Costco avocados from Bill Gates-backed Apeel gets more funding

Apeel
Sciences

• A food-tech startup called Apeel Sciences has landed a
  $70 million funding round led by Viking Global Investors,
  Andreessen Horowitz, Upfront Ventures, and S2G
  Ventures. Previously, the
  Bill and Melinda Gates Foundation had invested in
  Apeel.
• The company has created an invisible, edible coating
  designed to be sprayed on produce to extend shelf life. The
  company says its avocados last twice as long as nonorganic
  avocados. 
• The coating slows the decaying process.
• In June, Apeel introduced its avocados
  at Costco
  and Harps Food Stores locations throughout the American
  Midwest.

Avocados are known for their short shelf life. By the time the
beloved fruit hits a grocery-store shelf, it will last about a
week before it gets too ripe.

A Santa Barbara, California-based startup called Apeel Sciences has invented an
edible coating that it says will double an avocado’s shelf life.
Food suppliers spray the product on the produce before it ships
to grocers.

So far, the startup has developed products for more than three
dozen crops, including asparagus, peaches, lemons, pears, and
nectarines.

Before this week, Apeel had attracted at least $40
million in venture-capital funding from several high-profile
investors, including the Bill
and Melinda Gates Foundation.

On Tuesday, the company announced it received an additional $70
million in a funding round led by Viking Global Investors,
Andreessen Horowitz, Upfront Ventures, and S2G Ventures. Walter
Robb, Whole Foods Market’s co-founder and former
co-CEO, will join Apeel’s board as well.

In June, Apeel debuted its longer-lasting avocados at Costco and
Harps Food Stores locations throughout the Midwest. This is the
first time the startup has sold its produce. (Harps Food Stores,
a regional grocery chain, has 87 locations. Costco is much
larger, with more than 500 wholesale locations across 44 states
and Puerto Rico.)

Harps reports that, over the past two months, it has seen a 65%
increase in its margins and a 10% lift in sales across the Haas
avocado category. This may be due to Apeel’s claim that it helps
food retailers reduce food waste, since its avocados can last
longer than traditional ones.

Made of leftover plant skins and stems, the coating acts as a
barrier designed to slow the decay process. After the coating
dries, it locks in moisture and acts as a shield against natural
gases (e.g., oxygen and ethylene) that make avocados ripen.

Slicing open an Apeel avocado will break the shield, and at that
point it will brown just as fast as a normal avocado.

“Refrigeration has been used to increase produce quality during
transportation and storage, but you lose the benefit of
refrigeration when a fruit sits on a grocery store shelf or on a
kitchen counter,” CEO James Rogers told Business Insider. “With
our technology, we’re able to dramatically reduce the rate that
clock is ticking.”

An
untreated avocado versus an Apeel avocado 30 days after
harvest.
Apeel
Sciences

The US Food and Drug Administration has approved Apeel’s first
products as “generally
recognized as safe,” meaning they’re OK to eat and sell. In
2017, the company received approval to use the coating on organic
produce, though the avocados at Costco and Harps will not be.
They’ll also cost the same as any other conventionally grown
avocados.

Last year, Apeel moved into a 105,000-square-foot facility, and
at least six farms in Southern California, Kenya, and Nigeria are
now using Apeel’s products. In the past several months, the
company finalized negotiations to work with over two dozen
packing houses and several farms in Mexico, Peru, and Chile to
prepare for its commercial rollout.

Farms and food-packing houses have been able to buy Apeel’s
products since early last year. It’s usually sprayed on produce
during the wash cycle, before it’s sorted and packed to go to
retailers.

The coating is made of discarded materials from organic produce —
anything from pear stems to leftover grape skins to grass
clippings. But the formula differs for each fruit or vegetable.

The company is also working on a second product called Invisipeel
that is designed to keep insects away. Invisipeel is not yet
widely available.

Below is a time-lapse comparison the company created to show
Apeel’s effect on a variety of fruits and vegetables.

The coating could help stores and farmers reduce waste from
produce that has ripened too quickly. Since Apeel’s plant-based
product controls the rate of decay, the company offers Costco and
Harps a less costly way to preserve produce (the idea being that
grocers will discard fewer spoiled avocados and thus save money).
This is one major reason the locations will offer Apeel’s fruit
at the same price as other nonorganic avocados with a shorter
shelf life, Rogers said.

If Apeel starts selling more types of produce at Costco, it could
also give the chain an advantage over its competitors, including
BJ’s Wholesale Club and Whole Foods. Costco is known for its
low-cost produce, but
as Whole Foods lowers its prices following its sale to
Amazon, the
wholesaler may be looking for ways to differentiate its fresh
food.

Rogers plans to expand the types of produce Apeel sells and to
grow geographically, too. Asparagus could be next.