AI-powered grocery inventory startup Shelf Engine nabs $41M

Prior to the pandemic, average grocery profits hovered around 2%, mostly due to transportation and logistical inefficiencies. Shifting product demand and sales compounded these issues, with stores now responsible for 10% of U.S. food waste. This over-ordering not only costs profitability, but forces retailers to increase prices to make up for the losses. In April 2020, grocery prices showed their steepest monthly increase in nearly 50 years, led by rising prices for perishables like meat and eggs.

Shelf Engine has a plan to reduce food waste at grocery stores, and $12 million in new cash to do it

For the first few months it was operating, Shelf Engine,  the Seattle-based company that optimizes the process of stocking store shelves for supermarkets and groceries, didn’t have a name.

Co-founders Stefan Kalb and Bede Jordan were on a ski trip outside of Salt Lake City about four years ago when they began discussing what, exactly, could be done about the problem of food waste in the U.S.

Kalb is a serial entrepreneur whose first business was a food distribution company called Molly’s, which was sold to a company called HomeGrown back in 2019.

Shelf Engine uses machine learning to stop food waste from eating into store margins

While running Molly’s, the Seattle-based ready meal wholesaler he founded, Stefan Kalb was upset about its 28 percent food wastage rate. Feeling that the amount was “astronomical,” he began researching how to lower it — and was shocked to discovered Molly’s was actually outperforming the industry average. Confronted by the sheer amount of food wasted by American retailers, Kalb and Bede Jordan, then a Microsoft engineer, began working on an order prediction engine.

The project quickly brought Molly’s percentage of wasted food down to the mid-teens. “It was one of the most fulfilling things I’ve ever done in my career,” Kalb told TechCrunch in an interview. Driven by its success, Kalb and Jordan launched Shelf Engine in 2016 to make the technology available to other companies. Currently participating in Y Combinator, the startup has already raised $800,000 in seed funding from Initialized Capital, the venture capital firm founded by Alexis Ohanian and Gerry Tan, and is now used at more than 180 retail points by clients including WeWork, Bartell Drugs, Natural Grocers and StockBox.