Reducing Food Waste: Shelf Engine Bags $41M To Transform Grocery Supply Chain

Shelf Engine aims to reduce the 43 billion pounds of food the grocery industry wastes each year by outfitting grocery stores with intelligent forecasting and an order automation system that generates accurate orders for perishable items.

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Today, the Seattle-based company announced a $41 million Series B round of funding that will enable it to rapidly expand those tools to thousands of new stores in the next 18 months, Stefan Kalb, co-founder and CEO of Shelf Engine, told Crunchbase News.

Led by General Catalyst, the round also included GGV Capital, Foundation Capital, 1984 Ventures, Correlation Ventures, Founders’ Co-op, Soma Capital, Firebolt Ventures and Initialized Capital. The new investment brings Shelf Engine’s total funding to $58 million since the company was founded in 2015, Kalb said. This comes eight months after the announcement of its $12 million Series A round led by GGV, according to Crunchbase data.

It’s not just grocery stores that end up wasting food, but the United States itself wastes approximately 40 percent of the food it produces, and globally, $2.6 trillion annually is lost.

Other startups working on this problem include:

• Apeel Sciences secured a $250 million round of funding to develop its coating product;
• Imperfect Foods raised $72 million in Series C funding to improve the food supply chain;
• Mori raised a $12 million Series A to advance its food-coating technology; and
• Phood Solutions’ platform enables grocery stores to see what they are purchasing, preparing and have sitting in refrigerators or on shelves. The company brought in a $2 million seed round co-led by New Stack Ventures and Story Ventures.

Prior to forming Shelf Engine, Kalb was running Molly’s, a Seattle-based ready meal wholesaler, while his co-founder Bede Jordan was a Microsoft engineer. Kalb noticed Molly’s was averaging 28 percent food waste per year and thought it was high.

“I told some folks in the industry about it, and they said 28 percent was good for the industry,” Kalb said. “I thought it was insane that major grocers were wasting more. I talked to Bede, and we discussed myself writing an algorithm and him writing an app.”

After their early system reduced Molly’s waste to the high teens, Kalb and Jordan realized they were on to something.

Using machine learning, Shelf Engine forecasts demand for perishable foods then handles the entire ordering process from vendor management to shelf optimization, saving retailers money and reducing risk by buying back any remaining unsold items. Its system is currently in more than 2,000 grocery stores nationwide.

Prior to the pandemic, the average grocery profits were between 1 and 2 percent, and they were throwing away 30 percent of their fresh products, Kalb said. Shelf Engine has proven it is able to help grocers benefit from an average profit margin increase of more than 50 percent, while reducing food waste by as much as 32 percent.

“We bump them up to a gross margin of 28 to 30 percent, so for a store that is the motivation to move the needle,” he added.

The new funding will be invested in expanding into more stores — Shelf Engine averages 200 per month right now. In addition Kalb intends to add to the company’s 145-person team by more than doubling to 350 to 400 by the end of the year.

Meanwhile, Garry Tan, managing partner at Initialized Capital, made the first investment into Shelf Engine and called the company a “classic startup story.”

“It is cool to see them build the company from a deep knowledge of the business and pair it with software to solve the problem,” Tan said. “Stefan and Bede are doing great work with grocers, who don’t like to spend money on software because it is a lot of risk. Instead, they are taking on the risk and driving impact from the beginning. They are going to be one of the defining companies in this space.”

Illustration: Li-Anne Dias