Why let bread go to waste if you can drink it?
Bakeries toss out a lot of unsold bread that are close to expiry. That’s why Singapore-based Crust Brewing is giving these items a new lease on life and turning leftover croissants and baguettes into beer. In the future, the brewer has aspirations to expand into Vietnam, one of the fastest-growing beer markets in the world.
“Think about Vietnam and all their leftover baguettes,” Travin Singh, the founder and CEO of Crust Brewing, tells Tech in Asia. “That’ll be a resource that would never run out.”
The company is expanding overseas to tap into the rising demand for beer across Asia Pacific, which Euromonitor crowned as the biggest market for the drink. Case in point, people in the region consumed some 69 billion liters of beer in 2018.
Crust Brewing entered the Singapore market last April after months of polishing its bread-to-beer process. It has so far received seed funding of S$30,000 (about US$21,000) from Enterprise Singapore, a government agency supporting business development in the city-state.
In theory, using surplus bread, which technically costs nothing, as one of the main ingredients for a product that retails for S$12 to S$17 (about US$9 to US$13) a pint sounds like the ideal business model. However, Singh reveals that the company’s profits are “small.”
Most of Crust Brewing’s margins go into operational costs, as only 30% of the grains used in the beer-making process is replaced with bread. As the startup doesn’t own any of its equipment, it rents out breweries, which Singh says is “very expensive.”
The CEO, however, plans to change that soon.
Crust Brewing is looking to acquire a brewery through funds it will raise from an investor who also owns a distillery. The fresh capital will go into developing new processes and products and finding new ways to keep costs low as well.
“We’re going to keep working on turning bread into viable whisky and gin to export it worldwide but never losing our focus on the usage of surplus products,” Singh says. “We’ll also work toward establishing our own microbrewery that features a full circular ecosystem that’s based on beer and bread.”
The company is among a growing troupe of startups that are coming up with innovative solutions to tackle the big, ugly problem of food waste in Southeast Asia. Venture capital and private equity firms are beginning to notice the potential of these enterprises, injecting nearly US$20 billion into the nascent industry in 2019 – a 250% increase over five years.
In Southeast Asia, high-profile deals for startups in the space include Malaysia-based Nutrition Technologies’ US$8.5 million series A funding round in 2019. The company uses black soldier fly (BSF) larvae to break down agricultural waste. The insects are also turned into fish and livestock feed, as well as pet food.
“Food waste is a big problem,” says Bennett Lee, the investment director at Singapore-based Velocity Ventures. “Sustainability is something that has gotten consumers, corporations, and investors thinking. It’s a very real problem, as it will affect people in the current generation and the ones to come.”
Velocity Ventures invests between US$500,000 to US$1.5 million in the seed to series A funding rounds of startups across Southeast Asia. It focuses on travel and hospitality enterprises as well as food and beverage companies.
In January, the firm took part in a S$750,000 (US$557,000) seed funding round for Singaporean startup Lumitics, which aims to help restaurants and kitchens reduce food waste and improve their bottom lines.
Its flagship solution, Insight, is a smart food waste tracker that uses sensors and image recognition technology to identify the type of food being discarded. It then generates data – such as the portion of a dish that’s thrown away at a buffet – to help businesses reduce waste, save costs, and improve their environmental footprints.
The company’s CEO, Rayner Loi, said that the tech has helped customers reduce their food wastage by some 30% to 40%, lowering operating costs by about 3% to 8%.
Now that its tech has been tested and commercialized, Lumitics tells Tech in Asia that it’s planning to raise a series A round in “12 to 15 months” to scale up their business around Asia Pacific and the Middle East. “Our competitors have a large presence in the US and Europe, but not in those two regions. It’s an open market for us there at this point, and we want to capitalize on that opportunity,” says Loi.
While many startups take on waste at the end of the consumer food cycle, another company, Confetti Fine Foods, takes a different approach. It turns “ugly” vegetables – those that would otherwise not have made it on supermarket shelves – into artisanal snacks.
New York-based Big Idea Ventures invested an undisclosed amount in the Singaporean company, founder Andrew Ive tells Tech in Asia. Although the venture firm focuses mainly on backing alternative protein companies, many of the startups in its portfolio have an impact on waste management, he adds.
Why the focus on Asia?
Globally, about 1.3 billion tonnes of food go to waste every year – enough to feed 2 billion people annually, according to the United Nations’ Food and Agriculture Organization. Southeast Asia makes up about a quarter of that tally.
Although the region is home to some of the poorest communities in the world, most of the wastage is due to inefficiencies in agricultural production. The UN’s World Food Programme estimates that the problem cost the global economy US$1 trillion in 2019.
It’s crucial for Asia to tackle this environmental problem. Companies such as Nutrition Technologies view the region’s growing food waste as an affordable raw material to produce animal feed.
“Southeast Asia is a great place to kick off production,” says Thomas Berry, the chief operating officer of Nutrition Technologies. “Not only due to the abundance of raw materials from plantations but because of the tropical weather – it’s perfect for insect production.”
The company has broken even and turned a gross profit margin of 50% to 60%, says Berry. He acknowledges that although the firm is making a loss because of its plans to scale, the US$1 to US$1.5 gross profit they make per kilogram of insect powder sold will be maintained.
Like Nutrition Technologies, Entobel is another BSF-based startup. It raised US$2 million from its seed and series A funding rounds, which it used to produce about 1,000 tons of insect powder for animal feed in 2019.
Ahead of its series B funding round in June, its co-founder, Gaetan Crielaard, says that they are on the “right track” in terms of cost structure and competitiveness. The fresh capital it banks from the series B round will go into financing the development of a production site in Vietnam that will boost its output tenfold to 10,000 tons.
Crust Brewing is also doing its part to reduce food waste in Singapore. According to the Singapore Food Agency, bread wastage alone has increased by a staggering 40% between 2008 and 2018 in the city-state.
The startup has tied up with bakeries such as Maison Kayser and Tiong Bahru Bakery, and Singapore online supermarket site Redmart to collect as much unwanted bread, says Singh. Redmart also sells Crust Brewing’s beer on its platform.
“Neither are we stopping at beer nor at bread,” Singh says. ”Basically, our motto is to just help F&B establishments convert their waste into something better.”