As they look to capture the prized millennial consumer base, beverage companies are looking for new ways to connect with consumers beyond what’s in the bottle itself. For them and for the environmentally conscious consumer, part of the appeal of the drink is the story behind it.
One part of that narrative is reducing food waste. According to a 2013 report from the United Nations and the World Resources Institute, 30 to 40 percent of the food supply in the U.S., the equivalent of more than 20 pounds of food per person per month, goes straight into landfills. That amounts to $165 billion in lost revenue per year, enough to make the food waste issue a growing concern for consumers; awareness was up 11 percent from 2015 to 2016 according to LeanPath, a company that monitors food waste prevention solutions.
That awareness has spread to the beverage category as well. Great taste will always be paramount, but several brands that use crops like coconuts, bamboo and watermelon are taking a closer look at upcycling, the practice of using discarded waste and byproducts from the production process, as a way to promote sustainable farming practices and responsible environmental stewardship.
MAKING THE PITCH
The entrepreneurs working in this space share a common sentiment: upcycling and sustainable farming practices are more than just part of their business models, but also central to their company missions and core beliefs. Yet they still face the challenge of communicating the added value of their efforts to consumers.
“We are in the process of figuring out how to articulate [upcycling and sustainability] in a way that the consumers can understand it and have it be relevant,” said Diane Roy, president and general manager for Aurantiaca USA, an affiliate of Grupo Aurantiaca that imports Obrigado to the U.S. Along with producing 100 percent pure coconut water, the company uses coconuts from its 450,000 tree farm in northeast Brazil to make erosion control mats from the fibrous husks, a practice that predates its entrance into the commercial beverage market.
“If you look at most coconut water brands, most of them buy on the market from multiple places — they don’t have their own trees, their own farming or their own manufacturing. It makes us a little bit different,” said Roy.
WTRMLN WTR has taken a different approach. The company, which markets a high-pressure processed watermelon juice, was founded on the idea that melons considered unfit for retail sale because of blemishes or other slight aesthetic imperfections were being unnecessarily discarded by farmers.
Rather than focusing directly on consumers, the company is involved with several programs and initiatives that are exploring how to reduce food waste on a large scale. CMO Jeff Rubenstein mentioned as examples the Wallace Center, a Washington, D.C.-based academic group that works with young entrepreneurs on food waste solutions, and the Food Recovery Network at the University of California Davis, which is involved with the college’s efforts to power its electrical grid through food waste processed through a commercial machine called a biodigester.
“When you look at all the stuff, there’s just a lot of growing interest among young people especially that we can make a real dent,” he said. “And we’re proud to be partners with some really great folks who are leading the way. To the extent that we can do what others are theorizing, I think we can make a nice contribution.”
Rubenstein said that WTRMLN WTR is also working with produce trade publications to specifically articulate the ways in which they are using “ugly fruit” in unique ways, as well as other educational initiatives.
“We have a program that we’re building with a university to create a curriculum where the ugly fruit becomes part of the discipline, and people can study how ugly fruit can become a profit center for the American grower,” he explained. The efforts fall under the company’s mantra of “seeding change,” which he described as the idea that “if you can convince people to do things slightly differently and it’s net positive for the planet and net positive for your pocket, then it’s a win.”
Food and beverage distributor Baldor Specialty Foods has taken a leading role in the upcycling movement through its SparCs program, an initiative with the goal of ensuring that 100 percent of the edible product in the company’s warehouse goes toward human consumption. Baldor Sustainability Director Thomas McQuillan told BevNET that the idea behind the term — a play on the word ‘scraps’ spelled backwards, pronounced “sparks” — was to change the narrative around using food products that may be considered “ugly” or imperfect.
“We wanted to see if the word could be used to replace the negative side of the discussion; if you say ‘food waste’ or ‘byproduct’ or ‘trim’ or ‘scraps,’ then people get sort of uncomfortable about eating it,” he explained.
As understanding of upcycling broadens, McQuillan said it provides companies that source from the program, such as Washington, DC-based Misfit Juicery, with a powerful sustainability message they can pass along to customers.
“[Our customer base] really like the idea of partnering in this way because they can then tell the story how their partner where they buy their fresh cut produce sends nothing to landfill, because then in a sense they are sending nothing to landfill,” he said. “You could say that we are partnering with all of our customers whenever they buy fresh cuts because we now have a solution. That becomes a selling point for us.”
Looking further ahead, Zachary Anderson, co-founder of IGZU, noted that consumers may not always realize the environmental cost, in terms of carbon footprint, associated with shipping products to the U.S. from across the globe. His company markets Bamboo Tea, made from the leaves of bamboo trees sourced from an organic, wild harvest farm in the Caribbean.
Yet while the all-important millennial beverage consumer is likely more attuned to environmental issues than his or her predecessors, Anderson concedes that upcycling and sustainability are still only small pieces of the larger conversation.
“The consumers that get excited about the sustainability piece of it definitely are excited to learn and explore that topic, but I don’t think that the general population completely understands it just yet,” said Anderson, noting that customers general familiarity with bamboo helps build an immediate connection that can later be further explored. “So we are at least able to jump into that conversation a little sooner, but I don’t think that it is the main thing that people connect with.”
One area that’s becoming hotter in the space is using product that wouldn’t necessarily make it to the produce stand. So-called “ugly” produce is at the heart of several beverage plays right now, as well as with snack products like Barnana, ReGrained, and juice brand Forager Project’s chip line as well.
Spurred on by an active social media presence and with the help of a celebrity investor, Grammy-winning singer Beyoncé , WTRMLN WTR has enjoyed rapid growth over the last several years. More than just a marketing call-out, the brand has made using “ugly” fruit a core principle, as Rubenstein explained that WTRMLN WTR was reducing waste from the “hundreds of millions of pounds of unused watermelons just in the U.S. alone.”
“They are typically not the kind of melon that makes sense in a commercial retail environment– Kroger or Safeway would reject them because of their aesthetics. But for us, they are still delicious,” he said. “So what we like to do is save those discarded melons or so-called ‘ugly’ fruit, and we’re in the process reducing food waste and providing a new source of revenue for these American growers who are typically taking those ‘ugly’ melons and tilling them back into the soil. So you are reducing food waste, you’re creating a little bit of extra revenue, and at the same time you’re doing something that has absolutely no bearing on product taste.”
In addition to sourcing these fruits, sometimes called “seconds,” the brand also uses 100 percent of each watermelon processed in its facility. The rind and the flesh of the fruit goes into the product, while the skin goes for composting and animal feed for livestock.
“We’re producing in mostly rural areas, and a lot of the watermelons are grown in those same areas,” Rubenstein said. “So if it’s possible to give back to the communities that we sourced from, that’s optimal. We are not super unique in doing these programs; what I think is unique is the sourcing of the ‘seconds.’”
Other beverage brands are investing in “ugly” produce as well. Misfit Juicery, a graduate of the inaugural class of the Chobani Food Incubator program, produces cold-pressed juices made from 70-80 percent recovered fruits and veggies that are leftover from fresh cut products like carrot sticks and watermelon cubes. In an interview with BevNET last April, co-founder Phil Wong said the company sees itself “as a company fighting food waste, and the vehicle for that is cold-pressed juice.”
And just last week, California-based organic cold-pressed juice company Project Juice launched, as its spring seasonal offering, a flavor called Ugly & Awesome, which is made from 99 percent ugly produce from organic apples, strawberries, cucumber, bok choy and ginger.
ECONOMICS & SCALE
While companies working in burgeoning categories are pushing the upcycling movement forward, the true test of its viability on a large scale will likely be determined by how it affects the bottom lines for farmers, manufacturers and distributors.
Baldor Specialty Foods distributes to a broad customer base up and down the East Coast, processing over 1 million pounds of produce at its facility every week. From that, around 150,000 pounds of SparCs is leftover and extracted for use in products; carrot peel, for example, goes to Misfit for juice and to New York City-based bakery Haven’s Kitchen for cookies. About 10 percent of the SparCs are used in products for human consumption; any remaining by-product is used for animal feed, ensuring that nothing goes to waste.
The obvious result is that the company has added a viable revenue stream without making changes to its existing production process. Baldor, which does not have an agreement to be the exclusive supplier of imperfect produce to Misfit, sells SparCs for 30 cents per pound, roughly ⅓ of the cost of its standard fruits and vegetables. The animal feed is sold for between five and 12 cents per pound, depending on the quantity purchased.
“That’s going to be a dramatic reduction in cost from what companies pay for a whole product,” McQuillan said. “In some instances, because the product is already cut up, it makes their processing go much faster. So their input cost is lower and then they can utilize the product very quickly.”
Yet according to McQuillan, the major constraint to widespread adoption of upcycling and “ugly” produce adoption across the industry is not a resistance to the concept itself, but rather a lack of consistent volume for those kinds of fruits and vegetables.
“If there’s a very small portion [of produce available], it’s very hard to say to a restaurant that we can provide a product, but only once a week,” he said. “For us, it’s finding the partner that has the right scale to match our volume, If you are talking to a massive nationwide food processor, that’s not a good partner for us.”
Sourcing is also an issue for WTRMLN WTR, as Rubenstein said that the company is not able to produce beverages exclusively from “ugly” fruit and therefore uses them “whenever possible.”
“Access to that kind of fruit is growing,” he said. “It used to be that the melons would just be tilled back into the soil, and it would take quite a while to educate the growers that there was a business that you could use those for. And I think that is part of our mission as a company.”
Check back tomorrow for a further look at the younger brands bringing innovation and entrepreneurship to the upcycling movement in Part 2 of this report.