In the sprawling landscape of the United States, a staggering 30-40% of food never reaches our tables, instead finding its final resting place in the depths of landfills. Globally, this issue magnifies, with a United Nations report revealing that a shocking one-third of the planet's food—equivalent to 1.3 billion tons and nearly $1 trillion in value—goes uneaten each year.
This monumental waste poses a significant challenge to our society and opens the door for innovative solutions. A burgeoning wave of startups has emerged, each armed with a unique approach to mitigate this pressing issue.
Take Yume, a visionary platform that transforms potential food waste into a revenue stream for manufacturers. Divert, on the other hand, leverages sophisticated algorithms to reduce waste in grocery stores. Then there's Ida, which employs artificial intelligence to curtail surplus stock in supermarkets, while Choco is on a mission to cultivate a sustainable ecosystem for restaurants and their suppliers.
Amidst these pioneering efforts stands ProducePay, a Los Angeles gem with a noble cause. Its core mission? To infuse the fresh produce market with unprecedented transparency and adaptability, benefiting growers and buyers within the intricate grocery supply chain.
"ProducePay is on a mission to eliminate the economic and food waste caused by the volatile and fragmented nature of today's global fresh produce supply chain," CEO Pat McCullough told TechCrunch in an email interview. "Our [platform] gives growers and buyers greater control of their business by providing unprecedented access to capital, a global trading network, insights and supply chain visibility."
Pablo Borquez Schwarzbeck laid the foundation for ProducePay in 2015, fresh from earning his MBA at Cornell. His journey into the complexities of produce supply began amidst the asparagus and grape vines of his family's farms in Mexico. It was there, in the fields of his youth, that Schwarzbeck first encountered the challenges facing growers. Stepping into his role as ProducePay's executive director, his insights deepened through his tenure at the Giumarra Companies, a prominent grower of fruits and vegetables. Here, he developed a keen understanding of the significant hurdles that growers endure, fueling his drive to innovate and advocate within the industry.
"A single shipment of produce typically travels 1,600 miles and will be handled by four to eight intermediaries," Schwarzbeck said. Along the way, factors such as unpredictable weather, fluctuating markets, crop disease, and pests create a constant state of instability that wreaks havoc across the supply chain. This volatility and unpredictability, coupled with the fragmented, speculative nature of the supply chain, results in enormous inefficiencies and wasteful practices."
Schwarzbeck highlighted a pivotal challenge for growers: the fierce battle to secure buyer contracts. An investigation by the environmental group Feedback into Global Food Supply Chains unveiled a startling trend—60% of farmers confessed to overproducing to safeguard their contracts. This surplus production often leads to an imbalance between supply and demand, culminating in unnecessary food waste.
ProducePay has crafted a dual approach to mitigate these issues: it offers supply chain oversight and financial assistance to those in the agricultural sector.
By providing essential working capital, ProducePay enables growers and distributors to cover various needs, ranging from daily operational costs and technological enhancements to purchasing additional land. Furthermore, the company offers liquidity to these parties after the harvest, bolstering growers' financial stability for future planting seasons and allowing distributors to entice top-tier growers with the promise of quicker, more substantial payments.
But how beneficial are these financial arrangements? According to some of ProducePay's clients, the terms are indeed attractive. McCullough reports that the company now collaborates with over 60 different types of commodities in 20 countries, having recently financed more than $4.5 billion in agricultural produce.
"This success is built entirely on trust," he added. "Growers trust that we are there to help them grow. And we've built a robust network of growers and buyers who we know can deliver on their commitments."
ProducePay goes beyond just offering financial services; it combines these with tools that enhance supply chain transparency to introduce what McCullough describes as "predictable commerce programs." These initiatives see retailers agreeing to predetermined prices and quantities before the cultivation period begins in return for high-quality produce sourced from thoroughly vetted growers. A dedicated team of agronomists from ProducePay ensures continuous oversight and communication regarding the quality of orders, starting from the field, during transit, and up to the point of delivery. This strategic approach stabilizes the market for growers and guarantees retailers access to premium produce, fostering a more reliable and efficient supply chain ecosystem.
One customer for whom ProducePay built a program, Four Star Fruit, is leveraging it to connect to growers, advertisers, and retailers in ProducePay's ~1,000-client network while bypassing "non-value-added intermediaries," McCullough says. We're addressing volatility with capital, technology, and our team of agronomists to more efficiently capture all of the value that's lost to these intermediaries and other inefficiencies," he continued.
ProducePay's revenue model has been exceptionally profitable, which involves taking a percentage from each transaction facilitated on its platform. The company witnessed a remarkable 76% surge in revenue last year compared to 2022. According to McCullough, the trade volume on the platform has nearly tripled, with transaction volume poised to hit the $2 billion mark by the end of 2023.
This financial success has not gone unnoticed by investors, who have eagerly increased their investments in Schwarzbeck's enterprise.
Recently, ProducePay announced a significant milestone, securing $38 million in a Series D financing round. Syngenta Group Ventures spearheaded this round and saw contributions from an array of investors, including Commonfund, Highgate Private Equity, G2 Venture Partners, Anterra Capital, Astanor Ventures, Endeavor8, Avenue Venture Opportunities, Avenue Sustainable Solutions, and Red Bear Angels. This influx of capital, raising ProducePay's total funding to $136 million, is earmarked for accelerating the company's international expansion efforts across Europe, Asia, Africa, and Australia and bolstering its workforce, which currently stands at approximately 300 full-time employees.
"Even though many industries have presented a slowdown, fresh produce will always be indispensable and continues to grow as consumers demand healthier food choices," McCullough said. "We saw it through the pandemic and continue to see that upgoing trend."