The food supply chain is massive, and in a system so vast, it is inevitable there will be significant waste. The U.S. Department of Agriculture estimates that 30 to 40 percent of all food produced in the country each year goes to waste. According to a 2014 study conducted by the U.S. Environmental Protection Agency, America throws away more than 38 million tons of food every year.
Misfits Market, a Philly-based subscription box service, saw in these facts an opportunity: to deliver otherwise wasted food products to consumers at more affordable rates than supermarkets while creating a profitable business. How does it do it? It sells ugly produce direct to customers' doorstep.
"Our goal is to combat the food waste problem and focus on sustainability, [and] at the same time, provide affordable, healthy access to [organic produce for] the broader masses," said founder and CEO Abhi Ramesh.
Turning waste into a market opportunity
How does selling imperfect, organic produce accomplish this goal? Most farms throw out ugly or imperfect organic produce even though it offers the same nutritional value as its more aesthetically pleasing counterparts simply because supermarkets won't buy it. According to Ramesh, most produce is sorted into bins with the more visually perfect fruits and vegetables being sold to markets and restaurants while the ugly ducklings are typically just thrown away.
Ramesh, who began his career in finance, saw an opportunity in this flawed model.
"When I first heard about it, something clicked. I thought it was insane that this happens today," he said. "So I tied that back into my original ambition of providing affordable access to healthy produce."
Misfits Market was born. The company offers a delivery-box service that ships organic vegetables and fruits directly from one of the company's partner farms to customers in Pennsylvania, New Jersey and Delaware typically within two days of the order being placed. Boxes can be purchased on a one-time or subscription basis with prices ranging from $19 per box to $49 per box. Each box contains a mixed variety of fresh, organic produce for a fraction of the cost of what you would buy for the same items at a supermarket.
"It's a combination of the three pillars of our mission," Ramesh said. "Tackling the food waste problem … at the source of the problem, getting that food to customers at a lower cost than you'd get anywhere else, and enabling these small and medium-sized local farmers as much as we can."
Even though Misfits Market has only delivered boxes for a few months, the company has plans to expand service to New York and Connecticut.
Challenges to finding a niche for 'ugly' produce
Although it might seem easy to take produce that is considered less than perfect and connect those items to market outlets, it presented a massive logistical challenge to Misfits Market at the outset. Moreover, the company was dealing with perishable products – it had to find a way to not only move these items at scale but to act quickly and efficiently so customers were getting a fresh product.
"[I was surprised] by the sheer volume of things," Ramesh said. "When you actually … physically see just how [much] produce people won't buy, even at a single farm, you multiply it in your head by the number of farms in the country."
Still, one farm's surplus or rejected produce wouldn't be enough to serve an entire customer base, so Misfits Market had to aggregate a suitable supply by courting small and mid-sized farms throughout Pennsylvania. Once it had access to products at scale, Misfits Market then tackled the transportation challenge it faced of ensuring that produce arrived at customers' doorsteps 24 to 48 hours after it was harvested.
With those two major challenges solved and the infrastructure in place, Misfits Market began selling to its first subscribers, and it hasn't looked back since.
Finding additional opportunities to solve the problem of food waste
Misfits Markets' organic produce operation is now up and running successfully, and Ramesh said the company is in "rapid, rapid growth stage." However, that doesn't mean it's done leveraging the wastefulness of the current food supply chain. For Ramesh, expanding geographically is the current goal, but on the horizon is adding a similar program for meat products that due to cosmetic or food-labeling issues are disposed of rather than consumed.
"There is a broad landscape of food waste; there's a lot of mislabeled goods that get thrown out because labels are misprinted or upside down – things you and I would consider ridiculous – and they cannot be sold on regular grocery store shelves," Ramesh said. "That's something we can provide to customers for a significant discount for an otherwise perfectly fine product."
"Our goal is to be a national brand with misfit food, even beyond produce," he added.
Lessons for other entrepreneurs
It's a common axiom to avoid "reinventing the wheel," but in many cases, there are better ways of improving processes that have such far-reaching effects. In Misfits Market's case, a wasteful and inefficient food supply chain was almost begging for this service, which has created new revenues for small and mid-sized farmers, established affordable access to fresh, organic produce for customers, and allowed Misfits Market to grow into a successful business. Finding inefficiencies and addressing them doesn't always look like the hottest new software or innovative technology.
You also don't need a professional background in the space you're looking to operate within. Ramesh, for example, was trained in finance and had an eye for inefficiency. He also describes himself as "always having been entrepreneurially inclined."
"For me, from a business perspective, I found a market with an inefficiency and used it to get people benefits at scale," he said. "Seeing this stuff that was perfectly good thrown away clicked from a business perspective."
Taking that same mentality of leveraging an inefficiency in any industry to provide benefits at scale is a recipe for profitable disruption of a space. In Misfits Market's case, the result has been rapid success and growth.