Food Waste Is Ripe for Profit

Every year Americans discard $165 billion worth of things they could eat. These startups are working to fix that

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    CropMobster, which isn't currently profitable, funds itself through donations solicited online. But Papadopoulos says the company can eventually generate revenue by charging a small commission on transactions.

    The way food is shipped is also creating opportunities. A report from consulting firm Oliver Wyman estimates that up to 1 in 7 truckloads of perishable goods delivered to supermarkets gets thrown away, amounting to 34 million tons of food lost every year. A truck driver for over 25 years, Richard Gordon founded Food Cowboy a year and a half ago with his brother Roger and Barbara Cohen, a public-health and nutrition expert. The for-profit firm reroutes rejected food deliveries otherwise bound for dumpsters to food banks and charities across the country. Truckers can sign up on Food Cowboy's website to receive alerts about nearby drop-off locations. The startup then notifies a local food bank, for example, of an impending delivery. The company charges food banks 10¢ per pound, about a third of the going rate.

    Food Cowboy recently caught the attention of the U.S. Department of Agriculture, which asked the company to help form a national technology-innovation council to find solutions to food waste. (So far, legislation has done little to address the issue.) Other members include Google Ideas--the search giant's in-house think tank--and the Grocery Manufacturers Association.

    Some ventures are betting they can profit by selling excess food directly to consumers. Rauch, who was a Trader Joe's executive for over a decade, will launch his first Daily Table store in Dorchester, Mass., in April. The firm will take the bruised peaches, oversize tomatoes and crooked cucumbers rejected by other chains and sell them at discounted prices. Daily Table will also sell takeout meals made from imperfect fruit and veggies and priced to compete with fast-food restaurants. Rauch says a gallon of milk will cost $1, less than a third the national average, to compete with soda prices. (The milk will be donated overstock from local markets, not expired.) Rauch has raised over $1 million from the Robert Wood Johnson Foundation, the Boston Foundation and others.

    Newcomers will be joining a number of established companies and programs. FoodStar, a California for-profit, organizes flash sales of aesthetically challenged food. Bi-Rite Market, a popular organic store in San Francisco and a CropMobster client, created a kitchen in its store to cook would-be wasted food into meals to sell or give its staff. "We've been so conditioned to look for the perfectly polished, perfectly shaped apple. When you see something with a scab on it, you shy away from it. But that's usually the fruit that's the most flavorful," says Sam Mogannam, Bi-Rite's chief. Mogannam has become a spokesman for the trend.

    Other startups are aiming to change consumer behavior. Appmakers have particularly targeted users trying to save money. The 222 Million Tons iPad app--named for the amount of food wasted in industrialized nations each year--allows users to plan meals for their families and buy exactly the right amount of groceries that week. Another, Green Egg Shopper, allows people to track when the foods they purchase will go bad, sending alerts to encourage using up soon-to-expire ingredients.

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