ScaleUpNation Runway venture PeelPioneers is well on their way to scaling their innovative venture. Their journey showcases the challenges and creative opportunities Food & Agriculture entrepreneurs must master as they grow. This fall, promising scale-up ventures like Peel Pioneers are invited to join the ScaleUpFood program and deep dive on these F&A specific scaling success factors with ScaleUpNation, Foodvalley and Rabobank.

In recent years, Dutch fruit-eating habits have significantly developed. Based on the 2012-2016 research wateetnederland (“What does the Netherlands eat?”), the average person consumed nearly 120 grams of fruit per day, an 8% growth from the previous three-year period. Supermarkets are part of this trend, thanks to a widening variety of choice that has made it easier for fruit to reach Dutch plates. But forget passionfruit, mangoes, and kumquats – the top three consumed fruits are still apples, bananas, and oranges.

Oranges, in particular, have seen a consumption boost that can be attributed to a conspicuous new presence: the commercial juicer, available at almost every supermarket outlet. Customers pick their oranges, drop them into the large-capacity storage basket and the machine peels and squeezes the juice into take-away bottles to be paid at the cash register. The promise of no more messy and sticky home juicing is irresistible to busy and health-conscious professionals, and these fast and simple juicers have boomed all over the country.

But what happens to all the leftover orange peels? It takes a real entrepreneur to see greater opportunity within this contraption – treasure among the trash. PeelPioneers co-founder Sytze van Stempvoort had been working on his Bachelor’s in Chemistry in the UK in 2014, and experimented on extracting value from hollowed orange peels. Sytze became obsessed with finding a business solution within the waste. At the time, it was calculated that 70 million kilos of citrus waste from supermarkets, juice producers, and the horeca industry were being incinerated. The answer was surprisingly simple – each discarded peel holds a treasure trove of extractable resources, most significantly as essential oils and animal feed. He knew he was onto something great, and upon returning to the Netherlands attended several pitch events where he presented his idea.

He met TEKKOO investors Bas van Wieringen and Lindy Hensen, who saw the opportunity and initiated collaboration. “Where others see waste, we see raw materials,” he says, and with this philosophy they launched PeelPioneers in 2016. In conversation with Bas inside their Amsterdam offices at Spring House, he recounted the founding story and the evolution of how they turned the humble orange peel into a scaling, thriving enterprise.

Designing and constructing

“The problem with the orange peel,” Bas explains, “is that our current waste processing facilities are not equipped to deal with the high volumes of waste stream from these juice-pressing machines.” Before, there was a small and manageable volume of oranges that we squeezed at home and discarded. The current figures state that 250 million peels are thrown out and burned in the Netherlands. Recapturing and processing these creates a whole new waste stream, one that is aggressively sour – the components inside an orange peel are so strong they can even remove graffiti on walls. This created trouble for waste companies because regular trash was disturbed by this large volume. “Sytze found the win-win solution that extracts and exploits all the new nutrients and usage that had been found. I found this be a hugely interesting proposition for a business.” Just a single peel is multipurpose and yet nobody was treating it, especially not at a trade level. The team is working and expects to develop new extracts to expand their proposition from animal feed and essential oils and cover even more of the market. “We know there is even more value in the inside ingredients that we are now feeding to cows, and know that we can further develop to extract more food ingredients for human consumption.”

Strategic Selling

“When we started, we had the idea to do everything ourselves – gather, deliver, process at the factory, and sell to buyers. We had our own trucks and went from supermarket to supermarket, but it was soon obvious that we were working with two very different businesses.” They reached out to the leading process waste company Renewi, which now allows them to process 5000 kilos of peels per hour, the equivalent of one waste truck. One of the leading Dutch supermarkets, Jumbo, with over 650 sales points across the Netherlands, are the biggest partners of PeelPioneers and together with Renewi, this collaboration efficiently services two thirds of all Jumbo stores. “We are full at the moment. We’ve sold all of our oil and feed with a year advance, and we can’t process any more peels with the current setup. We are full of peels with this current setup for the next five years.”

While these sound like the perfect conditions for rapid scale, Sytze, Bas and Lindy decided not to expand beyond their current capacity. “We made this decision as a team, and together with our advisory board. The word that kept coming back to us was focus, and really master what we are doing at the moment, which is collecting peel. If the authorities were to do an audit, we need to be sure that we will pass the audit. For instance, other citrus like grapefruits and lemons are interesting, but they won’t work in the same way because the highest bulk of production right now comes from oranges. Why bring in a new ingredient when we still have to become really good at streamlining 5000 kilos of orange peels per hour?” Bas says. “We don’t want to promise too much too soon, break the promises made along the way, all because you are focusing on trying something new while the original idea falls apart.” The decision was clear: ensure all the discarded orange peels in the Netherlands and eventually Northern Europe are processed in their Eindhoven factory by 2022.

Data-driven business models

 The first 2.5 years were devoted to engineering and making the technology work on an industrial scale. As they secured funding, investors demanded greater commercial traction and stable contracts for collection and resale. “We did pilots, got grants, and secured funding, and finished building the plant that started operating in November, which allowed us to grow the team quite quickly. We hired an operations team, as well as an R&D to find what more there is beyond the contents we know now of the peel.” They have a patent pending for the upcoming factory set to open in the coming two years.

There are tight regulations to running a business that is intended for animal and human consumption, making technology a welcome asset. “We use data to track and trace the food streams – these tell us which peels come from which retail company/supermarket and how they are distributed in our bins, how we process them, and where they get distributed. When we eventually make the step up to food ingredients intended for humans, it will help to have this track and trace system. This data gives us a license to operate and even if we don’t make any money from it, without it the authorities would shut us down.”

Regulatory Navigation

“Our five-year road map is more like one year from now, which is the aspiration build a new factory able to do a lot more and extract a lot more food ingredients. If this factory is well-operating, we want to duplicate this super-factory to different areas in Europe.” How will they expect that to be for the company? “We expect everything to become more expensive, more challenging to implement, and lots of more regulations and permits to go around,” Bas answers. “The kind of food we can make for humans are in the form of ingredients – we won’t directly sell to customers, but to companies that can process it in their recipes, mainly for bakeries. It stays B2B and we sell it to companies who mix it and make a product to make other ingredients as well.”

Specialized Finance

“In the beginning, we bootstrapped. We rented machinery and were able to self-finance until reaching the point of technical proof. After that we gathered some grants and subsidies which brought us to the proof of concept and the basic engineering of the next factory. We made a layout of the next factory and were able to go to investors with a proof of technology on a small scale, plus commercial contracts, and show how we would operate on this blueprint. With that package, we secured Series A funding, and some seed funding to get us off the ground, as well as a bank loan. Altogether the package was about 1 million from investors Brabantse Ontwikkelings Maatschappij (BOM), Stichting Doen, as well as ABN AMRO. That made it possible to build a factory, and within a half year we were cash positive, so we currently don’t have an ending runway in this current factor so if we don’t secure any more funding we can keep open until there is no more peel in the Netherlands.”

“If someone like Jumbo sells us the peel, they know they spend less than if they used a fermentation factory, for instance. Sustainability provides a conversation point when negotiating your company to work with us, but the reality is that there is always someone along the chain – say, a purchaser – that will ask, ‘what about the price?’ That will make all the difference, especially when you can offer a healthy price. We are very sustainable, but not the more expensive option. To any entrepreneur, we would give the advice of making yourself price competitive, and not per se the cheapest on the market.”

Bas concludes with a learned lesson for all impact entrepreneurs: “If you are sustainable but expensive, you will only reach a niche and have a small impact. To make huge impact, we want to not just sell the sustainability story but also make it cheaper for the buyer. What we learned along the way is that to make impact you have to scale, and to scale you have to be competitive with your commercial prices. We will keep being sustainable while running a business the healthy way. As we grow, we become stronger in our belief that it won’t be more than ten years before clean tech will just be called just tech – anything else will be marked dirty tech.”