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Converting food waste into opportunity by generating value

Startup Story

Published on 2022-11-28

Listen the full podcast or read the article below!

Luciano Kleiman, co-founder of B4Waste, told us about how they plan to decrease food waste by empowering supermarkets to sell foods close to the expiration date at half the price.

 

The idea to create B4Waste was born in late 2019, just before the world changed. My co-founder Danielle Neman and I were chatting at a children's party because our children are best friends, and we were discussing how great the pain of food waste is in the world.

It is a very dramatic point when we consider that one-third of all food produced is wasted every year. Not only in terms of the magnitude of this figure but also in terms of the consequences of it, both socially and environmentally. 

We have begun to discuss the possibility of a framework on how to address this problem, in a way that might be feasible first, but that has to destroy the mindset that this challenge is impossible to address. If you look at the mindset of retailers, I would say that in general, it is a very conservative view that this is a kind of loss to be considered and not to be fought, and scalable solutions.
 

That led us to develop this digital platform, which is quite flexible and has a clear concept. We connect any company that has losses due to deadlines or problems with anyone interested in purchasing goods to be consumed quickly at a discount of at least 50 percent. We can then provide these goods to companies or small markets, for example, but also to people. We have come to create a real business that creates real value for all parties involved. 

There is a clear proposal for retailers to reduce their losses: they will turn waste or garbage into extra cash flow. It is a very simple and very effective proposal.

We are providing an opportunity for citizens to buy quality products at half price for quick consumption. Also, for some people, we are providing access to some types of goods that they simply would not be able to afford at the normal price.

We are also helping the planet because we are saving food from waste: we have already saved over 300 tons of food from the trash. As a result, we have also prevented the emission of over 16 tons of methane gas. 

We are pleased with what we have achieved, but of course, it is still the beginning of the journey: there is still much to be done, but we believe that the market is beginning to understand and embrace the cause we are fighting.


 

The different stakeholders involved in B4Waste

 

B4Waste has four pillars: the sellers, the app itself, the buyers, and the operation. 

As for the sellers, the approach is quite simple. We propose to turn waste into an additional cash flow with no risk and no cost to the retailer.
This is why some large Brazilian chains are choosing B4Waste as a partner because there is an opportunity to reduce the average loss due to expiration from as low as 2 percent to probably half in a short period. Interestingly, the Brazilian benchmark for losses in supermarkets due to expiration and maturity is about 2% of GMV (Gross Merchandise Volume), which is a huge number. In addition, the average net profit is about 3% of their total GMV. So you can see how important it is for the seller to reduce losses. 

This is the approach we have with most supermarket chains, although we are very flexible and can provide solutions to stores and any type of retailer.

The app is as frictionless a journey as possible for end consumers, and we enable end-to-end transactions. Through the app you can find offers - there are over 2,000 every day - and make payments directly in the app. It is also possible to choose different shipping options: click-and-collect or home delivery. This allows you to go through the whole food journey, making the fruition and completion of the transaction easier and smoother.

The third point is consumers, and what we are trying to do is a real mindset shift. Our communications combine the opportunity to help the planet and to do good for people. 

I think this combination makes our journey more powerful in changing mindsets because people are not used to it. People have a bias against foods that are close to expiration. In this regard, it is interesting to mention that in some countries there is the concept of "best before" instead of the expiration date.
The way food matures is a process that does not turn food into a monster at midnight of the expiration date. That is what we are trying to communicate: it is still good. We will not promote anything beyond that date because we have to abide by the rules, which are very strict here. We agree, but if they are before this day, they have to be consumed. 

So we are communicating through our marketing tools to broaden the consumer base. We are now present in all the cities of São Paulo, we have started operations in Real de Janeiro and also in Belo Horizonte, so in three big capitals, and we are looking forward to expanding beyond that.

The last point is about operations. This aspect is crucial for anyone who knows the backstage reality of a supermarket: it is a very intense and hectic active routine.
What we have created is the smallest possible disruption of an existing process. Basically, as in most supermarkets, the people who work there already separate the goods that are about to expire. The only difference is that they have to enter the quantities and expiration dates of the products that will be loaded into the app.

So we tried to make it as simple as possible, and as flexible as possible, and this is what we were able to communicate and provide as a solution to our partners.

 

 

Is the market ready for this approach to food waste?

 

Now from our side of course this is the idea. We have to take steps according to our capabilities. So first of all, we were in a single city, we are expanding outside the national base right now, but for sure, we are willing to go beyond Brazilian borders in the future.

We have to respect the laws of different markets and we have to respect them at least until the mentality of the government understands how much this kind of regulation affects food waste, hunger, and so on.

Of course, we are 100 percent in favour of offering food in proper condition to be consumed, but at the same time, we have to face the reality that in some countries, for many reasons, people have a habit of assuming that products are no longer good when they approach their expiration date, which is not true. One motivation could be the mentality based on advertising that products are always perfect.
Standards for expired data are very high here in Brazil, so there are still 100% ready-to-eat products.

You have to consider each type of product: whether it is a dairy product is different from a seasoning product, for example. But of course, considering each type of food's reality or peculiarity, there is a lot of room to reduce waste. 

For this app, we thought of something that could be scalable. 
In terms of operations, set-up and everything else, we believe it is possible to expand across borders. I think the main issue from a business point of view, is the need for some adjustments in terms of enforcement, taxes and everything else. But that doesn't seem to be the main obstacle. I think the main obstacle is related to how retailers around the world see this as something feasible, as something that they are willing to embrace.

I think, especially in the last year, people are starting to open up more to this possibility, and this has a lot to do with the United Nations 2030 agenda, the SDGs, and the mindset that is evolving to support the world and the environment more and more. 
There are also some retailer groups emerging that are formed by new generations that are less conservative and more open to understanding the importance of the fact that anyone can make a difference in supporting environmental issues.

It depends on who allows us to start. Because if we start, we can show the market how effective it can be, how easy it is to implement, and how affordable it is for consumers: it’s just a win-win-win proposal.
We take great pride in providing real value to sellers, buyers and the Planet. So it depends on those who dare to change the mindset, change the paradigm, and open the door to a waste reduction solution that works.


 

How stakeholders react to this new sustainability tool

 

We have some data on stakeholder responses and feedback to our offering: we can mention some of the main KPIs of our current activity. From a buyer perspective, we have an order frequency of more than four devices per month per consumer. 

This is probably one of the figures we are most proud of: it shows that it is becoming a habit. Consumers understand that the economy they are making is quite significant and at the same time, they are helping the planet. 

As far as retailers are concerned, we measure the efficiency we can offer as a waste reduction tool. We can compare the total products offered by the platform with the total products sold, both in terms of quantity and value. We can reach 50 percent in three or four months of working together.
This is a very important figure because if we take into consideration the benchmarks I mentioned earlier and the effect it can have not only in reducing waste but also in increasing profits and cash flow, this is a key proposition for any retailer.


 

The two different triggers to adopt B4Waste

 

Adopting a new model depends on the extent of the need you have to treat one of your problems. Why don't we talk about supermarkets? 

There are two channels we usually communicate with to start the conversation: one is business-oriented, and the second is ESG-oriented.

In most of the changes, especially the familiar ones, the motivation is still 95 percent commercial. The environmental proposition is something that comes in the background and is very far from the profit we can generate. For me, it shows how much the mindset still has room to improve, to change in a better direction

In terms of the ESG part, there is a similarity between some of the more structured companies, usually not the family ones but more on the corporate side, that are already making strides in protecting the planet and becoming more sustainable and less harmful. Some of these departments are the people most interested in learning more and trying to do a pilot project. This is the way we prefer to work: start with a pilot project and give an idea of the benefits we can offer.

This kind of talk applies to large organizations. In some cases, they are similar to small retailers or small stores. In this case, the adoption of B4Waste would not be so much related to financial distress, but more to a mindset that embraces and understands that everyone and every business has a responsibility to do good and change the world in a more positive direction. 

In summary, there are two triggers: the economic part, which is still the most important in our conversations, but we see that the mindset toward supporting the environment is growing at a faster rate than we initially expected.


 

The main challenges that B4Waste has faced

 

B4Waste is something new that brings new technology and that, in my opinion, is disrupting the way retailers can reduce waste, there is a change in mindset. This is a problem that needs to be addressed. It is not an easy solution, it is something new that people have to understand, they have to believe that they have to take a risk, at least from their point of view, in doing something new.
It was very nice to see how quickly we can grow and how many people can embrace us and take us as partners in food waste.

I think the second challenge is related to how a startup works.
Our startup is now 16 months old, and of course, we face all the challenges of building an organisation. The development of technology is an endless pipeline full of new things. It is a very intense process because we want to offer our consumers something very simple.

The second part is the expansion of operations, which involves understanding and calibrating how the company works backstage and getting to know the needs of different profiles of companies with different profiles of people. 
It is important to set the right pace of growth, based on the capabilities you have, based on the funding you have, to do it qualitatively without taking bigger steps than you can take. 
Our growth has been very intense: in the last three months, we have grown 120 percent over the previous three months. 
We are certainly moving in the direction where we want to become a solid provider of waste reduction solutions.

The third point is again about mindset but from the consumer's point of view. Advertising shows perfect products, as we said before, something that can lead to tons and tons of fruits and vegetables being thrown away every single day, because they may have such a small spot that you wouldn't even notice, making it no longer perfect. It's still as delicious as it should be, but it gets thrown away.

My transformation point was that I have been an executive all my life: I worked for Adidas for 18 years, I was the CEO of the largest wine imported and distributed in Brazil, and then I joined the operation together with partners in a supermarket chain in Brazil a few years ago. The scene of so much food or so many products in good condition being thrown away every day is just shocking. It is something that cannot be accepted.
I think this was, at least from my point of view, one of the triggers that led me to think about B4Waste, create B4Waste, and join B4Waste as a full-time challenge.


 

Focus is based on changing consumers' mindsets

 

We need to consider that consumers' shopping behaviours are different.

There are those, for example, who shop for the whole month, so they need to have more time to consume goods. They cannot buy something that expires in the short term, but this is naturally expected by many shoppers.

Certainly, some products will be kept at home longer and this is not a problem. The problem is only to be restrictive and not to bring home products near or close to the expiration date. Sometimes being close to the expiration date can mean just one day, if we are talking about meat or milk, for example, but on the other hand, sometimes it is three months, sometimes four months, sometimes three weeks. It's still a long time and you're not changing your habits, but you're making an extra contribution to the family's economy, to the environment, and also to retailers. 

It is about not being restrictive about something that is still good because this behaviour harms the planet and only causes waste. 

We all see positive development and we see that people at least understand that this is something good, that it can be done, and that if they give their support there will be a benefit to their companies, society and the planet.

It is also important to mention that we have defined our purpose as "to have an impact on the planet and people to help reduce waste," so we know we are not alone in the fight. 
We have to combine B4Waste's proposal with other companies, and we like to work together to address the whole food chain, from farm to table.

Ours is a win-win proposition on all fronts and is a real value-add for all parties involved.


 

About the author

Luciano Kleiman

Founding Partner & CEO na b4waste

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