For brick-and-mortar grocery stores, fresh food is a double-edged sword. It’s one of the main reasons that customers still prefer food shopping in physical stores instead of online, but it also spoils quickly and can end up costing retailers some serious dough.
In 2017, Matt Schwartz founded Afresh Technologies to try and solve this conundrum. Based in San Francisco, the company makes software which leverages artificial intelligence (AI) to help grocery retailers optimize their fresh food stocking — from produce to baked goods to meat.
Since fresh food has variable quality, doesn’t always have bar codes, and is sold by weight, it requires a lot more manual processes and human intervention. Think: it’s a lot trickier for a produce manager at a grocery store to decide how many bananas to order than, say, boxes Cap’n Crunch cereal. They have to order exactly enough to meet consumer demand, but not so many that they’re stuck with a surplus that gets thrown away at the end of the day. It’s a delicate balance, and one that not all grocery stores are very good at striking.
According to Schwartz, all the ordering optimization technology for grocery stores focused on shelf-stable items, not fresh food. “We believe there’s a dearth of intelligence in the fresh food supply chain, and as of now inventory solutions are often really inaccurate” he explained to me over the phone. “There are opportunities for innovation up and down the chain.”
So when he met Afresh cofounders Nathan Fenner, a robotics engineer, and Volodymyr Kuleshov, an expert in machine learning, at Stanford Business Scool, they teamed up to build the first supply chain company focused solely on fresh food for grocery.
Afresh’s technology uses machine learning to analyze customer data and forecast product demand. Retail managers can then use the Afresh software to order the exact amount of fresh food that they’ll need — no more, no less. The company is working on a tablet-based workflow which Schwartz said will integrate with the grocer’s existing system. Schwartz told me that in their Afresh pilots with regional grocery chains, stores reduced fresh food waste by 50% and reduced out-of-stocks by 80%.
Reducing food waste is certainly a noble and economical cause, but the value proposition of Afresh extends far beyond that. Schwartz also hopes that by optimizing inventory grocery stores won’t lose so much money to food waste, and can lower the cost of fresh food to make it accessible to more consumers — even those without a lot of disposable income to spend on fresh fruits and vegetables.
Afresh uses a SaaS model for which retail partners will pay a recurring fee. Schwartz didn’t disclose exact numbers, but said that they will charge a percentage of the money they save each retailer by reducing their waste. Afresh is currently working on both paid and unpaid pilots with multiple national grocery chains, slated to roll out in 2019.
Earlier this year the company raised a seed round of $1.7 million from Silicon Valley investors, including Baseline Ventures founder Steve Anderson. The startup currently has a team of 10 and are looking to expand.
Afresh isn’t the only one working to help find a solution to the massive food waste problem in grocery stores. In March Walmart announced its Eden Technology: a suite of apps which helps suppliers optimize distribution of fresh produce. Zest Labs developed a similar system to measure produce freshness, Zest Fresh — so similar, in fact, that they sued Walmart. Israeli startup Wasteless is tackling the problem with a dynamic pricing algorithm that reduces food prices as they get closer to their expiration date.
Like Afresh, Farmstead also uses AI to optimally stock grocery “microhubs” for local delivery, and recently opened up their technology to help supermarkets — as well as cafeterias, restaurant chains, and others — better manage inventory. Afresh specifically targets fresh food, but both companies are based in California, which could lead to some competition down the road.
While Schwartz didn’t touch on online grocery ordering, I don’t see why Afresh’s technology couldn’t also optimize fresh food stockage for e-commerce operations. They certainly need the help: our own Chris Albrecht had some serious issues with fresh produce from online grocery delivery.
“This is a really hard problem,” said Schwartz. “Grocers have to thread the needle with perishable foods.” With their AI-powered software, Afresh is hoping to make that needle a lot easier to thread — and take a huge bite out of the food waste crisis along the way.