SKU’d Thoughts 53: What can CPG companies do beyond recycling?

Sustainability continues to be a hot topic in the CPG industry and rightfully so. Companies understand that sustainability is also a marketable differentiator which impacts consumer purchasing decisions. In fact, the 25 largest CPG companies have set ambitious goals to reduce greenhouse gas emissions through packaging initiatives. However, these packaging initiatives are a bit constrained because of our current recycling systems’ limitations. The constant influx of new and hard-to-manage materials in the waste stream has posed problems for facilities with aging infrastructure.

Another sustainability lever for CPG companies to consider is minimizing food waste. Food waste is a huge problem worldwide, specifically, in the U.S., the Department of Agriculture estimates that between 30–40% (~133 billion pounds) of the food supply is wasted annually. This waste contributes to 8% of global greenhouse gas emissions and at least 2.6 percent of all U.S. emissions. Food waste happens along the entire supply chain; farms, supermarkets, restaurants, and homes. At the farm level, it’s estimated that one-third of edible produce remains unharvested in the fields or is discarded and never makes it into the supply chain. There are several reasons for this, like the market price is too low to justify the harvesting cost or lack of labor to harvest the crop. With produce, some of the farm-level food waste is compounded because of perishability and or aesthetics; if fruit is overripened or considered ugly, it is kept out of the supply chain. If produce is harvested and sent into the supply chain without a market for it, it ends up in landfills, where it releases greenhouse gases.

Last year, a group of large CPG companies and retailers including General Mills, Kellogg’s, Nestle, Tesco, and Walmart formed the Coalition of Action on Food Waste to cut global food loss per capita in half by 2025. These companies have enough power to pressure their suppliers to minimize post-harvest waste. They could also legitimize the already fast-growing upcycled food movement of using ingredients, such as surplus or ugly produce, traditionally not consumed by people. According to a study by Future Marketing Insights, the food waste business was worth $46.7 billion in 2019 and is expected to grow 5% during the next decade.

Currently, the charge for upcycling is being led by emerging brands. The process makes a ton of sense for food & beverage brands that simply need the taste profile or nutritional value of the produce. One upstart beverage brand using this technique is Agua Bonita, a health and wellness beverage brand. The company partners with farmers to buy their surplus or ‘ugly’ fruits and then turn them into healthier agua frescas, a popular Mexican and Central American non-alcoholic beverage. This is just one of many reasons I was excited to invest in this forward-thinking brand.