Food Waste, and the Chaos of Good Solutions

Today, the Wall Street Journal published an interesting article about the decline of organic milk consumption in the U.S. You can read the article here. If you have limited time, however, here is the main takeaway: dairy producers overestimated demand for organic milk and now have a surplus. As Evan Rainwater (yes, his last name is actually “Rainwater”), a senior VP at Albertsons says, the organic milk space has “reached market saturation.”

So how did this happen? People in the industry blame increasingly popular dairy alternative products for this severe miscalculation and also admit to just plain bad forecasting:

Dairy-industry executives say their forecasts were off for organic-milk demand continuing at the initial pace, but also blamed almond, coconut and other plant-based milks for grabbing market share to an unexpected degree.

Also interesting is how dairy companies are handling this surplus. According to the article, many companies are trying to turn their excess milk into alternative dairy products, such as cheese. Danone, the French food giant, has specifically stated its intent to turn some of its organic milk into cheese, yogurt, or creamer.

Why is this interesting? A few takeaways from this story really stand out:

• The growth of non-dairy milk products is far faster than even leading dairy companies anticipated
• Big companies can be really bad at forecasting customer demand
• Food waste is a huge issue in developed countries, not only because individuals waste food, but also because food manufacturers do
• Innovative solutions to problems can (do?) create new, unanticipated problems that require additional (but beneficial) work

I want to focus on this last point a little bit (hence the bolding). By most standards, innovations in food technology that have made dairy replacement products (such as almond milk and coconut milk) more accessible are very positive developments. People who are health-conscious or sensitive to dairy now have alternatives, and for the rest of us, well, at least we have more options. However, at the same time, large corporations have not responded as quickly as these new products have grown, and now we have a problem: way too much milk that might go to waste.

The concept of a widely praised solution creating new and unforeseen problems is by no means new. You could argue that the single greatest “solution” of the last half-century, the internet, has created all of the problems that startups in 2018 are trying to solve. Good solutions move us forward; they help us progress. As a result, good solutions should create new and exciting problems for people or companies to tackle. Of course, the classic quote, “When one door closes, another opens…” comes to mind here. In the case of startups and new industries, however, a more appropriate version might be, “When one door closes, several more open.”

To make this point more concrete, reading this article reminded me of a beverage startup called Misfit Juicery, which I recently came across through work. Misfit Juicery uses misshapen fruits deemed too-weird-looking-to-sell to make its juices, reducing food waste by using ingredients that would have otherwise been thrown away.

Perhaps an even clearer example of the “one door closes, several more open” phenomenon comes from Airbnb. Of course, Airbnb has been a massively successful technology startup, offering traveling accommodations all over the world and receiving a $31b valuation in a funding round in 2017. However, in Airbnb’s wake, new problems (and new companies) have emerged. Specifically, hosts listing properties for vacation rental on Airbnb need a way to manage guests, market their homes effectively, and make the experience for their guests as easy and enjoyable as possible. From this set of problems, companies like Pillow (which has been successful in its own right, raising $16m in venture financing) were born.

Ultimately, the takeaway from the dairy companies’ misstep is not at all that the creation of new and helpful non-dairy milks is a negative development. To the contrary, some degree of chaos should ensue from truly great ideas.

Moreover, although entrepreneurs and investors often consider the big problems facing society when weighing a possible venture or investment, there is another strategy: consider the biggest, newest solutions that might create problems in the future. Sure, thinking about problems of today is necessary. But thinking about problems of tomorrow is much more powerful. Although no one can predict the future, following in the wake of the best new solutions is probably a pretty good way of being first to uncover new problems that need solving.