1. Introduction

Around the world, 1.3 billion tons of food are discarded annually. Food waste not only emits 8.85 million tons of greenhouse gases every year but also incurs enormous processing costs. The U.S. Environmental Protection Agency (EPA) is proposing 'food upcycling' as a concrete action plan to minimize food waste (USEPA, 2019). According to the EPA, food upcycling refers to the process of reprocessing food by-products generated during food production into new products with higher added value. Korea remains in the early stages of the food upcycling industry, and domestic consumers have limited opportunities to access information or products related to this technology in their daily lives. This study aims to promote awareness of domestic food upcycling and seeks ways to encourage domestic companies to introduce related technologies and promote consumption by benchmarking and exploring practices from advanced countries abroad.

This project is closely related to achieving the 12th (“Sustainable Consumption and Production”) and 2nd (“End Hunger”) goals among the 17 United Nations Sustainable Development Goals (SDGs). First, recycling food by-products can contribute to reducing food waste per capita, as outlined in the 12th goal, and decreasing food loss occurring in the production and supply chain. Additionally, reducing food loss within the food supply chain through food upcycling can support food production and equitable food distribution, thereby securing and stabilizing the food supply in line with the second goal.

Literature Review Results

Literature on Effective Awareness-Building and Decision-Making Regarding Upcycling Products

In the study by Kim (2022), titled "Review of Food Upcycling in South Korea: Regulation, Limitation, and Prospects," examples, regulations, limitations, and prospects of the food upcycling industry in South Korea are discussed. An analysis of food loss rates from 2015 to 2020, based on data from the UN Food and Agriculture Organization, reveals that most foods experience a 0% to 10% loss before consumption [Figure 1]. In South Korea, upcycling by-products requires approval from the recycling environment evaluation system, except for some recyclable resources. Major limitations of food upcycling include microbiological and chemical risks, low marketability, stringent recycling approval procedures, and a lack of relevant regulations. Therefore, companies should actively adopt food upcycling technologies in line with ESG trends, and the government must rigorously review related regulations to promote industrial activation.

2. Materials and Methods

Methods

1) Market Analysis

For the analysis of the domestic market, we utilized the 5 Forces Model and SWOT Analysis techniques. The 5 Forces Model, devised by Michael Porter, is a framework that evaluates market structure and characteristics from five perspectives: the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, the bargaining power of buyers, and competitive rivalry within the market. SWOT Analysis is a tool used to identify strengths, weaknesses, opportunities, and threats of a company or industry, providing a macro-level understanding of the market environment. Additionally, to assess the financial performance of companies practicing food upcycling, we analyzed financial statements using data from CRETOP. For the analysis of foreign markets, we focused on overall industry trends, consumer perceptions, policies and regulations, and product case studies.

Measures

1) Company Interviews

Due to the low consumer acceptance of upcycled food so far, the project's direction was aimed at revitalizing the industry by raising awareness of food upcycling products among consumers. However, based on the sales analysis of the current food upcycling industry, it became evident that revitalization would require understanding difficulties and processes from both consumer and producer perspectives. Therefore, 10 interview questions were developed [Table 1].

Our research indicates that while there are many small and medium-sized companies in the food upcycling industry, they struggle with achieving substantial sales. For a more in-depth analysis, accurate financial information from these companies is needed. As this information is difficult to obtain online, we sought to gather it directly through interviews.

Due to the limitations of domestic market analysis via literature review, we aimed to directly gather insights from practitioners in the food upcycling industry. We selected Min Myung-jun, CEO of RE: HARVEST; Cha Hong-seon, CEO of Cornerstone T&M; and Lee Jae-won, CEO of Green Goods as interview subjects. Interviews were conducted in various formats: written, face-to-face, and virtual. The purpose was to understand current trends in the domestic food upcycling industry and gain insights into consumer perceptions. Topics covered included the motivation for starting the business, the process of selecting business items, revenue, connection with sustainability, and challenges in business operations (e.g., R&D, marketing and promotion, policies, and regulations).

Based on the list of questions, interviews were tailored for each company. Despite reaching out to numerous companies involved in food upcycling or environmental issues, only these three companies responded positively. RE: HARVEST initially requested a face-to-face interview, but it was conducted in writing due to scheduling conflicts. Non-face-to-face interviews were conducted with Green Goods, and a face-to-face interview was held with Banana Island.

Using various interview methods allowed us to gather insights from representatives without time and space constraints. However, it was regrettable that written or non-face-to-face interviews did not capture non-verbal information such as the internal atmosphere of the company.

Nevertheless, through interviews with companies, it was possible to grasp the strategy and approximate situation of food upcycling start up companies. In the case of B2B, cost competitiveness is key. For B2C, companies develop products that can access various channels, focusing on cost and quality competitiveness. The marketing strategy team identifies specific target group needs and incorporates them into marketing efforts. Companies also refer to examples and practices from North America, where food upcycling is more established. Therefore, based on the above, we visited the Zero-waste village in Kamikatsu, Japan, conducted interviews with companies related to overseas food upcycling, and explored various literatures to apply solutions to revitalizing the food upcycling industry to Korea.

2) Consumer Awareness Survey

In this study, in order to find out consumer awareness of food upcycling, an awareness questionnaire was conducted after tasting upcycling apple jam developed by researchers at the school's workstation street booth [Table 2]. The subjects of the questionnaire were 108 people (including Yonsei University students, executives and employees, and outsiders) who participated in the booth, and the question type was divided into 3 sections and set as the degree of recognition, comparison of upcycling apple jam and general jam, intention to purchase upcycling apple jam, and improvement. In addition, all questions were set as multiple-choice questions, except for one short answer question asking the reason for recommending apple jam.

For the Consumer Awareness Survey Research System, the study was largely composed of three stages. The first step was to set up the study, then the second step was to design the study, and finally, the data analysis and experiment were performed. In the research setting, the purpose of the study was clearly set, and then the problem based on the purpose of the study was set. After that, a conceptual reference system and research hypothesis were established. It was designed on the assumption that consumer awareness of food upcycling will be low. After setting up the study in this way, as the second step, the research design determines the research method and performance scale. Finally, the study was conducted with a system that analyzes the data obtained by direct performance, interprets the results, and draws conclusions.

The questionnaire was prepared by referring to the questionnaire form of the previous study Ju-Won Seo and others (Seo et al., 2023).

The survey was conducted by holding ‘Yonsei IHEI Work-street booth’ at Yonsei University. The survey was conducted by writing Google Form, and the survey period is Wednesday, Nov. 15, 2023, the day the booth was held. The subjects of the survey were 108 people who attended the same day that the booth was held at Yonsei University. Therefore, most of those who conducted the survey were students of Yonsei University or faculty members of Yonsei University. The survey participants were given a small reward, and the information they responded to was valuable as research data, and the collected information was not used or disclosed for any purpose other than reference purposes when researching or developing products. In addition, information on research ethics arising during the survey was presented to the participants in advance.

The survey had three main purposes. First, to promote food upcycling awareness and to sell PB products. Second, to sell "handmade apple jam" made with apple by-products remaining after the production of apple juice to check the marketability and market demand of food upcycling products. Third, to expand awareness of food upcycling. By planning a booth that sells jam, people raised awareness of food upcycling by holding an event to distinguish between upcycling jam and commercial apple jam, and confirmed market demand and marketability.

According to the results of the survey, 40% said they knew about upcycling, and 49% said they didn't. About 95% of people said they didn't know anything about food upcycling, which was quite high, compared to those who had purchased food upcycling products. In addition, nearly 93% of people felt the need for food upcycling. Through this, it was found that overall consumers' awareness of food upcycling was quite low. In addition, in the questionnaire comparing self-made upcycling apple jam with general commercial jam, there were many evaluations that upcycling apple jam tasted good or the same. Therefore, it was possible to judge that upcycling products are competitive in the market.

3) Zero Waste Village Exploration Interview

Through interviews with domestic and foreign food upcycling companies, the research was conducted to identify difficulties from the perspective of producers and improve them. Prior to the interview, RE:HARVEST, the company effectively grasped the company's position through the experience of making and selling upcycling jams from the producer's point of view and reconsidering the direction of the interview efficiently. Through employee interviews, we visited Zero Waste Village in Kamikatsu, Japan, and identified the virtuous cycle of resources and the role of residents, governments, and companies for this. In addition, by directly practicing Zero Waste through food upcycling, we identified the roles of each subject.

3. Results

Research Progress in the development of international food upcycling industries

1) Market Analysis Results

(1) Domestic Market Analysis

An analysis of financial statements indicates a common trend of increasing sales revenue but operating losses. The operating profit margin, indicating profitability, is negative, while the growth rate of sales revenue, indicating growth potential, is positive. This suggests that although it is challenging to achieve significant profits in the early stages of the industry, the future outlook is promising.

The market structure and characteristics analyzed using the 5 Forces Model are as follows:

a. Buyers: The buyers in this industry can be broadly categorized into ‘individual consumers’ and ‘food manufacturing companies,’ allowing for both B2C and B2B operations. B2C customers value sustainable consumption, while B2B customers are companies that use upcycled ingredients to manufacture final products for consumers. Hence, buyer bargaining power is high.

b. Suppliers: Since most food manufacturing companies generate food by-products, sourcing raw materials from suppliers is relatively easy. Additionally, it is possible to procure non-marketable agricultural products from fruit farms, which gives suppliers high bargaining power.

c. Industry Rivalry: The industry is still in its early stages, and the high entry barriers due to stringent product approval processes and technological development limit competition.

d. Potential Entrants: Although there are entry barriers, the ease of sourcing raw materials and low competition suggest that the threat of new entrants is moderate.

e. Substitutes: For B2C, the nutritional content of upcycled food products, such as protein and dietary fiber, can be substituted by other functional foods. However, for B2B, there are currently no substitutes that can match the carbon and food waste reduction rates of upcycled foods, making the threat of substitutes generally moderate.

The market environment analyzed using the SWOT technique is as follows:

a. Strengths: Increasing consumer interest in environmental protection and growing R&D investments by companies. Additionally, the variety of upcycled food ingredients is expanding.

b. Weaknesses: Lack of national policy and budget support for companies, and insufficient statistical data for market analysis.

c. Opportunities: Entry of large corporations such as CJ CheilJedang and CJ Foodville into the market, and the global growth of the industry.

d. Threats: Inadequate regulations related to upcycled ingredients, complex recycling approval procedures for food waste, and low awareness among the government and consumers.

Based on the above analyses, it can be concluded that despite current operating losses, the growth potential and future outlook of food upcycling companies are excellent considering sales growth rates and the market environment. Additionally, for the activation of the food upcycling industry in South Korea, it is important to expand consumer awareness. However, from a producer's perspective, considerations for sustainability are crucial. It is necessary to deliberate on the environment needed for producers to sustain the food upcycling industry domestically.

(2) Analysis of the U.S. market

The UFA defines upcycling food as ‘foods that use ingredients that cannot be consumed otherwise, procured and produced through verifiable supply chains, and that have a positive impact on the environment’, and three different labels are given depending on the percentage of upcycling ingredients. In addition, last year, the UFA secured a plan to reduce food waste and certification for upcycling food development in line with consumption trends.

In the U.S., an increasing proportion of consumers are looking for upcycling products, and the launch of food and beverage products using upcycling materials has increased by 122% in the past five years through the third quarter of 2021. According to the article (Green Post Korea, 2020), the association's study found that only 10% of consumers know what upcycling products are, while 60% are willing to purchase them. The article said the consumer's demand to adopt upcycled materials is increasing, and UFA is trying to address the knowledge gap among consumers in this area. In the U.S., 25 companies are currently certified in upcycling, and in October 2019, the government signed a new partnership with the Food Waste Reduction Association (FWRA) to continue industrial education and public relations activities with the Food Manufacturers Association, the Food Marketing Institute, and the National Restaurant Association.

(3) European Market Analysis

The EU and EU countries aim to reach the Sustainable Development Goal of 12.3, which is to halve food waste per capita every year by 2030 and reduce food loss through food production and supply chains. To this end, the EU has been actively implementing several schemes, including the Farm to Work Strategy, the EU's Circular Economy Action Plan, and the EU Waste Framework Directive, and France passed a law requiring restaurants to pack leftover food this year, after passing a law in 2016 that forced supermarkets to donate leftover food products. Italy is pursuing legislation that would allow retailers to actively participate in food donations, while the UK is launching campaigns to promote the consumption of ugly vegetables and fruits, and campaigns to prevent food waste by recycling discarded bread into beer.

Consumer Awareness Survey

First of all, only 10.2% of the respondents answered, "I know exactly what this concept is" when asked about food upcycling awareness, while 49.1% and 40.7% answered "I don't know" or "I've only heard of it," respectively. In addition, 94.5% of the respondents chose "None" when asked about the purchase of food upcycling products. When asked about the necessity of food upcycling, 93.5% chose "Yes." From the results of this response, it can be seen that most of the respondents do not know exactly the concept of food upcycling and have little experience in purchasing it, but they are aware of the need. Next, in the question of comparing upcycling jam with regular jam, 65.7% and 28.7%, respectively, answered that upcycling jam was better or similar in terms of "taste", while 56.5% and 20.4% mentioned that upcycling jam was better in terms of "nutrition", and 58.3% and 31.5% in terms of "appearance (color, shape), respectively. Therefore, it can be seen that from the consumer's point of view, upcycling jam is not better or much different in terms of taste, nutrition, and appearance than regular jam. As for whether or not they were willing to purchase the product, 97.2% chose "Yes," and the most common reason was "to protect the environment" and "because it tastes excellent.”

Key achievements

As a major achievement, first, they made profits by producing and selling upcycling jams. In addition, through the experience of producing and selling upcycling jams from the standpoint of producers, they effectively grasped the company's position and reconsidered the direction of interviews efficiently. Through consumer surveys, they recognized the rejection and prejudice of 'food upcycling' and 'upcycling jams’ and identified effective marketing plans. Second, through interviews with domestic and foreign food upcycling companies, they identified difficulties from the perspective of producers and conducted research in the direction of improving them. Through interviews with domestic Green Goods, Cornerstone TMN, and RE:HARVEST companies, they identified the degree of revitalization of the domestic food upcycling industry, and visited the zero-waist village of Kamikatsu, Japan, and identified the virtuous cycle of resources and the role of residents, governments, and companies for this through employee interviews. In addition, through financial statement analysis and overseas market analysis, they were able to systematically analyze domestic and overseas industries. Third, various activities were conducted to increase food upcycling awareness by providing educational services, mentoring for social innovation, attending various lectures, distributing card news and videos on SNS channels, and appearing in upcycling planning videos of the Higher Education Innovation Institute.

4. Discussion and Conclusions

The above paper aims to derive implications for building the food upcycling industry. However, in the process, it is essential to increase byproducts awareness. Therefore, prejudice against food by-products and upcycling foods must be resolved. In addition, the food upcycling industry should be further expanded by practicing zero waste in real life or helping byproducts wasted by companies to be born as new products through the B2B method or the B2C method through the essential concern about zero waste, like in the village of Kamikatsu, Japan. Finally, the government plans to revitalize the parent fund and private investment to expand the food upcycling industry so that the food upcycling industry can be expanded. The expansion of the food upcycling industry will soon achieve the UN-SDGs' 12th and 2nd goals.

Therefore, it is necessary to study what specific policies are needed to revitalize the food upcycling industry in the future. In addition, it is necessary to study what marketing strategy techniques are needed to increase consumer awareness of food upcycling products and secure market competitiveness.

Implications

Compared to countries in North America and Europe, South Korea's food upcycling industry is smaller in scale, and the efficiency of processing facilities and the establishment of policies and regulations related to upcycling raw materials are still in progress. However, given the positive market environment and consumer response, the outlook for this industry is promising. If active bench-marking of international practices and diverse startup entries through private investment are achieved, food waste and carbon emissions—identified as major environmental issues—can be significantly reduced. Consumers will appreciate value-driven investments, while producers gain economic benefits through missions and visions directly linked to ESG management.

Expected Outcomes in the Mid to Long Term

1) Qualitative Outcomes

Establishing a sustainable food system through food upcycling aims at Zero Waste & Zero Hunger. As the food upcycling industry develops, nationally, there will be benefits such as reduced carbon emissions, decreased food waste, increased food production, reduced waste disposal costs, and improved nutrition for low-income groups. For companies, utilizing food by-products will provide a cost advantage, allowing them to produce functional foods with high nutritional value at minimal costs, thus leading the way in ethical consumption. On an individual level, this approach will enable the practice of environmental protection and the purchase of affordable, high-nutrition foods.

2) Quantitative Outcomes

Post-research performance indicators include the cost of upcycled food sales, crowdfunding amounts, and the number of views on upcycled food sales websites. For PB product sales, reducing suppliers' food material processing costs and generating profit through high-value-added products will yield social value. Additionally, marketing products to attract consumers will enhance overall consumer awareness.

3) Suggestions on Sustainable Management and Outcomes of the Project

Government support is crucial for ensuring sustainable business operations and effectiveness. As a result of overseas market analysis, in the case of Europe and the United States, the business is continuing to actively resolve consumer prejudice by providing food safety and reliability through legislation promotion and certification marks of the Upcycling Food Association.In order to achieve a sustainable food system in Korea, government support and the influx of large corporations are needed. In the long term, food upcycling can achieve a sustainable food system ahead of all economic, nutritional and environmental aspects. Due to the nature of this study, it is a global scope of research, so the influx of government support and corporate investment in the business increases the sustainability of business operations and effects.

4) Limitations and Areas for Improvement

During the research and development phase, challenges included the extraction process of useful products from food by-products and the difficulty of obtaining government support, especially due to lack of information on usable by-products. In marketing and promotion, low consumer awareness posed a significant challenge, affecting accessibility and sales during booth operations. Furthermore, planning and executing overseas exploration, including contacting companies and arranging interviews, faced numerous obstacles, such as information shortages and multiple interview rejections, requiring frequent plan adjustments. Contact and logistics issues with Japan's Kamikatsu village also consumed considerable time. In literature reviews, many financial statement-related aspects were not publicly disclosed, and the nascent stage of the industry made direct comparisons and information searches challenging.

Due to difficulties in contacting overseas food upcycling companies, interviews were conducted with companies focused on composting or energy recovery to achieve resource circulation, rather than with large corporations converting food by-products into high-value products. The difference in focus between the interviewed domestic companies and the direction of upcycling remains a limitation of the study. In summary, addressing the challenges identified in this research—such as enhancing consumer awareness, securing government support, and improving industry practices—will be essential for advancing the food upcycling sector, thereby contributing to the UN SDGs of reducing food waste (Goal 12) and ensuring food security (Goal 2), ultimately fostering a more sustainable and resilient food system.

Figure 1.

Food loss percentage (%) between 2015 and 2020 collected from the Food and Agriculture Organization of the United Nations (Kim, 2022)

References

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Figure & Data

References

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