Imperfect Foods’ perfect plan

Talking with CEO Philip Behn about the online grocer’s growth plan and focus on sustainability

The food offerings sold by Imperfect Foods often look, well, weird. A twisted carrot. A skinny bell pepper. An oddly shaped piece of salmon. So what? It all tastes the same.

On that premise, Imperfect Foods was founded in 2015 with a goal to help eliminate annual U.S. food waste by 40 percent and help build a kinder, less wasteful world. With its scheduled weekly deliveries of sustainable food, the San Francisco-based company, owned by Flybridge Capital Partners, helps its customers save time, money, and the planet.

NRF spoke with Philip Behn, who has been CEO since 2019 and was formerly responsible for Walmart’s online marketplace business in the United States, about Imperfect Foods’ growth plans.

How did Imperfect Foods come to be?

We are a retailer that started in 2015. We put sustainability at the forefront of everything we do. We started with imperfect produce that was being rejected by larger retailers because it didn’t meet their beauty standards. Later, we added protein, dairy, and shelf-stable foods. We’re now an online grocery retailer with a mission to eliminate food waste and build a better food system.

What exactly are “imperfect” foods?

The unloved fruits and veggies we sell we buy at a substantial discount from farmers that we pass on to customers. The problems are purely cosmetic. It means something is off with the shape or color of has cosmetic damages. It doesn’t mean anything is too ripe or moldy.

Our products have no biological or quality problems. They just don’t look perfect. The ugly fruits and veggies we sell are 40 percent cheaper than the local grocery store.

"The ugly fruits and veggies we sell are 40 percent cheaper than the local grocery store."

Philip Behn, CEO of Imperfect Foods

Can you give me some examples of “imperfect” foods you sell?

Let’s say it’s a carrot. Well, the carrot might be twisted. It tastes the same, but it’s a little twisted. Or if it’s a bell pepper, it might be long and thin instead of round. Again, it tastes the same. What nature produces isn’t always homogenized.

How do you get most of your imperfect foods?

We mostly go to farmers and ask: ‘What are you not able to sell to the large retailers?’ It’s high-quality, fresh produce. It just doesn’t look the part.

How many farmers do you work with?

We work with about 240 growers. About 50 percent of them are very small, family-owned farms. The other half are larger farms that supply the retail industry across the U.S.

What about an example of an Imperfect Food that’s not a produce?

One of our most popular is chocolate-covered pretzel pieces. This is a brand that is made for retailers, but pieces break off during the chocolate coating process. We save that food that would have gone to waste and our customers get a great price.

Can you give me a few examples of how much cheaper your “imperfect” products are?

OK, let’s consider the Texas market. A retail competitor sells carrots for 79 cents a pound and we sell them for 55 cents a pound. Another competitor sells bell peppers for $1.42 each and we sell them for 99 cents. And another sells russet potatoes for 63 cents per pound and we sell them for 44 cents per pound.

What about shipping fees and subscription fees?

Unlike our competitors, we don’t charge a subscription fee. As for shipping, if you buy an order above $50, there is no shipping fee. And our orders are 100 percent customizable. There are no other charges.

How do you avoid charging a subscription fee?

Our formula is to own the “last mile” logistics and the “first mile” logistics. That way, we can squeeze out costs by working directly with growers and bypassing fees that others charge. Every-day low cost is an enabler of every-day low prices.

"Our formula is to own the “last mile” logistics and the “first mile” logistics."

Philip Behn, CEO of Imperfect Foods

How does your “first mile” and “last mile” system work?

We pack boxes in six cities in the U.S. and move the food via trucks to 65 smaller cities (in a hub-and-spoke manner). We have branded delivery trucks in those cities that deliver the orders.

What drives your customers to return?

We believe the vast majority of families actually care about sustainability. But most local retailers don’t care, so many consumers haven’t been able to find a sustainable alternative to grocery shopping. We tell them that with us, they can now buy sustainably without paying more.

How much do Imperfect Foods customers spend monthly on your food?

We don’t disclose our average. But it’s grown tremendously in the past 18 months as we’ve branched from produce to mainstream groceries. Nationally, about $120 per week is the average American family’s grocery spend — or about $500 per month.

Who can purchase Imperfect Foods?

We’re now in 40 states. We’ve already expanded significantly, and we will continue to until we are near every customer who wants to buy our product.

How do you market Imperfect Foods?

We prefer channels like Facebook and Instagram to reach likely customers. But we also advertise on network and cable TV. Sometimes we also have local activation with pop-up kiosks where we show the merchandise.

Any plans for physical retail locations?

We’re not against building some form of a physical store, but we have no plans for that yet.

Are there plans for more pop-up stores?

We like pop-ups. We use them to sign up people. Pop-ups give people a chance to see the products for themselves before they sign up to buy them.

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How did the COVID-19 pandemic impact your business?

There were two effects. Last April and May there were an enormous wave of signups. Customers were looking for alternatives to going to grocery stores. We saw hundreds of thousands of customers starting their service. Then, with the gradual reopening, people were still increasing their basket size orders because they like our products.

Since you are dependent on a constant supply of imperfect food products, how can customers depend on you to have the products they like every week?

We have developed a supply chain. We know what’s in stock. You can buy ugly carrots from us every week of the year. Eighty percent of our produce comes on a continued basis.

What are your growth plans?

We will continue signing up new customers. We will double down in cities where we already have a presence. We are adding new categories every week.

What’s been your biggest challenge?

Our biggest challenge was to operate during the pandemic. We’re a front-line business and our employees can’t work out of their living rooms. I can’t begin to tell you what it’s like to keep 2,000 employees safe and keep all the wheels moving.

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