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From sugary wastewater from food production facilities to brewers’ spent grains and used coffee grounds… scores of so-called ‘waste’ streams are now being upcycled into a new generation of products.
On the farm, meanwhile, enterprising startups are exploring ways to decarbonize fertilizer production by manufacturing close to the point of use and using renewable energy to drive the process.
Two startups out of 10 chosen from 600+ applicants for the 2023 cohort of AgFunder’s GROW Impact Accelerator are adopting innovative new approaches to creating a more circular economy:
Plenty of startups have explored upcycling coffee fruit—the fleshy part around the bean—but what about spent coffee bean grounds?
Founded in 2020 by Aaron Feigelman, a mechanical engineer on a mission to “upcycle the world’s 23bn pounds of coffee grounds,” California-based The Kawa Project originally focused on upcycling high-value fats from spent coffee grounds, but gradually came to realize that the economics didn’t make sense.
“Fat is only 15% of the composition,” Feigelman tells AgFunderNews. “And you have to operate at a really massive scale to get close to cost parity with traditional oils. We came to realize that we couldn’t scale this to make a very interesting business.”
Hence the pivot to the current business, a replacement for alkalized cocoa (cocoa solids treated with an alkalizing agent to reduce acidity), a high-value ingredient with a supply chain that is coming under increasing pressure, says Feigelman.
“So we pivoted about a year and a half ago to focus on a byproduct of our process (for processing spent coffee grounds) that functions really well in certain formulations as a cocoa alternative, which many companies are now actively looking for. And importantly for us, it’s a lot more scalable from an economic perspective.”
“The demand for waste to value upcycling solutions like Kawa’s is increasing and finding alternatives to traditional production methods is key in meeting future demand. Asia, in particular, presents a massive growth opportunity with its increasing middle-class population, which has developed a taste for chocolate confectionery products.” Ryan Lee, associate, AgFunder and part of the selection committee for GROW
So how does he get from spent coffee grounds to a replacement for cocoa, something multiple startups from California Cultured to Voyage Foods are now exploring?
According to a patent application, Feigelman’s process comprises drying the spent grounds, extracting the oil, milling the remaining coffee flour material to an average particle size of less than 250 microns; and flavoring the material to produce a “cocoa-homologous flavor.” The latter process could be achieved through a microbial fermentation process.
Feigelman won’t go into details but says: “We didn’t have to invent any new machinery. The innovation is more around the refining techniques and solvents that allow us to retain certain properties in coffee that we need for alkalized cocoa products. There are some fermentation additions we can do, but we don’t have to rely on those to start, because they do add cost.”
In general, he says, The Kawa Project is not looking to replace cocoa in gourmet chocolates, not least because companies in this space want cacao, not coffee on the label, while there are also standards of identity for chocolate in many markets.
“It’s really about removing certain flavors and keeping others to create a product that will plug and play [as an alkalized cocoa substitute] into industrially produced baked goods, rather than high-end confectionery products.”
So are The Kawa Project’s upcycled coffee grounds designed to be cocoa extenders, enabling firms to use a bit less cocoa, or could they potentially serve as a 1:1 replacement in some applications?
According to Feigelman, “It’s hard to be a one for one replacement if a customer’s variety of cocoa has a very different flavor profile, but it’s usually a case of I will replace as much as I can [without negatively impacting taste or texture]. I’d say that we’re getting very close [to the real thing] if you’re using a heavily alkalized cocoa, whereas for some other grades we’re 70-80% there.”
Regardless, he says, customers will usually want to retain some cocoa in a formulation as consumers will expect to see it on the ingredients list of a product that tastes chocolatety.
As for the appeal of The Kawa Project’s proposition, he says, it depends on the customer, but in general, anyone that buys cocoa will know that prices are only going in one direction (spoiler alert: it’s up), that demand exceeds supply, and that climate change, poor farm management, and disease are threatening production.
“I think companies are saying okay, the demand for chocolate products is not going away, but the supply chain has a hard time expanding to meet demand. But beyond that, cocoa production is running counter to their ESG goals when you consider deforestation, child labor, and so on.”
But what are the unit economics of The Kawa Project’s process, and can it hope to compete on price with what is, after all, still a commodity product?
At this stage, it’s a little challenging to do the math because the price of cocoa keeps fluctuating so wildly, says Feigelman, but at significant scale, he claims, if a customer were buying “millions of pounds” of alkalized cocoa, the upcycled coffee alternative could be 30% cheaper.
As for sourcing spent coffee grounds, he says, a fertile source is companies manufacturing bottled or canned coffee drinks such as cold brew, who have to pay to dispose of their waste.
“In some countries they just burn the coffee waste, and in others they send it to landfill or compost, or sometimes farmers will take it,” says Feigelman. “But there’s not a really commercial solution that generates value from the waste anywhere.”
As for the business model, he says, “We’ve been working with contract manufacturers, but our goal in the next couple years is to have a facility of our own in the central United States, especially once you start getting into millions of pounds of production.”
Right now, Feigelman is selling to some small bakeries, but says that he will have to “work with the big guys” to make the proposition work in the long term.
As to whether the ‘upcycling’ aspect to The Kawa Project is much of a purchase driver for customers or end consumers, it remains to be seen, notes Feigelman, who has secured some grant funding from the Startup UCLA accelerator and an investment from AgFunder via the GROW Impact Accelerator.
For cocoa buyers, he says, what ultimately matters is price, performance, availability, and meeting ESG goals.
“It’s unclear to me how valuable the ‘upcycled’ claim really is at this stage, but we do have some customers that are asking about the Upcycled Foods certification, although it hasn’t been the majority.”
On the labeling front, he says, “there’s an ongoing discussion” about what to call the spent grounds, in part because the word ‘coffee’ makes people think of caffeine, when in fact the spent grounds contain half as much caffeine as cocoa. “There’s a lot of interest in fibers at the moment, so maybe something like ‘arabica fiber’ would have the most appeal, but we’re still looking at it.”
Founded by John Ireland in early 2021, Virginia-based NTP Technologies has developed cold plasma technology enabling growers to create their own salt-free nitrogen fertilizer on-site using two inputs: air and electricity.
Ireland, who spent the early part of his career in the oil industry, first started looking into the technology when he got into indoor farming and hydroponics via a Maryland-based company.
“One of the issues was fertilizer,” he tells AgFunderNews . “So I started looking at non-thermal plasma technologies, did a little research, as ionizing air is not new, but what’s changed is that we have better compressor technology, better power supplies and easy, affordable electricity in renewable energy that can be placed anywhere in the world.”
So how does it work?
Think of Jacob’s ladder (which enables you to visualize electricity by creating a plasma arc), says Ireland. “It’s basically a technology where you take two divergent electrodes and you apply an electrical charge and you see an arc going between the two of them.
“We’re using something similar, a proprietary, modified gliding arc technology. As those arcs move through air, they have high intensity characteristics that break apart nitrogen and oxygen molecules producing molecules floating around in their ionic state.
“The ions recombine as RONS [reactive oxygen nitrogen species] in the air phase, and when we bubble that gas through water, it absorbs all the nitrates and some nitrites, producing nitrogen-enriched water with no salts. But the water never actually touches the plasma field.”
While electricity powers this process, which takes place in a box that can be connected to clients’ fertilizer tanks and irrigation systems, it’s highly sustainable if the source of the electricity is renewable, claims Ireland. “You just need air and electricity.”
“Our initial target is what we call forward-thinking farmers, vertical, hydroponic, indoor organic, small farms with less than 100 acres; most of them are using drip irrigation and farm all year round. The next group we’re going after is turf, so we’ll be targeting eco-conscious groundskeepers, golf courses, municipalities, college universities, and athletic complexes.” John Ireland, founder and CEO, NTP Technologies
NTP’s first machine is about the size of a microwave and produces around 25lbs of nitrogen, making it ideal for trials, while its next generation device will make around 2,500lbs a year running at 16-hours a day, he says. A third generation device will produce 7,500lbs/year.
“The small unit can plug into the wall like any electrical appliance, the next size unit is more like an oven, where you don’t necessarily plug it into an outlet with 10 other things running. We also provide the farmer with support on application, dosing, maintenance and optimization.”
So what’s the attraction of nitrogen-enriched water vs commercially available nitrogen fertilizers?
According to Ireland: “We’re salt-free and produced on site so there’s no transportation or storage costs. The process provides consistent quality with no contaminants because we’re just using air and electricity. Our capex is quite low, and our uptake is very high, as we’re providing the nitrates directly to the plants in their ionized form.”
“NTP’s innovative approach aligns perfectly with our vision for a greener future. We are confident that its cutting-edge solution will play a pivotal role in addressing the pressing challenges of food security and environmental sustainability.“ Angela Tay, senior investment associate, AgFunder
Given that NTP’s process results in a liquid (nitrogen enriched water or ‘NEW fertilizer ’), rather than a powder, doesn’t that limit its potential applications?
Says Ireland: “So this is one reason why we’re initially targeting indoor farms, growers with irrigation systems, not corn farmers that throw the [granulated] fertilizer down and hope for the best. There are also plenty of farmers that grow outdoors using pivot sprayers or drip irrigation.”
He adds: “It depends on your system, but in an indoor farm, they usually have fertilizer tanks to mix fertilizer in concentration prior to application. Initially, we would bubble the nitrogen into this tank. But potentially, we could hook our system directly into their systems that pump dissolved oxygen into their water, making it a plug and play installation.
“Growers can add sensors to control the nitrogen levels at any given time. So say you target around 50 parts per million in the table at all times. When the level drops to 40ppm it turns the machine on; if it goes up to 60ppm it turns the machine off, so you can automatically keep as much nitrogen in that system as you need, as opposed to pre-mixing and doing all these calculations.
“This will require different kinds of sensors, as most currently use electrical conductivity as a measure [which doesn’t work with NTP’s nitrogen fertilizer as it doesn’t contain salts], but we’re working on this.”
The other thing that’s potentially appealing for clients using hydroponic systems is that using a salt-based fertilizer such as calcium nitrate tends to result in calcium buildup as nitrates are used at a faster pace than the calcium, says Ireland. “NTP fertilizer can be used as a supplement to add nitrates without adding other molecules or contaminants.”
NTP originally envisaged a leasing model for its cold plasma machines but has since pivoted away from that idea, says Ireland, who says clients will have to buy the machines up front, although NTP can provide financing options.
In the solar industry, he says, “They are taking the operating cost of purchasing electricity on a daily, weekly, yearly basis. But when I install solar panels, I’m converting that to a capital cost. When amortized over 20 years, the real cost of electricity is less than purchased electricity. This is how the solar industry makes the numbers work. So people naturally ask, how many years will it take to make my money back? And with solar, it’s maybe five to seven years.
“We’re doing the same thing. We’re taking the operating costs of buying fertilizer every year, when pricing and availability are very uncertain, and converting that to a fixed cost. If I’m producing 2,500-lbs of nitrogen a year [if you run the next-gen machine at 66% capacity or 16-hours a day, for example] and it costs me an estimated $43,000 for the machine, I amortize that over 20 years, that’s $2,150 a year so less than $1 a pound [of nitrogen].”
NTP’s third-generation device, at an estimated $70,000, has three plasma cores, and can produce 7,500-lbs nitrogen a year, meanwhile, says Ireland.
“Our proprietary technology is being licensed from an R&D team which has been developing the technology for over 10 years. They have been waiting for the right team and the right time to commercialize their innovation. We are glad they decided that NTP is that team and now is the time.”
He adds: “Our value proposition is that we produce an affordable, sustainable, low carbon footprint, salt-free nitrate on site and on demand. You don’t have to worry about the shipping or storage costs, price volatility, or availability.”
The AgFunder GROW Impact Accelerator launched in 2019 with the aim of supporting the growth of emerging technologies in the agrifood space while strengthening their efforts towards sustainability.
For the 2023 cohort, 10 companies were chosen from over 600 applicants to join the 20-week program, which comes with a $100,000 investment in each company from AgFunder along with access to AgFunder’s co-investors and GROW’s network.
The programme culminates in an in-person Demo Day in Singapore on November 2, 2023. Join the waitlist if you are keen to meet these agrifoodtech movers and shakers pitching live for investment and partnership opportunities.
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