Hedge Fund Viking Invests in Battle to Keep Avocados Ripe Longer

(Bloomberg) -- Viking Global Investors, one of the world's biggest hedge funds, is joining the fight to keep avocados ripe longer.

Andreas Halvorsen's $26 billion firm led a recent $70 million fundraising round for Apeel Sciences, a California startup that is backed by Bill Gates and Andreessen Horowitz. The company, which uses food waste and other plant material to delay the aging of fruit and vegetables, has now raised a total of $110 million as it pitches its product to grocers as a way to reduce food waste and boost margins.

Avocados treated by Apeel's plant-based solution -- which stay ripe twice as long -- have been in the market for roughly a month as part of a pilot test at about 100 grocery stores in the Midwest, including more than 30 Costco locations. Apeel's lightweight powder, which is mixed with water by suppliers to wash produce, mimics the natural skin on things like avocados and lemons, and boosts shelf life by maintaining moisture and keeping oxygen out -- the two biggest factors in spoilage.

“We're not making fruits and vegetables any better,” said James Rogers, Apeel's 33-year-old chief executive officer. “We're just maintaining that natural quality.”

Margins Increase

Harps Food Stores, a regional chain testing Apeel's product, has boosted its profit margins on avocados by more than 50 percent in recent weeks, mainly because locations are taking advantage of the longer shelf life and throwing out less product, according Rogers.

Those early results are being used to pitch the Santa, Barbara, California-based startup to other grocers, and it's looking to apply the product to a host of other fruits and vegetables. An estimated $200 billion worth of food is thrown away each year in the U.S., meaning about $18 billion in lost revenue for retailers. The new round will help Apeel expand its capacity as its list of produce suppliers grows, Rogers said.

For Viking Global, the investment gives the firm a foothold in the battle against food waste. In addition to helping grocers sell more produce, Apeel's product could also be used abroad to expand access to fresh food in countries with limited cold-supply chain, investors said. Rogers said he met Viking's Brian Kaufmann, a portfolio manager in the fund's private investments unit, about two years ago at an event organized by Andreessen, an encounter that eventually led to the recent investment.

Halvorsen's firm invests the vast majority of its assets in public stocks but also runs a $4 billion fund that makes private investments. As part of the fundraising round, former Whole Foods executive Walter Robb has joined Apeel's board. For years, he ran the organic grocer alongside founder John Mackey, drawing in customers in large part with quality fresh produce.

“I love his respect for the laws of nature,” Robb said in an interview, referring to Rogers and Apeel. “That was always what we tried to support at Whole Foods.”

To contact the reporters on this story: Craig Giammona in New York at cgiammona@bloomberg.net;Hema Parmar in New York at hparmar6@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Lisa Wolfson

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