Insight has a strong track record investing in direct-to-consumer, but even more so in the food industry. A few notable investments include DeliveryHero, HelloFresh, ezCater, and Freshly. The last time we welcomed a direct-to-consumer food business to the Insight portfolio was Freshly in July 2016. So, what is driving Imperfect Food’s value proposition to resonate so well with customers, and subsequently attract an investor like Insight Partners who has numerous big wins in the direct-to-consumer food space?
Imperfect delivers quality food at affordable prices while on a mission to eliminate food waste and build a better food system for everyone.
Quality food. It’s worth actually peeling back the onion to truly understand just how retail standards work today. Retail grocers, where most of America shops at, are picky. They require "shelf appeal,” and because of this the US Department of Agriculture requires its farmers to bucket produce into a quality grade that is a sliding scale: No. 1 or "Extra Fancy,” No. 2, No. 3 and so forth. Companies like Whole Foods and Kroger will only buy No. 1 grade. Taken directly from the USDA, No.2 has "fewer desirable characteristics in appearance and/or marketability." To be extra clear, the only difference is appearance. It is this No. 2 produce that often goes to waste.
Imperfect sells quality organic and conventional produce and groceries that, for the most part, is No. 2 grade. The only difference from the carrot that they sell, compared to the carrot at Whole Foods, is the shape.
Affordable prices. Imperfect created a new market to reduce waste and help bring quality food to market, affordably. Farmers will try to sell their “ugly” or excess supply to food processors or juicers for example, but for the most part this bucket of produce will go into the ground to enrich soil. Meat producers are not dissimilar; say a client requests 6 oz. filet mignons, but after cutting filets they have a bunch of leftover 4-5 oz. filets that are dubbed useless. They would probably process it into burger meat, but burger meat sells at a fraction of the price of a filet mignon. Imperfect creates a new channel for those producers to sell to, and as a result, Imperfect is able to buy at discount while economical for the producer and resell at a discount to customers.
Mission. Imperfect’s mission is to find a home for the nearly 40% of produce that never leaves the farm, either because of unforeseen circumstances like weather, food system inefficiencies or high retail standards. They work around the clock with farmers, food manufacturers, and logistics services providers to recover perfectly good food and divert it to households at an affordable price.
All in all, Imperfect represents a Win-Win-Win for consumers, farmers and the food system. By directly connecting consumers with “ugly” or excess quality products, Imperfect:
- Makes it convenient and more affordable for consumers to buy quality food
- Makes it more profitable for farmers for any given harvest given higher yield on “ugly” or excess produce
- Reduces waste, promotes sustainability and efficiency
This investment comes at a time when the COVID pandemic is resulting in an economic crisis with spiking unemployment and price-sensitive consumers. Stay-at-home orders have caused a surge in online activity and catapulted the e-grocery industry into experiencing more growth in these last few months than the past decade. To make matters worse, the food industry is suffering while most hospitality businesses come to a halt, resulting in unprecedented levels of food waste.
The above translates to a business that is growing like a weed. In May, Imperfect had a 90K person waitlist, and because of the fundraise they have been able to expand capacity dramatically and satisfy the pent-up demand entirely. Imperfect Foods is a ScaleUp in hyper-growth mode, and the proceeds from the investment round will ensure that they can maintain a strong customer experience as they expand rapidly. As an investor in some of the leading food-related consumer businesses in the world, it’s hard to overlook a business with such a full-package offering.