Israeli food waste reduction startup Wasteless has raised a $2 million Series A round led by smart-technology focused venture capital fund Slingshot Ventures out of Amsterdam. The round also included participation from a handful of angel investors.
Founded in June 2016, Wasteless has developed a proprietary dynamic pricing algorithm for products with a limited expiration date, allowing retailers to create and display discount prices across the demand curve. The startup’s technology combines RFID sensing, a dynamic pricing equation, and electronic shelf labeling technology. Wasteless maintains offices in Tel Aviv and Amsterdam and has a New York headquarters opening soon.
Use of proceeds
The new round of capital will be used to help the startup expand its current team, further develop its pricing algorithm, and manage its rollouts with additional food retailers.
“We strengthened our data science team because the more we work with clients the more data we have and that data is our main asset,” Ben Biron, founder and COO of Wasteless, told AgFunderNews. “We also have a new VP of sales, and a strong and energetic team in the Netherlands that is focusing on our European sales market.
In 2017, the company closed a $400,000 seed round. Since then, the fundraising process shifted from pitching the startup’s concept to delivering a proof of concept.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Wasteless’ technology was born out of the team’s desire to apply a dynamic pricing model to food products based on how quickly the food product is set to expire. Dynamic pricing is not a new concept to the retail world, but according to Biron the grocery retail space could benefit from becoming more tech savvy.
The company taps into stores that are using electronic pricing labels and uses its algorithm to adjust an item’s price in real-time, according to its expiration date. The sooner something is set to expire, the cheaper it will be. Wasteless’ dynamic pricing engine is based on machine learning principles and takes into account several variables of information about a product when calculating the adjusted price. The technology also integrates with other aspects of a grocery store’s operations like inventory management and point-of-sale software so that the store can manage product volume.
“The idea is straightforward, but there are a lot of issues that come to someone’s mind when they think about it so we had to go in the field and do a pilot to prove that these issues aren’t a problem,” says Biron. “No one says it’s a bad idea, but they had questions.”
Two of the most common points they raised were whether consumers would only buy the discounted food items thereby chipping away at store profits, and whether people would even care about a difference in price based on a product’s expiration date.
Proof of concept
To demonstrate a proof of concept, Wasteless teamed up with a leading Spanish food retailer earlier this year. At the end of the pilot project, the data collected indicated that Wasteless’ technology was able to slash one-third of food waste from a leading Spanish food retailer’s supermarkets, while producing a 6.3% increase in revenue. The pilot program, which provided the company with highly conclusive results, was summarized in detail in a recent case study published by Wasteless. The pilot itself was part of a scientific study conducted by professor Robert Evan Sanders at the University of San Diego.
“As the data show, we have a variety of customers. Someone may need a product longer or for a shorter period of time. Some don’t even look at the date, they only look at the price. There are very different attitudes and that proves that people won’t always buy the cheapest item on the shelf,” says Biron. “Also, there’s a limited supply of the cheap ones when they are about to expire so if everyone buys them then the regular-priced items will be all that’s left.”
While grocery retail stores are its bread-and-butter customer, Wasteless is also finding that many food manufacturers are interested in tapping into its cost-saving technology. Some retailers return unsold food to manufacturers when it hits its expiration date, which means the supermarket doesn’t bear the price burden of unsold food.
“It’s an interesting situation because we need to have the retailer on board, but it’s also interesting because once the retailer doesn’t have responsibility over the waste, they can order as much as they want so that its shelves look nice. This means more returns for the retailer and more product loss,” explains Biron. “There’s more waste and a bigger problem, but also a bigger opportunity for us.”
Riding food waste momentum
Biron isn’t aware of any other companies that are applying dynamic pricing to the grocery retail space. So far, the company has garnered continued attention for its technology. In April 2018, the startup was selected as a runner-up in Rabobank’s Rabo Sustainable Innovation Awards. The company is also among a handful of startups selected to pitch at Rabobank’s FoodBytes! New York event taking place on October 18.
Wasteless is focusing heavily on the European market where many countries have shown a greater sensitivity toward food-related causes like reducing waste. One of the United Nations’ sustainable development goals aims to reduce global food waste 50% by 2030 and in February 2016 France became the first country to legally prohibit supermarkets from tossing out unsold food, requiring them to donate it to food banks and charities instead. In August 2016, Italy enacted a measure that makes it easier for stores to donate unsold food.
Outside the sustainably-minded European market, Wasteless is keeping a keen eye on the US market and looking for opportunities to expand in the states.
“At this stage, our focus is mainly about implementation. We are entering an industry that is only now learning what high-tech is, so it’s a lot about adapting our newer solutions with older solutions and making it seamless as opposed to only innovating.”