivot Bio
Plant breeding & seed foundry: Developing new crop varieties
Root-focused plant-breeding: Smart root technology to boost yields
Smart/precision farming: Coated seeds with yield-enhancing microbes
Crop nutrition specialists: Nitrogen-producing microbes
Repurposing
waste
Solum Gruppen Generating value from waste: Anaerobic digestion and in-vessel composing
Source: Barclays Research
Barclays | Sustainable & Thematic Investing
4 March 2019 22
Handling & Storage
Within Handling & Storage, we believe there are two key areas of innovation: storage &
transportation and excess produce management – Figure 20. The increased use of real-time
technology has led to the industry adopting various intelligent supply chain solutions. This
has effectively redefined the way transportation of food is planned and managed, in our
view, as well as promoting innovation focused on reducing spoilage.
For example, BT9 is an Israeli-based cold chain management solutions provider. It has a
suite of products tailored for the food industry, including BT9’s Xsense system which
minimises risks to fresh produce quality by providing real-time or offline monitoring
information to decision-makers at every segment of the cold chain. For produce storage,
Hazel Technologies is a USDA-supported AgTech company that develops biotechnology to
increase the shelf life of produce. Hazel's products are packaging inserts that release an
anti-fungal shelf life extending vapour. For apples, they have delivered 5x extended shelf, 2x
improved post-stage firmness and a 90% reduction in the incidence of scald.
FIGURE 20 Emerging innovation in the handling & storage stage
Value chain
stage
Area of
innovation
Example Companies Description
Handling &
Storage
Storage &
transportation
BT9
Hazel Technologies
Real-time cold chain technologies: Visibility for the entire cold chain
Spoilage reduction: Conditions the storage environment to slow spoilage rate
Excess
produce
management
Food Cowboy
Charity collection platform: Connects food transporters and wholesalers with
food charities, offering a waste hotline and running awareness campaigns
Source: Barclays Research
Processing & Packaging
Within Processing & Packaging, we believe there are three areas of innovation: shelf life
extension & unique packaging, repurposing surplus foods and innovative products – Figure
21. Consumer interest in sustainability and the environment has meant that up-cycled
products likes Snact, ChicP and Toast Ale have proved popular. We have even seen other
players within the value chain leverage this trend, including Tyson Foods which has started
to make crisps from up-cycled chicken breast. For food waste specifically, we believe shelf
life extension & unique packaging has garnered significant interest across the VC
community and industry bodies.
Within Barclays partnership with Unreasonable Impact, Mimica aims to reduce food waste
and improve food safety through its innovative food expiry labels. The Mimica Touch labels
allow customers to monitor the freshness of the product through simply feeling the texture
of the packaging. We spoke with the founder of Mimica who championed the value of
partnerships as the most mutually beneficial way to work. For example, for milk it is now
incorporating its label into the milk lid through a partnership with Coveris, which makes
80% of milk caps in the UK. (Refer to Appendix 1 for our full interview including information
on pricing/ROI and its global expansion plans).
We highlighted Apeel in our thematic note Future of Food Retail: Long Live Clicks and
Mortar (12/10/18), though we equally think this is relevant to our discussion on food
waste. Apeel develops invisible plant-based edible skin aimed at extending the shelf life of
fruits and vegetables by slowing down water loss and oxidation. Existing partnerships have
shown that Apeel-coated avocados have led to a 65pp increase in margin and 10% increase
in sales. (Refer to Appendix 1 for our full interview including trial feedback).
Barclays | Sustainable & Thematic Investing
4 March 2019 23
FIGURE 21 Emerging innovation in the processing & packaging stage
Value chain
stage
Area of
innovation
Example Companies Description
Processing &
Packaging
Shelf life
extension &
unique
packaging
BluWrap
Apeel Sciences
Mimica
Shelf life extension technology: Focusing on perishable protein
Shelf life extension: Edible coating to extend the shelf life of fruit and vegetables
Innovative packaging: Tactile label to indicate the spoilage of the product
Repurposing
surplus food
Snact
Rubies in the Rubble
ChicP
Foxhole Spirits
Toast Ale
Fruit jerky: Turning excess/ugly fruits into snacks
Condiments: Makes condiments from surplus produce
Hummus: Made from surplus fruit and vegetables
Gin: Made from unused resources in the English wine industry
Beer from bread: Beer brewed with surplus bread from sandwich manufacture
Innovative
products
Beyond Meat
Memphis Meats
MycoTechnology
Plant-based meat alternative: To reduce waste in supply chain
Cultured meat: Made in a lab, with less waste in production
Mushroom fermentation: To produce mycoproteins
Source: Barclays Research
Distribution & Market – Food Retail
Within Food Retail, we believe there are three areas of innovation: innovative retail formats,
excess produce management and repurposing surplus food. Within Barclays partnership
with Unreasonable Impact, HISBE is the most widely discussed innovative format within
food retail and is known as the “supermarket rebel.” Powered by local people and a social
enterprise business model, HISBE aims to reduce food waste by providing products loose
and products that are locally and ethically sourced. We spoke with co-founder Amy Anslow
who told us that their goal is to “hack the current supermarket model to make it fit and fair
for the 21
st
century”. (Refer to Appendix 1 for our full interview including information on the
business model and expansion plans).
Another growing area of focus is the idea of turning food waste into locally produced
fertiliser. For example, Vivid Life Sciences has partnered with ag-tech start-up WISErg to
produce the Lifeforce line of fertilisers, created from food waste from local grocery stores.
The “zero-waste process” reportedly retains 90% of the food nutrient value, providing a full
spectrum of nutrients and minerals to promote higher-quality crops, healthier soils and
increased ROI for growers.
FIGURE 22 Emerging innovation in the distribution & market stage
Value chain
stage
Area of
innovation
Example Companies Description
Food Retail
Innovative
formats
HISBE
Bulk Market
The Source Bulk Foods
WeFood
Flashfood
Ethical supermarket: Focusing on local suppliers and minimal waste
Bulk supermarket: Focus on minimizing waste
Buy-what-you-need: Minimal waste, bulk food grocery store
Excess food supermarket: Sells unwanted food products at a 30-50% discount
Excess food app: Sells foods near its best-before to customers via an app who
then pick up the produce in-store from a designated Flashfood area
Excess
produce
management
Spoiler Alert
412 Food Rescue
FoodCloud
Unsold inventory management: Mitigates unsold food and recovers value
Charity donation: Connects grocers with non-profits in Pittsburgh
Charity donation: Connects grocers with partner charities in Ireland and the UK
Repurposing
surplus food
Vivid Life Sciences
California Safe Soil
Repurposed fertilizer: Made from grocery food waste
Repurposed fertilizer: Aerobic, enzymatic digestion technology
Source: Barclays Research
Barclays | Sustainable & Thematic Investing
4 March 2019 24
Consumption – Foodservice and Households
Within Consumption, we believe innovation has either focused on foodservice (e.g.
restaurants) or the individual household.
For foodservice companies, this includes order forecasting, waste measurement, excess
food platforms, buying networks and repurposing. For example, Tenzo is a restaurant
management software solution that collates sales/labour/inventory data to provide
actionable insights. We spoke with the co-founder who mentioned how its offering can help
restaurants optimise labour and food – each of which account for c. 25-30% of a
restaurant’s cost line. (Refer to Appendix 1 for our full interview including Tenzo’s
partnership with Mitchell & Butlers).
For individual households, innovation has focused primarily on making the idea of food
sharing and meal planning more accessible. OLIO is a free app that connects neighbours
and local shops so that surplus food can be shared rather than wasted. It is another
member of the Barclays partnership with Unreasonable Impact and we spoke with the co-
founder who mentioned that, within the consumption stage of the value chain, there is very
little understanding of the environmental consequences attached to food production. (Refer
to Appendix 1 for our full interview including OLIO’s retail partners in the UK and how
awareness is set to grow).
FIGURE 23 Emerging innovation in the consumption stage
Value chain
stage
Area of
innovation
Example Companies Description
Foodservice
Order
forecasting
Tenzo
Restaurant demand forecasting: AI forecasting to optimize inventory levels
Waste
measurement
Winnow
Leanpath
Tracks and measures food waste: Through weighing and logging systems
Data analytics: To reduce food waste in kitchens
Excess food
platforms
Too Good to Go
Karma
Goodr
Surplus food marketplace: For restaurants
Surplus food marketplace: For grocery stores, cafes and restaurants
Blockchain food management system: Enables businesses to donate surplus
food, captures waste analytics and IRS tax savings data
New formats Instock Surplus food restaurant: Creates meals from supermarkets’ excess food
Buying
network
Bluecart Wholesale procurement: Platform to connect buyers and sellers of produce
Repurposing
surplus
FatHopes Energy Biofuel production: Used oil is piped directly from restaurants
Households
Food sharing OLIO Food sharing platform: Allows users to share food with the local community
Meal planning Innit Virtual chef: Helps consumers with meal planning, shopping and cooking
Source: Barclays Research
Barclays | Sustainable & Thematic Investing
4 March 2019 25
INVESTOR GUIDEBOOK – SECTOR IMPLICATIONS
Alongside our sector analysts, we assess the impacts of increasing food waste
awareness on a wide variety of sectors. We see Food Retail and Leisure as the sectors
most at risk, whereas we see greatest opportunity in the Food Manufacturing and
Agribusiness sectors (Figure 25).
A number of sectors fit neatly into the stages of the food value chain we have been
analysing (e.g. Agribusiness and Food Retail), whereas others sectors will be impacted
by changes across the entire value chain (e.g. Energy and Chemicals).
We analyse the risks and opportunities for each sector from increasing awareness
around food waste, highlight specific company actions that can reduce food waste and
assess relative company positioning within each sector.
Dissecting the food value chain
In Figure 24, we show the breakdown of the food value chain alongside the Barclays sectors
we believe to be both directly and indirectly impacted by growing food waste awareness. A
number of sectors fit neatly into the stages of the food value chain we have been analysing
(e.g. Agribusiness and Food Retail), whereas others sectors will be impacted by changes
across the entire value chain (e.g. Energy and Chemicals).
We have broken down the $ opportunity around food waste for each stage using the FAO’s
estimate of the value of food waste per year of $680 billion in the developed world and
$310 billion in the developing world. We highlight that, although we do not see food waste
falling to zero, as there will always be some unavoidable waste, the values in Figure 24
indicate a significant opportunity from even a small change in food waste.
FIGURE 24 Barclays sector analysis – potential opportunity across the food value chain
Source: Barclays Research, FAO 2011, WRI 2013
We see Food Retail and Leisure as the sectors most at risk from growing food waste
awareness, whereas we see greatest opportunity in the Food Manufacturing and
Agribusiness sectors (Figure 25).
~$126bn
~$113bn
~$25bn
~$63bn
~$353bn
~$96bn
~$103bn
~$14bn
~$48bn
~$48bn
~$222bn
~$217bn
~$39bn
~$111bn
~$401bn
Production Handling &
Storage
Processing &
Packaging
Distribution &
Market
Consumption
Barclays Sectors:
Agribusiness
Barclays Sectors:
Transport
Barclays Sectors:
Food Manufacturing
Packaging
Barclays Sectors:
Food Retail
Barclays Sectors:
Food Delivery
Leisure
Developing
Countries
Developed
Countries
Barclays Sectors:
Energy Chemicals
Barclays | Sustainable & Thematic Investing
4 March 2019 26
FIGURE 25 Sector implications around growing food waste awareness
Source: Barclays Research
Sector Impact
Key company
mentions
Food
Manufacturing
Opportunity
• Create innovative product offerings
• Adapt existing products
• Develop sustainable brand image
• Re-engineer manufacturing processes
• Kellogg
• Mondelez
• Kraft Heinz
Emerging
innovation
• Shelf life extension
• Repurposed products
• Assortment
management system
Food Retail
• Review promotions strategy
• Increase flexibility of supplier contracts
• Optimise order forecasting
• Promote food waste awareness
• Tesco
• Walmart
• Kroger
• Sainsbury
• Carrefour
• Upcycled products
• Innovative packaging
• Ethical supermarkets
Agribusiness
• Benefit from more flexible supply contracts
• Invest in technology around yield, storage
and demand forecasting
• Tyson
• JBS and PPC
• BRF
• Hormel
• Supply management
• Repurposed products
• Land analysis
• Produce monitoring
Leisure
• Invest in waste analytics
• Increasing use of demand forecasting
• Embrace consumer waste initiatives
• Carnival
• Sodexo
• SSP
• JD Wetherspoon
•Greggs
• Data analytics
• Smart waste
management system
• Excess food platforms
Energy
• Increasing demand for renewable fuels
• Food waste as feedstock
• Neste
• Covanta
• Energy recovery
Chemicals
• Leverage agrochemical solutions
• Improve consistency of food production
• Facilitate transport and prolong shelf life
• BASF
• Croda
• Covestro
• Seed enhancements
• Biostimulants
• Shelf life extension
Food delivery &
Meal kit solutions
• Shift towards flexible eating
• Pre-portioning of ingredients
• HelloFresh• Demand analytics
• Intelligent logistics
• Modified atmosphere
packing
Transport
• Increasing demand for supply chain
management
• Demand for in-transit shipment monitoring
• DPDHL
• Kuehne + Nagel
• DSV
• Hapag-Lloyd
• Remote monitoring
• Spoilage reduction
Risk
Packaging
• Improve shelf life stability
• Reformulate to meet sustainability goals
• Enhance supply chain efficiencies
• Enable consumers to waste less through
portion control and re-sealability
• Sealed Air
• Bemis
• Sonoco
• Avery Dennison
• High barrier film
technology
• RFID and smart labels
• Atmospheric control
Barclays | Sustainable & Thematic Investing
4 March 2019 27
Contributing Authors
European Food Retail
James Anstead
+44 (0)20 3134 6166
james.anstead@barclays.com
Barclays, UK
European Food Retail
Nicolas Champ
+331 44 58 32 45
nicolas.champ@barclays.com
Barclays, UK
U.S. Food & Staples Retailing
Karen Short
+1 212 526 7146
karen.short@barclays.com
BCI, US
U.S. Food
Andrew Lazar
+1 212 526 4668
BCI, US
Americas Agribusiness
Benjamin M. Theurer
+52 55 5241 3322
benjamin.theurer@barclays.com
BBMX, Mexico
European Leisure
Vicki Stern
+44 (0)20 3134 6733
vicki.stern@barclays.com
Barclays, UK
European Leisure
Patrick Coffey
+44 (0)20 3555 5955
patrick.coffey@barclays.com
Barclays, UK
European Leisure
Richard Taylor
+44 (0)20 3555 2650
richard.e.taylor@barclays.com
Barclays, UK
U.S. Restaurants
Jeffrey A. Bernstein
+1 212 526 3855
jeffrey.bernstein@barclays.com
BCI, US
U.S. Paper & Packaging
Scott L. Gaffner, CFA
+1 212 526 9132
scott.gaffner@barclays.com
BCI, US
European Integrated Oil &
Refining
Joshua Stone
+44 (0)20 3134 6694
joshua.stone@barclays.com
Barclays, UK
European Integrated Oil &
Refining
Lydia Rainforth
+44 (0)20 3134 6669
lydia.rainforth@barclays.com
Barclays, UK
North America Alternative Energy
Moses Sutton, CFA
+1 212 526 4060
moses.sutton@barclays.com
BCI, US
European Chemicals
Sebastian Satz, CFA
+44 (0) 20 3134 7201
Barclays, UK
European Chemicals
Alex Stewart, CFA
+44 (0)20 3555 4957
alex.stewart@barclays.com
Barclays, UK
European General Retail & E
-
Commerce
Andrew Ross, CFA
+44 (0)20 7773 3023
andrew.ross2@barclays.com
Barclays, UK
European General Retail & E
-
Commerce
Alvira Rao
+44 (0)20 7773 3624
Barclays, UK
European Transportation
Mark McVicar
+44 (0)20 7773 1919
mark.mcvicar@barclays.com
Barclays, UK
Barclays | Sustainable & Thematic Investing
4 March 2019 28
Food Retail
European Food Retail
James Anstead
+44 (0)20 3134 6166
james.anstead@barclays.com
Barclays, UK
Nicolas Champ
+331 44 58 32 45
nicolas.champ@barclays.com
Barclays, UK
U.S. Food & Staples Retailing
Karen Short
+1 212 526 7146
karen.short@barclays.com
BCI, US
Looking across the food value chain, we think food retail could be the sector at
greatest risk from the consequences of increasing awareness around food waste
(Figure 25). Consumer pressure may be a significant driver as consumers see
supermarkets as the face of their interaction with food, shaping the amount and type
of foods that consumers buy as well as how it is stored and cooked. In response to
consumer pressure, food retailers will likely want to use their actions on food waste as
a competitive advantage to build a sustainable brand image.
Pressure to act on food waste will also come from a greater focus on the sustainability
of the retailer-supplier relationship. The historical power imbalance between food
retailers and suppliers – especially those who produce the fresh goods that are at
greater risk of being wasted – has meant that a large proportion of the food waste in
the supply chain is driven by food retailers (Feedback estimates that UK supermarket
practices drive farmers to waste around 10-16% of their crops). Some of the reasons
for this include the imposition of strict aesthetic standards on fruit and vegetable
suppliers, cancelling orders and changing the order size depending on multi-buy
timings. We think that – in some countries at least – greater focus on the retailer-
supplier relationship may be needed from regulators and investors, with retailers being
held more accountable for treating suppliers fairly and taking ownership of the food
waste that is being created along the supply chain (not just in their stores).
We see Tesco, Sainsbury, Carrefour, Kroger and Walmart as the grocers taking most
action around food waste and hence think they are the most likely to be able to
mitigate the risks around increasing food waste awareness within the food retail
sector, potentially even turning the threat it into an opportunity to improve brand
image and customer loyalty.
Risks vs. opportunity
Although we see the reduction of food waste as an opportunity for food retailers to cut
costs and develop a sustainable brand image, we think the risks of not acting upon food
waste are greater. Firstly, the cost reduction opportunity of reducing food waste at the store
level is perhaps not as significant as at the supplier level, due to the historical power
imbalance we mention above. Secondly, as food waste awareness grows, we think food
retailers will see increased pressure from consumers, government and investors. Customers
may take food waste credentials into greater account when choosing where to buy their
groceries, investors will likely include food waste factors into their investment decisions and
we see the risk of intrusive government regulation (such as penalties for wasting food in
France). We therefore argue that retailers taking no action on food waste will likely lose out
to those who are leading the industry. We also argue that there is more of a risk in
concentrated food retail markets, such as the UK, where the supplier-retailer power
imbalance is the greatest.
Company-specific strategies
Although we see the growing awareness around food waste as a risk to the food retail
sector as a whole, within the sector we see some companies taking more decisive action
than others. We see Tesco, Sainsbury, Carrefour, Kroger and Walmart as the grocers taking
most action around food waste and hence think they are the most likely to be able to
mitigate the risks around increasing food waste awareness within the Food Retail sector,
potentially even turning it into an opportunity to improve brand image and customer
loyalty. We see differences between the US and EU in terms of action on food waste – the
European grocers tend to have a greater focus on food waste policies and data, whereas the
Barclays | Sustainable & Thematic Investing
4 March 2019 29
US grocers appear to focus more on excess food donation and recycling. We show greater
detail of how these actions impact company strategy in Figure 26.
FIGURE 26 Company action on food waste – relative positioning in the food retail sector
Food Waste
Action
Policy & data
monitoring
Product
innovation
Supply chain
initiatives
Consumer
support
Optimise
storage and
packaging
Active industry
collaboration
Relative position
on food waste
Tesco
Positive
Sainsbury
Positive
Kroger
Positive
Walmart
Positive
Carrefour
Positive
Ahold Delhaize
Neutral
Casino
Neutral
Morrison
Neutral
M&S
Negative
Aldi*
Negative
Lidl*
Negative
Source: Barclays Research. *Private. See Appendix 2 for Feedback scorecard on the UK supermarkets and The Centre for Biological Diversity’s US scorecard.
Impacts on strategy
In Figure 27 we highlight potential impacts on business strategies within food retail. While
we can see many supermarkets responding to consumer pressure with media-friendly
‘wonky veg’ campaigns, we are concerned that these could be tokenistic measures rather
than substantive action, hence we see a need for supermarkets to consider making radical
changes to their current ways of doing business. Supermarkets have a dominant position in
the fresh food value chain and should realise the direct control they have over food wastage
from farm to fork. Food retailers may have to rethink their relationships with suppliers to
work collaboratively to disincentivise food wastage.
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4 March 2019 30
FIGURE 27 Impact of food waste action on strategy
Food waste action Impact on strategy
Policy & data
monitoring
Monitor food waste reduction
- Consistently record food waste: standardized measures across the industry including crop utilization rates,
quantity and type of waste, avoidable vs unavoidable.
- Regularly publish data: e.g. Tesco, Ahold Delhaize, M&S.
- Set targets for waste reduction: e.g. Kroger’s target to eliminate waste by 2025, Tesco will continue with food
waste action despite missing elimination target date, Ahold Delhaize’s Moving to Zero Waste programme. Carrefour
targets halving food waste by 2025 vs 2016 levels. Walmart’s target is for zero waste in Canada, Japan, the UK and
US
by 2025.
Product innovation Reduce food wastage through product innovation
- Stock upcycled excess food: e.g. Snact’s fruit jerky, Toast Ale’s beer brewed from excess bread (see our emerging
innovation section on page 21). Casino’s Monoprix has partnered with Re-Belle craft jams to use up excess fruit.
- Promote and sell imperfect produce: many grocers in the UK and US sell imperfect produce, e.g. Tesco Perfectly
Imperfect, Morrison wonky veg box, Ahold Delhaize’s ‘misfits’ produce at Hannaford chain, Kroger’s Imperfect
Produce.
- Promote seasonal produce: to absorb excess produce in peak times of the year and reduce wastage. Tesco and
Carrefour purchase ‘bumper crops’ and pass the savings onto customers.
- Focus marketing on products with a lower wastage rate: reduce marketing on highly processed foods with high
wastage rate.
- Send food waste to animal feed: currently inhibited by UK regulation to only allow certain foods to be turned into
pig feed. Common practice in the US and Japan. Tesco, Sainsbury and Iceland are only major UK retailers to do this. In
Japan, Walmart recycles fish traces into raw materials for pet food.
- Inedible waste to anaerobic digestion (AD): most supermarkets send zero waste to landfill, instead sending
inedible waste to AD to recover energy. Tesco recognizes that AD is inferior to redistribution of food or turning it into
animal feed, although AD is often cheaper. Carrefour and Casino send waste that cannot be sold or donated to be
converted into biogas and biomethane. ASDA sends inedible unsold food to AD plants.
- Inedible waste to fertilizer: California Safe Soil creates fertilizer from supermarket waste using aerobic digestion
technology, Vivid Life Sciences’ LifeForce fertilizer is made from grocery store food waste (see page 23).
Supply chain initiatives Prevent food waste through improved supply chain relationships
- Relax aesthetic standards and move to whole crop purchasing: to prevent wastage at the supplier level. By
widening specifications, ASDA sold an additional 690 tonnes of produce in 2017.
- Work with suppliers on optimizing supply chain network: optimize time in supply chain and improve cold chain.
E.g Tesco has cut two days out of the supply chain with suppliers in Spain for citrus, lettuce, tomatoes etc. Casino
reports working with suppliers on extending shelf life. Walmart’s Project Gigaton encourages suppliers to measure
and report food waste in their operations.
- Work with suppliers on ordering & forecasting: share forecasts to help reduce over-production, move to
guaranteed order for suppliers. E.g. Tesco shares forecasts through its Tesco Connect system, Walmart’s blockchain
system with IBM for supply chain traceability. Carrefour has created an ‘Anti-waste award’ to stimulate competition
amongst suppliers.
- Help suppliers with network of contacts: to enable re-selling of excess produce that does not meet specification.
E.g. Tesco claims to be connecting growers with fresh & frozen food suppliers. ASDA launched a surplus produce
hotline which enables suppliers to connect with others who can utilize the food.
- Limit multi-buy promotions: to stabilize ordering of products from suppliers, reducing over-ordering.
- Focus on sourcing locally: to reduce time in transit and extend life on the shelf.
Source: Barclays Research
Barclays | Sustainable & Thematic Investing
4 March 2019 31
FIGURE 27 CONT’D Impact of food waste action on strategy
Food waste action Impact on strategy
Consumer support Enable customers to limit their own food waste
- Limit multi-buy promotions: Tesco trialed Buy One Get One Free Later promotion and has stopped BOGOF offers
on fruit & veg since 2014, Sainsbury has removed most multi-buy promotions.
- Offer smaller pack sizes: e.g. Tesco expanding its range of 430 single-serve products, Morrison customers can
choose between one and 30 eggs. Casino is developing single or portioned offers.
- Offer loose produce: to enable customers to buy only the produce they need, such as in Bulk Market and The
Source Bulk Foods (see our emerging innovation section on page 21).
- Improve awareness through campaigns: offer recipe ideas to use up leftovers, provide food charity collection
points in store. E.g. Tesco Love Food Hate Waste tips on its website, Albert Heijn’s campaign on food storage,
Walmart’s education initiatives. Carrefour Italy works with Barilla to educate consumers around how to use excess
vegetables and pasta. Casino improves awareness through in-store campaigns.
- Improve system of reducing near-expiry foods: reduce near-expiry products earlier in the day to reduce chance of
wastage. Most supermarkets already do thus but Co-op was the first supermarket to sell food past its best before
date and reduces prices to as little as 10p. Walmart sold more than 262 million reduced products in FY2018.
- Rethink store layout and stocking strategy: to reduce customer expectation of abundance and newest products
being sold before older items (particularly in fresh and bread where wastage rates are high).
- Grow produce in-store: Auchan has partnered with Agricooltur in a Turin store to grow fresh herbs and salad,
Casino has trialled small greenhouses in-store and Albert Heijn has trialled fixtures for customers to harvest lettuce.
Optimise storage and
packaging
Improve conditions of produce to extend shelf life
- Adopt innovative packaging solutions: e.g. Kroger is using Apeel’s edible coating on its avocados (see our
emerging innovation section on page 21). M&S used ethylene strips in strawberry packets to extend shelf life,
improving wastage by 4%. Walmart uses ruggedized, reusable containers to transport eggs to reduce damage in-
transit; this helped the company prevent 37 million eggs from being wasted in 2016.
- Improving date labels: standardizing language on labels, clarifying ‘use by’ and ‘best before’. Work with innovative
labels to give more accurate representation, e.g. Mimica’s tactile label (see our emerging innovation section on page
21). Carrefour France has removed use-by dates on over 50 items including sugar and vinegar and has extended the
date for 300 other products. Tesco is set to remove best before dates from more produce to reduce waste.
- Phase out best before labels: ASDA has removed dates from apples and onions, Tesco has removed them from
some fruit and veg, Walmart has also worked to standardize date labels.
Active industry
collaboration
Engage with industry organizations and non-profits
- Charity partnerships: e.g. Tesco and WWF partnership, Tesco CEO Dave Lewis chairs the Champions 12.3
committee, Tesco partnership with FareShare to donate excess food to local charities, Hannaford’s partnership with
Feeding America, Kroger partners with WWF and Feeding America. Supermarkets in France have to have these
partnerships by law. Casino has partnerships with Phénix and Eqosphére. Walmart donated the equivalent of 628
million meals globally in 2017 and created the Closed Loop Fund to help communities redirect food waste.
- Food waste trials: e.g. Sainsbury launched its 5-year ‘Waste Less, Save More’ campaign in 2015. The trial was an
innovative experiment but Sainsbury has since ended it due to “broadening and changing customer priorities”.
- Encourage innovation: Tesco‘s partnership with WRAP for Innovate UK’s Future Retailing
competition, Kroger’s $10
million innovation fund, Walmart’s $650k grant to WWF and Walmart Foundation’s funding of food waste research.
Source: Barclays Research
Barclays | Sustainable & Thematic Investing
4 March 2019 32
Companies to highlight
Tesco: Leading the UK on food waste
We see Tesco as the most transparent and proactive retailer in terms of tackling food waste
(see Appendix 2 for the 2018 Food Waste Scorecard highlighting Tesco’s action on food
waste). What we think makes Tesco stand out is its emphasis on prevention and
partnerships. Tesco works with suppliers to prevent the food waste in the first place
through measures such as whole crop purchasing and aims to educate customers to
prevent food waste in the home through its Love Food Hate Waste campaign.
Head of Sustainability, Sourcing and Waste Policy for Tesco, Mark Little, told Food Navigator
that new supply chain technologies, as well as increased collaboration, have been central to
Tesco’s efforts to help reduce food waste. Tesco was also the first UK retailer to publish its
food waste data, with the latest 2017/18 data showing that food waste in its UK operation
increased from 46,684 tonnes to 53,126 tonnes, representing a “broadly flat” 0.5% of food
sales. Although Tesco missed its target to eliminate food waste by February 2018, it
continues to focus on its battle against waste and has called on other retailers and suppliers
to follow its lead.
Walmart: Holistic action on waste
Walmart tackles the problem of food waste within its broader target to achieve zero waste
in its operations in Canada, Japan, the UK and US by 2025. The company started analysing
its waste in 2005 and reportedly diverted 78% of unsold products, packaging and other
waste materials from landfill in 2017. In recognition of its work, Walmart recently received
an A-rating on the CDP’s environmental scorecard, making it the top US food retailer.
On food waste specifically, Walmart is working to tackle food waste both up and down the
value chain (The Centre for Biological Diversity grades Walmart a B for its efforts, see
Appendix 2 for the latest Scorecard). Project Gigaton encourages suppliers to measure and
report food waste and Walmart’s moves towards more flexible supply contacts will help
reduce food waste at the farm level. Walmart stores are adopting a culture of waste
reduction, learning from ASDA’s ‘We Hate Waste’ programme, which involves a daily ‘waste
parade’ and tracking waste on a daily basis. Walmart also aims to help consumers reduce
waste through reducing near-expiry food, standardising date-labels and innovative
packaging to extend shelf life. Finally, unsold food is either donated to local food banks or
inedible produce is sent for animal feed, composting or anaerobic digestion.
Kroger: Zero Hunger Zero Waste and innovative packaging
The Centre for Biological Diversity grades Kroger a C for its efforts (see see Appendix 2 for
the latest Scorecard). We find Kroger’s ‘Zero Hunger Zero Waste’ campaign to eliminate
waste in the company by 2025 encouraging, which includes establishing a $10 million
innovation fund, donating 3 billion meals by 2025 and advocating for public policy
solutions. Kroger has also partnered with protective coating company Apeel (see our
emerging innovation section on page 21) to extend the life of its avocados.
M&S: Lagging behind on food waste
M&S scored poorly on Feedback’s Food Waste Scorecard from 2018, with a score of 25%
compared with Tesco’s 66% (see Appendix 2 for a detailed breakdown of scores for the
major UK supermarkets from Feedback). Although M&S has some food waste data publicly
available, it is far less detailed than Tesco’s or Sainsbury’s data. Unlike most other major
supermarkets, M&S also does not offer a ‘wonky veg’ line of products – perhaps because its
premium image makes it more difficult to offer visually ‘suboptimal’ goods.
Barclays | Sustainable & Thematic Investing
4 March 2019 33
Carrefour: Ambitious target by 2022
When presenting its new strategic plan for the group in January 2018, Carrefour’s new
management team set the target to become the ‘the pioneer of the food transition’ by 2022.
While this primarily aims to promote food quality for customers, the group also plans to
strengthen its fight against food waste. This includes actions at different levels, namely
among its producers, during transport operations, in its stores and among its customers.
The strategies include: ordering more effectively and better managing stock, working with
suppliers, selling products with short use-by dates at low prices, extending the use-by dates,
donating excess produce and sending unsellable products to recover energy. We think
Carrefour is acting decisively on food waste from many angles to achieve its ambitious
target of halving food waste by 2025 compared with 2016 levels.
Casino: Some differentiating initiatives but lack of targets
In 2013, Casino signed the National Pact against food waste set up by the French Ministry
of Agriculture and Food. In order to tackle food waste, the group tries to limit spoilage
through training of staff, donating excess food, charity partnerships, working with suppliers
to extend shelf life and optimised packaging with the development of single/portioned
offers. In addition, Casino’s Monoprix sends excess fruit to be made into jam by Re-Belle,
GPA in Brazil launched a zero waste campaign and Assaí reports on waste recycling and
composting. Although combatting food waste is part of
Casino’s CSR Spirit, it appears the
company does not have a clear target on food waste, which we see as one of the important
first steps to tackling the issue.
Questions for management
How are you preventing food waste at all stages of the supply chain?
How do you see your role in tackling food waste?
What is the breakdown of what happens to your food waste currently?
What measures are in place to reduce it?
How are your product innovations changing to utilise surplus food?
How are you helping reduce consumer food waste?
Is consumer pressure on food waste a risk?
Do you see regulatory change, such as that in France, as a risk or an opportunity?
Barclays | Sustainable & Thematic Investing
4 March 2019 34
Food Manufacturing
U.S. Food
Andrew Lazar
+1 212 526 4668
BCI, US
Looking across the food value chain, we think food manufacturers have the biggest
opportunity to capitalise on growing awareness around food waste (Figure 25). The
majority of the manufacturers have already adopted successful measures to reduce
food waste in their factories and we see further opportunity for them to help both
farmers and consumers reduce their waste also. We see limited risk of regulatory
change impacting the manufacturing sector and instead see significant opportunity to
reduce food waste more broadly and be the wider drivers of change, through more
flexible supply contracts, innovative products and adapting current offerings.
Compared with the food retailers, we think there is likely to be less consumer pressure,
due to the greater degree of separation, and instead see a more significant opportunity
to use growing awareness on food waste as a catalyst to further develop a sustainable
brand image with consumers. We outline a variety of strategies that have already
helped reduce food waste at the manufacturing level and highlight some areas of
further opportunity (Figure 28).
Although we think the entire sector has an opportunity around growing food waste
awareness, we see Kellogg as the leader on food waste due to its thorough
measurement and senior level commitment.
Risks vs. opportunity
We see the opportunities for food producers as centred around three areas; 1) supply chain
efficiencies, 2) adapting current products and 3) developing new products. Each of these
areas benefits the sustainability of the company as well as being financially motivated. We
think supply chain efficiencies have already been a focus for the food manufactures and
hence food waste from this sector specifically is already relatively small (Figure 24).
However, we do see some opportunity for the manufacturers to adopt more flexible supply
contracts as well as for further development in the assortment management space, using
data analytics and AI to help with demand forecasting.
Adapting current products and developing new products both offer an opportunity for the
manufacturers to reduce food waste at the farm level as well as the consumer level.
Manufacturers can develop products using ingredients with historically higher rates of
wastage or adapt current offerings so that they can help consumers waste less (e.g.
through smaller pack sizes, frozen products or standardising date labels). We think growing
consumer awareness around food waste therefore offers an opportunity for food
manufacturers to further build their sustainable brand image and differentiate their
products through their focus on tackling waste.
Impacts on strategy
In Figure 28 we highlight potential impacts on business strategies within the food
manufacturing sector. Although the majority of the food manufactures have already
implemented policies around food waste, benefited from supply chain efficiencies and
joined in collaborative initiatives, we think there is an opportunity to further tackle food
waste through adapting current products as well as developing new, innovative products.
Barclays | Sustainable & Thematic Investing
4 March 2019 35
FIGURE 28 Impact of food waste action on strategy
Food waste action Impact on strategy
Policy & data
monitoring
Target and monitor food waste reduction
- Consistently record & publish food waste data: standardized measures across the manufactures including waste
at
the farmer level from producer specifications, waste from the production line and in storage. Kellogg reports its food
waste by destination.
- Set targets for waste reduction: e.g. Mondelez targets to reduce total waste in manufacturing by 20% vs 2013.
Kraft Heinz targets to reduce waste sent to landfill by 15% by 2020 vs 2015.
Supply chain
efficiencies
Reduce waste in the supply chain and manufacturing process
- Assortment management: use data analytics and consumer testing to help predict which products will be
successful with customers, to reduce wasting newly launched products.
- Make supplier contracts more flexible: by relaxing product specifications.
- Train employees and suppliers: particularly in developing countries. E.g. Kellogg has partnered with TechnoServe
to
help farmers reduce loss on farms by providing training.
- Factory efficiency measures: Kraft Heinz has developed a manufacturing playbook and records hourly waste
metrics. Mondelez has implemented Integrated Lean Six Sigma.
Adapting current
products
Changing current products to help reduce food waste
- Reduce pack size: particularly relevant with snack products where consumers want to limit waste. Snack
companies such as Kellogg, Mondelez and The Hershey Company have commented on reducing pack sizes.
- Focus on frozen products: frozen food generates 47% less waste when compared to ambient and chilled food
consumed in the home.
- Reformulate products: to incorporate ingredients with lower wastage rates.
- Standardise date labels: to reduce wastage through confusion over food expiry. Kellogg is in the process of
standardizing date labels on its US food products to ‘BEST if used by’.
- Shelf life extension: using innovative packaging such as Apeel (see our emerging innovation section on page 21) or
through high pressure pascalisation (HPP).
New products Develop new products to reduce waste
- Repurposed products: e.g Snact uses fruits that would have been wasted to make fruit jerky, Rubies in the Rubble
uses excess food for condiments and Toast Ale uses leftover bread to make beer (see our emerging innovation
section on page 21). Kellogg has partnered with Seven Bro7hers Brewery to create beer made from rejected
cornflakes.
- Focus on alternative products: to reduce waste in terms of environmental impact. Beyond Meat and Memphis
meats produce plant-based and cultured meat respectively (see our emerging innovation section on page 21).
Innovation Invest in innovation around food waste
- VC/start-up unit: to accelerate innovative solutions to food waste. Campbell Soup - Acre Ventures, Kellogg - 1894
Capital, General Mills - 301 Ventures.
Collaborative
initiatives
Engage in industry programmes to reduce waste
- Commitment to the Food Waste Reduction Roadmap: major UK manufacturers have committed to the WRAP’s
roadmap to halve food waste, e.g. Bakkavor, Coca-Cola, Kraft Heinz UK, Unilever UK.
- Collaborative initiatives: Kellogg was one of the first companies to join Champions 12.3. Mondelez is a member of
the Consumer Goods Forum.
- Charity partnerships: Kraft Heinz has partnerships with Feeding America and Rise Against Hunger, having donated
over 2 billion meals.
Source: Barclays Research
Companies to highlight
Kellogg: Leader in measurement and senior commitment
Kellogg piloted the WRI Food Loss and Waste Standard reporting methodology in 2016 and
has been one of the first companies to report global food waste data by destination. In
2017, Kellogg reduced total food waste by 4.7% and reported that 86% of food waste went
to animal feed compared with 6.4% to the sewer and 1.6% to landfill. Kellogg was also one
of the first companies to join Champions 12.3
1
and hence has committed to working
towards the SDG of halving food waste per capita by 2030. Kellogg’s regional business
presidents have also spoken at highly visible global events including Sustainable Brands,
1
Champions 12.3 is a group of around 40 CEOs, government officials and NGO leaders with the aim of mobilising
progress towards the SDG’s goal.
Barclays | Sustainable & Thematic Investing
4 March 2019 36
Business Climate Summit and Climate Week, indicating the senior level commitment to
tackling food waste. We think Kellogg is one of the leaders on food waste within the food
manufacture space givens its thorough measurement and backing by senior management.
Mondelez: Focus on lean manufacturing
Mondelez has worked to improve awareness around food waste amongst its factory
employees as well as adopting lean manufacturing techniques such as Integrated Lean Six
Sigma to improve efficiency and reduce waste. Mondelez also reports to “continually search
for innovative reduction solutions”. Mondelez reports that most of its factories have already
achieved zero waste to landfill and hence has targeted reducing total waste in
manufacturing by 20% by 2020 compared with the 2013 baseline. The company has also
supported the Consumer Goods Forum’s resolution to halve food waste by 2025. The 2017
Impact for Growth Progress Report shows a 15% reduction and hence suggests the
company is on track to meet its target.
Kraft Heinz: Less focus on food waste specifically
Kraft Heinz’s sustainability page on its website does discuss reducing energy usage to
improve the environment as well as it making business sense, but food waste specifically
appears to be less of a focus than for Kellogg and Mondelez. However, Kraft Heinz does
publish its waste to landfill statistics in its CSR 2017 report – having reduced waste to
landfill by 9.5% in 2016 vs 2015 to 9.2kg of waste per metric tonne of product made.
Questions for management
What happens to your food waste currently?
What is the cost of this waste and what measures are in place to reduce it?
How are you collaborating with suppliers and retailers to improve food waste?
How are your product innovations changing to reduce waste?
Do you see increasing awareness around food waste as a threat or an opportunity?
Barclays | Sustainable & Thematic Investing
4 March 2019 37
Agribusiness
Americas Agribusiness
Benjamin M. Theurer
+52 55 5241 3322
benjamin.theurer@barclays.com
BBMX, Mexico
Looking across the food value chain, we think agriculture is the sector with the
second-largest opportunity from increasing awareness around food waste, behind only
food manufacturing (Figure 25). Compared with other stages of the value chain,
agriculture is a sector that produces a significant amount of avoidable food waste,
whether through retailer aesthetic standards, spoilage in storage or inadequate
produce management. This wastage comes at significant cost to the companies and
hence we see a significant cost opportunity for agribusiness companies as awareness
around food waste improves.
Fewer aesthetic standards to meet enables agriculture companies to sell their
previously unsellable produce at very little extra cost, whereas improving technology
around storage may require some upfront capital expenditure. However, partnerships
with spoilage reduction companies such as Hazel Technologies or supply management
services like AgCode (see our emerging innovation section on page 21 for further
details) enable access to this technology with lower upfront spend. There are also
opportunities for agriculture firms to send excess produce for repurposing into both
consumer products (such as snacks or condiments, see page 21) and agricultural
supplies (such as organic fertilizers), as well as into energy via anaerobic digestion.
While most companies account for waste management actions as part of their
sustainability efforts, we see a correlation between companies’ diversification
across the different proteins and the amount of policies and information available.
Large, well-diversified companies such as Tyson and JBS, as well as BRF and Hormel,
have shown a wide array of company initiatives to reduce food waste, from data
monitoring and innovation in storage, packaging, and transportation, to excess
produce management. This has allowed these companies to turn waste
management efforts into a profitable exercise. On the other hand, we think greater
disclosure around food waste is needed from Sanderson Farms, while Marfrig could
update its waste management goals post recent M&A activity.
Risks vs. opportunity
Although we see significant opportunity for agricultural firms, we do note that a large
proportion of the benefits are likely to only appear when manufacturers and retailers take
serious action with regards to contracts and aesthetic standards. Generally, retailers hold
significant power over agriculture companies (particularly those only supplying to one
retailer) and hence retailer action is likely to generate greater benefits than investing in
storage technology alone. Although we see most benefit of lower food waste occurring
when supermarket practices change (either voluntarily or through regulatory change), we
still see scope for the agriculture businesses to take action themselves (see Figure 29-30 for
actions and impacts on strategy).
Company-specific strategies
Although we see the growing awareness around food waste as an opportunity for the
agriculture sector as a whole, within the sector we see some companies taking more
decisive action than others. JBS (and subsidiary PPC), TSN, Hormel and BRF are the
companies we believe provide the most updated information on the matter and have a
broader approach to food waste. We show greater detail of how these actions impact
company strategy in Figure 30.
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4 March 2019 38
FIGURE 29 Company action on food waste – relative positioning in the agribusiness sector
Food Waste Action
Policy & data
monitoring
Demand
forecasting
Process
innovation
Storage &
transport
innovation
Excess
produce
management
Collaborative
initiatives
Relative
position on
food waste
BRF
Positive
Hormel Foods Corp
Positive
JBS
Positive
Pilgrim’s Pride
Positive
Tyson Foods
Positive
Marfrig Global Foods
Neutral
Sanderson Farms
Negative
Source: Barclays Research
Impacts on strategy
In Figure 30 we highlight potential impacts on business strategies within agribusiness
companies.
FIGURE 30 Impact of food waste action on strategy
Food waste action Impact on strategy
Policy & data
monitoring
Monitor food waste reduction
- Consistently record & publish food waste data: BRF publishes waste by type and disposal method and has an
Environmental Compliance Index to measure waste and air emissions. Hormel, JBS, PPC (within JBS USA) and Tyson
have similar disclosures regarding waste breakdown and historical performance. Marfrig reported a reduction of
waste in 2017 vs. 2016, but the different types and disposal methods weren’t provided for 2017. SAFM does provide
metrics regarding its electricity, natural gas and water usage, but there is a lack of disclosure on food waste.
- Set targets for waste reduction: BRF is committed to the UN’s SDG 12.3. Hormel Foods has set the target to halve
its food waste by 2020 vs 2016 levels. JBS has metrics for solid & organic waste reduction; in 2017 the company
increased its waste sent to composting to 34% from 32% a year earlier. BRF and Pilgrim’s Pride’s Moy Park business
have targeted zero waste to landfill.
Demand forecasting Improve forecasting and ordering systems to reduce waste
- Data analytics: companies rely on industry data, e.g. Agristats, and on internal processes (e.g. BRF’s and TSN’s sales
and operations planning process) to analyze industry dynamics and forecast demand trends. This is more useful in
the chicken business, as companies can be more responsive to trend shifts given the lower product lifecycles vs. beef
and pork.
- Use robotics/satellites to collect data on land: to analyse quality of the soil and optimizing land usage etc. E.g.
EarthSense’s TerraSentia robot, the Taranis ‘air scouting’ system (see our emerging innovation section on page 21
for
more examples).
Process innovation Reduce food waste during production
- Disease control: most companies follow measures to control the risk of disease and product recall.
- Automated meat cutting: robotics and automation of meat processing e.g. Scott Technology, which is used and
partially owned by JBS (see our emerging innovation section on page 21).
Storage & transport
innovation
Reduce food waste during storage and transport
- Monitor storage and environment conditions: most of the companies use technology to assess farms temperature,
quality of feed, and overall livestock conditions. TeleSense’s grain monitoring can help grain agriculture businesses
(see our emerging innovation section on page 21).
- Innovative packaging solution: Hormel has produced different canned foods and shelf-stable microwaveable meals
that have a long shelf life and thus don’t need refrigeration when being shipped and stored. Tyson offers portion-
controlled options and label guidance to reduce food waste.
- Waste sorting and management: to reduce spoilage and spread of disease. BRF’s logistics centres have a waste
sorting structure. JBS and PPC have been focusing on engaging with suppliers and producers to yield improved
logistics and waste management efficiencies.
Source: Barclays Research
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4 March 2019 39
FIGURE 30 CONT’D Impact of food waste action on strategy
Food waste action Impact on strategy
Excess produce
management
Utilise or donate excess produce
- Recover value for animal feed, fertilizer or anaerobic digestion: BRF reuses by-products, e.g. using the sludge
generated in the treatment of effluents as a fuel for the boilers, turning waste into organic fertilizer. Hormel has been
using its food waste as animal feed, feedstock for AD and for composting. JBS New Business unit and JBS USA also
transform byproducts into value-added products, including products sold to consumer goods companies to be used
in cosmetics and pharmaceuticals as well as composting and fertilizer. Tyson also uses its waste to create animal
feed, biofuels, fertilizers, cosmetics, leather and pharmaceutical ingredients.
- Repurpose into new products: the Tyson Innovation Lab launched ¡Yappah! Protein Crisps from rescued
ingredients in 2018, as part of its plan to use almost every part of the animal.
- Donate excess produce: Hormel Foods contributed $7.8million in cash and product donations in 2017. Tyson also
partnered with Flashfood (see page 23 for more details on Flashfood) in 2018 to provide a direct-to-consumer
surplus food box to households in Detroit.
- Join supply platforms: to send excess produce to markets, manufacturers, retailers or foodservice providers, e.g.
through Bluecart’s supply platform (see our emerging innovation section on page 21).
Collaborative
initiatives
Engage in collaborative initiatives to utilize surplus food
- Food waste programmes: the BRF Institute is present in 60 cities, with over 1 million people benefiting from its
projects. Hormel Foods created the Hormel Foundation and Hormel Institute to work on food waste solutions. JBS
sponsors a recycling programme in Brazil. PPC’s Moy Park was the first poultry company to sign up to the Courtauld
Commitment 2 to reduce waste in the supply chain. Tyson has donated more than 9mn pounds of protein to food
banks in the U.S. to reduce food waste.
Source: Barclays Research
Companies to highlight
Tyson: A leader in excess produce management
Tyson foods is a US-based protein company with operations across the world, and a well
diversified portfolio (beef, chicken, pork, and prepared foods), with growing exposure to its
value-added business and a small exposure to alternative meat via its recent investments.
Tyson provides disclosure on its food waste management, and has been an advocate of
reducing food waste across the supply chain. Moreover, Tyson has been a leader in using
excess produce and the launch of its ¡Yappah! snacks brand demonstrates the company’s
ability to launch value-added products whilst also reducing food waste.
JBS and PPC: Waste management as a generator of value-added products
JBS is the largest protein company in the world, with a well diversified portfolio across the
different proteins (beef, chicken, pork and prepared foods). JBS is the owner of chicken
company Pilgrim’s Pride, which operates in the US and Europe. JBS has been focusing on
waste management, as can be seen with its new plants that have been modernized to
improve production performance and waste treatment processes. The company’s New
Business unit transforms by-products and waste from processed proteins into high value-
added products. This program included 12 plants and 49 affiliates, and develops products
and solutions to be used both in-house and exported to over 20 countries. One of the
results of this program was the launch of a fertilizer product made using organic waste.
Overall, the company is committed to using every part of livestock in an attempt to reduce
waste. Similarly to its parent company, PPC is committed to efficient waste management,
and in Europe, its Moy Park unit has maintained its zero percent to landfill program.
BRF: Focus on sustainability and connections with start-ups
BRF is a Brazil-based protein company with a large exposure to the chicken and processed
foods businesses. BRF’s annual reports continuously reference sustainability and the
company appears to have a keen focus on the issue of waste – we highlight some of its
actions in Figure 30. We also think the company is open to innovation with the b.Connect
programme to bring BRF closer to start-ups to build a more sustainable future. We think this
shows promise for continued action on food waste in the future and collaboration with
industry bodies and innovative start-ups.
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4 March 2019 40
Hormel: Reaching targets ahead of time
Among protein companies, Hormel is the company with the largest exposure to prepared
foods and value-added products, while most of its offering is based on pork protein.
Hormel’s target of reducing solid waste sent to landfill by 3,500 tons per year was reached
in 2014, 6 years ahead of its target. Besides committing to halve food waste by 2020 vs
2016 levels, the company has set the goal to reduce its non-renewable energy use, water
use, solid waste sent to landfill and GHG emissions by 10% by 2020 (vs 2011 levels), which
in our view reflects a solid view on sustainability. Additionally, the company’s production of
canned foods and shelf-stable microwaveable meals, which have a long shelf life and thus
don’t require refrigeration when being shipped, reflect efforts across the supply chain.
Marfrig: Update needed
Marfrig is a Brazil-based protein company with growing exposure to the US via its recent
acquisition of National Beef, which has led the company to be mostly exposed to the beef
business. While Marfrig was able to reduce waste by more than 20% in 2017 vs 2015, we
believe that the company could provide more information on its waste reduction initiatives
as disclosure of the different types and disposal methods was not provided in the
company’s 2017 annual report. Moreover, some of its initiatives, such as a target to send
zero solid waste sent to landfill by 2020, were related to its Keystone subsidiary, which was
sold in 2018, followed by the acquisition of National Beef. We thus believe that updated
disclosure on targets and waste metrics could be provided.
Sanderson Farms: More information needed
Sanderson Farms is one of the largest poultry companies in the US, mostly exposed to the
commodity chicken business. While the company is subject to Environmental Protection
Agency regulations, which include regulations regarding the discharge of materials into the
environment and waste handling and disposition, we think that further breakdown of the
company’s initiatives to manage waste could help measure progress throughout the years.
The company’s lower exposure to value-added products could be one of the reasons for the
lack of disclosure on excess produce management, but other topics in waste management
also lack disclosure.
Questions for management
What happens to your food waste currently?
What measures are in place to reduce it?
How are you collaborating with retailers and manufacturers to improve food waste?
Are there any packaging innovations that have helped reduce food waste?
What is the cost opportunity of reducing food waste?
What do you consider to be the main risk/pushback in reducing food waste?
If undertaken, what has the feedback been for repurposed products from excess food?
Would clearly marketing these products as an antidote to food waste be most successful?
What is the feedback within the company on your sustainability measures?
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4 March 2019 41
Leisure
European Leisure
Vicki Stern
+44 (0)20 3134 6733
vicki.stern@barclays.com
Barclays, UK
Patrick Coffey
+44 (0)20 3555 5955
patrick.coffey@barclays.com
Barclays, UK
Richard Taylor
+44 (0)20 3555 2650
richard.e.taylor@barclays.com
Barclays, UK
U.S. Restaurants
Jeffrey A. Bernstein
+1 212 526 3855
jeffrey.bernstein@barclays.com
BCI, US
Looking across the food value chain, we think leisure could be the sector with the
second-largest risk around growing food waste awareness, behind food retail. Within
leisure, we think the restaurants will be most impacted but also see implications for
travel and hotel companies. Similarly to the food retailers we see the risk of regulatory
change impacting the sector – for example, regulation requiring measurement and
disclosure of food waste, donations of excess food or a French-style requirement of
‘doggy bags’. However, we think leisure companies are less at risk from regulatory
focus in the nearer term compared with the food retailers due to the less consolidated
nature of the industry.
We think leisure companies will also face pressure to act on food waste from
consumers. Similar to the backlash against restaurants using excessive amounts of
plastics, we think consumers will name and shame companies not tackling the food
waste issue (particularly on social media) and will likely show preferences for
restaurants with greener credentials. We note, however, that this may lead to some
companies taking tokenistic measures for the sake of PR rather than fundamentally re-
evaluating their systems around food waste.
Although we think the leisure companies have already taken some steps to improve
efficiencies within their supply chain, we see scope for further action through
measures such as waste analytics and improved demand forecasting. We also see the
opportunity for leisure companies to help both farmers and consumers waste less.
Flexible menus and improved demand forecasting may help suppliers waste less food
and initiatives such as smaller portions or even ‘trayless-dining’ may help consumers.
Although we think the leisure sector is at risk over growing food waste awareness, we
see the opportunity for individual companies to differentiate themselves based on their
actions in respect of food waste. We see Carnival as the most transparent in the
leisure sector regarding its waste management approach, but think Sodexo, SSP, JD
Wetherspoon and Greggs are also taking decisive action.
Risks vs. opportunity
We see leisure as a sector at risk of being impacted by regulatory change as well as a target
of potential consumer backlash. A 2018 study by Booking.com showed that 87% of
travellers say sustainability is important on holiday.
However, we do see some opportunity for leisure companies to improve productivity
through tackling food waste. In the UK, WRAP estimates that 9% of food waste comes from
hospitality and the food service industry at a cost of £2.9 billion per year. The amount of
food wasted is equivalent to one in six of the 8 billion meals served each year and, of this
waste, it is estimated that 75% is avoidable and 40% is carbohydrates (potato, bread, pasta
and rice). When looking at the composition of food waste, on average, 21% arises from
spoilage, 45% from food preparation and 34% from consumer plates. In addition, a WRAP &
WRI report showed a ROI of $6 for every $1 invested by the catering industry in reducing
food waste. 64% of the companies recouped their investment after 1 year and food waste
was reduced by 36% on average in just 12 months.
Company-specific strategies
Although we see the growing awareness around food waste as a risk to the leisure sector as
a whole, within the sector we see some companies taking more decisive action than others.
Catering, restaurants and hotels are sectors that generate a lot of consumer-led food waste
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4 March 2019 42
but can have great influence on consumer behaviour. Many leisure companies are tackling
the food waste problem with innovative solutions but there are a few that lag behind. Our
research also suggests a difference between the strategies in the US and Europe, similarly to
our analysis of the food retailers. The US restaurants appear to have a greater focus on
donations, whereas the European leisure companies tend to tackle food waste earlier along
the value chain at either the supplier or the consumer level. We show further detail of how
these actions impact company strategy in Figure 32.
FIGURE 31 Company action on food waste – relative positioning in the EU leisure sector
Food Waste
Action
Policy & data
monitoring
Demand
forecasting and
ordering
Storage & food
preparation
innovation
Customer waste
reduction
Excess produce
management
Collaborative
initiatives
Relative
position on food
waste
Carnival
Positive
Compass
Positive
Elior
Positive
Greggs
Positive
JD Wetherspoon
Positive
Sodexo
Positive
SSP
Positive
AccorHotels
Neutral
Merlin
Neutral
Whitbread
Neutral
Vapiano
Negative
Source: Barclays Research
Impacts on strategy
In Figure 32 we highlight potential impacts on business strategies within the leisure sector.
FIGURE 32 Impact of food waste action on strategy
Food waste action Impact on strategy
Policy & data
monitoring
Measure and track food waste data
- Waste measurement: Winnow and Leanpath offer services for restaurants to measure and track food waste,
highlighting where waste can be saved (see our emerging innovation section on page 21). Carnival’s Costa Cruises is
working with Winnow to prevent food waste and donates excess meals to those in need. AccorHotels reduced food
waste by 54% over the first 12 weeks using Winnow’s system with aggregated annualized savings of $880,000. SSP
consistently reviews internal production processes to align them with the business’ peaks and troughs (e.g. as a
result of this exercise, the amount of sandwiches wasted was reduced by 30%). Sodexo works with Leanpath on its
WasteWatch programme.
- Adopt targets to tackle food waste: e.g. JD Wetherspoon is working towards a target to recycle 95% of recyclable
waste. Carnival’s Costa Cruises is aiming to reduce food waste by 50% fleetwide by 2020. AccorHotels is committed
to reducing food waste by 30% by 2020 as part of its Planet 21 programme. Sodexo targets a 50% reduction in food
waste by 2025. Elior targets no waste to landfill by 2025. Compass targets reducing US food waste 25% by 2020.
Demand forecasting
and ordering
Improve forecasting and ordering systems to reduce waste
- AI and data analytics: to help with forecasting demand for produce. Tenzo’s AI system helps restaurants optimise
inventory levels (see our emerging innovation section on page 21), with clients including Mitchells & Butlers.
- Flexible menus: to utilize excess produce when there is a glut in production, use leftovers in later meals, change
menu if there are items that are regularly wasted. Instock is a restaurant that creates meals from supermarkets’
excess produce (see page 24).
- Order in-season and ‘ugly’ produce: to use surplus produce at potentially lower prices. Bluecart’s platform
connects buyers and sellers of produce (see page 24).
Source: Barclays Research
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4 March 2019 43
FIGURE 32 CONT’D Impact of food waste action on strategy
Food waste action Impact on strategy
Storage & food
preparation innovation
Improve processes to reduce waste
- Educate staff around minimizing waste: Thomas Cook has worked with chefs and hotels in its portfolio to develop
a manual on sustainable food.
- Rotation system for food storage: to enable staff to use up foods nearer expiry first.
- Accurate order system: to reduce likelihood of wasting incorrect orders.
Customer waste
reduction
Adopt initiatives to help reduce customer food waste
- Reduce portion or plate sizes: Carnival’s ‘taste don’t waste’ scheme to cut consumer-led waste. Reduce plate filler
items e.g. chips.
- Trayless dining: in buffet-style settings, ‘trayless dining’ may stop customers taking more than they can eat.
- Doggy bags: France has ruled that restaurants must provide ‘doggy bags’ when requested by customers.
- Accurate menu details: to reduce likelihood of customers sending meals back.
- Sodexo uses LeanPath to support its ’WasteWatch’ initiative, data is analysed and used to drive change in
consumer behaviour.
Excess produce
management
Utilise excess produce
- Surplus food platforms: Too Good To Go and Karma enable restaurants to sell their excess food at a reduced rate
to customers (see our emerging innovation section on page 21). Similarly, SSP partners with M&S.
- Food-sharing platform: OLIO connects foodservice providers such as Pret A Manger with its volunteers to collect
and distribute excess food (see page 24).
- Donate excess food: Goodr uses blockchain software for businesses to donate surplus food, capture waste data
and IRS tax savings (see page 24). Elior works with local communities to distribute excess food. JDW partners with
FareShare to donate excess food, c4000 meals worth. Costa Cruises has partnered with food bank charity Fondazione
Banco Alimentare to donate excess food, distributing c16k meals in just 6 months. McDonalds, Starbucks and YUM!
Brands also have food donation schemes. Greggs works with charities and other organisations to offer surplus food,
lowering waste.
- Offer staff meals: from leftovers to improve morale and reduce waste.
- Biofuels, fertilizer or anaerobic digestion: Elior sends its used cooking oil for biofuels. JDW sends its waste for AD.
Collaborative
initiatives
Engage in industry programmes to reduce waste
- Commitment to collaborative initiatives: major UK foodservice companies have committed to the WRAP’s
roadmap to halve food waste, e.g. Accor Hotels, Compass Group, Sodexo. Sodexo is also part of Champions 12.3.
- Sustainable Restaurant Association: to highlight sustainability in the foodservice industry. JD Wetherspoon won the
SRA’s Waste No Food 2018 award due to its work including smaller portions, separating prep waste, and donating
unavoidable waste to charity.
Source: Barclays Research
Companies to highlight – European Leisure
Carnival: Big company, big plans
We see Carnival as the most transparent company in the leisure sector regarding its waste
management approach. With clear sections outlined on its website, its current actions to
tackle food waste are thoroughly explained. What we think makes Carnival stand out is the
continual evaluation of technology and operations used for food discharge at sea. In 2017,
two cruise brands started a pilot program whereby special equipment is used to digest food
waste prior to discharge at sea. Another brand has recently completed assessments on food
procurement, preparation, consumption and disposal. As part of the ‘4GoodFood’ program,
Costa Cruises partnered with University of Gastronomic Sciences to revamp its food & wine
offerings based on sustainability principles. It also has an active consumer campaign called
‘taste don’t waste’ which encourages responsible behaviours particularly in buffet-style
dining. It is clear to us that Carnival does not hold back on investing, whether it is on
campaigns or leading technology. However, we do note that there is limited detail as of yet
around the success on any of its initiatives.
Sodexo: Ongoing initiatives and active global partnerships
Sodexo targets 50% reduction in its food waste by 2025. We think it has a differentiated
initiative that focuses not only on food waste in the kitchen, but also on consumer-driven
waste. Through a partnership with LeanPath, a provider of an automated food waste
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4 March 2019 44
tracking and analytics platform, it launched the ‘WasteWatch’ programme whereby it
captures waste data and uses this to drive behavioural change, both in the kitchen and also
at the consumer level. The program has been a success so far, reducing food waste by 50%
and reducing purchases by 3% in FY18. Sodexo aims to extend this program to 70% of its
food sites by 2020, 100% by 2025. In the importance matrix published in its FY18 report,
food waste ranks in the top right corner, suggesting high importance to Sodexo and also its
stakeholders.
Elior: Focused, measured and collaborative approach
In Oct 2017, the company set up a target that by 2025 no food waste will be sent to landfill.
In its five-step food waste elimination approach, the company intends to reduce food waste
at every stage of the supply chain with targeted procurements and production, better
packaging and measured servings to end-customers. Furthermore, to achieve zero waste to
landfill, the company plans effective reuse of food within local communities and recycling of
leftovers as fuel and fertilizer. We think that the rigorous approach at each stage and clearly
defined plan has led to the good progress on food waste reduction – e.g. in FY17, 82% of
the used cooking oil was recycled; c.700 kg of unsold food was redistributed in Spain; and
food waste was reduced c.16% in a pilot program in 50 French schools.
JD Wetherspoon: Multi-pronged approach
We see JDW as actively making efforts to find ways to tackle the broader problem. Unlike
Carnival and Sodexo, both of which attempt to tackle consumer behaviour, JDW
concentrates on dealing with waste responsibly. Its targets are also much broader and
without time-frames, unlike the above examples. So far, 900+ pubs separate food waste and
send it for anaerobic digestion. JDW currently sends zero waste to landfill and continues to
work towards the target of recycling 95% of recyclable waste. It has also partnered with a
charity, FareShare, to donate food that would otherwise go to landfill. So far, it has provided
about 4000 meals worth, donating to 100+ charities. Currently JDW provides a regular food
donation service to centres in Hull, Speke, Manchester, Preston and Newcastle, but given
the success of this initiative, it is capable of rolling this out across the UK to make much
more of an impact.
Accor: Early but steady progress towards food waste reduction
We think Accor has set the targets and foundation needed to tackle waste management
effectively, but, considering that food waste is its biggest source of waste (51% of total
waste), the initiatives can be further developed. Though Accor has partnerships with
Winnow and LeanPath, it is not clear how effectively the data from these providers are
being used and integrated within action plans. The company targets to reduce 30% food
waste by 2020. By Dec 2017, 6% of the hotels had implemented its initiatives, of which 96
hotels saw a 52% reduction in food waste worth c€5.4mn. The company
recovered/recycled 48% of total food waste and 46% of hotels recycled food in 2017 vs.
36% in the previous year.
SSP: Differentiated initiatives but lack of explicit targets
In Germany, France and Norway SSP uses a third-party app called Too Good to Go (which
we highlight in our emerging innovation section on page 21). This app lets consumers know
when unsold food is available to be purchased at reduced prices. SSP Norway is currently
seeing 700 products/month sold via the app, equating to 21 tonnes per annum of unsold
food diverted from landfill. SSP has also developed partnerships to donate food, with 28
M&S sites taking part in a food donation scheme. It seems that SSP is actively attempting to
manage food waste, but there are no explicit targets in place.
Vapiano: Lack of detail on targets/initiatives
Vapiano does not specify any targets on food waste or any key stats on the success of its
initiatives. Its reports contain a brief paragraph explaining that it aims to calculate precisely
Barclays | Sustainable & Thematic Investing
4 March 2019 45
the purchasing and use of goods to prevent any food waste, but there are no specified
targets like those set by some of its peers in the leisure sector. There are also no signs of
partnerships or campaigns being established in an effort to manage food waste.
Greggs: Focus on unsold food reduction and food donations
We believe that Greggs has a number of steps in place to focus on food waste. The
company had a target to increase food donations by 50% in its latest annual report (based
on 2016 results). This target was narrowly missed, but there was still a 45% increase in food
donations. The company states its “aim to give away unsold food to community groups and
charities” (amount unquantified) and there are clear systems in place on the company’s
website for groups to contact the company about taking unused stock. The amount of
unsold food has increased 16-fold since 2013, according to the company’s website. Finally,
we also note that Greggs diverts 99.6% of waste from its manufacturing sites away from
landfill.
Other pub & restaurant companies: Focus on reducing waste to landfill
We have found slightly less information on food waste policies from the companies listed
below. These companies may be doing more than we cite below, but, from looking through
annual reports and the responsibility/governance sections of their websites, we would
highlight the following:
• Greene King. Achieved 98% of waste to landfill in 2017, with an objective of this
reaching 100% by 2020. The company is also looking at ways of recycling food waste,
with the annual report commenting that there were 10,933 tonnes of food recycled in
2018.
• Marston’s. In FY18, the company achieved zero waste to landfill. Waste recycling rates
within the company’s pubs have improved over the last two years from 60% to 78%.
• Mitchells & Butlers. In FY19, the company intends to “fully roll out and embed the new
stock auto-ordering system, improving control through a reduction in waste, fewer stock
outages and a more efficient stock take process.” In addition, M&B has been signed as a
client by Tenzo, which is helping companies reduce food waste using AI (see our
emerging innovation section on page 21).
• Restaurant Group. The company has improved its diversion from landfill to 99%, up
from 90% in 2016. Many sites divert 100% from landfill. The company diverted 14,000
tonnes from landfill via its recycling schedule, focusing on the segregation of food waste
from general waste, along with working with suppliers on end-disposal points.
Cynics may comment that focusing on lowering food wastage could purely be a gross
margin improvement driver rather than a strategy with genuine altruistic intentions, but this
is a clear ‘win-win’ opportunity. Many of the comments we have read show that companies
can help combat the food price inflation headwinds they face via more progressive policies
with regards to food waste.
Barclays | Sustainable & Thematic Investing
4 March 2019 46
Companies to highlight – US Restaurants
McDonalds: Supply chain management and donations
As a central part of its Velocity Growth Plan, McDonald’s aims to use its scale for good.
Management has noted that in order for guests to feel good about visiting the restaurants,
they must feel good about McDonald’s food, the company, and the impact McDonald’s is
having on the world. Ultimately, McDonald’s wants to “ensure that [its] food serves its
purpose of feeding people”. Across multiple countries, the company has started to work
with suppliers to reduce food loss and waste within the supply chain and with its
franchisees to reduce ongoing waste within their restaurants. That said, the company
“recognize[s] that there is a lot more to be done”. Within the US alone, the McDonald’s
Food Donation Program in partnership with Food Donation Connection has registered 785
restaurants and donated 370k+ pounds of food to charities in need, as of January 2018. To
take these efforts global, McDonalds has developed a Global Food Disposition policy, which
will “encourage our suppliers and distributors globally to dispose of food in alignment with
the food waste hierarchy, including enabling food donations to be made where possible”.
Starbucks: Leader in food rescue
Management has noted that partners (i.e. employees) across the US advocated for a
solution to donate unsold food to help the communities they serve on a daily basis. Through
a partnership with Feeding America, Starbucks will rescue 100% of food available to donate
from all US stores and thus position Starbucks as the “sector leader in food rescue”. At
scale, Starbucks will 1) support 100% store participation in food donation, 2) provide 50m
meals annually, 3) divert 60m pounds of food waste from landfill, and 4) lead a coalition of
like-minded brands in the fight again hunger.
YUM! Brands: Demand forecasting and excess food donation
Management noted that “reducing wasted food is where [we have] made the most
significant strides”. On a corporate level, YUM! adheres to the US EPA’s Recovery Hierarchy,
which shows that there are much better places for leftover food than the landfill or compost
bin and that “reducing food waste begins at the source”. As such, YUM! works with
suppliers to purchase only as much fresh food as is expected to be sold to customers based
on projections. In terms of excess food, the YUM! Harvest program in partnership with Food
Donation Connection donates surplus food from restaurants to food banks, soup kitchens,
and other non-profits. The Harvest program is the “longest-running food donation program
in [their] industry and has made Yum! a leader among peers.”
Questions for management
What happens to your food waste currently?
What measures are in place to reduce it?
How are you collaborating with suppliers and retailers to improve food waste?
How are your product innovations changing to utilise surplus food?
Do you think the most effective way to tackle food waste is by focussing on consumer
driven waste or waste at the procurement/production stages?
Are you willing to change your end product offering in attempt to tackle food waste (i.e.
using different ingredients/reducing portion size)?
Barclays | Sustainable & Thematic Investing
4 March 2019 47
Packaging
U.S. Paper & Packaging
Scott L. Gaffner, CFA
+1 212 526 9132
scott.gaffner@barclays.com
BCI, US
Contrary to conventional wisdom, plastics and consumer product packaging are as
much a solution to critical world issues as they may be a problem: Packaging can
help solve the world’s food waste problems and help to alleviate supply chain issues
around food-borne illnesses, but we as a society must let it do its job versus vilifying it
in the press. Steel food cans, aluminium beverage cans, and modified atmospheric
packaging can provide significant extensions in shelf life while technologies such as
RFID and intelligent QR codes can help to alleviate supply chain concerns around food-
borne illness. However, as Thomas Hine noted in his book “The Total Package”,
“packaging is omnipresent and invisible, deplored and ignored”, and “it only comes to
the fore when there’s a problem”. That problem manifests today as concerns regarding
the potential for plastics to end up in the world’s water-ways. To that end, most
regulators and NGOs have targeted single-use plastic packaging applications that
provide consumer convenience vs those that help to alleviate waste.
While packaging has historically been a vessel to carry products and a marketing
tool, it is clear that the importance of packaging to society is increasing. 70%-75%
of purchase decisions are made in front of the grocery store shelf within milliseconds
and the packages ability to attract eyeballs and generate buys was historically the
primary focus. In the new world order, packaging must also be environmentally
friendly and solve financial challenges in new market channels such as ecommerce. We
think packagers will meet these challenges, with the industry having made significant
progress in reducing the volume of material over the past several decades. We expect
the coming decade to see these companies take the next step to utilise material
sciences to reformulate products and at the same time re-engineer the recycling
supply chain.
With the rising importance of ESG factors to consumers, we reference several
companies leading with solutions to the critical issue of food waste: We believe that
plastic packaging manufacturers such as Sealed Air, Bemis and Sonoco will need to be
the leaders around food waste given the substrates inherent ability to lengthen shelf
life along with the associated concerns regarding post-consumer waste. Food can
manufacturers Crown Holdings, Silgan Holdings and Ardagh can also play a
meaningful role given the product’s reduction in waste at the point of harvest,
preservation of nutrients, low cost and significant shelf life extension. The same holds
true for beverage can producers. Paper based packagers also can add value to the food
waste equation by protecting fresh produce through the supply chain with a relatively
low cost package. Lastly, Avery Dennison with its unique RFID and smart label
technology can alleviate waste along the supply chain, particularly at the point of
consumption, by alleviating consumer concerns regarding product authenticity,
freshness and chain of custody.
Risks vs. opportunity
We see food waste, along with the broader discussion around the environment and
sustainability, mostly as an opportunity for packaging manufacturers rather than a risk.
Packaging represents a significant portion of food producers’ COGS (we estimate ~17%)
and has historically been viewed strictly as a cost centre rather than something that could
drive differentiation. Again, we go back to our quote above from Thomas Hine. “Packaging
is omnipresent and invisible, deplored and ignored”. Consumers have historically bought the
brand but not the package, which is mostly taken for granted despite the average consumer
opening 7 packages per day or ~140k items in their lifetime. However, if packagers can
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4 March 2019 48
solve a trifecta of issues (shelf life stability, environmental friendliness, and marketing), the
value that they provide can increase and be seen as a source of significant differentiation for
brand owners. One need look no further than the recent launch of craft beers and
beverages in the United States to see evidence of this trend.
Company-specific strategies
Shelf life stability and hence food waste strategies have been at the core of packaging since
it was invented. Plastic packaging is a great example of this reality. Refrigerated lettuce’s
shelf life is approximately 2-4 days but can be extended to 14 days when placed in Modified
Atmospheric Packaging (MAP). Fresh red meat goes from 2-3 days to 21, and cheese from
7 days to 180. The same holds true for beverages and foods placed in air-tight metal
containers. Food cans stored properly will last 4-6 years with minimal to no loss in the
nutrient value, which is locked in at the point of harvest. And liquids stored in beverage cans
maintain their freshness for 6-9 months though the product is still safe to consume for
many years thereafter. Even cardboard boxes provide meaningful benefits to food waste.
Nearly 50% of box shipments go into Food & Beverage related end-markets, with a heavy
focus on fresh produce. Cardboard boxes hold up to the moisture and temperature changes
throughout the supply chain while protecting produce from external and internal damage in
ways that plastic crates can’t. Lastly, while the historical role of packaging was to get a
product from point A to B safely, then market the product to consumers before eventually
being tossed, packaging today is a source of valuable information though the data is
relatively static and limited to what’s printed on the side. Avery Dennison’s RFID technology
can provide the backbone for such projects as IBM’s Block Chain Food Trust. RFID hardware
allows for tracing and tracking technology to be implemented and, as IBM highlights,
increased food safety, a more efficient supply chain, food freshness, sustainability, brand
trust, less food waste and a decline in food fraud.
FIGURE 33 Company action on food waste – relative positioning in the packaging sector
Food Waste
Action
Policy & data
monitoring
Product
innovation
Targeted capital
allocation
Supply chain
initiatives
Consumer
support
Active industry
collaboration
Relative position
on food waste
Ardagh
Positive
Avery Dennison
Positive
Ball Corp
Positive
Bemis
Positive
Crown Holdings
Positive
Sealed Air
Positive
Sonoco
Positive
International
Paper
Neutral
Owens-Illinois
Neutral
Packaging Corp.
Neutral
Silgan
Neutral
WestRock
Neutral
Source: Barclays Research
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4 March 2019 49
Impacts on strategy
In Figure 34 we highlight potential impacts on business strategies within packaging. While
most packaging companies today are focused on sustainability and the environmental
aspects of packaging waste, we view food waste as a strategy to change that narrative.
Most government regulators and NGOs have targeted single-use plastic packaging that
largely provides consumer convenience. Straws, water bottles, cutlery, and plates. These
items are predominantly not under the purview of the publicly traded plastic packaging
producers. What the companies do provide is high barrier/high value products that reduce
food waste by extending shelf life. However, companies will need to work on reformulating
their product portfolio to meet these sustainability and recyclability goals but ultimately we
think they will be successful. BPA (Bisphenol A) bans across Europe along with consumer
backlash in the US is a prime example. While many investors were concerned about the
increased cost and complexity, food can manufactures along with the coatings providers
seamlessly tackled this issue such that the price of the container didn’t rise significantly
despite the increased complexity. To that end, food cans could play a significant role in
reducing food waste, but currently doesn’t have the support of consumers. Therein lies the
rub. Packaging can and will help to solve the world’s food waste issues, but has to
simultaneously deliver on consumer preferences and sustainability.
FIGURE 34 Impact of food waste action on strategy
Food waste action Impact on strategy
Policy & data
monitoring
Limited monitoring specific to food waste as packaging today is doing its job. Monitoring is largely focused on
sustainability performance targets.
- Food waste specific monitoring largely under the purview of plastics: shifting consumer preference towards
fresh and natural options generates unique opportunities for plastic packaging. Legacy packages such as food and
beverage cans provide significant product protection and hence reduction in food waste, but largely don’t participate
in fresh and natural as it pertains to reductions in food waste. Paper-based packaging lies somewhere in the middle
as fresh fruits and vegetables represent a significant end-market for corrugated packaging.
- Regularly publish sustainability data along with 2020/2025 pledges: our companies all publish their progress
towards various sustainability goals, such as energy, green-house gas emissions, water, waste, and percentage of
portfolio that is recyclable/reusable. Many packagers have pledged to increase the portion of products that are
recyclable or reusable and/or increase the amount of recycled materials in their products by 2025.
Product innovation Innovative products and solutions to reduce food wastage
- Food packaging at its core is meant to reduce food waste and limit damage to the product: food packaging
provides barriers against contaminants, physical protection to prevent damage, increased product portability,
security features to prevent tampering and breakage, clear windows for consumers to view a product’s freshness,
portion control options, and stackable containers/boxes to reduce produce damage from farm to grocery.
- More sophisticated solutions: these come in many forms, such as improved packaging processes/equipment
(SEE’s FlexPrep portion control condiment dispensing solution reduces food waste by >20%), modified atmosphere
packaging and vacuum skin packaging to extend a product’s shelf life from 1-2 days to as long as 180 days, and
temperature regulating packages for e-food.
- Managing food inventory with RFID tags: AVY’s RFID technology is another example of sophisticated product
innovation that allow grocers to significantly improve inventory management, and can be applied to fresh food
categories by helping grocers prevent over-ordering and improve the timing of promotions to turn food inventory
before spoilage.
Targeted capital
allocation
Investing in technologies to improve ‘Food Waste Reduction’ product portfolio
- Added capacity: beverage can manufacturers continue to invest significant capital to service various shapes and
sizes that can address both portion control and resealability features.
- Acquisitions: SON expanded its flexibles portfolio into the frozen food aisle through its acquisition of Clear Lam
(the PrimaPak package for Green Giant frozen veggie spirals); frozen food is a good option to extend the shelf life of
fresh foods. Also Highland Packaging Solutions and Peninsula Packaging directly target perimeter of the store
opportunities.
- R&D: plastic packagers continue to spend R&D as a percentage of sales at a significantly higher rate (~1.6%) than
other substrates (~0.2% for containerboard and ~0.3% for metal can manufacturers) in an effort to combat some of
these issues.
- Upstream investments: SON has an interest in a company called Harvest CROO, which is looking at using robotics
in automating the picking and packaging process in an effort to reduce food waste.
Source: Barclays Research
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4 March 2019 50
FIGURE 34 CONT’D Impact of food waste action on strategy
Food waste action Impact on strategy
Supply chain initiatives Prevent food waste through supply chain solutions
- Proximity to customers to reduce spoilage: Food can manufacturers are typically within 50 miles of their
customers to support volumes through various harvest conditions while packaging on site reduces damage and
retains nutrients. The same goes for box manufacturers who provide equipment direct to farms so that boxes can be
assembled and utilized as close to fresh produce as possible.
- Technology in the supply chain: AVY’s RFID and smart label technology provide food safety and spoilage visibility
in the supply chain by notifying the supplier/customer where damage or temperature fluctuations occur.
Consumer support Enable consumers to limit their own food waste
- Portion control packages: smaller single-serve beverage and/or food can options facilitate portion control, as well
as reducing food waste. Portion control and portable packages are available for healthy and convenient on-the-go
snacking, as well as portion control films for condiments, dips, dressings and sauces.
- Resealability and reclose features: increasing food and beverage packages with easy-use resealable option will
allow for longer shelf life after the product is opened.
- Consumer awareness driving change: principally in emerging markets, companies are driving awareness regarding
the positive impact of increased packaging intensity relative to food waste. For Sealed Air, the awareness of food
safety and food waste is driving the Chinese market, where only 5% of the 400 million hogs in production are
packaged. This growth in awareness is translating to 3-4m more hogs to the package processing plant a year or ~30-
50m bags.
Active industry
collaboration
Engagement with industry organisations and non-profits is typically focused on sustainability of the product
rather than reduction of food waste
- University partnerships: SON partnered with Clemson University to discover new technologies and new forms of
packaging that can optimize the fresh food lifecycle by extending shelf life and reducing food waste.
- Alliance to end plastic waste: several companies have joined this Alliance to eliminate plastic waste through
infrastructure development, innovation, education/engagement and clean-up. The Alliance spans the finance
community, government and civil society, including environmental and economic development NGOs.
- Various other sustainability-focused partnerships: metal can and glass manufacturers belong to industry groups
like the Can Manufacturers Institute and Glass Packaging Institute that actively collaborate to promote sustainability
benefits but also highlight the product’s impact on food waste. Packagers across substrates collaborate with various
advocacy groups to improve their impact on the planet, from IP’s partnerships with World Wildlife Fund, Corporate
Eco-Forum, and the Carolinas Working Forest Conservation Collaborative to Ball’s own Foundation that supports
programs to increase metal packaging recycling rates, improve collection processes and provide education about
recycling benefits.
Source: Barclays Research
Companies to highlight
Sealed Air/Bemis: High barrier film technology
Sealed Air’s and Bemis’ high barrier film technology is best positioned for growth if food
waste initiatives take on increasing importance globally. Quite simply, there is no other
packaging substrate today that extends the shelf life of perishable products such as fresh
meat, fruit, vegetables, and cheese/dairy while at the same time meeting the demands of
marketers for shelf appeal and the demands of consumers regarding transparency. Sealed
Air generates nearly 60% of its revenues today in these specific food categories, with a clear
runway for expansion, particularly in the developing markets where packaging intensity is
extremely low. Bemis (which is set to be acquired by Amcor in 2Q19) also exhibits many of
these same characteristics but at a lower rate, with ~40% of sales coming from this
category.
Sonoco: Leading perimeter of the store initiatives
Following the acquisitions of Highland, PPI, Peninsula and Clear Lam, Sonoco has become
the clear packaging leader at targeting the perimeter of the store and in particular fresh
fruits and vegetables. At the same time, the company’s partnerships, particularly Sonoco
Fresh in conjunction with Clemson University, show that management is proactively
targeting this area of potential growth. However, with just 15% of total company revenues
coming from these categories, we believe the economic benefits to the bottom line will take
time to mature but bear monitoring.
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4 March 2019 51
Avery Dennison: Long-term supply chain solutions
Avery Dennison is uniquely positioned to help reinvent supply chains, reduce inventories,
increase traceability, increase consumer confidence and trust, and ultimately to reduce food
waste. Through the use of its RFID technology, consumers and suppliers can generate real
time data that enables these activities. Today RFID generates around $300m in revenue or
4% of total company sales, but is growing at 15-20%+ per year. With the price per RFID tag
hovering around 6-7c, cost is the primary barrier to adoption. If prices can be significantly
reduced, we think AVY could be a long-term beneficiary of initiatives to reduce food waste.
Questions for management
How are you preventing food waste at all stages of the supply chain?
How do you see your role in tackling food waste?
What is the breakdown of what happens to your food waste currently?
What measures are in place to reduce it?
How are your product innovations changing to utilise surplus food?
How are you helping reduce consumer food waste?
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4 March 2019 52
Energy
European Integrated Oil & Refining
Joshua Stone
+44 (0)20 3134 6694
joshua.stone@barclays.com
Barclays, UK
Lydia Rainforth
+44 (0)20 3134 6669
lydia.rainforth@barclays.com
Barclays, UK
North America Alternative Energy
Moses Sutton, CFA
+1 212 526 4060
moses.sutton@barclays.com
BCI, US
The opportunity to produce renewable fuels from waste is growing for the energy
industry. We think growing food waste awareness will encourage companies along the
food value chain to think more carefully about how they dispose of their waste
products and hence energy companies have an opportunity to turn this processing
waste, once destined for landfill, into renewable fuel. Within the energy sector, we have
seen a number of company initiatives but see Neste as being at the forefront.
Neste is a clear leader on renewable fuels but other major oil companies are also
pursuing the opportunity. Eni has launched its pilot plant to produce biofuel from
municipal waste at Gela refinery and BP and Johnson Matthey have developed
Fischer Tropsch technology to convert municipal solid waste into biojet fuel. This
technology has also been licensed to Fulcrum, which will run the first plant in the US
that converts household garbage into renewable fuel from 2020. Total has also
launched the BioTfueL project to transform lignocellulosic material, such as forest
waste, agricultural by-products and energy crops, into biofuel.
Companies to highlight
Neste: A pioneer of renewable fuels
Neste is by far the largest producer of renewable fuels from waste and residues, with
capacity of 2.9 million tonnes (mt) and a market share in renewable diesel of over 60% in
2017. Using its own NEXBTL technology, Neste can transform 13 different raw materials
including animal fat, fish fat, vegetable oil and used cooking oil into biofuel. The company
expects to expand its capacity to 3.2mt through debottlenecking its current facilities and
plans to grow capacity to ~4.5mt in 2022 when a new plant in Singapore is due online.
Neste themselves say that they are “continuously on a search for new, even lower quality
waste and residues to be utilised” and even estimate that if all Thanksgiving turkey waste
fat in the US were turned into renewable diesel, it would be enough for a car to drive around
the globe over 3000 times. Therefore we think increasing awareness around food waste will
help divert waste products from landfill into renewable fuels.
Neste’s customers include UPS, which announced a 3-year deal in 2015 to purchase up to
46m gallons of renewable fuels from three companies including Neste. In Finland, City of
Porvoo, Helsinki Airport shuttle buses, Lapland Airports, DB Schenker, and Lassila &
Tikanoja are among the B2B customers of Neste’s renewable diesel. In California, the main
customers are those managing fleets of large heavy-duty vehicles. As we show in Figure 35,
the clients span both the public and private sectors and, based on feedback from our trip to
California, we expect the number of customers to continue to expand.
FIGURE 35 Some of the organisations that have already made the switch to Neste’s RD
Public organisations Private organisations
Berkeley University of California Apple
California Department of Transportation Facebook
City & County of San Francisco Google
City of Carlsbad Kaiser Permanente
City of Oakland LinkedIn
City of San Diego Pacific Gas and Electric
City of Walnut Creek Ryder Trucks
Contra Costa County Twitter
San Jose Unified School District UPS
State of California Whole Foods Market
Source: Barclays Research
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4 March 2019 53
What is renewable diesel?
Renewable diesel (RD) is a colourless, odourless fuel that has an identical chemical
composition to petroleum diesel and is also often referred to as a ‘second generation
biofuel’. RD can replace conventional diesel in existing engines without any blending
requirements and can therefore be considered a ‘drop-in’ fuel. It is produced mainly by
hydro-treating, where different types of feedstock are reacted with hydrogen in the
presence of a catalyst. Palm oil was the first feedstock that Neste used but the company has
since expanded the number of potential feedstocks to 13, with the most environmentally
friendly being ‘waste and residues’ which predominantly includes animal fats, fish fats and
used cooking oil. Feedstock from food waste drives large GHG emission reduction.
The extent of carbon reduction depends on the feedstock used, with a reduction versus
petroleum diesel of up to 90% achieved when using waste and residues. The reduction
relies upon the assumption accepted by regulators that biofuels are inherently carbon-
neutral with the CO2 emitted in engines reabsorbed by the growth of crops used as
feedstock. Since it is not directly associated with deforestation, feedstock classified as waste
and residues is considered more environmentally friendly, while it also reduces the amount
of waste being sent to landfill, or, in the case of used cooking oil, clogging up sewers. In
addition to being low-carbon, switching to RD can also provide important improvements in
air quality. The lack of aromatic hydrocarbons, high cetane number and very low sulphur
content help reduce emissions of other toxic air contaminants. This includes a ~10%
reduction in nitrogen oxides, 24% lower carbon monoxide and significantly fewer
carcinogenic diesel particulate emissions.
FIGURE 36
A sample of some renewable diesel
FIGURE 37
Lifecycle emissions from traffic fuels, gCO2 eq/km
Source: Barclays Research
Source: JEC, company data, Barclays Research
0
50 100 150
Fossil gasoline
Fossil diesel
Fossil diesel
hybrid
Gas (LPG)
Electricity FIN-mix
Renewable diesel
from animal fat
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4 March 2019 54
Covanta: Leader in Waste-to-Energy
Addressing all forms of municipal solid waste, Covanta (CVA) is the US leader in waste-to-
energy (WtE), processing 22 million tons per year. Tons processed represent a 1:1 CO
2
offset, while also generating 500-700 kWh of renewable power and recovering ~50 lbs of
metals per ton processed. WtE represents ~7% of total US waste tons processed, landfill
accounts for around 2/3, and the remainder is recycled/composted. Covanta accounts for
~75% of the WtE tons processed in the US, and is in the process of expanding into the UK.
Sources of waste span the spectrum, from standard MSW such as food and plastics (among
others) to profiled and hazardous waste that requires more specialized treatment.
In addition to addressing food waste through its standard business operations, the
company has in the past partnered with organizations to address issues around food and
other organic waste, one example being its 10-year agreement with Turning Earth, for
diverting food waste for reuse at Connecticut municipalities and businesses.
FIGURE 38
Covanta waste processed and renewable electricity generated, historical and projected
Source: Company data, Barclays Research estimates
Questions for management
What is the global opportunity for using processing waste as renewable fuel?
How does this opportunity evolve in the future as awareness on food waste increases?
How are your product innovations changing?
Which sectors along the food value chain present the biggest opportunities for acquiring
waste?
Waste Volumes Processed, mn tons
Total Renewable Electriicity Generation, GWh
18.4
18.7
19.4
19.5
18.7
20.5
21.4
21.8
21.9
22.0
0
5
10
15
20
25
5,350
5,545
5,905
6,040
5,990
6,510
6,421
6,703
6,729
6,754
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
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4 March 2019 55
Chemicals
European Chemicals
Sebastian Satz, CFA
+ 44 (0) 20 3134 7201
Barclays, UK
Alex Stewart, CFA
+44 (0)20 3555 4957
alex.stewart@barclays.com
Barclays, UK
Chemical companies are not part of the food supply chain, but some provide solutions
that enable efficiency gains and reduce wastage. We therefore see an opportunity for
companies able to provide such solutions, in terms of both their sustainability profile
and growth.
We think companies in the European Chemical space are likely to help mitigate food
waste most significantly at the production level compared with the other supply chain
stages. We think advancing efforts in food waste present an opportunity for chemical
companies to provide solutions that improve production yield (agrochemicals and
biotechnology), facilitate transport (insulation and industrial gases) and prolong shelf
life (industrial gases). BASF is the most exposed to this trend.
Risks vs. opportunity
A fifth of the world’s total crop production annually is at risk from herbivorous insects,
before or after harvest, according to the FAO. In addition to insect pests, fungi and plants,
parasites also pose significant risks to production yields. The intensification of agricultural
practices has also created nutrient-rich habitats, with crops highly susceptible to infestation.
The situation is worse in hot climates and the implications of production loss are
compounded by population growth in the developing economies. At this stage, major
agrochemical companies such as BASF and Bayer, and to a smaller extent Croda, play a
significant role in improving production. We see the advancing efforts around food waste as
growth drivers for their respective segments. Agro-chemicals and ag-tech can help farmers
improve techniques and increase resilience against threats such as diseases, insects and
weather. We hypothesise that improving the level of certainty around production quality
and yield would allow for the fine-tuning of the production/demand balance, as well as for
reduced waste due to faulty (off-spec) fresh produce.
Products that increase the lifetime of a product, such as packaging and processing
additives, impact food waste directly. In this space, the industrial gas players have
technologies to control the gas composition within the packaging. DSM and Johnson
Matthey are developing other solutions, but they currently contribute little to sales and are
unlikely to be material in the near term. A further source of avoidable loss is at the storage
and transportation stages. Industrial gas companies are trying to reduce waste through
their chilling and freezing solutions, while insulation and flourogases players allow for
prolonged and energy-efficient refrigeration.
Companies to highlight
BASF: Crop protection and digital farming
BASF’s Agricultural Solutions segment generated EUR6.2bn sales in 2018, or c10% of group
sales, and accounts for close to 20% of our sum-of-the-parts valuation. The business
consists of crop protection solutions developed and produced to improve crop health and
yields. In addition to fungicides, insecticides and herbicides, BASF also has a functional crop
care business for biological crop protection, seed treatment and other applications. In 2018,
the company announced the acquisition of Bayer’s entire vegetable seeds business as well
as a range of seed treatment products. The transaction also added a digital farming
capability composed of a diagnosis and crop management platform. About 40% of the R&D
expenditure of the group goes into growing this business, selectively expanding capacities
for crop protection products.
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Croda: Pest prevention, seed enhancements and biostimulants within agriculture
Croda’s Crop Care division, which accounts for roughly 15% of group sales, has been the
company’s fastest-growing segment in recent years. At the heart of this business are
delivery systems for active ingredients that prevent pests. Furthermore, Croda acquired seed
enhancement technology company Incotec in 2015, which can improve seed quality and
stimulate seeds during their early development. Last year, the company also acquired Plant
Impact, a technology platform for chemical biostimulants that improve yields under high
stress conditions such as drought and climate variability.
DSM and Johnson Matthey: Small solutions targeting food waste
Various solutions can improve the efficiency of the processing and packaging stage of the
value chain and increase product shelf life. DSM has several product lines aimed at
improving food processing. Pack-Age is a cheese-ripening solution that replaces the natural
process; the company estimates it can decrease Gouda and parmesan waste by c200k tons
annually. Also in the dairy space, DelvoGuard’s protective cultures prevent mould and yeast
for longer. In 2015, Johnson Matthey acquired StePac, with sales of cGBP20m p.a. The
company increases storage time and shelf life of fresh produce by manufacturing packaging
solutions that control atmosphere, humidity and condensation.
Linde, Air Liquide: Cryogenic chilling and packaging solutions
The food and beverage end-market accounts for 5-10% of the Industrial Gases space.
Nitrogen and carbon dioxide are used in packaging and cooling across the cold chain,
respectively, and together they allow for improved yields, quality and shelf-life. On the
packaging side, industrial gas companies, such as Linde and Air Liquide, provide modified
atmosphere packaging solutions used to preserve food characteristics, and inerting and
deoxygenation technologies. Carbon dioxide and nitrogen are used in cryogenic freezing or
chilling technologies, in cold transportation and in in-transit refrigeration solutions.
Arkema: Refrigerants to aid cooling in transport and storage
Food waste can be reduced by improving refrigeration during transportation and in-store.
This is an issue mainly encountered in the emerging markets, rather than in the developed
world. While reducing food waste at this level could be a driver for refrigerants (Arkema),
we do not see it as a material catalyst for accelerated growth.
Covestro: Foams used for insulated storage
In the insulation space, Covestro manufactures rigid polyurethane (MDI-based) foams used
in warehouses, trucks, refrigerated counters in supermarkets and private freezers. The
refrigeration insulation foam segment grew at c8% on average between 2015 and 2017 and
is one of the growth drivers for the polyurethanes market. Covestro grew at 12% p.a. in this
space, aided by its proprietary innovation in the space, Microfoam. This allows better
insulating properties at lower volumes of insulating material.
The Credit View
Bayer: focus on crop science
Our credit analyst Maggie O’Neal sees improving crop yields as a key component in the
drive to lower food waste. Bayer has invested heavily in its crop science product
offering, providing the company with a solid base from which to address growing
consumer concerns around food waste. Digital farming is part of its product offering
and one in which it holds a leading market position. Bayer’s FieldView platform allows
for precise application of pesticides and fertilizers, which allows farmers to achieve
higher yields with less waste.
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Questions for management
Where do you see most opportunity around growing awareness of food waste?
Which innovations are helping reduce food waste the most?
Is there scope for further acquisitions or strategic partnerships to help reduce food waste?
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Food Delivery & Meal Kit Solutions
European General Retail & E-
Commerce
Andrew Ross, CFA
+44 (0)20 7773 3023
andrew.ross2@barclays.com
Barclays, UK
Alvira Rao
+44 (0)20 7773 3624
Barclays, UK
Delivery platforms provide an opportunity to tune into demand for flexible eating,
reducing food waste as consumers can eat what they want, when they want it. We
think food delivery is taking share from both grocery and dining out – in the latter
scenario, we think it can help reduce food waste as it allows consumers to store
leftovers more conveniently.
Meal kits, which are largely an online category, offer an interesting solution to food
waste. Perishable foods are ordered based on highly accurate demand forecasts, and
usually exit the company’s fulfilment centres within one day. In addition, ingredients
are pre-portioned into meal kit boxes based on a given recipe, substantially reducing
waste compared to what one would see in a traditional grocery model.
HelloFresh’s business model lends itself to substantially reducing food waste
compared with traditional grocery retail. The company has reduced its food waste
going to landfill by 65% and nearly doubled its excess products being donated to
charity using Spoiler Alert’s service.
Risks vs. opportunity
In our view, growing awareness around food waste is largely an opportunity for the sector.
The flexibility offered by food delivery platforms and the precise quantities inherent in the
meal kit model both offer practical solutions to the issue of food waste. However, delivery of
these items to the home may cause greater congestion in urban areas – which is another
factor worth considering. In addition, meal kits often require more packaging materials than
traditional products from a grocery store (precisely because they are pre-portioned); so
while food waste is reduced or eliminated, packaging waste might increase – which also
needs to be taken into account.
Companies to highlight
HelloFresh: just-in-time orders and pre-packing
As stated above, HelloFresh’s business model lends itself to substantially reducing food
waste compared to traditional grocery retail. In fact, in its IPO prospectus, the company said
that it has nearly eliminated waste from its supply chain by making just-in-time orders and
pre-packing food into the right quantities. Packaging is an issue – but the company is
actively working on reducing packaging (helpful both from an environmental and a cost
perspective).
Questions for management
What happens to your food waste currently?
What measures are in place to reduce it?
How are you collaborating with suppliers and retailers to improve food waste?
How are your product innovations changing to utilise surplus food?
What kind of cost savings are you making – or could you make – by having less food waste
compared to your peers?
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Transport
European Transportation
Mark McVicar
+44 (0)20 7773 1919
mark.mcvicar@barclays.com
Barclays, UK
Within transport, we see little risk to the logistics companies from greater food waste
awareness and instead see a slight opportunity for an incremental supply chain
management service if legislation or food industry practices change.
Some 25% of Supply Chain Management (SCM) is outsourced to the third-party
market; this proportion is higher in the food industry, notably across the large food
retailers, where it typically exceeds 50%. The third-party logistics operators may be
involved across the supply chain; from inbound sourcing both domestically and
internationally, through the management of the core Regional Distribution Centres, to
the store delivery and returns management. This is usually done under long-term (5-
10-year) contracts and will be based on cost and capital employed, with variations
built in for both volume and operational efficiency. We believe there is currently little
involvement in food waste management, but see the potential for it to count as
another component of SCM that would be costed and charged for.
DPDHL, Kuehne + Nagel and DSV already operate SCM across the breadth of the
food industry and could expect to see further growth in their outsourced business
models from a greater focus on food waste management.
Risks vs. opportunity
There is little risk to the logistics sector from a greater focus on food waste management, in
our view; operating standards are already very high and externally monitored and inspected
as a matter of public health. If legislation or food industry practice changes to require even
higher or different standards and procedures for handling food waste, this would count as
an incremental SCM service and be charged to the food industry appropriately.
Companies to highlight
DPDHL, Kuehne + Nagel, DSV: Growth opportunity through outsourcing
The SCM divisions of each of DPDHL, Kuehne + Nagel and DSV already operate across the
breadth of the food industry and could expect to see further growth in their outsourced
business models from a greater focus on food waste management.
The Credit View
Hapag-Lloyd: Remote Reefer Monitoring
According to our credit analyst, Maggie O’Neal, Hapag-Lloyd has invested in Remote
Reefer Monitoring technology, which records data relevant to quality (temperature,
humidity, fresh air supply, etc) to ensure minimal waste in transit. Cargo is monitored
by reefer experts and engineers who receive alerts if the transport environment
becomes sub-optimal. As some fruits (e.g. bananas) are very sensitive to even minor
temperature shifts, being able to control the temperature can prevent food perishing
en route. The controlled interior atmosphere also helps reduce spoilage and mould so
the ripening of fruit and flowers can be delayed.
Questions for management
Are you currently involved in food waste management?
How would you respond to new legislation and higher standards?
Do you believe your customers would be willing to pay for such new services?
What operational challenges might greater food waste management bring?
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APPENDIX 1 – EXPERT & START-UP INTERVIEWS
Interview: Forum for the Future – Geraldine Gilbert, Principal Sustainability Advisor, Food and
Sustainable Nutrition
Forum for the Future is a charity that works in partnership with business and government to accelerate the shift towards a
sustainable future.
What is the problem with food waste and what are some potential solutions? “This is a classic systemic problem in that
there isn’t one thing that needs to be fixed and there isn’t one way of explaining it. There are many aspects that have led to
the momentous amount of food waste in our system and therefore it requires a collaborative, joined-up effort to fix it. On
the consumer end, while the food waste problem is partly due to a food system based on a false sense of abundance, people
also have less time for cooking and some haven’t had adequate education around the subject. There are certainly cultural,
social, economic factors at play. On the production end, in poor countries the problems come about from factors such as
poor infrastructure and lack of training around food safety and hygiene. There is also a problem with farmer and retailer
contracts – due to the power dynamic, retailers can often back out of contracts at short notice, and hence food that was
destined for a particular retailer will go to waste if the farmer does not have the network to sell the produce elsewhere.”
What can businesses do? “Food waste is clearly bad for business and bad for reputation; if senior management can see it
this way then it can enable investment in solutions for the problem. Tesco reports its food waste statistics – companies are
almost competing in this space, wanting to be seen to be grappling the issue of food waste.
There are a lot of deeply embedded systems which contribute to food waste, such as food retailer dominance or selling
continuously cheaper food to consumers. The businesses in the whole supply chain need to understand that food waste is a
risk to everybody. We would advocate a collaborative and systemic approach – one food retailer is not going to fix the
problem on its own. Either the retailers will need to get together to decide on a path of action or there can be collaboration
along the supply chain. This could involve advocating for better regulation which would enable them to reduce the problem,
or trialling technology and new systems along the supply chain to improve food waste.
For a brand or manufacturer it could be having a better procurement process that connects the data of what is being
wasted in-store and the ordering system. There are collaborative approaches available in the same way that people are
coming together around plastics, for example the Plastic Pact in the UK. It is not necessarily the case that the technology is
missing; it is sometimes that the technology is not being deployed in the right way or is not supported with an appropriate
regulatory framework. We believe standards and ratings can help; a good example is the EU bringing in energy efficiency
ratings on white goods – that really helped to push more efficient goods because no one wanted an F-rated appliance.”
Is regulation needed? “Having regulation can certainly help the issue. The UN’s Sustainable Development Goals are also
coming into play; lots of companies are aligning themselves with these goals and wanting to show their contributions.”
Are investors pressuring companies around food waste? “We track broad investor interest and we have seen more interest
for ethical and ambitious companies. There is also academic research showing that companies with better longer-term
strategies perform better in the long run. The factors are coming together but at the moment the issue is not yet
mainstream enough. If investors were to put pressure on companies then this would likely help the issue.”
Are there any successful industry case studies? “I think Sainsbury’s Waste less, Save more campaign was really interesting.
It was interesting because the project wasn’t owned by the sustainability team but instead was driven by marketing. This
meant that the campaign was immediately about engaging customers with the issue, which was something no-one had
done yet. Sainsbury trialled a variety of solutions such as giving out fridge thermometers, providing cooking classes on how
to use up leftovers. They even created an app where you could input what was left over in your fridge and it would give you
recipes to use up these ingredients. This app not only helped consumers reduce food waste in the home and save money
but also gave Sainsbury some valuable data on the most wasted foods – which turned out to be bread, potatoes and milk.
Tesco is also releasing its data on food waste, which is really good, because a lot of the time we don’t actually know the
scale of the problem so it is encouraging that Tesco are willing to be the first to release their data.”
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Interview: Apeel Sciences – Michelle Masek, Head of Marketing
How does Apeel’s solution work? “We use food to preserve and protect food – our products are made from plant-derived
materials that are found in every bite of fruits and vegetables that we already eat. When we apply this material to the
surface of fresh harvested produce, it doubles or triples the shelf life of the produce without requiring refrigeration. We work
with fresh food suppliers and the retailers, and our products are applied in the packing house or the distribution facility. For
avocados, for example, we coat them with the Apeel product as they are coming down the conveyance system and then
when it dries, the barrier of plant materials is left on the outside of the fruit. This barrier then slows down the rate of
oxidation and dehydration of the fruit. By slowing down these two processes the fruit is staying healthy for much longer.”
How is Apeel helpful? “Apeel is a value-add as well as food waste prevention solution for every member of the fresh food
supply chain. For a grower or a producer, they can optimise harvest practice when they have more time with the fruit – for
example, they can leave it on the vine longer which means the fruit can develop more natural nutrition as well as colour. For
distributors, the Apeel solution leads to significant cost savings as they can potentially shift modes of transportation, reduce
energy use, and even expand to new markets. For the retailers, Apeel leads to a better experience for shoppers as Apeel
produce maintains its freshness for much longer, which also means less good food goes to waste.”
What experience do you have with your existing retail partners? “Apeel is proven effective on dozens of types of fruits and
vegetables, but we are focusing on three categories at the moment – avocados, citrus and asparagus. In the US, hundreds of
stores in the Midwest are carrying Apeel Avocados. The focus on the Midwest initially is because this is the area in the US
that has historically had quality issues around fruits and vegetables.
These programmes have shown the tremendous opportunity for value capture when you prevent waste rather than simply
divert it. For example, Harps Food Stores have reduced their food waste in the Hass avocado category by over 50%. This
shrink reduction then led to a 10% sales lift, after being normalised for any changes in inflation/deflation of the avocado
market. This translated to a 65pp increase in margin on avocados. This is very important because the fresh department of
the store is where the battle for differentiation is being fought, and produce shoppers tend to be the retailer’s best
customers.”
What aspect do venture capital firms like most about Apeel? “We have raised $110mn to date and closed Series C funding
of $70mn in July 2018. We now have the capital we need to expand globally, to expand into the citrus and asparagus
categories and we are also expanding our team. From VCs we hear a lot about double bottom-line investing, which means
investing that is good for the bottom line as well as good for people and the planet. Apeel is a great opportunity because it
satisfies both of these requirements. In the US alone, food waste at the retail level is reported to be an $18bn loss. Both us at
Apeel and investors are seeing this is as a massive opportunity. What we are finding is that when you mitigate food loss at
the shelf, you can see credible economic benefits that were not captured before. Investors are now seeing food waste as big
business, not just as the responsible thing to do for the planet.”
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Interview: Mimica – Solveiga Pakštaite, Founder
What is Mimica’s solution? “We aim to reduce food waste and improve safety with a tactile food expiry label to enable
customers to monitor freshness by the texture of the label. Mimica’s first product is a tactile label for milk bottles. In the
milk industry, if you average out the waste in the UK it works out at a cost of 4p per bottle. The Mimica label costs around
1-1.25p per label, this is crucial for a company’s ROI.”
What are some potential solutions? Does it require industry action, education and/or regulation? “The problem of food
waste is not going to be solved through our solution alone. The specific area we are targeting is the general trend that
people are getting further and further away from food – knowing what it should smell like, look like etc. This used to be part
of common knowledge 50 years ago but less so now. We are trying to educate people about what conditions are going to
keep food fresh for longer. We are filling a part of the education gap but there needs to be more information in schools. This
knowledge gap about how much effort goes into production explains why people don’t value food as much as they should.
Food is so abundant at the moment, that it becomes difficult to value it. But if you have an understanding about how many
work hours, how much water and how much energy goes into producing each item of food then I think people wouldn’t
waste it as much. I think there is a big issue with people expecting to see abundance in a supermarket and these retailers
want to provide this availability so that customers don’t switch supermarkets. So I think both sides have built up this
unrealistic expectation of abundance and we need to radically shift the way we think about food. Legislation can obviously
help with this, with significant moves being made in France around reducing food waste already. But to make radical
change we need to start changing our perspective on food and what it means.”
What can industry do about the issue? “New supermarkets like HISBE are really interesting. The name stands for How It
Should Be and it’s an ethical supermarket model that doesn’t just tackle food waste but wider issues also. Mimica are
working with HISBE at the moment which is very exciting. HISBE think about waste from a very holistic level – for example if
HISBE are ordering in meat, they only order the meat from one or two cows rather than order 1.5 cows as this leaves the
farmer with waste. Yes this makes the supply chain harder to manage but at scale this would become easier.”
What is the impact of extending shelf life? “Mimica’s CEO Laurence Kayson conducted trials on shelf life extension
technology at his previous company It’s Fresh! They found that extending shelf life by two days can lead to a 50% cut in
waste, which led to a 10% sales increase and a subsequent 17% increase in profits.”
What has the feedback been from Mimica’s trials? “Consumers have said that the reassurance of having Mimica Touch on
a product would encourage them to buy larger pack sizes, remain loyal to brands and even switch brands.”
What does the competitive landscape look like? “Mimica is the only tactile solution; the others are either using small
electronic screens or using colour changing solutions. One of the colour changing labels is by a Scottish company called
Insignia who make an open life label, that is on the inside of the film so that when you open it the oxidisation would tell you
how long it’s been open.”
Do you partner with manufacturers only? Would you move into working with supermarkets? “We have found
partnerships as the most mutually beneficial way to work. For example for milk we are actually building the label into the lid,
so we are working with Coveris who make 80% of the caps in the UK. So when they produce a cap with our technology
built in, they can then sell that cap to other dairy manufacturers. This opens us up to their customer channels. This is why
it’s helpful for us to work with packaging manufacturers in this way. We need to make sure we understand the benefits first
with manufacturers before going to the supermarkets.”
What about Mimica’s global expansion plans? “The UK is a sensible starting point as we are making the labels in Wales but
as we expand we want to find local partners to work with to produce the labels. I can see ourselves moving into Nordic
countries very soon as there is a huge appetite for sustainable interventions to reduce food waste. France is another
interesting area for us due to their new laws on food waste. The US is another consideration because they have such a big
problem with food waste. By product, dairy is where we are starting; it is a huge industry with a lot of waste within it and is
a lower risk area. This is a good proof of concept target for us so that we can then move onto other products such as red
meat, poultry, seafood, fish and eggs.”
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Interview: OLIO – Tessa Clarke, Co-founder
OLIO is a free app tackling food waste through connecting neighbours and local shops so that surplus food can be shared
rather than wasted. Launched in 2015, OLIO now has 900k users who have together shared over 1.25m portions of food.
OLIO also boasts 30k volunteers who collect food from local retailers and redistribute within their local community.
What are the main factors causing food waste? “I think the dialogue globally around food waste has to date focused on
the supply chain and the retailers. However, there has been very little coverage on the role that consumers play even though
in developed countries such as the UK, US and countries in Western Europe, well over 50% of food waste occurs in the
home. It is an extremely common misconception to believe that most food waste takes place at a retail store level. Using UK
data as an example; there are around 15k supermarkets that are throwing away between 0.5%-1% of their food, but there
are 27 million households throwing away around a quarter of their weekly shop. This is why households are responsible for
over half of food waste in the UK, whereas retail stores, at a store-level, account for less than 5% of all food waste. But there
is a perception problem because most people assume the majority of the problem lies with the retail stores.”
How does OLIO fit into the solution? “We are harnessing the power of digital technology to connect neighbours so that
they can share their unwanted food. To use OLIO, you take a photo of the food, add it to the app and then neighbours
nearby get an alert to say that a food item has been added. They can then browse what is available, request what they
would like and then arrange pick-up via private messaging (which usually involves going to collect the products through a
doorstep exchange). Around half of the food shared on OLIO comes from within a user’s house, whilst the other half comes
from our volunteers going to pick up unsold food at a partner retailer and then uploading this onto the app.
We have partnered with the UK’s leading charitable food redistributor, FareShare, and they have said the charitable sector
could absorb about 20-25% of the industry’s unsold food once fully scaled. The remaining 75-80% of the industry’s unsold
food is where OLIO steps in to provide a community solution, preventing the food from going to landfill.”
Which retail partners do you work with and what has their feedback been? “Our largest partner at the moment is Pret a
Manger, where we currently support around 100 of their stores. We are also working with Sainsbury, Morrison and Planet
Organic and have been speaking to all of the major retailers in the UK, having run pilots with a number of them. In terms of
feedback, Pret a Manger and our other partners have been thrilled with OLIO because it helps them fulfil their zero edible
food waste commitments at a store level. They also tell us that it has improved staff retention and morale because store
staff no longer have to throw away food. Additionally, at the moment, the cost of OLIO to our retail partners is comparable
to the cost of paying a waste contractor to take the unsold food. As we continue to automate our systems, we will become
even more cost-effective.”
Do you see scope for further education into the true value of food? “There is a big problem that, for many people, food
has lost its value. If you look at the proportion of household disposable income that is spent on food, over time this has
consistently declined, therefore we are valuing it less. There is also very little understanding of the incredibly long supply
chain that our food is going through and hence the enormous carbon footprint that is being generated. Generally, people do
not realise that the single biggest thing they can do to mitigate climate change is to not throw away food. This can be more
impactful than transport or energy or many other things people would cite ahead of food waste.”
Is awareness around food waste growing? “Awareness around food waste is definitely gaining momentum, but it is not
yet at the level of awareness around plastic waste. The UN’s Sustainable Development Goals will help and the Mayor of
London actually adopted the UN’s goal of halving food waste by 2030 for the city of London in his 2018 environmental
report. The USA has also adopted the UN’s SDG as a goal for their country. In the same way that child labour used to be
endemic in the fashion industry but is now completely unacceptable, I believe the same is happening to food waste.”
Is there scope for regulation on industry? “I would start with a requirement to measure and publish food waste data,
because what gets measured and shared gets addressed very quickly.”
What are OLIO’s next steps? “The events industry is a significant opportunity for OLIO, both large and small-scale including
the catering companies. Other areas of opportunity include corporate canteens, hospitals, schools etc. We have already had
food successfully shared in 49 countries and at the moment we are focusing on organically growing in the UK. After we
have done our next capital raise we will then be focusing on international expansion.”
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Interview: Tenzo – Adam Taylor, Co-founder
What is Tenzo? “Tenzo uses AI forecasting to optimize inventory and staffing levels for restaurants. It takes into account
data on many aspects such as the weather, sports events, movie releases, promotions and traffic. The Tenzo system enables
restaurants to optimize labour hours as well as reduce their food waste. Generally, restaurants have the greatest
opportunity to optimize two areas, labour and food, and each of these account for about 25-30% of a restaurant’s cost
line.”
Is awareness around food waste increasing in the restaurant space? “We do see a trend of people becoming increasingly
aware of food waste. At the moment, this is driven mostly through cost pressure but consumer pressure cannot be ignored.
I think both employees and consumers are becoming more socially conscious and the biggest thing a restaurant cares
about is the number of people walking through the door.”
Which partners have you worked with and what has their feedback been? “Some of our partners include Nandos and
Mitchell & Butlers. The feedback has been really positive and the restaurants have seen a sizeable reduction in wastage.
Generally we are able to reduce errors in forecasting by around 30-50% and seeing as food waste can cost c1-3% of sales
for some restaurants, the savings can be significant. Typically we can reduce food waste by around 0.5-1% of sales, which
can represent a saving in the order of £10-20million. Reducing waste is especially important given that restaurants are such
narrow-margin businesses.”
Can flexible menus help reduce food waste at the supplier level? “I think flexible menus are certainly a possibility and
could become more of a reality in the future as the use of digital signage and menus increases. However, the problem at the
moment is that a restaurant’s menu exists in so many places so it’s difficult to change them all at once – it’s online, on
delivery platforms, social media and it’s physically printed.”
Are there other ways restaurants can improve supplier waste? “Some restaurants are also already working with suppliers
to plan produce 18 months in advance. I also think existing contracts between suppliers and restaurants are probably more
flexible than contracts with a retailer. There is also a trend for locally grown produce. To really minimize food waste, a
vertically integrated supply chain is probably the best way to do this but it depends whether the decision-making is at the
central or local level.”
Delivery platforms or excess food platforms like Too Good To Go? “I think some restaurants are not sure whether the
economics of going on a delivery platform like Uber Eats or Deliveroo is going to work. The restaurants are acutely aware of
the costs of going online and using these delivery platforms. However, a platform that means a restaurant can offer meals
at a discount and consumers collect these meals may be more appealing.”
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Interview: HISBE – Amy Anslow, Co-founder
What is HISBE? “HISBE is a supermarket run on a social enterprise model, with a pilot store in Brighton that has been open
for five years. We work across 8 main areas of social impact, one of them being waste. Our goal is to hack the current
supermarket model in the UK to make it fit and fair for the 21
st
century. We offer a fair deal for the people that make the
food, have well paid staff, a transparent supply chain, an understanding of provenance and an environment that people
want to shop in. We want supermarkets to serve their local communities, so for every £1 spent at HISBE, 50p stays within
the local economy.”
How is HISBE working to tackle food waste? “Half of the food waste in the UK is wasted in the home so we at HISBE are
trying to reduce this by offering consumers the amount they actually want to buy, for example single carrots rather than
1kg packs. We sell over 100 products loose, which helps reduce plastic packaging as well as reducing food waste. We think
there is a lot of scope to change the usual supermarket practices, for example mainstream supermarkets over-order
produce by as much as 50% to create the feeling of abundance in-store, with a lot of produce consequently being wasted.
But we think this is completely unacceptable. We are very careful with our ordering rates, ordering more frequently to
reduce wastage and have good relationships with suppliers. We also start reducing near-expiry products in-store quicker,
both to reduce waste and so that lower income customers can buy the produce more cheaply. We also have a policy of
refusing to throw away edible food – so we either reduce food further, give food to staff or it gets put outside the shop for
people to take. We generally have very little left over, so don’t need to work with charity donation platforms.”
What are HISBE’s expansion plans? “We want to replicate our store in other local areas to ensure we keep close
relationships with suppliers and grow their businesses along with ours. We want to create a hub of 10-15 stores around the
same area that we are in now and then want to look at replicating the entire hub to a new supply chain area.”
What is the solution for food waste? “People need to be motivated to make different choices and it needs to be easy for
consumer to make a change. There has to be a benefit to consumers, it needs to be easier, cheaper, more convenient etc -
which is why we make our unpackaged products cheaper. Regulating people on how much they waste is difficult because it
ignores why they are having to waste the food in the first place – the three-for-two offers, impulse purchases, large pack
sizes, for example. Mainstream supermarkets are creating the need for consumers to buy more produce than they can
actually use. Whereas, to really solve food waste, we need to help people buy less. This would require a supermarket to
authentically care about the problem of food waste and not just about publishing their data to meet requirements.”
Do HISBE’s customers have different expectations around availability? “As people gravitate from being a top-up shopper
at HISBE to shopping more frequently, we find that they become more flexible around what they want to buy, and hence
cook accordingly. We find that we actually don’t have a lot of gaps in availability, particularly in our fruit and vegetables
where we have a lot of choice. We are careful with our ordering and closely monitor our stock levels.”
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ANALYST(S) CERTIFICATION(S):
We, Emily Morrison, Hiral Patel, Anushka Challawala, James Anstead, Nicolas Champ, Karen Short, Andrew Lazar, Benjamin M. Theurer, Vicki
Stern, Patrick Coffey, Richard Taylor, Jeffrey A. Bernstein, Scott L. Gaffner, CFA, Joshua Stone, Lydia Rainforth, CFA, Moses
Sutton, CFA, Sebastian
Satz, CFA, Alex Stewart, CFA, Andrew Ross, CFA, Alvira Rao and Mark McVicar, hereby certify (1) that the views expressed in thi
s research report
accurately reflect our personal views about any or all of the subject securities or issuers referred to in this r
esearch report and (2) no part of our
compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
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Distribution of Ratings:
Barclays | Sustainable & Thematic Investing
4 March 2019
69
IMPORTANT DISCLOSURES CONTINUED
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BARCRES-63852b76
Sustainable & Thematic Investing
Sustainable & Thematic Investing
Adeline Diab
+44 (0)20 3134 1578
adeline.diab@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Deborah Taylor
+44 (0)20 7773 8418
deborah.taylor@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Kristina Church
+44 (0)20 3134 2199
kristina.church@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Hiral Patel
+44 (0)20 3134 1618
hiral.patel@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Emily Morrison
+ 44 (0)20 7773 9080
emily.morrison@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Anushka Challawala
+44 (0)20 3134 2326
anushka.challawala@barclays.com
Barclays, UK
Sustainable & Thematic Investing
Katherine Ogundiya
+44 (0)20 3134 1391
katherine.a.ogundiya@barclays.com
Barclays, UK
Contributing Authors
European Food Retail
James Anstead
+44 (0)20 3134 6166
james.anstead@barclays.com
Barclays, UK
European Food Retail
Nicolas Champ
+331 44 58 32 45
nicolas.champ@barclays.com
Barclays, UK
U.S. Food & Staples Retailing
Karen Short
+1 212 526 7146
karen.short@barclays.com
BCI, US
U.S. Food
Andrew Lazar
+1 212 526 4668
BCI, US
Americas Agribusiness
Benjamin M. Theurer
+52 55 5241 3322
benjamin.theurer@barclays.com
BBMX, Mexico
European Leisure
Vicki Stern
+44 (0)20 3134 6733
vicki.stern@barclays.com
Barclays, UK
European Leisure
Patrick Coffey
+44 (0)20 3555 5955
patrick.coffey@barclays.com
Barclays, UK
European Leisure
Richard Taylor
+44 (0)20 3555 2650
richard.e.taylor@barclays.com
Barclays, UK
U.S. Restaurants
Jeffrey A. Bernstein
+1 212 526 3855
jeffrey.bernstein@barclays.com
BCI, US
U.S. Paper & Packaging
Scott L. Gaffner, CFA
+1 212 526 9132
scott.gaffner@barclays.com
BCI, US
European Integrated Oil &
Refining
Joshua Stone
+44 (0)20 3134 6694
joshua.stone@barclays.com
Barclays, UK
European Integrated Oil &
Refining
Lydia Rainforth
+44 (0)20 3134 6669
lydia.rainforth@barclays.com
Barclays, UK
North America Alternative Energy
Moses Sutton, CFA
+1 212 526 4060
moses.sutton@barclays.com
BCI, US
European Chemicals
Sebastian Satz, CFA
+44 (0) 20 3134 7201
Barclays, UK
European Chemicals
Alex Stewart, CFA
+44 (0)20 3555 4957
alex.stewart@barclays.com
Barclays, UK
European General Retail &
E-Commerce
Andrew Ross, CFA
+44 (0)20 7773 3023
andrew.ross2@barclays.com
Barclays, UK
European General Retail &
E-Commerce
Alvira Rao
+44 (0)20 7773 3624
Barclays, UK
European Transportation
Mark McVicar
+44 (0)20 7773 1919
mark.mcvicar@barclays.com
Barclays, UK
