Does a misshapen apple picked up from the ground next to its mother-tree taste any less delicious than the plucked-from-the-branch, perfectly symmetrical and waxed-up fruit that’s currently awaiting your arrival at a neighborhood grocer?
Misfits Market founder and CEO Abhi Ramesh thinks not, and an apple orchard near his hometown of Philadelphia helped inspire the launch of his online-only grocery service in 2018.
“I saw the farmer there rolling thousands of apples that had been picked up off the ground into a shed,” Ramesh said. “I asked him about it and he said they were misfit apples that he couldn’t sell through traditional retail channels because they were misshapen or had a little dent or scar. He told me they try to sell them to secondary markets where they can become apple sauce or cider, but most of them would probably be tossed out.
“That’s really when things started to click for me.”
Ramesh immediately saw opportunity, not just in helping address the waste and inefficiency of disposing all that still edible organic produce, but what it might represent as a pathway to bring fresh and affordable food to his home city where large portions of the population live in functional food deserts.
“For me, launching Misfits Market was about access and affordability,” Ramesh said. “Almost a quarter of the people in Philadelphia live in a food desert ... if you drive 45 minutes outside of the city, there are farms growing organic products.”
Ramesh said his company’s model eliminates a whole series of product handling steps compared to traditional, brick-and-mortar grocers.
That leads to a direct, freshness benefit for customers who, instead of buying a product that has made multiple stops along a route that can include long-term cold storage, get produce that was in a field or orchard one week and on a customer’s doorstep the next week, with only a single middle agent in the mix, he said. And that box of fresh food can get to pretty much anyone with an address.
Along the way, the company says it has also kept some 225 million pounds of food out of the waste stream, about 70% of which would have been lost revenue for farmers and food producers.
Misfits Market has expanded beyond its original mission to bring ugly but affordable fresh organic products to its clients, and its offerings now also include meat and fish, plant-based proteins, baked goods, pantry goods and a newly added category, dairy products. The company also just completed construction of a giant distribution center in West Jordan that will function as the headquarters for its operations in the western U.S.
But don’t expect to be scrolling through page after page of options as a Misfits shopper. Ramesh said curation plays a big role in what does, and does not, make it to the online grocer’s shelves, but consumers can expect to see that same 30% to 50% savings across the board as the company looks for products that meet stringent quality standards but may have some other quirky anomalies.
“We’re looking for all sorts of products that are in surplus, off spec or have other issues, like mislabeling,” Ramesh said.
One recent example was 100,000 cans of imported olive oil. Great product, Ramesh said, but it made it to Misfits Market for a deeply discounted price thanks to a label that was perfect in all respects, except that it was mistakenly applied upside down.
Right now, Misfits Market features a selection of about 500 products and is aiming to grow to offer a couple thousand. That’s dwarfed by a typical grocery store that may have 40,000 items available at any one time. Misfits’ curated selection, Ramesh said, ends up making it easier for customers to find and purchase everything they’re after.
“No one really needs to spend three hours at a store browsing through tens of thousands of items to find what they need,” Ramesh said. “About 95% of most customers’ grocery lists are the same every week. We don’t need, for example, 30 different types of peanut butter to choose from. We have three or four.”
Misfits Market requires signing up for a no-fee membership and shoppers can set up their own delivery frequencies. Once a week, once a month or once in a while are all options, but so is the ability to have a regular standing order delivered every week. Shipping is a flat $5.50 per order to all ZIP codes, and the company delivers virtually everywhere in the 44 states it currently serves, including Utah.
The direct-to-consumer model with across-the-board discount pricing is drawing interest from a fast-expanding customer base as well as a growing list of investors. To date, the company has attracted over $560 million in venture investment and is currently valued at over $2 billion. Misfits Market customer lists and order volumes both grew at a 500% clip last year, and the company recently went live in the biggest consumer market in the country — California.
And, the company is cutting the ribbon this week on a mammoth, 200,000-square-foot facility in West Jordan that will be the base of operations for moving groceries to customers in the entire Western region of the country as well as some of the Midwest, Ramesh said. It’s the third facility of its kind for Misfits, joining other distribution centers in Delanco, New Jersey, and Dallas.
The West Jordan operation already has put over 150 new employees to work, none of whom are making less than the company minimum hourly wage of $15. Employee perks include free “shopping” at an in-house store featuring products that are nearing pull dates. Ramesh said staffing at the facility has the potential to grow to 800 employees in the next five years.
Misfits Market also received a post-performance tax credit package last year from the Utah Governor’s Office of Economic Opportunity that could earn the company about $430,000 in rebates. That maximum benefit would come on the heels of the company’s $25 million in capital investments in the state and over $27 million in expected wage payouts over the next five years for higher paying positions.
Following the state tax rebate announcement last year, West Jordan Mayor Dirk Burton celebrated the company’s decision to locate in his city.
“We are thrilled Misfits Market has chosen West Jordan as the permanent location for its new distribution and customer service facility,” Burton said in a statement. “This project aligns well with the many food-based manufacturing and distribution centers already operating in West Jordan and reflects continued confidence in the city’s stable business environment and excellent workforce.”