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Saved from the scrap heap: How online grocery brands Martie, Imperfect Foods and Misfits Market plan to reduce food waste

These direct-to-consumer grocery brands are trying to intervene in the food industry’s waste problem. How much of a difference can they make?

As part of its mission to save food from landfill, Misfits Market has built over one million square foot of refrigerated warehouse space across the U.S. (Photo: Misfits Market)
CATEGORY DIVE

The Honeycrisp apple — the fifth most popular apple variety in the U.S. — is the ultimate experiential crop, bred just for the moment of being bitten into.

The idea of the Honeycrisp is that, every time, it delivers a sweet, crispy mouthful. People don’t need to worry that they’ve picked up a mushy, floury, or otherwise bad apple.

But the uniform piles of apples you encounter at the grocery store are only a fraction of the Honeycrisps out there. It’s a tricky crop to grow, and it’s estimated that just 55-60% of them make it into retail. The rest are considered too big, small or blemished to be sold — even though they probably still deliver that crisp bite.

“If you’re buying a Honeycrisp apple as a brick-and-mortar grocery store, [there’s only one] spec you can buy because that’s what you want your customers to see on the shelf,” explains Abhi Ramesh, the founder of Misfits Market, an online grocery brand that sells “ugly” fruits and vegetables. “It’s also the only spec that all your warehouse management systems and logistic systems can support. But nature doesn’t work in perfect specs like that.”

The Honeycrisp is not the only food item that has this waste problem. In 2019, a whopping 54 million tons of edible food, or nearly 90 billion worth of meals, ended up in the landfill or incinerated, according to nonprofit organization ReFED — much of it due to imperfect appearances.

Uneaten food accounts for an estimated 18% of cropland use and 14% of fresh water use, making it not only a huge drag on farmers’ incomes, but also on natural resources.

Increased awareness of this problem has paved the way for change. There are now a number of brands in America that have launched specifically to intervene at points where food would normally be thrown away. Their big idea is that they can get good quality (albeit imperfect) fruits, veggies and other grocery items into consumers' hands, while saving them money at the same time.

Imperfect Foods, founded in 2015, says that it has saved over 163 million pounds of food from “lesser outcomes,” such as being left in the field to rot or sent to landfill, over its lifetime. The company sells groceries that have been sourced from farmers and manufacturers that wouldn't have ended up on the shelves, alongside its own-label pantry staples. It now has over 400,000 customers.

Misfits Market, meanwhile, says it has saved 228 million pounds of food since it was founded in 2018. It also says that it has generated revenues of more than $115 million for the suppliers from which it buys its products.

A new entrant to the space is Martie, which buys shelf-stable products from food brands and distributors that would have been thrown away due to packaging changes, rebrands or approaching best-by dates. Its service launched in November with over 400 items, including baking ingredients, pastas, and snacks. In its first two months, cofounder Louise Fritjofsson says the brand diverted 30,000 pounds of food from the landfill.

Seventy-five percent of the goods Imperfect Foods sells have been saved from lesser outcomes, such as going to landfill, while 25% are own-brand "staples". (Photo: Imperfect Foods)
The business of saving scrap food

The idea of saving food from going to waste, while also helping shoppers to cut down on their food bills, is a compelling one, particularly as consumers start to feel the pinch of inflation (in November 2021, food prices rose 6.4%).

Imperfect Foods, Misfits and Martie each source food products at a heavy discount from farmers, brands and food manufacturers they work with, who also provide regular updates on which items they are struggling to sell into traditional grocery stores. That discount is then passed on to the customer, who pays 40% less, or more, than they normally would for the same items.

As well as helping suppliers recoup some of their losses, Fritjofsson says Martie provides them with reports on how much food has been diverted from landfill, which they can communicate to customers. “We’re really helping them reach their sustainability and ESG (Environmental, Social, and Corporate Governance) goals,” she says.

But while it sounds straightforward, it’s not an easy model to make work. In October, Business Insider reported that Imperfect Foods was struggling with its pace of growth during the pandemic, as sales soared to a reported $400 million. Last year, the company reportedly went through two rounds of staff layoffs, while its founding CEO has also departed.

In the U.K., ethical online supermarket Farmdrop, which connected farmers with food shoppers, shut down in December after failing to raise additional funding. Even though sales had surged to £12 million during the pandemic, in 2021 its pre-tax losses stood at £10 million.

“The challenge is building the supply chain,” explains Madeline Rotman, head of sustainability at Imperfect Foods. “[That's] distribution, trucks, the flexibility within our [own] shelves and merchandising, and finding ways we can bring this food to consumers’ plates.”

Setting up an online grocery store is complicated and expensive. Food needs to be shipped from farmers to warehouses, and then to customers. Along the whole journey, temperatures must be controlled, or the food that's been saved could still end up in the trash. As the brands have expanded their ranges to ensure customers can do a full week’s shopping, they’ve also had to navigate the world of packaging. All of this process is made more difficult by the fact they are often buying and selling produce in non-standard quantities.

Misfits’ Ramesh says this infrastructure is why the company has accrued so much funding throughout its lifetime — $526.5 million, according to Crunchbase.

“The reason no one’s tackled this (problem) at scale [before] is because it’s really hard to build the infrastructure to power this,” he says. “We didn’t really realize how complex the operations would be.” To date, Ramesh says Misfits Market has built over one million square feet of refrigerated warehouse space across the U.S., which is staffed by over 1,200 employees.

Is selling imperfect produce the same as saving it?

The pressure is mounting on grocery stores and food manufacturers to cut the shocking amount of waste they produce, making partnerships with Misfits Markets, Imperfect Foods and Martie more appealing.

But there have been criticisms that the rise of the imperfect produce movement could actually reinforce waste as a feature, not a bug, of the food system. Now there are more ways to make money from surplus goods, why would producers want to reduce waste?

“There is always going to be some inventory that doesn’t get sold,” Fritjofsson says. “It doesn’t matter how hard you try.”

The way manufacturers incentivize food brands contributes to this problem — it’s cheaper to produce in larger volumes, and business owners are often weighing the risk of having too much stock with that of not having enough when customers are ready to hand over their cash. “So you’d rather overproduce, for a few different reasons.”

There are also criticisms that such online grocer models could be diverting food away from food banks and other charitable organizations working to feed hungry Americans.

Rotman, however, argues that “there’s not a silver bullet” when it comes to the problem of food waste. The problem is so large that it’s not feasible for one solution to absorb all of the food waste that exists, and Rotman says operations like Imperfect Foods working with charities will create a better outcome overall.

“It [will] take a network of partners to rebuild the system, and we’ve been partnering with folks like Feeding America since day one to elevate all of us,” she says. “There is so much food to be saved.”

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