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The AI-Driven Platform Powering The Future Of Fresh Food

The AI-Driven Platform Powering The Future Of Fresh Food

The perimeter of the supermarket, with its fruits, vegetables, fresh meat and fish, has always offered a mind-bending supply chain puzzle for grocers to solve. Berries go bad. Avocados age. Expiration dates loom. The question is, how can stores make sure they have enough of the fresh foods their customers crave at just the right, ripe moment, while minimizing losses from past-its-prime or expired offerings?

More and more retailers are ready to tackle this thorny problem, as they work to reduce food waste, boost efficiency, stay competitive and meet customer expectations during the ongoing pandemic. Supermarkets have already handled a host of challenges over the past year, from toilet paper shortages and delivery bottlenecks to e-commerce logistics and social distancing in the aisles. It’s clear that improving fresh food orders, inventory and merchandising is good for business.

Afresh Technologies, a San Francisco-based startup, is on the cutting edge of helping to make this happen. The first AI-powered grocery optimization platform specializing in the unique challenges of fresh food, Afresh raised $25 million in Series A funding in 2020, for a total of nearly $33 million since 2018.  The company says that grocers using its AI solutions have increased fresh food sales by 3%, reduced in-store food waste by up to 50%, and increased fresh gross margin by 4%.

“Our big vision was to create a technology company that focused ruthlessly on fresh food — that is, all the idiosyncrasies and complexities of those products,” says Matt Schwartz, CEO and co-founder of Afresh. “We believe that makes fresh food less wasteful, far more efficient and profitable, and more accessible to as many people as possible.”

Existing Technology Not Optimized For Fresh Food

According to Schwartz, the grocery industry has typically been slow to move away from manual methods and outdated technology because, for the most part, it hasn’t had to. However, increased competition from Amazon and other e-commerce options means supermarkets must find ways to reduce costs and meet customer demands.

“The majority of what grocery stores have to offer comes in a box stamped with a barcode,” he says. Existing technology and supply chains mostly serve that model, he explains, and aren’t meant to help grocers shift into more healthful, fresh, nutrient dense foods.

One of the biggest pain points in the world of fresh food is store-level ordering. “Just deciding how many bananas or avocados should go into a store every day has been overwhelmingly decided on pen and paper,” says Schwartz. “That was the first problem we wanted to solve.”

It is not, however, a problem with an easy fix. Scores of non-glamorous complexities shape management of the fresh food aisle: For one thing, there are different units of measure, such as avocados that might be sold by weight, or by the bag, or shipped by the case weight. Some vegetables, like lettuce, begin to evaporate and lose weight as they get closer to their expiration date, so it’s easy for inventory to be inaccurate.

Other issues abound: An organic item might be accidentally scanned upon checkout as conventional, for example, which affects the accuracy of what is actually in the store. And supply chain problems, such as berries that arrive moldy or delivery trucks that get stuck in snow, mean expected product may not be available, yet not properly reflected in the store’s data.

“Unlike items with barcodes, like Cheerios or Coke, fresh food is dynamic and constantly changing,” Schwartz says. “Every week you might be rotating produce, turning over inventory and changing the layout of your fresh assortment.”

Afresh’s system helps supermarkets plan in advance by using AI to analyze previous demand and data trends. This allows grocers to keep fresh food for as little time as possible, reducing their losses and the amount of food waste. “We use AI to power-charge our core innovation, which is a solution built specifically for fresh food,” says Schwartz. “We’re looking at sales and shipments, but also using an algorithm to assess what we think is in the store, with a confidence interval that includes how perishable the item is.” When workers using Afresh’s front-end tool periodically count inventory by hand, that continues to help train the AI-driven model, he adds.

To be successful, Afresh needed to piggyback on supermarkets’ existing systems to make it easy to integrate and adopt, Schwartz explains. “We knew we had to make it a cloud-based, modern software stack in which our system connects with a grocer’s core data system to ingest sales, pricing and shipment date on a nightly basis,” he says.

A “Sea Change” Towards a Fresh Future

James McCann, chairman and CEO of Food Retail Ventures and former CEO of Ahold USA, invested in Afresh and recently joined the company’s board. The company’s technology is transformative and a no-brainer for retailers to adopt, he says. “I think people would be surprised at how complicated this supply chain is, with your average grocery store bringing in products from all over the world to meet year-round demand,” he says. “And people would be horrified at how much perfectly good food is going to waste just because it is no longer perfect for sale.”

Afresh’s system, he adds, is a win-win for both the supermarket and the customer: “The grocer’s profit will increase 25% because they are getting the order right,” he says. “They’ll take a proportion of that, reinvest it in lower prices, which will bring in more customers.”

The company doubled its headcount from 2019 to 2020 and currently has 45 employees. It anticipates it will double in size again in 2021. “We have some big commercial growth coming and a ton of momentum for our existing products,” says Schwartz.  “We’re expanding our product portfolio to handle more functionality and more areas of the store.”

All of the company’s efforts to optimize fresh food, he adds, align with industry trends. “We think fresh is the future,” he says, pointing to retailers like Dollar General, which now offers fresh fruits and vegetables at 870 stores , as well as Kroger, which rebranded as “Fresh for Everyone” in 2019, and Walmart, which has brought fresh food to the front of its stores.

“We see this as a multi-decade sea change, driving towards a fresh future,” says Schwartz.

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