Selling directly to the consumer has been a boon to industries such as beauty, food storage and even mattresses. But food is particularly difficult to sell using a D2C model. Consumers buy a variety of foods at a market and are unlikely to start purchasing cases of their favorite chips directly from a manufacturer. Furthermore, shipping just one bag of chips is cost prohibitive. Finally, food is perishable and difficult to keep stocked for long periods of time, awaiting a consumer to click “buy” on their phone. These reasons add up to a slightly antiquated business model for the grocery industry. Read more about this in a blog post we published last year.
One startup plans to change the grocery industry and tap into a pseudo D2C business model as well. Imperfect Produce buys the “ugly” or surplus produce that farmers would have otherwise left in their fields. The company then ships subscription boxes of the produce to consumers looking for cheap alternatives to the reddest apples at their local supermarket. “We work directly with the farms and we’re buying directly from farms,” said Reilly Brock, a content manager at Imperfect Produce. According to Brock, Imperfect focuses on “the ugly and surplus produce because there isn’t a market for a lot of it. Despite the fact that appearance doesn’t impact flavor or taste or nutrition at all, most grocery stores won’t buy ‘ugly’ produce.”
Imperfect Produce’s primary focus is curbing food waste. Founder and CEO Ben Simon has been concerned about food waste since his college days. While at the University of Maryland he started the Food Recovery Network, a nonprofit focused on reducing food waste in college cafeterias. According to the company’s website, “More than 20% of the fruits and vegetables grown in America never make it off the farm because they aren’t perfect enough for grocery store standards.”
Imperfect Produce’s strategy is novel, but not everyone agrees that it’s perfect. Some worry that this national startup will cut into the profits by farms and co-ops who offer community supported agriculture (CSA) programs. In an article published on newfoodeconomy.org, a nonprofit called Phat Beets Produce writes, “Three years later and with a 30-percent drop in customers at our Beet Box CSA, we realized that we were being out-competed by a startup with a glitzy marketing campaign and venture-capital funding.” The article complains that this decline in business has led to cutting back on charitable outreach such as a free farmstand run by the non-profit in an underserved area. It goes on to criticize, “The company has helped to create a market for the “waste” created by industrial agribusiness, selling it to conscious (rather than needy) buyers by branding it as a form of environmental activism.”
When Ironbridge spoke with Imperfect Produce, they acknowledged that they’ve created a market for previously unsellable produce, but that doesn’t mean they’re now competing with food banks. Brock also acknowledged that farms need to be large enough to sell to Imperfect Produce. “Even after food bank donations, there’s billions of pounds of produce that they can’t move,” Brock said of the farms they work with. He continued, “They also don’t have a lot of incentive to pick a lot of this stuff…it’s cheaper to leave it in the field. So we offer an outlet for farmers.” Imperfect Produce can’t work with every small farm due to logistics. Moving produce is extremely time-sensitive and more about logistics than anything else, Brock explained. As for food banks, California’s food banks can only accept so much produce each year. With the majority of U.S. farms operating in California, that still leaves a huge surplus that would otherwise rot in the fields. Citing the NRDC, Brock says that the U.S. generates about 6 billion pounds of food waste each year. “It’s a multi-billion pound problem and right now we have a million-pound solution,” Brock says.
Imperfect Produce’s goals revolve around chipping away at the food waste problem in the U.S. True, a traditional CSA program is a purer form of D2C selling. But no CSA could achieve the scale that Imperfect Produce has in just three years. They currently operate in eight cities and have plans for expansion. In those three years, they’ve moved 30 million pounds of ugly or surplus produce. “We want to be a voice for change and positive reform in our food system,” Brock says, adding, “but we realize that we’re not the only solution.”
In the history of the grocery industry, no other company has made such strides in delivering a perishable commodity to consumers. Between the popularity of subscription boxes and the technology available, the market is ripe for opportunity in this area.
Stay tuned for more on D2C sales.
Written by Kim Kelly Consulting
