BountifulAutomated fruit & vegetable

scanner: taste, appearance, shelf-life, food safety

# of Interviews: >200 (153 class + >50 prior)

ORIGINAL IDEA

FINAL IDEA

Demand forecasting and intelligent purchasing for grocery

stores

Matt Schwartz

MBA / MS (Food & Ag)Founder, Protein Snack Co

Food & Ag Operations

Nathan Fenner

MBA + BS/MS & Lecturer Stanford Mechanical

EngineeringRobotics Engineer

Stacey Huang

PhD Candidate Electrical Engineering

Spectroscopy

Mayank Agarwal

MS MS&EComputer Science

Team MentorPartner, CTO Khosla VenturesDeep Startup & EngineeringExpertise

Sven Strohband

Team Bountiful

Our initial interest

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Our initial solution

An automated fruit & vegetable scanner that uses

spectroscopy, computer vision, and machine learning to measure taste, shelf life,

and food safety

“If we can measure taste, the whole market will adopt it and grow better produce and we’ll

make tons of money!”

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-Classify produce distinguishing between sellable (meets buyer specifications) vs. unsellable; ultimately create spectrum of unsellable to perfect (incl. dimensions of taste & safety)-Sort produce quickly, cheaply, and with no harm to produce-Maintain customer data platform / user interface (Produce Grower: performance per acre; Produce Distributor: performance per supplier farm)

Business Model Canvas Update

-Produce buyers and end customers: retailers, restaurants, food service providers

-Taste experts and laboratories to inform classification and gradation of the produce

-Agriculture and Food Regulators and Gov’t entities (FDA, USDA)

-Food safety international standard setters (BRC, SQF)

-Food safety consultants

Key Suppliers:

-Machine parts?

Produce GrowersLong-term: All types of produce growers

Short-term: strawberry growers and high-value lettuce growers-Initial buyers may include Food Safety and Quality Assurance within grower businesses

Produce DistributorsCompanies that purchase produce from the farm gate or directly from growers to re-sell to Restaurants / Grocers / Food Service andvertically integrated distributors (e.g., Sysco)

Long term: all distributorsShort term: focus on large distributors who purchase at scale

-Technical talent: engineers, scientists, coders-Machinery: harvesting and produce-sorting robot-Data from each kind of produce for calibration of the produce-sorting classification routine-Financial capital to build initial equipment-Sales

Machinery construction/maintenance - parts, laborResearch - sensor and ML experts, food scientists, taste expertsData analysis and reporting team - data scientists, UI for consumers, infrastructure, servers, customer service[Service model only] - labor to man the harvest robot / produce scannerChannel managersMarketing / Trade ShowsSalesforce

Produce GrowersIf subscription service: customers pay for harvesting and categorization service (charged as % of selling price of produce assessed)If equipment: customers purchase harvest robot that can be self-operatedProduce DistributorsIf subscription service: customers pay for quality detection, food safety analyses, & classification (charged as % of selling price of produce assessed)If equipment: customers purchase scanner that can be self-operated

Produce Growers-Responsive to growers’ needs - tailored service to fit their equipment, growing techniques, processing & storage equipment-Meaningful feedback loop-Trust, transparency, and confidence in team and techProduce Distributors-Trust in consistent performance -Rapid response maintenance and backup- Technical expertise

Produce Growers-Lower reliance on harvesting labor and lower harvesting labor cost-Reduce waste → increase volume of sellable produce-Reduce food safety incidents-Consistently measure quality for buyers-Enable growers to command premium for higher quality produce-Enable the creation of a brand around product attributes-It would be valuable to berry growers if we could automate aesthetics and shelf life testing

Produce Distributors-Lower labor cost for quality assurance and food safety-Reduce food safety incidents-Consistently measure quality-Command premium for higher quality produce

Retailers-Grocery Produce QA will find significant labor savings and reduced shrink through automated scanning-Online Grocery will find value through delivering taste ratings to consumers (increase revenue) and optimized logistics for shelf life (reduced waste)

Produce GrowersEquipment model - Farm equipment dealerships/ retailersService model - Direct Salesforce

Produce Distributors-Direct Salesforce-Food Safety Consultancies?

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We realized we needed to measure value at Attribute / Customer intersection

Attribute Measured Grower Distributor

Grocery – Brick & Mortar

Grocery – Online Restaurant Food

Service Consumer

Taste

Aesthetics

Food SafetyRipeness / Shelf LifeGeneral Thoughts

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Customers say positive value, follow up

So we talked to 40 customers in 2 weeksAttribute Measured Grower Distributor Grocery –

Brick & MortarGrocery – Online Restaurant Food Service Consumer

Taste

“It’d be nice but I don’t get

paid on it. I measure BRIX

just to hit spec”

“It could be cool to

intelligently send good

stuff to good customers”

“Would be nice…”

?

?The big

players don’t care

I care, but it needs to look good or I’m not buying

AestheticsWe care. But not sure how

much?

“If you could automate my

spec QA, you’d have a $B company”

?We care, but this isn’t a pain point

Definitely

Food Safety

Bigger issue for cut fruit

(some mention of annoying

FSMA)

We care, but this isn’t a pain point (although,

FSMA)

We care, but this is mostly OK already

Major concern (we heard a

lot of Chipotle references)

We care, but this isn’t a pain point (although,

FSMA)

Definitely

Ripeness / Shelf Life

We’ve heard yes, but want

to confirm? This could be

big! ? ? ?

General Thoughts

“I just want to hit my spec”

“This is interesting,

but how would we do it?”

“I’m busy” Need to talk to them

Need to talk to them, but

we’re putting lower priority

“Who cares”We don’t want

to target consumers

Mixed opinions or unsure, follow up

OK for big fruit.

Opportunity in thin wall produce

Customers say it doesn’t add value

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Beyond

Attribute Measured Grower Distributor Grocery –

Brick & MortarGrocery – Online Restaurant Food Service Consumer

Taste

“It’d be nice but I don’t get

paid on it. I measure BRIX

just to hit spec”

“It could be cool to

intelligently send good

stuff to good customers”

“Would be nice…”

?

?The big

players don’t care

I care, but it needs to look good or I’m not buying

AestheticsWe care. But not sure how

much?

“If you could automate my

spec QA, you’d have a $B company”

?We care, but this isn’t a pain point

Definitely

Food Safety

Bigger issue for cut fruit

(some mention of annoying

FSMA)

We care, but this isn’t a pain point (although,

FSMA)

We care, but this is mostly OK already

Major concern (we heard a

lot of Chipotle references)

We care, but this isn’t a pain point (although,

FSMA)

Definitely

Ripeness / Shelf Life

We’ve heard yes, but want

to confirm? This could be

big! ? ? ?

General Thoughts

“I just want to hit my spec”

“This is interesting,

but how would we do it?”

“I’m busy” Need to talk to them

Need to talk to them, but

we’re putting lower priority

“Who cares”We don’t want

to target consumers

So we talked to 40 customers in 2 weeks

OK for big fruit.

Opportunity in thin wall produce

WE DISPROVED PRETTY MUCH EVERYTHING

Customers say positive value, follow up Mixed opinions or unsure, follow up

Customers say it doesn’t add value

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Latest business model canvas

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…and realized we were hallucinating

An automated fruit & vegetable scanner that uses

spectroscopy, computer vision, and machine learning to measure taste, shelf life,

and food safety

“If we can measure taste, the whole market will adopt it and grow better produce and we’ll

make tons of money!”

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But where to pivot???

SUPPLY VARIATION VERY SMALL PROBLEM

DEMAND VARIATION (HOW MANY CUSTOMERS PER DAY) BIG

PROBLEM

…we had come upon a huge problem

$218B63M Tons

$57B25M Tons

FOOD WASTETotal

Consumer Facing

Biz

GROCERY STORES

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We started exploring the problem and were surprised to find…

Current Solution

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ManualTime-intensiveCumbersome

InaccurateInconsistent

New idea! Demand Forecasting for Grocery

Current Solution Bountiful Solution

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And it could be a potentially huge market

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-Writing and maintaining predictive software for demand-Parse and analyze large datasets for indicators that impact consumer buying patterns (demographic data)-Data mining for social trends scraping articles on current events for trends, etc)

-Retailers that are currently dissatisfied with their demand forecasting/inventory management software

-Retailers that currently have

-Restaurants

-Competitors to keep

-Researchers in the field of predictive data analysis

Retailers-Grocery stores that stock perishable goods-Specifically - produce procurement directors and store managers

Restaurants-Premium sit-down restaurants that buy perishable ingredients the day of preparation-Technical talent:

engineers, scientists, coders-UI: tablets to be provided to retailers-Data to assess relevant metrics -Sales

Research - data analysts, predictive forecastingData analysis and reporting team - data scientists, UI for consumers, infrastructure, servers, customer serviceChannel managersMarketing / Trade ShowsSalesforce

RetailerSubscription service: customers pay yearly for demand forecasting service based on volume of goods covered by the demand forecasting software

Retailers-Trust in consistent performance -Transparency in data management and privacy protection-Quick updates and bug patches-Tailored service

Retailers-Reduce shrink losses by preventing over-purchasing of perishable goods-Reduce out-of-stock incidents-Reduce upfront costs in overstocking-Enable auto-placement of orders based on demand forecastsRestaurants-Reduce shrink losses by preventing over-purchasing of perishable goods-Reduce labor cost during low-demand hours-Ensure customer satisfaction by having more waiting/kitchen staff during high-demand periods

Retailers-Direct Salesforce-Trade shows-VARs - software suite on a tablet with retailer tools

So we created a new Business Model Canvas

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We quickly spoke to >40 grocery store employees

• Validated our value propositions

• Discovered new value proposition of reduced ordering time

• Learned a ton about our customer• i.e., Produce Buyer is the end

user, CFO is economic decision maker

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…and got to know our customer

Bill the Produce BuyerJob title: Produce

BuyerJobs done: Receive produce, count inventory, assess sales velocity, place ordersLocation: Everytown, USAStarts work: 5amEnds work: 12:30pm

40,000 “Bill the Produce Buyers” in US100,000+ Store Buyers of Fresh in US

Calculation:# of grocery stores in US: 40,000

# produce buyers per grocery store: 1

Receive produce from truck and break down pallets

Assess last night + this morning’s sales by looking and

talking to teamCheck out computer data (historical sales) & place

tomorrow’s order

5AM

9AM

10AM

Customer Archetype

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…and got to know our customer

Bill the Produce BuyerJob title: Produce

BuyerJobs done: Receive produce, count inventory, assess sales velocity, place ordersLocation: Everytown, USAStarts work: 5amEnds work: 12:30pm

40,000 “Bill the Produce Buyers” in US100,000+ Store Buyers of Fresh in US

Calculation:# of grocery stores in US: 40,000

# produce buyers per grocery store: 1

Receive produce from truck and break down pallets

Assess last night + this morning’s sales by looking and

talking to teamCheck out computer data (historical sales) & place

tomorrow’s order

5AM

9AM

10AM

Customer Archetype

THE 20 YEAR OLD KID WHO UNLOADS THE TRUCK IS

THE SAME GUY WHO PLACES THE ORDER!

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…and got to know our customer

Bill the Produce BuyerJob title: Produce

BuyerJobs done: Receive produce, count inventory, assess sales velocity, place ordersLocation: Everytown, USAStarts work: 5amEnds work: 12:30pm

40,000 “Bill the Produce Buyers” in US100,000+ Store Buyers of Fresh in US

Calculation:# of grocery stores in US: 40,000

# produce buyers per grocery store: 1

Receive produce from truck and break down pallets

Assess last night + this morning’s sales by looking and

talking to teamCheck out computer data (historical sales) & place

tomorrow’s order

5AM

9AM

10AM

Customer Archetype

THE 20 YEAR OLD KID IS RESPONSIBLE FOR A

CRITICAL COST DRIVER IN A 2-3% MARGIN BUSINESS!!!

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...and started trying to sell pilots

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…with mocked up Dashboards as an MVP

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So we did what anybody in there right mind would do…

“How do we validate Willingness To Pay & a bunch of other canvas

hypotheses???”

WE WENT TO VEGAS

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-Software development: aggregate internal data; aggregate external data-AI development: build predictive algorithm for sales; build tool that takes sales prediction and suggests purchasing-UI development: Design tools to be effectively used by grocery buyers and owners

-Retailers that currently have no or inadequate demand forecasting solution

-Competitors, including non-direct competitors selling retail software but not in perishables

-Researchers in the field of predictive data analysis

Large Medium Retailers-Grocery stores that stock perishable goods and have data and some tools for purchasing-Specifically - produce procurement directors and store managers

Small Retailers-Small mom-and-pop stores that stock perishables and have data but no tools to use it intelligently

Food Service-Food Service companies that serve large organizations and have data but no tools to use it intelligently

-Technical talent: data scientists, coders-Customer data-UI: tablets, computer software, or physical reports to be provided to retailers-Exogenous data -Salesforce

Research - data analysts, predictive forecastingData analysis and reporting team - data scientists, UI for consumers, infrastructure, servers, customer serviceChannel managersMarketing / Trade ShowsSalesforce

Retailers and Food ServiceSubscription service: customers pay yearly for demand forecasting service based on volume of goods covered by the demand forecasting software

SaaS - Value-based pricing possible

Retailers-Trust in consistent performance - proven cost savings-Transparency in data management and privacy protection-Quick updates and bug patches-Tailored service

Retailers-Predict demand based on a myriad of inputs - current events/social trends, promotions, weather change, demand of related products.-Reduce shrink by preventing over-purchasing of perishable goods-Reduce out-of-stock incidents-Reduce upfront costs in overstocking-Enable auto-placement of orders based on demand forecasts-Spend more time rotating produce instead of ordering-Improving cash position by reducing necessary buffer stock in inventory

Retailers-Direct Salesforce-Trade shows-Pilot programs-Word of mouth - increased performance of one retailer will drive competitors to adopt-

We left with many learnings

Dramatically accelerated our learnings

…and many potential pilots

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“You are right on the money with this idea – we’re interested”

-EVP, Large Grocery Chain“If you are able to do this, it would save $55M across our 200 stores in 3 years”-Director of Shrink, Medium Grocery Chain

We’re projecting a run rate revenue of $3.5M in <3 years

• Assumes 10 stores in 2017, 100 stores in 2018, and 500 stores in 2019

• Assumes ~$2,500 price point per store per year (very conservative)

We’re going to pursue this as a business going forward!

Biggest Open Questions

Just how much better can our tech do than the current solution?

How much will customers actually pay for this?

How much will it cost us to integrate with customers?

Push forward with Pilot Programs

Next Steps

Get customers to sign Letters of IntentBenchmark with other grocery software vendors that integrate with POS systems

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BOUNTIFUL

THANK YOU!

Intelligent Food Purchasing