Consolidation is occurring in the “ugly produce” space.
Two online grocers focused on eliminating food waste are coming together.
Misfits Market, an online grocery platform in the “ugly produce” space, is acquiring online grocer Imperfect Foods. Both retailers seek to reduce supply chain costs, lower prices, and reduce food waste by directly sourcing food items which may not have an appearance deemed acceptable by other grocery retailers but are fresh and high-quality.
According to Misfits Market, the planned acquisition will put the combined business on track to cross $1 billion in sales and reach profitability by early 2024. While the brands will continue separate operations in the short term, Misfits Market founder and CEO Abhi Ramesh will serve as CEO of the combined company, with executives from Imperfect Foods joining the Misfits Market leadership team.
“We have a tremendous opportunity to advance the shared mission of both brands, which is nothing less than a fundamental re-imagining of both the grocery category and the broken U.S. food system,” said Abhi Ramesh, CEO and founder of Misfits Market. “The strengths of the Imperfect Foods organization, from its in-house delivery fleet and robust private label program to its sustainability commitments and innovation, add immediate scale and depth to what we’re building at Misfits Market.”
“Scale matters in grocery, and this combination makes us a truly meaningful disruptor in the space,” stated Imperfect Foods CEO Dan Park. “Both organizations have made significant progress as individual brands—together we have already rescued nearly 500 million pounds of food that may otherwise have gone to waste, and driven innovation in a category propped up by antiquated technology and thinking. The combined experience and expertise of this newly merged team will exponentially increase our ability to take on established players in the traditional grocery space.”
These discount grocers are merging as all-time high food inflation is driving shoppers to look for value. According to a report from Information Resources, Inc., which recently merged with The NPD Group, July 2022 data shows that prices of goods remain elevated across grocery categories.
In response, the study shows that consumers are responding when promotions are available. In some of the most-promoted categories within the grocery channel over the trailing four-week period ending July 10, 2022, percent of dollar sales and percent of sales volume lift have increased significantly. Consumers are also “trading down,” or switching from a preferred brand or higher-priced product for one at a lower price point, in many categories.
Wilson Sonsini Goodrich & Rosati is serving as legal advisor to Misfits Market. Solomon Partners is serving as exclusive financial advisor to Imperfect Foods, and DLA Piper is serving as legal advisor to Imperfect Foods. The transaction is subject to regulatory approvals and customary closing conditions.
Misfits Market delivers organic produce, bakery, wine, and other grocery items to nearly every ZIP code in 48 states at up to 40% off traditional grocery store prices. Founded in 2018, the company is headquartered in Greater Philadelphia.
Founded in 2015, Imperfect Foods works directly with farmers and producers to rescue, redistribute and develop goods across multiple grocery categories, including its own private label offerings.