Upcycled Food: A Business Model for Planet and Profit

What happens to all the grain left over from craft beer brewing? Where do oat remnants go after making oat milk? How about the fiber-packed pressings from fresh-squeezed juice? Or the sweet-tasting pulp of the coffee fruit? Sadly, despite having rich nutritional and functional value, food components like these are often thrown to waste, winding up in waterways and landfills and contributing to climate change. Fortunately, there’s a movement afoot to rescue would-be food waste and repurpose it into value-add ingredients for “upcycled foods” and beverages. Upcycling isn’t a new concept, of course—it’s essentially what tera’swhey® began doing years ago by turning the by-product of cheesemaking into whey protein powders. But in recent years, a contingent of sustainability-minded entrepreneurs has really put this practice on the map, proving it’s possible to create successful food businesses around upcycled food while helping to curb the global food waste problem. One of the first companies to do this was ReGrained, co-founded by homebrewers Dan Kurzrock and Jordan Schwartz and featured in Edible-Alpha® podcast #39. Determined to salvage leftover beer grains in a scalable way, they worked with USDA engineers to create a unique technology to process them into SuperGrains+, an alternative flour packed with protein, fiber and other nutrients. ReGrained uses SuperGrains+ in its own-branded nutrition bars and puffed snacks and also partners with other brands to develop consumer products. Riff Cold Brewed Coffee is another great example. Co-founder and CEO Paul Evers, who joined Tera for the most recent Edible-Alpha® podcast, saw vast market potential for cascara, the flavorful, caffeine-charged pulp that surrounds the coffee bean but is typically discarded. Riff began upcycling cascara into Alter Ego, a recently launched line of natural energy drinks, thereby reducing the ecological impact of coffee production. Last year, ReGrained, Riff and other likeminded businesses launched the Upcycled Food Association “to be a center of gravity for this movement,” says ReGrained’s Dan. “We needed a cohesive communication strategy to create a rising tide to hopefully reduce the global food waste problem.” Now with nearly 100 members, UFA recently helmed a task force to give upcycled foods an official definition: Upcycled foods use ingredients that otherwise would not have gone to human consumption, are procured and produced using verifiable supply chains, and have a positive impact on the environment. “This is a really exciting time for upcycled foods,” Dan says. “It’s a business model with the potential to do a lot of good for the world, and it’s an awesome business opportunity. It’s implicitly good for the bottom line, and it’s a really promising way for food companies to take climate action and educate consumers about food waste.” Food brands at any stage can take part in this movement, by developing new products or line extensions around upcycled ingredients or tweaking existing formulations to include them. Along with using upcycled ingredients already in production, such as SuperGrains+, they can also champion new ones from their own production or seek out yet-to-be-discovered ingredients. Processors, especially, can find these opportunities. “If a by-product is created, ask how that can be a coproduct,” Dan suggests. “It’s about finding value in waste streams. And at the farm level, maybe there is produce that doesn’t meet cosmetic specs so you can do value-added processing or work with someone who does it for juice or soups.” Entrepreneurs interested in making an impact this way should reach out to UFA to discuss their business needs, get market data and connect with peers to share ideas.

FFI is hiring a Farm Outreach Specialist in collaboration with the Wisconsin Small Business Development Center. This experienced individual will help grow and finance farm businesses across Wisconsin. Find the posting here. Applications due August 14.

And now, our roundup of the best food and beverage finance news, events and resources from around the web…

Business Model Insights

How to work with co-packers to keep your brand alive in the COVID-19 era (Food & Beverage Insider) The real problems taking down brands during the pandemic are tied to two issues: their co-packer and the supply chain. Here’s a rundown of what’s happening and urgent advice to help food businesses protect themselves.
Business lessons as second lockdown looms (New Hope Network)
Why cash flow is the No. 1 predictor of surviving the pandemic (New Hope Network)

Raising Capital

Regenerative Ag Investment Aims High by Focusing on Soil, Steady Growth (Regenerative Food Systems Investment Forum) Three fund managers who invest directly in farmland and farms share specific criteria they look for before opting to invest in or work with growers.
Patent protection is an essential first step ahead of fundraising (FoodNavigator-USA)
Private Equity Will Show Its True Colors in the Covid-19 Recovery (Forbes)

CPG/National Brands

U.S. online grocery sales growth tails off in June (Supermarket News) Sales hit $7.2 billion in June, up 9% month-over-month but less than the double-digit increases of April and May, reveals the latest Brick Meets Click/Mercatus Grocery Survey. However, total online orders, the number of active consumers and order frequency all surged last month.
Sustainability opportunities for each packaging format (New Hope Network)
Specialty Food Sales Reach $158.4 Billion in 2019, Sales Continue to Rise During COVID-19 (Food Industry Executive)