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Colorado Springs startup wants to prevent surplus food from ending up at the dump

March 4, 2017 Updated: March 7, 2017 at 12:06 pm
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Co-founder of FoodMaven Patrick Bultema photographed in The Gazette studio Wednesday, March 1, 2017. The Colorado Springs-based startup company is a food broker between food distributors and restaurants to buy and sell surplus food. (The Gazette, Christian Murdock)

A Colorado Springs startup wants to become for the food industry what Uber is for the transportation industry.

Colorado Springs-based FoodMaven Corp. hopes to dramatically reduce the surplus food - mostly meat, produce, dairy and baked items - bought by grocery stores and distributors and make a profit at the same time by creating an online marketplace where grocery stores and distributors can sell and deliver that food to restaurants, institutional kitchens and commercial food preparation businesses at a steep discount.

The company started the marketplace in July in Colorado Springs, expanded late last year into the Denver area and now employs 22 people with plans to hire 50 more this summer as it expands to restaurants in Denver. Within five years, FoodMaven plans to operate in up to 100 major cities nationwide with plans to grow to $1 billion in revenue and 8,000 employees, including 800-1,200 in the Springs.

"We want to do to the food industry what Uber did to the taxi industry," said Patrick Bultema, a longtime local entrepreneur and FoodMaven's co-founder and CEO. "This is a national rollout to every major metropolitan area. We will raise hundreds of millions of dollars when we are done with this. We have such a compelling economic model that it justifies that level of capital raise. Investors are realizing the food system is the next frontier of innovation, and there are a lot of venture capital funds focusing on that sector including some from major food industry players."

The Natural Resources Defense Council estimated last year that wasted food valued at $218 billion from consumers, restaurants, grocery stores, institutional food service operations and others ends up in U.S. landfills each year and began a pilot project two years ago in Nashville to reduce food waste. The U.S. Department of Agriculture and the Environmental Protection Agency last year launched an effort to cut U.S. food waste in half by 2030, in part to reduce emissions of methane and other harmful greenhouse gases from food that ends up in landfills.

"The estimates (from various sources) are that anywhere between 30 percent and 50 percent of all food sold in the U.S. is wasted, so there's definitely an opportunity there," said Virginia Till, recycling specialist and sustainable food management lead for the EPA's Environmental Stewardship unit in Denver.

FoodMaven acts as a middleman between buyers and sellers, creating the online marketplace and using a fleet of five refrigerated trucks to pick up surplus food from sellers and parcel it out to contract drivers to deliver to buyers, requiring sophisticated logistics that the company is still refining. Bultema said the company is generating a substantial profit margin on each transaction since it is replacing disposal expense with revenue for sellers and generating savings of up to 70 percent for buyers. FoodMaven isn't yet profitable because it is expanding rapidly, he said.

"We have very attractive gross margins because we don't pay for our product; we share revenue from the sale with the sellers, and it is attractive for them because they would have to pay to dispose of this food. Our expenses are for the logistics of transporting the food from the buyer to the seller," Bultema said.

The company is buying food from about 40 sellers, including several stores of a major grocery chain that Bultema declined to disclose but FoodMaven is selling items from Safeway's private-label brand on its website. He said several other chains are becoming sellers. Buyers include the catering operator at Colorado College, the food service operation at University of Colorado at Colorado Springs, Blue Star, Poor Richard's, the Airplane Restaurant, The Wild Goose Meeting House and 150 other restaurants, bakeries and other commercial kitchens.

"Food gets lost in the system because of the belief we have to have a lot of everything and that leads to oversupply. We are capturing that oversupply that would be destroyed and selling it to restaurants, institutional kitchens and other customers in the same region at about half the price for equal-to or better quality compared with what they buy elsewhere," Bultema said. "Most of the food system is managed with a clipboard and a phone. Using an online marketplace may not be that new to many industries, but it is novel for this $2 trillion industry."

Anything FoodMaven can't sell is donated to Care and Share Food Bank for Southern Colorado or given to the Cheyenne Mountain Zoo and pig farms in southeastern Colorado. None of FoodMaven's unsold food is sent to landfills, Bultema said. In exchange for its donations to Care and Share, FoodMaven gets access to the nonprofit's warehouse and other facilities.

FoodMaven grew out of a nonprofit started by Daniel Lewis while he was a Colorado College student. Colorado Springs Food Rescue came up with a smartphone application to provide charities that serve homeless and low-income people with perishable food that otherwise would be thrown away, and it won $5,000 three years ago in the school's Big Idea business plan competition. Bultema, who ran the competition and helped CC start an entrepreneurship program, joined Lewis as co-founder and serves as FoodMaven's CEO.

"While I was running a food rescue organization, Patrick and I discovered how much food was going to waste," Lewis said. "We identified the huge opportunity to create an enormous market and a better incentive structure to capture and distribute that food to everyone."

Colorado Springs Food Rescue continues to operate and receives some of the surplus inventory FoodMaven is unable to sell, he said.

Bultema's involvement with FoodMaven returns to his roots - he grew up on a Northern California farm, and his grandfather founded Lundberg Family Farms, a Richvale, Calif.-based organic rice producer.

The company raised $1 million from angel investors in the past year and is raising another $1 million now from angel investors. Bultema said FoodMaven plans raise $5 million to $7 million this summer from venture capital funds and $50 million to $60 million more from venture funds in 2018.

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Contact Wayne Heilman: 636-0234

Twitter @wayneheilman

Facebook Wayne Heilman

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