Dive Brief:

A new study from Future Market Insights using data published by Rethink Food Waste Through Economics and Data found that food waste is a booming business worth $46.7 billion in 2019 and has an expected CAGR of 5% for the next 10 years.

The beverage industry in both North America and Europe are poised to see the most lucrative growth from new diversion techniques and interest in rejected fruits that, although too cosmetically damaged for retail sale, are still nutritionally valuable when processed. Mango peels, for instance, contain a high amount of pectin and can be used in jams and jellies.

Bakery is the second ripest segment to take advantage of food waste as it looks to utilize nutritious and gluten-free flours from alternative sources that are also cost-effective.

Dive Insight:

For decades, American consumers have been trained to "eat with their eyes," but the trend appears to be shifting. While a recent survey from The Harris Poll showed that 81% of respondents said appearance is at least somewhat important to their produce purchase decisions, 62% of consumers also said they would be at least somewhat comfortable eating "ugly produce."

This willingness to alter ingrained habits stems from sustainability efforts that permeate the industry. A Nielsen survey reported that Americans spent $128.5 million on sustainable fast-moving consumer goods, translating to an increase of 20% in sustainable product sales. And companies are getting on board to their benefit.

Ugly produce alone accounts for 40% of the food produced in the U.S., an analysis by the Center of Biological Diversity showed. That means if retailers are unable to sell these imperfect items, that is potentially billions of dollars that are unnecessarily disposed of. Food waste costs retailers about $18.2 billion a year, according to ReFED, a nonprofit organization dedicated to fighting food waste in the U.S.

Seeing an open consumer mindset and an opportunity for innovation, several startups have jumped in and created a new market for this ugly product. Companies like Imperfect Produce and Full Harvest have popped up, finding an audience interested in purchasing produce that is conventionally deemed "off-spec" for a variety of reasons, including surplus, failure to meet strict retail standards, arrival in the wrong size containers and more. Larger retailers also are getting on board. In an effort aimed at reducing the more than 6 billion pounds of produce that goes to waste in its stores annually, Kroger announced the launch of an "ugly" produce brand called Peculiar Picks last year. Competitor Hy-Vee added Robinson Fresh’s Misfit produce line to almost all of its 242 stores in 2017.

Ugly produce, however, isn't the only food waste culprit. Plenty of spent peels, shells, and past-its-prime fruit find their way to the bin too. In an effort to repurpose some of these unloved food scraps, manufacturers have gotten creative. Startup WTRMLN WTR uses almost every part of watermelons that are not shipped to retailers to make fresh cold-pressed beverages. Sir Kensington’s created a vegan mayonnaise made with aquafaba, the liquid left over from cooking chickpeas. Barnana upcycles organic bananas that aren’t considered attractive enough for retail sales and makes them into ‘super potassium’ snacks.

On the large corporate side, AB InBev is funding a startup called Canvas that uses the spent grain left over from beer making to produce smoothie-like, barley milk beverages. Tyson uses spent grain donated from Molson Coors and combines it with vegetable puree and pulp from juicing and the company's chicken trim to create a protein crisp called ¡Yappah!.

Despite all this innovation, food is making only a small dent in food waste. As it stands, more than one-third of food produced for human consumption is wasted, according to the World Resources Institute.