Less Shrink, Longer Shelf-Life with Katherine Sizov of Strella

Today's guest is Katherine Sizov, co-founder and CEO of Strella, whose hardware-enabled software as a service uses data to predict the shelf life of produce and allows everybody from distribution centers, packers, wholesalers, and retailers to make better decisions about when to ship, when to sell, and where to allocate what produce.

Katherine joins Keith for a great discussion about how she and her co-founder came to start the business, some of the decisions they've made in terms of go-to-market and business model,  the economic and environmental results that their customers are seeing, and how to get those yellow bananas straight from the farm to the shelves of supermarkets! 

TRANSCRIPT BELOW:
Keith Anderson: Welcome to Decarbonizing Commerce, where we explore what's new, interesting, and actionable at the intersection of climate innovation and commerce. I'm your host, Keith Anderson, and together we'll meet entrepreneurs and innovators reinventing retail, e commerce, and consumer products through the lenses of low carbon and commercial viability.

Welcome to the Decarbonizing Commerce Podcast. I'm your host, Keith Anderson. Food waste has been a big theme on the show so far, and for good reason. The global food system represents about a third of global emissions, and about half of those emissions are the result of food waste. And while households are the biggest driver of food waste, there's a lot that happens along the supply chain that the industry itself can address.

And today's guest is Katherine Sizov, co founder and CEO of a company called Strella, whose hardware enabled software as a service, uses data to predict the shelf life of produce and allows everybody from distribution centers, packers, wholesalers, and retailers to make better decisions about when to ship, when to sell, and where to allocate what produce.

We had a great discussion about how Katherine and her co founder came to start the business. Some of the decisions they've made in terms of, go to market and business model and the kinds of economic and environmental results that their customers are seeing. So I'm sure you'll find it as interesting as I did, and I'm happy to introduce Katherine Sizov of Strella.

Katherine, welcome to the Decarbonizing Commerce Podcast. Great to have you with us.

Katherine Sizov: Thanks so much for having me.

Keith Anderson: Well, why don't we start with a bit about your background and how you came to focus on food waste and start Strella.

Katherine Sizov: For sure, yeah, so my background is in neuroscience, so I was supposed to go to grad school and get a PhD, but something about sitting at a lab bench for another extended period of time wasn't really calling me, so I started reading whatever I thought was interesting out there, and I read the stat that 40 percent of food is wasted before it's consumed.

That pretty immediately struck me because, first of all, it's a gigantic number and second of all, I quickly came to the realization that I had no idea where my food came from. So I didn't even know where this waste occurred and how it happened. So set out on a very long journey. What became a very long journey of learning about food waste.

And then eventually that led to the formation of the company.

Keith Anderson: So maybe we can take a few minutes and for those that aren't as familiar, just Strella does and how do you do it?

Katherine Sizov: Yeah, so what we do at Strella is we can predict the shelf life of different types of produce, and we use that data as an input into making smarter decisions all across the supply chain. So as you can imagine, perishability is kind of a critical component, in food. However, that data has oftentimes been lacking or very siloed, and so what we do is we create that information.

We started in apples and pears, which can be stored for a whole year before they get to a grocery store. And what we do is we decide which apples need to get shipped to the grocery store first, based on how mature they are. We also work in bananas, where if you've gone to the grocery store, you've probably noticed the bananas are sometimes way too ripe, sometimes way too underripe.

So what we do is we make the color of bananas more consistent on the store shelf, which reduces waste, makes forecasting easier, and lifts sales.

Keith Anderson: So you mentioned the color. Can you describe the technology? Monitoring the, you know, banana peel and that's how you're identifying maturity or is there more to it than that?

Katherine Sizov: Yeah, so we monitor gases that produce, emits, which happens to be a proactive indicator . So for example one of the gases that we monitor is ethylene. So before color change or a starches to sugar change, basically fruit will be producing this and we can get a proactive indicator of a change. And this is great, because you get a window of opportunity to act on this information before the product actually changes in quality.

Keith Anderson: And it sounds like you're doing what you do with a combination of hardware and software. What is the hardware like? You know, is this something that is tiny and is sort of at the individual banana level? Does it cover a bunch? Does it cover a whole storage space? You know, help me visualize what the hardware side of the equation looks like.

Katherine Sizov: Yeah, so our current kind of hardware looks like a brick. And since we work in the supply chain, we work with pretty significant volumes. So we'll work with whole truckloads of bananas or roomfuls of apples, which could be anywhere from one to five million individual apples. So gigantic volumes. And yeah, we basically measure, things that are the level of resolution of the supply chain.

So for example, the smallest unit is a lot, which is fruit that was picked on the same day by the same grower, from the same region of an orchard. And we can follow that lot all the way down the chain as it passes from hand to hand.

Keith Anderson: And when you describe the chain, what are some of the major steps that you're thinking of?

Katherine Sizov: Yeah, so we typically follow whoever owns, produce as it travels. So, right now our major categories are suppliers or packers, so those are folks who consolidate from the grower. So, fruit, for example, is picked off a tree, it's consolidated at the packing house, it's put into boxes and stored and shipped.

So we work with packers and we also work with retailers and wholesalers and food service folks. So those are people that receive the product downstream and do the final mile distribution typically.

Keith Anderson: And I imagine many of our listeners are closer to the retail side of the value chain than the producer side. So to help them think about where this might fit in their business model, is this something that would be deployed, in the back room, is it on the sales floor? How does it come to life for them?

Katherine Sizov: Yeah, so we typically work at the distribution center level, because by the time an item gets to the store, there's really two decisions you can make. You can either mark it down or throw it away. Both options that are not great for retailers, and so what we're trying to do is capture data upstream so that we can make an informed decision to kind of prevent those two outcomes from happening in the first place. So for example, in apples, what we do with retailers is we always send the most ripe apple to the grocery store first from the distribution center. And what this helps is to reduce waste in the retailer's chain because they're always selling the most ripe apple first.

In bananas, kind of similar story, but just focused on creating a bit more consistency, at the store level, so ripening the bananas at the distribution center so that every time they get to the grocery store, they're that perfect yellow color.

Keith Anderson: And you've mentioned three categories of fruit that you're working with. Apples, pears, bananas. What's the sort of potential in terms of applications across perishables for the kind of technology that you've built and are developing?

Katherine Sizov: Yeah, our technology applies to all different kinds of produce. So, you know, all of the things that are expensive and that you don't want to throw away. So avocados are an immediate next target for us, tropical fruits, even flowers, kind of have very similar mechanisms to produce items. And then looking even past that into meat and seafood, and just looking at the perishable supply chain overall.

Keith Anderson: I'd love to spend a little time on the economics, in a couple senses. From the perspective of somebody that is deploying technology like this. Do you have enough accrued experience through pilots and customers to have a point of view on what the economic benefits are in terms of, you know, waste or spoilage prevented and incremental sales from perishables that you can sell instead of donating or landfilling?

Katherine Sizov: Yeah, absolutely. I'd say our ROI is usually at least three to eight times whatever the price is that we charge. So, for example, with packing customers in apple storage, we charge $5, 000 per room per year to monitor apples and make decisions. And we save on average $40, 000 of food waste every single year.

We've saved over 20 million pounds of apples from going to waste, so we're a pretty significant percentage of the U. S. apple and pear market.

Keith Anderson: So it sounds like it's a, sort of a, I, I come from a SaaS background. So my bias is to say, it sounds like it's a SaaS model, but with the hardware component, it's not just software. Is that a reasonable way to think about the, business model on your side?

Katherine Sizov: 100%. Yeah, we call it hardware enabled SaaS. I think the thesis behind the company is that there is not really any data to capture, and so we have to be the ones to generate our own data. But at the end of the day, we are focused on the data, so we're a data company.

Keith Anderson: I can appreciate that. And again, you know, my inclination is to go deeper on the retail side, but if there are other interesting case studies or, or examples that you'd like to share, feel free to expand on them, but who are you finding is, using this and are they using it daily? I mean, my guess based on what you've already said is it's being used by maybe a combination of distribution center operations and produce buyers or produce managers.

Who's using it? How often are they using it? You know, help somebody who is in the kind of roles that this might improve the lives of imagine what it's like to log in and use it.

Katherine Sizov: Yeah, for sure, so warehouse people are the kind of daily users, so when they're making decisions about what to move and how. We help communicate that, but we also interface with the produce team typically, because they care about shrink and they care about sales numbers. So we work with them as well.

Yeah, those are kind of our two major categories that we, that we work with.

Keith Anderson: And you mentioned that you're a data company. Is there demand are you finding to align or integrate your data with other data sets or other systems?

Katherine Sizov: For sure. It's a good question to ask and something we're thinking through now too, We certainly do. So there are ERP systems that we integrate into, warehouse management software that we integrate into. And there's kind of this ecosystem around different chunks of the supply chain and how that information is collected or how that information is currently transmitted.

So we certainly work with a number of different partners all across the chain.

Keith Anderson: Are you finding that there's demand with a certain profile of grocer? Is this something that you're seeing interest from, the majors, as sort of, they've already got food waste or climate initiatives and this plugs neatly into those, or are regional chains and independents finding it's something that might actually fall to the bottom line pretty immediately for them too?

Katherine Sizov: I'll say that we never fall under a food waste or climate initiative. I think a lot of that stuff is very nascent for fortune 500 companies. So when we go into work with a retailer, we are always pitching the weight, the shrink reduction and the sales, top line improvements. So it certainly isn't kind of a climate draw that people have towards us. It's really more of a bottom line impact. In general, I'd say we focus more on the larger retailers because the larger the customer is, the more we, the more optimization we can do. So our sweet spot tends to be folks who are larger and have a lot of volume that they're moving that we can optimize.

Keith Anderson: You, you touched on something that I think we often cover in these conversations, which is the positioning and the framing of the benefit, whether it's predominantly commercial and economic, or, you know, climate and sustainability, and, you were pretty clear, but how did you come to arrive at that, you know, positioning that the pathway into our prospective customers is to focus on the shrink reduction and incremental sales versus, hey, we just saw you issued a climate transition plan, and we want to align with your strategy?

Katherine Sizov: I don't think they're, at the end of the day, companies make decisions based on what's good for the planet or some kind of charity situation. I think companies are out there to make money at the end of the day, and so aligning what they're profitability or incentives to become more efficient are always far stronger pulls for them.

I also think a lot of this climate action stuff is pretty nascent. And so there haven't been a ton of resources really allocated towards those types of goals. There certainly is PR and there's certainly the desire to do something, but at the end of the day, I don't know if there have been true resources put into solving these problems.

Keith Anderson: I would say broadly I agree, although I'm cautiously optimistic about some of the, you know, capital and, and people being allocated that go beyond just the annual PDF that's released or the, PR.

Katherine Sizov: I, agree, especially if you have two decisions that are equal and one can be a positive one and one is neutral, then people will always pick the better option, but I do think it's important to try to align the economic incentives. And I don't think that's that hard to do, right? Food waste is obviously something that sucks all across the supply chain, and so it's not that difficult to show an economic value, alongside the sustainability piece.

But I will say sustainability hardly ever comes up in sales conversations.

Keith Anderson: I'm not surprised to hear you say that. I mean, food waste, for the same reasons that I think you mentioned on the site, and you were drawn to this space, because the scale of the problem is so profound, it's an area that we focus a lot on, and, you know, we've identified and been speaking with solution and technology providers, Working on the problem through, sort of sensors and predictive analytics, sort of like you, dynamic pricing and markdowns, which you've made reference to, protective coatings, surplus, food marketplaces, you name it.

There, there's a growing solution ecosystem focused on this problem. And almost to a T, anybody I speak with says, yeah, you know, the food waste is a big part of why I got into it, but it's not a big part of the sales deck, if that makes sense. And it's like, I get it, you know, as you say, it's hard to sell something without a pretty compelling ROI and economic story.

And, you know, you can listen to one or two other episodes of the show and you'll hear a very similar discussion about. Yeah, you know, when I'm pitching a big European grocer, my pitch is Here's the EBITDA that I can add over a year because I'm going to help you sell perishables that you otherwise would have landfilled.

Katherine Sizov: Exactly. I also think in food, food waste is a little bit of a challenging topic because people point a lot of fingers. So, you know, there'll be articles that come out with, you know, where you have a ton of food waste and this person's to blame and that person's to blame for it or that segment. And I think the reality is that everybody's trying to do the absolute best they can.

A grower isn't trying to, you know, have food waste. They put blood, sweat, and tears into the product. And so when that's happening, it's hurting everybody. And so I think the conclusion to draw from that is that. The supply chain as it currently stands is inefficient, and there needs to be new technologies and systems in place, but that doesn't mean that someone is doing a bad job.

And so I think that's another reason why the whole food waste question is a little bit contentious in this space.

Keith Anderson: Hey folks, this is the part of the show where we say thank you and see you soon to the general audience, plus and higher tier members of decarbonize.co, stay tuned for the rest of the episode.

If folks wanted to learn more about Strella or get in touch with you, where should they go?

Katherine Sizov: Our website, strellabiotech.com, or feel free to reach out at info@strullabietech.com, or we're on LinkedIn, so feel free to follow our page. Pretty active on there.

Keith Anderson: Well, we'll, we'll link to all those from the show notes and on the site. And Katherine, really appreciate you joining us. Super interesting work that you're doing and best of luck.

Katherine Sizov: Thank you so much.

Keith Anderson: Thanks for listening. I'm Keith Anderson, the executive producer and host of Decarbonizing Commerce. Sonic Futures handles audio, music, and video production. If you enjoyed the show, we'd really appreciate it if you took a moment to subscribe and leave a review or share it with a colleague. For the full episode and more member exclusive insight and analysis, join the decarbonizing commerce community at decarbonize.co. Thanks for listening and we'll see you on the next episode of decarbonizing commerce.

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