OzHarvest Ventures to lead $18m raise for food recycling facility

Written by Matt Ogg

Originally published on Business News Australia website

Recognising the need to reduce dependency on philanthropy to support the efforts of OzHarvest Australia, six years ago the food rescue organisation's founder and CEO Ronni Kahn set out to find new streams of recurring revenue that aligned with her two main visions - halving food waste and feeding more people.

This led to the formation in 2018 of the venture arm For Purpose Co, which has dabbled in a few business concepts since then but nothing close to what it is about to attempt under the new name OzHarvest Ventures.

After delivering 220 million meals to Australians since OzHarvest was founded in 2004, aided by the tireless efforts of Kahn and her team to secure the backing of donors, the next chapter will be to drum up the interest of investors so the organisation can generate its own cash flow.

Kahn tells Business News Australia that after 1.5 years of due diligence, OzHarvest Ventures has reached an agreement to purchase the Australia and New Zealand intellectual property rights for the technology Food Recycle, developed at the University of Armidale to convert food waste into poultry feed.

"It will create animal feed which then adds to this beautiful story because the animals are eating nutrient rich biosecure feed that is of a very high quality, with an outcome that could create an ancillary OzHarvest brand."

"If it is [for] poultry, then there's this beautiful story that because the chickens are eating feed that is of a much higher quality, the eggs are of a higher nutritional value," she says, flagging her hopes to potentially launch a brand of eggs with the OzHarvest brand.

OzHarvest Ventures chair Stuart Cook, who is also the co-founder of plant-based restaurant chain Flave and impact-led investment advisory TWIYO, says the venture fund is hoping to raise $18 million for a Food Recycle facility in Sydney.

"The $18 million can be split up in a mix of debt and equity because of the large equipment component of it. The way we’re structuring the deal, OzHarvest Ventures will retain a portion of the equity, so that we can then eventually fund, through the free cash flow of this facility and many more, OzHarvest," Cook says.

"What we’re planning on doing is the first funding will be the purchase of IP as well as the standing up of the first facility. The first facility will be able to take 100 tonnes a day of food waste and turn it into 65 tons a day of high grade, bio-secure animal feed.

"We also will get paid, or at zero cost get the food waste, which is redirecting it away from landfill or even composting which doesn’t get huge returns, to become high-grade, biosecure animal feed to be sold at first as chicken feed which is layers and then soon to be broilers, and then there is development and testing being done with fish farms and pig farms."

He says conversations are taking place with several impact funds and other large corporations to be potential anchor investors, while Kahn notes interest is also coming from individual investors, including climate activists who recognise "that food waste is the third biggest reason for climate change so we have to minimise food waste from going into landfill".

"From that point of view, it’s people who understand the Zeitgeist of what’s going on in the world today, and also savvy investors, corporates, foundations, funds, are looking at this," Kahn says.

If all goes to plan she estimates it will take 18 months before the facility is functional.

"Owning the rights gives us the ability then to pilot…the concept has been proven, all the due diligence has been done, it’s now about running the first one, getting it set up and running, and then rolling it out," she says.

"It’s very exciting to think we’re playing in this space. We ventured in with our toe with a tiny little startup venture, and now I feel we’ve learnt so much in the last three or four years that we’ve also learnt that we thought very small.

"But you have to think big in these things, because we’ve got big problems to solve."

That "tiny little startup venture" was Juice For Good, which came about after the team discovered a fresh orange juice vending machine in Singapore.

"We brought over two machines to trial and loved them so much that we ordered another 50," she says.

Sourcing imperfect oranges and selling fresh juice to passers-by in high-density foot traffic around Sydney, Juice for Good was a hit and likely would have led to further geographical expansion interstate had it not been for COVID, according to Kahn.

"Our juice machines were all dependent on foot traffic in high density areas, and of course nobody was walking anywhere," she says.

"We decided that business was going to be hard to recalibrate. What we were left with was this notion that the connection between For Purpose Co and OzHarvest was not strong enough.

"And that's the genesis of really changing its name to OzHarvest Ventures, and funding it slightly differently. We were clumsy in the first iteration – we took advice that seemed appropriate at the time, and now we’ve gotten smarter and wiser, and that’s what happens as you venture into these businesses."

This conclusion was reached with the help of MBA students from around the world who had studied For Purpose Co's foray into a different method of funding OzHarvest.

"We had some MBA students do a deep dive into our Juice for Good, and they came back and said we’re just not leveraging the OzHarvest brand," Kahn says.

"It became apparent that people were buying the orange juice because they loved it and didn't even realise this story behind it that they were buying it and were enabling someone to get a meal.

"We didn’t lose money but we didn’t make as much as we had hoped. Had it gone on that trajectory, we would have been able to move into other states. There is no doubt that COVID gave us that punch in that business that became very hard to reconstitute."

Whilst most of the vending machines have now been sold, the Juice for Good brand remains and this year has done a soft launch at the retail level with Woolworths Group (ASX: WOW) in NSW.

Another endeavour was a partnership with London-headquartered hospitality food waste solutions company Winnow, with OzHarvest helping to support its roll-out in Australia.

"We partnered with them to use our brand and our leverage within the hospitality industry, because the purpose of Winnow is to embed within the hospitality industry technology to minimise food waste," Kahn says.

"It would literally go into the garbage bins of big hotels, big chains, measure the waste, and support the ordering of food down the track, and highlight and showcase where food was not being utilised to its best.

"Through COVID the hospitality industry got decimated – they have pulled back from everywhere and I think they are rebuilding at their core."

She emphasises the OzHarvest ventures arm didn't have an investment in Winnow, and the experience was a great source of education in dealing with food-tech.

"It gave us conversations and added a little string to our bow," Kahn says.

On a much smaller scale, OzHarvest has also launched a hampers business as a spin-off from its restaurant Refettorio OzHarvest Sydney - a concept developed with Massimo Bottura of Netflix's Chef's Table fame and his charity Food for Soul.

"We take some of our surplus produce and it’s a restaurant that provides free lunch for vulnerable people, but at night we are open to the public for private events. At the moment once every two weeks there's a community dinner where members of the public can come in and pay, and it's being used more and more now for events.

"We've got a new business coming out of it, and that's hampers. We’ve made products like pickles and chutneys and chilli oils that are in the hampers, as well as utilising some of our close friends who are connected to social businesses."

Stuart Cook is optimistic about what this new model of funding can do for a group like OzHarvest. Whilst Kahn is against the taxonomy of her project being described as a charity or not-for-profit, Cook notes there are multiple mutual benefits by combining the relative strengths of startups and charities.

"If you think about startups, what do they need? They need capital, exposure and relationships, networks. And what do charities have? Access to high net worth individuals, donors, distribution, and advisors and people who want to help," he says.

"If you combine those two together, it benefits startups but also charities. That’s what I’m trying to do with OzHarvest Ventures, to create a model that can be then replicated in other charities so it becomes self-sustaining through venture activities.

"She [Ronni Kahn] has one of the best abilities to get donors and corporates to be involved and invest in OzHarvest, but it’s not sustainable and there’s a lot of risk in one person, a charismatic founder and CEO like that."