Circular Economy of Food Challenge SPECIAL MENTION

Liv Up

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Liv Up

Pinheiros, São Paulo, Brazil

Liv Up is a digital native vertical brand (DNVB) food-tech startup that makes tasty, natural and convenient food. We do this through a direct-to-consumer business model designed to reconnect our industry to our customers. We take care of business from farmer to customer: selecting our raw materials, partnering with local producers to prioritize organic food, developing and producing products designed by real chef and nutritionists for our customers and delivering it to their hands. We collect data at every stage, improving decision-making and overall performance and satisfaction.

About Liv Up

Our product development is made by a team of chefs, nutritionists, food engineers, customer/marketing researcher, business analyst and product manager using agile methods, in a similar way our technology team works. 

First, there is the Discovery phase, where we combine customer feedbacks on new recipes they want to see at Liv Up with the major food trends, current products performance and the availability of the ingredient from current and new suppliers. The sourcing is made directly with smallholder organic farmers, planning each ingredient, promoting fair-trade relationships and environmental-friendly food production. A cooperative and responsible supply-chain is key to sustain rapid growth and add value to the product.

Then, the team delivers a briefing with major characteristics details for the new product, from which the chefs and nutritionists start to think about the recipe, the flavours and the nutritional value. After some tastings and many iterations, the team defines the recipe and make some adjustments on the process to scale it to our industrial kitchen.

After producing with all quality control the products are distributed to our local distribution centres and are made available for sales on our e-commerce website. The products are delivered directly to our customer´s house. After the purchase, each customer receives a feedback form about the overall experience and to rate specific products.

The final phase is to analyse product performance based on these products rating, as well as overall sales, sales within the same category and re-buy (the percentage of clients that buy that specific product on their next purchase). Such data is crucial in order to optimize the portfolio and develop even better recipes.

The Liv Up Q&A

How do circular economy of food principles help social entrepreneurs grow their businesses and meet their mandate?

As the Lavoisier famous quote goes: “In nature, nothing is lost, nothing is created, everything is transformed”. For us, “circular economy of food” means to foster processes in which there is no such thing as waste. It means to mimic natural systems which are alive, connected and thriving on the Earth much longer than we human beings. If we can build a food system in which every meal makes a positive contribution to those who eat, those who cook and those who grow food, the system will thrive. Translating in a more pragmatic way: it means to transform food grown regeneratively (with no pesticides and locally, when it is possible), and to make the best of it, with healthy recipes and optimal processes that minimise waste and converts leftovers into good compost. Additionally, closing the packaging loop and fostering fair-trade relationships with food growers are essential in order to make the food system circular.  

Making a parallel with three Ellen MacArthur Foundation dimensions on the food circular economy: 

  1. 1. Source food is grown regeneratively, and locally where appropriate: We work to integrate our supply chain, developing win-win relationships with organic, smallholder farmers and other suppliers.
  2. 2. Make the most of food: Our integrated supply-chain and optimized food processing minimize food waste as much as possible. We are looking for alternatives to make compost from our leftovers and give back to the farmers, as well as alternatives for closing the packaging loop. We donate food which is going to expire to an NGO close to our factory. As our main products are frozen meals, food waste at customers is close to zero.
  3. 3. Design and market healthier food products: Our recipes are designed by real chefs and nutritionist, with high-quality ingredients, to provide our clients with healthy food and a balanced diet.

The main problem we seek to solve is that people want to eat better, but the traditional food industry hasn’t been able to address this demand due to lack of innovation and consumer trust. 

For every US$1 spent on food, society pays $2 in health, environmental and economic costs. The over-industrialization of food disconnects people from real, natural and healthy food, introducing preserving agents, artificial flavours, fats and ultra-processed food. This kind of food has potentially harmful effects on eating and drinking behaviours, and have been replacing minimally processed foods and processed culinary ingredients. The coexistence of undernutrition along with overweight and obesity, known as the double burden of malnutrition is a health and social problem growing at an accelerated pace in emerging economies, due to the lack of responsibility of the food industry. Such externalities make the food sector far from being circular, as it impacts people’s health and therefore the whole health sector. 

Furthermore, the food system itself also needs to change. The integration across the supply chain relies on middlemen and distributors, but there is a lack of data-flow and many inefficiencies, food waste and unsustainable relationships. 

Smallholder organic farmers, which represents 70% of all organic producers, are especially harmed by this model. Most of them depend on distributors to sell their harvests, but these distributors cannot guarantee demand, as they also depend on supermarkets’ demand to buy from these farmers, with no data-flow across these players. The price varies according to product availability, but farmers don’t consider other farmers planning before deciding what to grow. The spot market for fresh food is neither fair nor efficient. Farmers may be forced to sell their products at prices that don’t even pay their costs. Companies may have some good deals in some cases, but there is no guarantee of supply, as they cannot predict either if the organic products will be available throughout the year or not.

The result? A linear model, with high prices and low availability of organic food. According to Organis (2019), almost half of the urban population would like to eat more organic food, but prices and availability are the main reasons for not doing so. Supermarkets charge two or three times more for organic products in comparison to conventional ones. Customers become easily trapped by the convenience of cheap and unhealthy food.

Liv Up was launched in March 2016, and we have been growing at a very fast pace. We have delivered over 2 million meals in 2019 across 40 cities in Brazil. As of March 2020, we are over 500 employees and 80 farmers and relatives directly impacted through the partnerships.

The greatest challenge we have faced so far is to grow at such speed, implementing processes to scale operations while maintaining the same quality at our 10.000 m² facilities as when we were at a 100 m² kitchen in 2016.  

A fast growth rate makes us think and rethink all our choices made so far, what are the key decisions that worked before, but need to change in order to continue. It includes how to develop a supply chain that can be scalable and sustainable at the same time, that can increase the amount of ingredients sourced at the pace we need, while makes a positive impact for all food growers. 

Another important challenge we face nowadays is to close our materials loop. Our products need good packaging to ensure food safety while freezing and reheating. Plastic has been the standard solution, but we know the consequences of its use, so we are both looking for compostable alternatives and for collecting the post-consumer packaging and guaranteeing its recycling.

The biggest drivers for our clients are convenience and healthy food. They are urban people in a conflict between the lack of time and the desire to eat well:

  • – They have an active and busy lifestyle and therefore do not want to spend time cooking.
  • – They value day-to-day healthiness. It has a more conscious look at the food routine, physical exercises and body care.
  • – They are informed and connected with news, so they value complex flavours, innovations and new formats.

Millennials place a lot more value in what they put into their body, educating themselves on the benefits of natural and organic food (Forbes magazine, 2017). So our task is to develop a solution that delivers both healthiness and convenience together. We do that through the tastiest, most nutritional, convenient and responsibly sourced food as possible, with recipes designed by professional chefs and nutritionists. 

As a digital native vertical brand, we collect data, identify demands and transform it into better products and experiences, which leads to more clients, that gives us more data, making it a virtuous cycle. Closing the feedback loop makes the clients closer to our brand, we constantly receive messages of people that are now able to have healthier habits, that are able to eat better even with a busy routine, that has found time to make other things while maintaining a good diet.

We know many of them are aware of our concern with our chain and our partnership with smallholder farmers. Nevertheless, our communication on that regard is being modest. For us, it is important to experience the model feasibility before communicate it more widely and actively. Our strategy has been to demonstrate other attractive features of our model, while we build a database to know more of our clients and what is important for them.

We are initiating a set of structured actions to communicate more actively about our partnership with small organic farmers and our chain disintermediation strategy. We are preparing physical and virtual letters to tell our clients about what we are doing and share some harvested facts. We are structuring a set of posts to also communicate through our social media. Conscious consuming is an important movement and we believe that after such implementation, many new clients perceive Liv Up as a brand that they can trust and rely on.

The greatest challenge with we have accomplished so far is to build a robust and integrated organic supply chain, developing fairtrade relationships with the farmers and food growers. 

Integrating and shortening the supply chain is not easy. One of the tasks is to develop a supplier network from smallholder organic producers while creating trust and ensuring an increasing volume to produce. Brazil’s organic food market is evolving, but its supply chain is still unripe. We face issues like lack of specialized technical assistance, equipment and biological products for scaling crops. Since our ingredients come from small farms surround São Paulo, transportation can be an issue for us to explore more the potential of our current and possible suppliers. 

We have accomplished a lot already. As we integrate the whole supply chain, we aim to facilitate decision making processes across each player by sharing data such as demand forecasting and production costs, so every partner can thrive as LivUp scales. 

To implement such integration, our key activities are:

  1. 1. Plan demand forecast for each ingredient
    Identify potential suppliers and farmers, raising information about which items they can grow
  2. 2. Allocate demand according to each supplier characteristics and previous harvests
  3. 3. Follow up with each farmer on crops development, updating supply forecast and reallocating demand, if necessary
  4. 4. Evaluate and manage suppliers’ performance, according to planning adherence and quality of ingredients delivered.

For Liv Up, there is a guaranteed supply of organic ingredients for agreed prices, with data about how each crop is developing. We went from 50% of organic vegetables in February 2019 to over 80% in November 2019, with no increase in the average cost of raw material. If we would buy from distributors, the costs would be 20% to 30% higher.

For the farmers, there is a guaranteed demand for their crops, so they can focus on food production — instead of commercialization — for an agreed price, which makes their income independent from market fluctuations. Also, not everyone has access to technical support, so the partnership is a way for them to learn different organic and regenerative techniques.

In 2019, we sourced over 230 tons of organic food through these partnerships, representing around 65% of all vegetables cooked at Liv Up. We expect to reach 80% in 2020. Some farmers had an annual income of over R$100.000, while the majority of them ranged from R$70.000 to R$15.000. Many of them have accomplished personal goals, such as buying their own piece of land — instead of leasing it — and found in organic farming a solid purpose of living.

We are building an empirical example of how organic agriculture and smallholder farmers can effectively produce food in scale and in connection with food-manufactures, integrating every player from farm to the consumer with consciousness and respect to nature. Our next steps are to incorporate more technology at the farm-level, improving data collection and enabling an increase in productivity, as well as to strengthen the relationships between the farmers and our chefs, exploring new flavours and possibilities for new recipes.

As we scale, we have to take on more rigidly the standards of the ingredients we receive from the field. Find a balance between what comes from the farm, our industrial processes and our quality control is a real challenge. 

Besides, building an organic waste composting dynamic, either by building a compost facility inside our factory or outsourcing, is also challenging. We want to give back the food waste to our farmers in the form of good compost, and want to do that in the right way, according to legislation and good regenerative practices.

Nowadays our production and portfolio composition does not consider ingredients seasonality. Minimizing the distance between the field and the table is one of our biggest challenges. We are blessed to be in a country where most of the plants can be cultivated during the whole year. Although there are some in particular which are difficult in certain seasons. For example, cauliflowers and broccolis are great in Brazilian dry winter, but not so during summers. The clients though seems to want them all year.

Our main focus is to bring circularity to the process as a whole, and our packaging is a bottleneck to achieving this. We replaced one of the packaging components with another from a renewable source, which contributed to the packaging cycle being more sustainable. Since June last year, 51% of our polyethene is made from sugar cane, a renewable and more energy-efficient resource than oil. One of our secondary packagings, which we use to deliver our products to our clients is also made with sugar cane. The other one, which we use for the first delivery, is made from cotton and can be reused by the client for other purposes.

Even with this energy-efficient replacement, our packaging remains complex and difficult to reinsert in the chain, which led us to research alternatives to substitute the current materials to compostable ones. 

Such research takes time and effort, so meanwhile, we are structuring the implementation of a reverse logistic program to guarantee that we are closing the loop for our packagings. We have been interviewing clients that have complained about our packaging, to understand their pain points and see which alternatives can deliver most value. We already have a destination for the packaging: a recycling facility that can combine our material with additives and make new objects from it, such as garbage bins. We aim to (re)buy those objects and use at our office and facilities, or even give souvenirs to our clients, returning the post-consumer packaging in a new and effective form.

The Liv Up customer profile involves a search for greater healthiness as well as higher purchasing power. The creation of value throughout the chain contributes to the consumer perception of quality in the final product, which justifies our current price level. For some clients, price might be more not sensitive, but in order to make our products more accessible, it is important to keep a competitive price. 

We want to make healthy and convenient food in the right way. To make it affordable is very important. As we scale we are studying ways to incorporate more circular practices in our processes so our marketing positioning is minimally affected and we can be more accessible to a broader spectrum of people. We do not think it is feasible to increase the price due to circularity but seek efficiency to reduce costs, make more circular and maintain the price. We want to increase the perceived value and keep the price.

We think all players in the food chain industry can benefit from circular principles. They can do that by practising fair trade and creating space for hearing the voice of all stakeholders. We recognise some players that stand out from others such as Sweetgreen, Dig (regarding sourcing of ingredients) or Nespresso, Loop and IceRiver (regarding packaging loop).

Last month, we met with a group brought together by Mike, Ellen MacArthur Foundation representative in São Paulo. There we met representatives from various spheres. In public and private schools, for example, there is great potential. It can be developed partnerships with small local producers to feed the children. And also it can be created a school vegetable garden to foster a process and circularity perspective on children from an early age. Restaurants and industrial kitchens can also benefit from this model, as well as other local organic farmers.

Also, we have spoken with a sustainability manager from Danone, and one of the three projects they develop in Brazil is to convert 100 farmers from conventional agriculture to organic methods, called Caruanas, establishing a fairtrade supply chain with third parties, in a very similar way we have been doing at Liv Up. Nevertheless, they are not pursuing such integration with their own operations, they are not developing the farmers to be Danone suppliers, which makes it a social-only driven project.

Success is when we and life around us, humans and other than humans, thrive. Success is when we, as humanity, recognise the pitfalls of our collective decisions with courage, understand and determination to make it different. Success is to see our farmers and their land prospering, our team working with passion and sparkling eyes and satisfied individuals with good quality food and meaningful stories. 

We want to leave the world better than we found it. If we can build a food system in which every meal makes a positive contribution to those who eat, those who cook and those who grow food, we will succeed.

Team Members

Andrezza Prestes

head of portfolio / product development

Beatriz de Assis Melo

strategic sourcing

Leila Bonfanti

Organic Farming Planning Analyst

Pedro Alexandre Martins

Sourcing and Sustainability