Shrinking Waste in Food Services with Niels Lorijn

May 27, 2022

As they nurture businesses of all scopes and sizes, investors have a unique opportunity to provide not only capital, but also guidance on best practices to help a company perform at its best. Brussels- and London-based investment firm Capdesia, lead by Co-Founder and Managing Director Niels Lorijn, specializes in support for branded European restaurant chains and works with them to develop environmental, social, and governance (ESG) strategies.

Niels spoke with Council about Capdesia’s method for engaging its portfolio companies in ESG planning and highlighted examples of their best innovations — from specialty salmon products to no-plastics service.

 


Transcript

Niels: One third of all food produced, including half of all fruits and vegetables, is lost or wasted. You can see how our industry is not only part of the problem, but also part of the solution.

Meredith: Hello, everyone. I am Meredith Sumpter. I’m the CEO of the Council for Inclusive Capitalism, and I’m excited to be joined today by Niels Lorijn, the Co-Founder and Managing Director of Capdesia Group, which is a council steward and a private equity firm that specializes in the consumer food sector, with offices in London and Brussels. Niels, thanks so much for joining me today.

Niels: Thanks, Meredith. Pleased to be here, and thank you for the opportunity.

Meredith: Niels, actually, if you could just start by sharing with us how you got started in the industry and how you came to found Capdesia Group.

Niels: Sure. So our mission is to support passionate, forward thinking, purpose driven food service operators and help them build exceptional businesses. That’s our trade. We founded Capdesia about five years ago, after having built a similar platform in the U.S. called Capital Spring, which we grew to about 4,000 restaurants across 50 brands. And today in Europe, we’ve made three investments: a healthy Asian food to go chain called Wasabi, the the European franchise of the largest udon noodle chain in the world called Marugame Udon, which has about 1,700 stores, and then, lastly, last year actually we teamed up with Bain Capital to acquire a majority stake in the UK’s largest artisan bakery chain called Gail’s, which is very popular in in the UK.

And so why are we doing that what why are we supporting and growing these these businesses and why is that important to us? Well, the food industry is huge, restaurants — and people sometimes don’t realize that — but restaurants represent somewhere between three and four percent of GDP and about 10% of the workforce in any any given country. And the sector is growing and changing very rapidly. To give you an idea, the U.S. restaurant sector doubled in size over the last 20 years. And Europe is now following that same path. And that’s driven by demographics and urbanization and globalization. Technology plays a massive role in that. So it’s an exciting industry. Lots lots of things happening.

And not only does that bring opportunity, but the industry as a whole has obviously a huge impact on everything we care about: our health, our social lives, our jobs, our disposable income, and, of course, the environment. So as a sector specialist investors, who have been doing that now for for almost two decades, we have the know-how and the resources to help restaurant businesses capitalize on that very attractive opportunity.

Meredith: I think what’s so powerful about this Niels, as you share with us, you know, the restaurant and food service industry the trends that you see and the needs of society. You’re working with our food service companies to ensure that their practices, and that the way in which they carry out their businesses, reflects the needs and desires of society writ large.

So as an investor, and as you work across a variety of companies that each bring their own different approaches to this business, how do you work with your portfolio companies to implement and to evaluate good business practices?

Niels: Yeah, it’s a good question. So ESG is is an integral part of of what we do every day from from sourcing and screening investment opportunities to growing, improving, and ultimately selling our portfolio companies. When we invest in a company it’s typically at an inflection point and it’s ready to embark on on the next phase of of growth.

And so the challenges that we we face with our companies evolve around firstly institutionalizing that all the things that work well, and that may include the as part if if they if they have it, so that it can be replicated at a larger scale, at the greater scale. And secondly, and in parallel, let’s say, at the same time, developing or improving the areas that don’t exist or don’t work as well. In all cases, once the the ESG strategy is defined, which which typically happens very early on in that investment cycle, if you will, we look to to prioritize the the high impact opportunities first.

And so we establish very concrete targets and KPIs to monitor progress, which we then do on  either a monthly or a quarterly basis. The targets themselves may be different for each each company, but they typically include waste ratios and energy and water consumption, use of plastics in packaging and non-consumables, employee retention rates, customer satisfaction…  again, it’s a long list of, of KPIs that we, that we use.

So it often feels like, you know, when you’re steering a big ship, it’s hard to change course at first. But once they get moving they’re they’re hard to stop.

Meredith:  And in all of this, you know, clearly Capdesia has identified core ESG strategies, best practices, and metrics for your portfolio companies to work with. And I wonder if you can share with us the business case for implementing ESG into the food service industry, as a source of long term value in your own business, but also that of your portfolio businesses as well.

Niels: Yeah. So as I said, we regard sound ESG practices as really as an investment rather than than a cost. Why? Because they’re crucial component of driving economic value in our portfolio companies. And I don’t say that loosely. You know, when you source responsibly, or you offer a wide range of vegan products, or you enhance… you try to enhance your brand profile by being involved in the community, or you properly incentivized staff, that helps you sell more. That’s just a fact. Minimizing waste, on the other hand, or optimizing water and energy consumption, making transport more efficient, minimizing employee turnover by creating a healthy, diverse and motivating work environment helps reduce costs and prove efficiency. So, there are a number of… it’s… a lot is driven by by economic value.

And all these initiatives have a direct or indirect impact on a company’s competitive position, its financial performance, its long term resilience, and ultimately on its value. So I’d say in addition to to the moral responsibility that we all share for the planet and for humanity, there are very tangible financial benefits to be had from adopting sound ESG practices.

Meredith: Alright. So Niels, in your commitments to inclusive and sustainable business practices on our platform Capdesia’s work focuses on non-recyclable food waste. So I wonder if you can share with us Capdesia’s work in reducing food waste and how it helps us ensure what we call at the Council fairness across generations.

Niels: And I mean ultimately our role as producers and consumers and our set of beliefs and attitudes towards goals that are bigger than simply making a profit will will dictate what kind of planet we leave behind for our children. One third of all food produced, including half of all fruits and vegetables, is lost or wasted. And this amounts to 1.3 billion tonnes of food per year. And it’s costing the global economy something close to a trillion dollars a year. When you consider the full cycle of a wasted food product — so from growing it to producing, growing or producing, transporting, selling it, and then collecting and disposing of it — it’s not surprising that food waste is one of the main culprits behind resource depletion, pollution, deforestation, and obviously the increase in greenhouse gases. Up to 10% of global greenhouse gases come from food that is produced but not eaten. That’s five times as much as total emissions from airplanes, for example.

And then of course, you see the ethical problem knowing that, you know, close to 10 percent of the world is malnourished. So that is clearly not sustainable and will affect life on Earth and the health and well-being of generations to come if we don’t do something about it.

So we all have a responsibility to to chip in. And when I look at our own industries, so the restaurants, when you consider that an average household in Europe and or in the U.S. spends between a third and 50 percent of their food budget on on restaurants you can see how our industry is not only part of the problem, but also part of the solution, which is why at Capdesia we are so focused on combating food waste.

Meredith: So very true, so very true. And Niels, I’m hoping you might be able to share with us some of the most innovative or impactful things that your portfolio companies are doing right now to reduce waste.

Niels: So we we’re constantly coming up with with clever ways to tackle that. I mean, one example that comes to mind is a Gail’s. Gail’s recently introduced a range of products that that are produced from leftovers. So it started initially with “wasteless” sourdough, which is made with porridge from leftover bread that would otherwise have gone to waste. Now, the “Waste Not” range also includes croissants and other products that are upcycled, as we call it. So it’s all very clever and customers love it.

But I’d say in addition to just clever ideas of what you can do with your existing product range, we will look at opportunities to extract as much yield out of the products that we produce. I’ll give you an example at Wasabi. We have a large central production facility, which, for example, produces all our salmon. The salmon comes in as a whole fish and then it’s filleted before it’s sent to our stores where it’s then cut into nigiri for sushi or sashimi. And sushi, as you know, is is subject to very high, very stringent quality specs from both in terms of the parts of the of the fish that can be used and the way it should be cut. So the parts of the salmon that are not fit for sushi and end up in salads and other dishes. But we realize that by throwing away parts that could perfectly be used in other products, we started to re-engineer the way we cut the salmon and looking into even new technologies to use some of the offcuts for sushi rolls and developing new products so as to maximize the yield on each fish.

And then lastly, where we also found a buyer for the waste that we would typically simply throw away who then recycles it into oils and animal feed and other products. So the result now is that ultimately upwards of, let’s say, 85 percent of an entire fish is is used for consumption. And that makes a very big difference. And we’re going through similar processes with with other key ingredients like chicken and cooking oil, obviously without ever compromising quality. So that’s in, I’d say, our production facility, and I’m sure many food companies are going through similar processes.

On the Wasabi stores, the challenge, like in any restaurant chain, is always minimize leftovers. Historically we’ve had an average in-store food wasted ratio of somewhere between 2.5 and 3 percent of sales. As of this month, we partnering with a Danish company called that Too Good to Go that has developed a very clever B2C platform that allows customers to order and collect end-of-day surplus from restaurants at heavily discounted prices, and we think that’s going to bring wastage further down to close to 1.5 percent.

So all these initiatives combined make a make a big impact on both the sustainability — but as I said earlier — also on the on the profitability of a of a restaurant chain.

Meredith: I think it’s so important. It’s the sustainability but also of the profitability. That’s why the maximizing the value or the usage of this food product in particular, and minimizing the waste, this is not just the right thing to do, it is business excellence.

When you think about where we are now and you think about where the future of sustainability and the food industry should go, what are the new innovations or business practices on the horizon that we should be paying attention to?

Niels: I think… two areas that that come to mind, I’d say, is one is generally called alternative proteins; plant based proteins, which is really causing a revolution, I think, in the food space today. And the other one is plastics.

So the first one, I think that the trend towards plant based proteins, both cellular — as they call them — or fermentation based is not only gaining pace but also broadening to include alternatives for pork and chicken and seafood and even cheese and eggs. This will, I think, transform a large part of the food ecosystem with the resulting reduction in carbon emissions. And greenhouse and greenhouse gases, land and water pollution and so on.

The other big area of improvement where again, a lot is happening is packaging. So in Europe we produce something around 23 million tonnes of plastic packaging every year, and 40 percent of that, so about 9 million tonnes, ends up in landfills. And even worse is the fact that 32 percent, so about 7 million tonnes, ends up polluting the land and the oceans. So in addition to social pressure and government regulations, we are seeing a lot of innovation in the space for products that should, you know, gradually become mainstream — from bioplastics to products made from vegetables like bananas or you know, tree stumps. I mean all sorts of things being tried.

So all that is, is very, very encouraging, and we’ve been focusing on that with our portfolio companies for a while. At Wasabi, for example, we have introduced paper bags and removed non-recyclable laminated cards. We use cutlery that looks and feels like plastic but that is entirely made of compostable material. And our goal is to to have 100 percent of our packaging be reusable, compostable, or recyclable in the next three to five years.

Meredith: That’s remarkable! Niels, that’s ambitious.  And certainly helps your peers also begin to recognize these solutions as something that they themselves can incorporate into their own practices. So we will keep our eyes on the alternative proteins as well as on tackling the use of plastics.

As you leave us for the day, I’m wondering if you can share with our audience as you think about the future of the food industry and the future for how our economy and capitalism needs to function for it to truly be sustainable, what gets you excited and what gives you hope?

Niels: Human ingenuity is what what gives me which gives me hope. The information age, for example, is with all its shortcomings and challenges is forcing more transparency and inclusiveness. It’s allowing people to hear and to be heard and to have open debates about very fundamental and important issues like inequality and human rights, climate change, and political or economic systems like capitalism. And that in turn, you know, galvanizes solidarity and engagement among people.

But I think that despite despite all the problems that we that our world faces today, you know, geopolitical, economic, social, environmental, we are making progress as a society. Be it slowly and obviously not in all parts of the world. But I think progress is happening. So all that gives me hope that, you know, at least, directionally over a long period of time, perhaps over generations our way of life and our economic model — or models, I should say — are becoming more inclusive, even though, you know, it’s difficult to sometimes appreciate that.

Meredith: Truly. You know, you’re focused on progress, but also on human ingenuity. Niels Lorijn, Co-Founder and Managing Director of Capdesia Group and a leading steward member at the Council for Inclusive Capitalism. Thanks so much for sharing your insights with us.

Niels: Thank you, Meredith. It was a pleasure. And we look forward to continuing to work with the Council.

 

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