Startup sees beauty in Misfits
A year and a half ago, Abhi Ramesh said he was visiting an apple orchard in eastern Pennsylvania when he first learned about the operation’s “crazy amount of food waste.”
For every apple picked from a tree, the orchardist told him, a dozen fell to the ground, some of them bruised, all of them unsalable.
Ramesh, already a serial entrepreneur in his late 20s, had a background in finance and had worked at a multibillion-dollar private equity fund in New York since graduating from the University of Pennsylvania in 2014.
The apple orchard, he said, was his “lightbulb moment.”
A few weeks later, he set up Misfits Market, a produce retailer that ships misshapen, “ugly” and discarded but otherwise perfectly edible organic fruits and vegetables to customers at a discount. The company shipped its first orders last August. It grew from four employees to 200, forged relationships with more than 70 regional growers, rescued more than 5 million pounds of produce and last week announced a $16 million private investment to fuel the company’s continuing expansion down the East Coast.
“It’s been a crazy 10 months,” Ramesh said.
The company, which first launched in the Philadelphia area, recently expanded service to Washington, D.C., Maryland, Virginia and West Virginia. Misfits Market expects to serve the entire East Coast by year’s end. Most of the company’s farmers are in the Northeast, he said, but some are in other parts of the country, such as the Carolinas and Georgia.
The company works with growers to buy edible organic produce often rejected by wholesalers and grocers for cosmetic reasons.
“We end up being grower-friendly,” Ramesh said. Supermarkets, for instance, often have stringent specifications for produce. “We tend to be kind of the opposite. … We’re market takers instead of makers on the supply side.”
Misfits customers can order boxes of organic mixed fruits and vegetables, including seasonal produce such as kale, cauliflower, potatoes and peaches, which reach the customer in three days or less. A 10-to-12-pound box costs $23.75 — less than the $35 to $40 a customer would spend on the same food at a grocery store or farmers market. An 18-to-20-pound box is $42.50.
Customers can save several dollars on each box by agreeing to subscriptions that ship every week or every two weeks. Families on a budget are typical Misfits customers, Ramesh said. Some are retirees on fixed budgets, and some live in food deserts where they can’t easily buy produce at grocery stores or farmers markets, he said.
“There’s a huge kind of word-of-mouth growth factor associated with saving produce and saving money on your grocery bill,” he said.
The company ships through several facilities across the country, and it recently opened a 141,000-square-foot industrial building in Pennsauken, N.J., to serve as its headquarters and cold storage distribution hub.
Misfits Market is one of several “ugly” produce businesses that have launched over the last several years hoping to monetize billions of dollars worth of rejected or surplus produce that ends up as livestock feed, fertilizer or in landfills. In 2014, more than 38 million tons of food was thrown away, according to the U.S. Environmental Protection Agency.
Two of Misfits’s competitors were launched by University of Maryland graduates. Ben Simon and Evan Lutz started Baltimore’s Hungry Harvest, another “ugly” produce business, in 2014. Simon left the company and created Imperfect Produce in San Francisco the following year.
The fledgling sector has its critics, however. Some food and sustainability advocates have said services such as Misfits Market could eliminate a significant produce source for food banks that serve the needy. Others fear they could lure consumers away from farmers markets that have become an increasingly vital source of revenue for many growers.
Ramesh said he sees only positives. Misfits Market serves every ZIP code in the states it services so that low-income families can benefit from the savings. It also works exclusively with small to midsize farmers, co-ops and distributors instead of sourcing its food from massive agribusinesses such as Dole, he said. Many of those smaller farms don’t have the resources or infrastructure to donate to food banks regularly.
“We’re buying stuff that doesn’t go there,” he said. “We work with all these folks in a very complimentary fashion.”
The industry provides another revenue stream for farmers, who are beginning to reach out to Misfits Market, Ramesh said. He encouraged interested farmers to email the company at email@example.com. They’ll probably have an easier time selling to Misfits than their local grocer.
“Our criteria is we’re pretty flexible,” he said.
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