Soup-To-Nuts Podcast: Startups seize fast-growing upcycling trend to drive sales, make social impact

By Elizabeth Crawford contact

- Last updated on GMT

Soup-To-Nuts Podcast: Startups seize fast-growing upcycling trend to drive sales, make social impact

Related tags: Soup-To-Nuts Podcast, Upcycling, Food waste

Upcycled foods and beverages made from ingredients traditionally not consumed by people are gaining popularity with consumers seeking more sustainable diets – creating a fast-growing market opportunity estimated to be worth more than $46 billion, which startups and emerging brands are seizing quickly.

According to the Upcycled Foods Association, approximately $940 billion is lost annually due to food loss and waste that could be converted into value-added ingredients and finished products that many consumers not only would buy, but would do so at premium prices.

Indeed, a Mattson study found 39% of consumers currently wish to buy foods and beverages made with upcycled ingredients, and 57% say they plan to buy more in the future. Their interest is helping to fuel an estimated 5% compound annual growth rate increase in the upcycled food waste sector, which Future Market Insights estimated was worth $46.7 billion in 2019.

While many large CPG companies in recent years have set ambitious goals to reduce greenhouse gas emissions, adopt more environmentally-friendly packaging and lower their use of limited resources, emerging brands and startups appear to be taking the lead on leveraging upcycling as a way to move the needle on sustainability while also creating consumer excitement around novel products or modern twists on classic favorites.

In this episode of FoodNavigator-USA’s Soup-To-Nuts podcast​ the co-founders of I Am Grounded, Outcast Foods and Agua Bonita – three emerging brands that won accolades from market analysts and investors through Rabobank’s FoodBytes! pitch competition in 2020​ – discuss the emergence of upcycling, the need behind it, its market potential and their unique approaches to creating a more sustainable and reliable food supply by finding new uses for what was considered waste previously.

[Editor’s Note: Never miss another episode of FoodNavigator-USA’s Soup-To-Nuts podcast – subscribe ​today.]

Buzz-worthy upcycling gives startups a toehold in competitive categories

The idea of ‘upcycling’ food is relatively new, with a formal definition only being penned last year by the Upcycled Food Association, which itself is new as of 2019. But the problems of food waste and food insecurity that upcycling tackles are age-old and pernicious.

They also are why TJ Galiardi says he co-founded the Canadian company Outcast Foods​, which dehydrates would-be wasted ‘ugly’ or unwanted produce to create value-added ingredients that brands can incorporate in foods and beverages to boost both their nutritional value and their sustainability story.

“Roughly a third of all food that we create is wasted. That’s over a billion tons a year. … It’s just mind blowing,”​ Galiardi said.

It is also a huge opportunity for companies and brands to meet consumers’ growing demand for more sustainable products, which Galiardi says is estimated to become at $150b industry this year.

“You ask any consumer now what’s important, and it’s always going to be the same. It’s going to be taste, and it’s going to be what the brand story is. And now a big part is sustainability,”​ he explained. “So, if you’re a brand in the market right now and you’re not adding something, a piece around sustainability, whether it’s your packaging or whether it’s your ingredients, you’re putting yourself at a huge disadvantage.”

Given this new pressure, Galiardi said he has seen a “massive uptick in the last couple of years”​ of brands wanting upcycled ingredients from Outcast Foods “to make their brand stick out a little more.”

Demystifying ‘upcycling’

While sustainability may be top of mind for many people, ‘upcycling’ is still a relatively unfamiliar term for many consumers, according to Vanessa Murillo who co-founded the startup I Am Grounded​ in Australia and recently launched a snack bar using upcycled coffee fruit. She explains that for upcycling to have a significant impact on food waste and food insecurity, brands and companies of all sizes need to demystify the term.

“Upcycling has always been tied to furniture or clothing, and so by terming upcycling, we’re just basically taking a term that’s already existed for a long time and people have always know about,”​ but to really succeed “we have to make consumers trust that upcycling isn’t just waste,”​ she said.

I Am Grounded is tackling education through digital and social media and call-outs on its packaging, but Murillo noted that if well-established and trusted brands that use upcycled ingredients would call them out on pack and help educate consumers it would be easier to earn shoppers’ trust.

Supply chain struggles pose unique challenge to upcycling

As consumer awareness and demand for upcycled ingredients grows, and more companies incorporate upcycled ingredients, Murillo cautions industry will need to remain vigilant to ensure the products are produced ethically and safely.

She explains that many upcycled ingredients come from just-in-time supplies that need to be processed on or close to the farms, which often means bringing farmers on board to help and teaching them how to preserve their surplus or byproducts safely for human consumption.

Galiardi echoed Murillo’s concerns about rapidly scaling production of upcycled ingredients – adding some upcycled ingredients may require a longer lead time while supply and demand find equilibrium.

“It’s almost a chicken and an egg situation whereas a business that's built off of surplus, we have to always know exactly how much we need to bring in where it's coming from. And also at the other end of the spectrum is knowing that we have customers for it. So, the good thing about the dehydration pieces is our products have a two to three-year shelf life. So that gives us some wiggle room to, to find customers after we gross it. But since this, this market's so hot right now, we're finding that we can't process fast enough to keep up with our, with our customers. So, it's an exciting problem to have, but it's also a very demanding when it comes to logistics,”​ Galiardi said.

Upcycling is only part of the solution

As optimistic as Murillo about the potential of upcycling to improve the sustainability of food production, she stressed it is only part of the solution and should not be treated as an easy box to check to make green claims.

She explains that companies that really want to be sustainable also need to consider their supply partners’ environmental impact, the sustainability of their packaging, processing and shipping and whether ingredients are natural, organic, local and the size of their carbon footprint.

The health benefits of upcycling

Beyond the environmental benefits of upcycling, the trend lends itself well to better-for-you foods and beverages as many of the ingredients or byproducts that would be wasted offer significant nutritional value or can be used to replace less desirable ingredients.

For example, Murillo notes that the coffee fruit she saves from the landfill and uses could be considered a super food because it is packed with antioxidants, polyphenols and flavonoids. She also notes emerging research suggests it could be a nootropic and help with anti-inflammation.

Similarly, Kayla Castañeda, who co-founded the startup Agua Bonita​, explains that she was able to cut the sugar from her ready-to-drink agua frescas by relying on the natural sweetness and flavor from the pound of surplus and ugly produce that she saves from the landfill and packs into each can.

She emphasizes that like with all CPG products, those made from upcycled ingredients must taste – and look – good to keep consumers coming back, otherwise brands won’t survive or be able to significantly impact food waste.

As each of these companies illustrates, the potential for incorporating upcycled ingredients into CPG foods and beverages is high – bringing not only an extra nutritional punch, but a feel-good marketing story that consumers can embrace as a way to make a positive impact without sacrificing the fundamentals of taste and experience.

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