Ecoark Holdings Inc (OTCMKTS: EARK)
For the millennial generation, holding the latest technological advances in the palm of their hands has become commonplace. Middle school children with iPhones, most owning smart tablets, are now part of an inter-connected social community that is taking far more personal action to bring about social change and to promote personal responsibility as citizens of the "world" than ever before.
Within that movement, there are a handful of select companies that are also taking on a leading role to endorse and incorporate more socially conscious methods of conducting business, with a goal of promoting sustainability, eliminating substantial amounts of waste and streamlining business processes with the intent to keep these savings perpetual.
Ecoark Holdings (EARK), for instance, is introducing an approach, through its subsidiary, Zest Fresh, that can literally save millions of tons of food per year, provide logistical solutions that can save fossil fuel resources and provide an important solution within the farm to market supply chain that can ensure quality, freshness and safety in the foods and commodities that consumers purchase.
What Is Zest Fresh And What Does It Have To Do With EARK?
Zest Labs is a subsidiary of Ecoark, a company that is piloting a supply chain enhancement system to address the significant challenge of reducing fresh food waste throughout the world. In the United States alone, estimates indicate that over $165 billion dollars worth of food makes it to the trash cans instead of hungry mouths. Part of the issue is simply irresponsible purchasing by consumers and businesses, other causes include inefficient expiration dates provided on packaging, often leading to spoilage due to the inaccurately calculated shelf life of perishable food items.
Contributing to the system wide inefficiencies and product waste factor is that preceding the emergence of the EARK "Zest Fresh" system, there have been very few, if any, products or systems that have had the capability to enable the tracking of perishable food products throughout the supply chain cycle. Prior to Zest Fresh, the food supply chain from farm to market was predominantly manifested by hand written documentation and loosely enforced safety inspections. Zest Fresh, though, can offer an immediate solution at every level of the supply chain, providing precise information as to how that food was handled, processed, transported and eventually put to sale to the end consumer.
Ironically, despite the enormous waste of valuable food and resources, EARK is one of the first companies to actually introduce a viable product and system that can immediately translate to increased freshness for the consumer, streamlined efficiencies to locate and eliminate failed processes that lead to waste, and specific and direct suggestions necessary to boost profitability for those in the supply cycle. In a multi-billion dollar market, EARK is the pioneer to offer a fully integrated, user friendly platform specifically designed to address two key drivers....be socially responsible to eliminate food waste and to allow its users to become streamlined, efficient and profitable.
A Simple Tool That Does All The Work
Zest Fresh, to put it in simplest terms, puts in place a mechanism that encourages both supplier and retailer to adhere to best practices and remain cognizant to quality and freshness guidelines. Or, they can go it alone and risk the chance that an entire shipment of product can be refused by the purchaser due to the lack of quality control and subsequent poor product quality.
The EARK tool provides both companies and workers with real-time tools and alerts that not only improve operational efficiency, but can also serve to demonstrate that the products being purchased from that company have the highest probability of being top grade, properly handled products. In other words, the Zest Fresh system can offer large quantity customers a high degree of confidence that what they will be receiving will be shelf ready and remain fresh for an extended period of time. And, for a retailer, that's the perfect recipe for an increasing profit.
Not surprisingly, when a supplier knows that they are being "watched", they will typically do the right thing every time. However, Zest Fresh is no "big brother", it's a tool designed to bring material and positive change to a business and industry, intended to reduce unnecessary waste and eliminate the loss of potential revenue by reducing waste.
Is Zest Fresh, Accountable To Freshness
The concept is relatively simple, however, the science, data and technology behind the Zest Fresh system will be difficult for any potential competitor to duplicate. Taking into consideration the strong IP portfolio at EARK and the barriers to entry get even higher after Zest Fresh is introduced.
The system works by placing a small sensor based transmission device onto a pallet of food. This device stores, records and transmits, in real time, the logistical journey of that product. The EARK system will provide the purchaser with vital information about the purchase.
Zest Fresh can identify if the critical temperature zone has been breached, record in exact time how long the product was in transit and provide additionally important information as to whether the items have been moved or stored in an unacceptable staging area. With these measures in place, a customer is treated to better quality product with a historical manifest to ensure its safety.
The Benefits Of The EARK System Are, Well, Systemic!
Not only does the customer benefit, the seller does as well. The Zest Fresh system offers both the production and transportation companies with a logistical "first in first out program" for the product, replacing the antiquated eyeballing of pallets with the hope that conscientious employees rotate the product. To that end, the Zest Fresh system dictates which pallet should be loaded first, which should be sold first and manifest deliveries to maximize quality by delivering product in a "freshness sequence" that provides top grade product to both wholesale and retail sellers.
The transmission tag uploads real time data to a hand held computer or tablet, providing instantaneous information at each level of the supply chain. The software that drives the system can use predictive analytics to predict product failure or can be used to predict when a product will fail, or lose freshness. Ultimately, the goal is to extend shelf life for food, maximize efficiency in how the food is handled through environmental factors and then use the analytical tools to predict how many days of freshness the product has remaining. Having this knowledge leads to more products on the shelves, which translates to more dollars in the register.
The beauty of the Zest Fresh system is that it is applicable at every stage in the supply chain, allowing for broad industry adoption. Here's how it can work.
Farmer Uses Zest Fresh
A farmer can often be the party blamed for inferior quality products. Without Zest Fresh, he has little defense. With the system, however, he can monitor the flow of delivery for each of the products sold. He can ensure that appropriate measures were in place at all times to maintain the products quality and freshness. He can remain fully appraised of the best storage and transportation processes and become aware if the product was detoured from its intended path.
From a business perspective, EARK is helping to save money with Zest Fresh by cutting waste, refines the pre-harvest season and defines a portrait of quality for his products. If the farmer knows the customers are watching, you can bet that he will perform even better for them. The farmer also remains part of the information loop to provide valuable insight and information as to how or why the vendor is seeing waste in the purchase. Maintaining a streamlined and accurate line of analytical communication builds increased confidence in the grower and vendor relationship, building trust that each are committed to preserving the quality and integrity of the products being sold to consumers.
The next value added component of using Zest Fresh technology takes place at the wholesaler level. These are the entities that sell to retail outlets or sometimes directly to consumer. For the wholesaler, quality is crucial to remaining successful in a business that is not short of competition.
Vendors use Zest Fresh to track real time data related to product temperature, time traveled and product variance due to storage facilities that can affect a products freshness. But more importantly, wholesalers can utilize the systems analytical tool that can predict the length of product freshness as a key driver to promote sales and storage efficiency within their own sales channel.
While the FIFO method of selling goods is still commonly recognized, the Zest Fresh system will provide a wholesaler with information specific to a product pallet, allowing them to shuffle product sales as necessary to take advantage of the data provided by Zest Fresh, which analyzes product characteristics as well as purchase date. Simply because a pallet is first in does not make it an automatic first out, this is where Zest Fresh provides significant customer benefit.
The wholesaler also has the benefit of tracking temperatures and logistics, in real time, to ensure the safe transfer of all food product, isolating themselves from potential liability in food borne illness cases that are beginning to permeate the industry landscape. In any business, information is power, and owning a data set that memorializes the journey from farm to consumer can be a critical component to not only protecting their business, but to build and maintain strong relationships with clients.
The consumer receives the ultimate benefit, at least from a freshness standpoint. While the retailer may find a benefit to sharing the logistical data with the customer, the consumer ultimately provides their endorsement by purchasing the food. It is not unreasonable to imagine several of the organic and whole foods based grocery chains demonstrating their commitment to quality by offering the Zest Fresh information as a guarantee of freshness and quality.
With produce being a commodity item, except by looking at the outer leaves or skin of a product, consumers must take the word of the retailer that the product has been handled properly and safely throughout the supply chain. Too often, these days, restaurants are in the news because of food borne illness related to lettuce, tomato and other commodity items. These occurrences are not only costly for the customers who get ill, the headlines associated to the illness can cost millions of dollars in lost product due to recalls and can cost tens of millions in market cap to publicly traded companies that may have served the food.
Once again, information is power...but, it can also be protection.
Ecoark Capital Structure
Here's the way I see it. EARK is offering investors an opportunity to take advantage of a multi billion dollar industry that is need of bottom up efficiency, that is, from the farm to market. If Zest Fresh can save the food industry a small percentage of its current waster, it is a vast opportunity for the food industry and EARK.
From a capital perspective, EARK is well positioned, with a small amount of debt and only 36.7 million shares currently outstanding and approximately 41 million shares on a fully diluted basis. From that, the trading float is relatively small with only about 10 million shares being traded in the open market. While EARK may experience some growing pains and potential dilution to raise capital, management appears to be focused on building the company through innovation and implementation, rather than by outright share dilution.
Zest Fresh Potential For EARK
It's worthy to repeat, for customers that use Zest Fresh, information becomes power. But, even more than that, Zest Fresh can also provide a farmer or distribution company with credibility. The use of the system demonstrates the willingness of the seller to take the extra step to provide exceptional service and uncompromising quality. Perhaps more significant, it also demonstrates the willingness of the seller to allow the buyer to peek behind the company screen, unafraid of what the buyer may see.
While technology continues to advance at tremendous speed, the reality in business is that people still make the difference. I spent over twenty five years in the restaurant business and remained with the same vendor and salesperson for that entire period. I did so because we built a relationship on mutual trust and confidence that each of us would fulfill our role in being responsible customers to each other.
Even though the Zest Fresh will never replace a person, it will certainly work to boost the level of trust in a mutually beneficial relationship. While many restaurants are fine with commodity grade products, many are explicit in regard to quality specifications and supply chain handling.
With patent protected technology, Zest Fresh is in a position to capitalize on a three tiered strategy, providing crucial information from ground to consumer. And, while freshness and quality is always a prime concern, the many millions of dollars that can be saved by modeling best practices from the data provided by the Zest Fresh system, the amount of food and resources saved in just a single year would be enough to feed millions of people a month.
Thus, from a social, economic and financial standpoint, the Zest Fresh system may be the most beneficial tool that has been brought to market in the food and hospitality industry in quite a long time. The benefit from farm to table is enormous, and in a world that is beginning to get squeezed by population growth, maximizing output and reducing waste will be crucial for the coming generations.
The EARK solution offers the best of all worlds for both the environmentally conscious and the business savvy...sustainability of resources and bottom line profitability. And, in which ever order gets priority, it still delivers a win/win proposition for all involved.