The formula for success

This article first appeared in Enterprise, The Edge Malaysia Weekly, on December 30, 2019 - January 05, 2020.
Zhafri (left) and his business partner, Buquari Othman. (Photo by Haris Hassan/The Edge)

Zhafri (left) and his business partner, Buquari Othman. (Photo by Haris Hassan/The Edge)

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Sector: Agricultural technology

Problem being addressed: According to the Food and Agriculture Organization, roughly one third of the food produced globally for human consumption every year — about 1.3 billion tonnes — is lost or wasted. Fruit and vegetables, as well as roots and tubers, have the highest wastage rates of any foods at 40% to 50%.

Addressable market: According to the US Department of Agriculture, the world’s production of apples alone stood at 68.7 million tonnes in 2018/19 while that of pears and table grapes came in at 19.4 million tonnes and 22.1 million tonnes respectively.

Intellectual property status: International patent pending for StixFresh’s technology, a Sirim certification following a material toxicity test and GRAS (Generally Regarded as Safe) certification from the US Food and Drug Administration

Product description and USP: A sticker, the size of a 50 sen coin, coated with a composite of sodium chloride, beeswax and natural ingredients that can prolong the shelf life of fruit up to 14 days without affecting the nutritional value. The sticker, when applied to mid-sized fruit, dispenses the compound on the fruit and slows its degeneration.

Currently exporting: Yes, to Indonesia, India and the US

Industry challenges: Lack of funding for R&D, marketing and the scaling of its production facilities, as well as getting regulatory approvals in the countries it wants to enter.

 

It has been a year since StixFresh International Sdn Bhd embarked on refining and selling its post-harvest sticker technology. It is starting to make waves internationally, thanks to the opening of StixFresh USA, which has proved to be a bridge to other countries.

The compound that StixFresh inventor Zhafri Zainuddin discovered is made of sodium chloride. The composite was used to formulate a soil activator for rubber trees. He then mixed this with some natural ingredients and blended it with beeswax to be applied on a sticker that slowly dispenses the compound on the fruit it is adhered to, prolonging the shelf life of the fruit by up to 14 days without affecting its nutritional value.

The sticker was initially designed to be used on mid-sized fruit such as apples, oranges, mangoes, dragon fruit and papayas. Now, the company is doing R&D to expand its product range so that it can cater for smaller fruit and other products with a shelf life such as vegetables, meat, milk and flowers. “We have improved the stickers so they can be used on avocados, but we are still developing the formulation for rock melons,” says Zhafri.

StixFresh currently has a team in Belgium, led by Dr Patrick Van Dijck of the Flanders Institute for Biotechnology, analysing the compound to develop a fruit-specific formulation. Locally, the company is working with food technologists, Associate Prof Dr Noranizan Mohd Adzahan and Dr Noor Liyana Yusof of Universiti Putra Malaysia’s Faculty of Food Science and Technology.

“The research allows us to better understand the mechanism behind StixFresh and how the formulation reduces the metabolic activity of plant tissue as the shelf life strongly depends on this,” says Zhafri.

The company’s R&D efforts and expansion plans go hand in hand. This is part of its creative partnership strategy to expand aggressively in the countries it enters.

“Before penetrating a new market, we appoint a company there and grant it exclusive distribution rights. In the early stages, we appoint it to develop the technology as well as conduct research so that we can establish a footprint and gain local confidence,” says Zhafri.

For its Indonesian expansion, it has successfully launched a strategic joint venture with PT Ardaco Mitra Artha and Tamza Global Sdn Bhd. The partnership is aimed at introducing StixFresh to the country’s fruit retail segment and distribution market.

In September, it officially entered the Indian market. The country is the largest producer of mangoes in the world — an estimated 18 million tonnes of mangoes were produced last year and the number is expected to grow in the years ahead. StixFresh has a strategic partnership with Ritz Global (Hong Kong) Ltd in India.

“StixFresh was introduced in India at the Agri Asia 2019 and Dairy Livestock and Poultry Expo Asia 2019 concurrently, and Grainmach Asia 2019 in Gujarat in the first week of September,” says Zhafri.

As for StixFresh USA, the founders there were the ones who set up an R&D facility in Flanders, Belgium, to kick off phase one of a study to characterise and optimise the StixFresh formulation. “Early this year, we launched an IndieGoGo campaign to raise funds and managed to generate US$16,000. We sold about 20,000 stickers,” says Zhafri.

StixFresh has signed a memorandum of understanding with South Korea, where the technology will be tested by the Ministry of Agriculture, Food and Rural Affairs. In Turkey, the company is negotiating with the representatives of The Scientific and Technological Research Council of Turkey.

Its partnership in the US looks very promising and over the past year, it has managed to attract the interest of other countries to further develop its product. The company has managed to get the attention of potential customers in Japan, South Korea, Thailand, Turkey, the Philippines and the Middle East.

“We have seen interest not only from end-users and companies willing to expand the product with us but also a lot of angel investors and venture capitalists. When we started out, not many people wanted to work with us because we were focused on R&D. But now that we have proven the potential of our product, more and more investors have been knocking on our door,” says Zhafri.

At the time of writing, the company was actively preparing for a fundraising exercise. “The aim is to strategically position ourselves as a serious player in the trillion-dollar food security market,” he says.

“For that, we need internationally recognised talent from the field of food technology and a full tech team to create supporting applications and infrastructure for food security development. We believe we have what it takes to deliver solutions in this highly lucrative market.”

 

The international challenge

Although raising capital was one of the major challenges when expanding to other countries, the biggest challenge was introducing the product into each market, says Zhafri. Since StixFresh is a product that deals with food, each country has its own authority (similar to the US Food and Drug Administration) whose approval the company requires to enter that market.

For example, in Indonesia, it needed to be certified by the National Agency of Drug and Food Control (known as Badan POM). In India, it needed an endorsement from the Indian Institute of Packaging, which comes under the Ministry of Commerce and Industry.

“We collaborate with local companies because they know the business culture and where to get the necessary certifications and verifications. If I do not collaborate, as a start-up company with limited funding, it would be difficult to penetrate the market. This way, we can get a proper endorsement that our product is good and can be used locally,” says Zhafri.

 But it is always a challenge to find the right partner. The company has been trying to enter Thailand and China, but has not been able to identify the right partners. “A few companies approached us, but their plans did not jive with ours,” he says.

The partners need to be in sync so that StixFresh is able to carry out its mission to reduce food waste around the world. “We look for companies that are of the same mindset and have the same understanding,” says Zhafri.

In India, the process took about seven months. The time needed to understand the product and the company’s mission can act as a deterrent to potential partners. “We want our joint ventures to have a deeper meaning and not just be about the money. We want to do product development and market research, among other things, with interested companies,” he says.

When StixFresh started, it operated out of a factory in Senawang, Negeri Sembilan. When it began mass-producing its stickers, it only had one machine. Now, it has three, thanks to its investors’ contributions. “If all goes well, we will open a 2,400 sq ft factory in Nilai,” says Zhafri.

“We are quite happy to say that we have locked in contracts for an estimated year-on-year growth trajectory of 80 times. This completely surpasses all of our expectations, but we attribute this growth to the global demand for the prevention of fruit wastage technology, especially those with non-invasive procedures.”

Since securing the Asean Rice Bowl Startup Awards 2018 prize for the Best Food Tech/Agritech Startup, the company has won several international awards. At the World Food Innovation Awards this year, StixFresh USA took home two awards — Best Packaging Technology and Best Sustainability Initiative. At the 2019 Asia Food Innovation Awards, StixFresh grabbed the Best Technology Innovation award.