Imperfect Foods and its model to deliver misshapen fruits and vegetables — unwanted by brick-and-mortar stores — began just a few years ago and has already witnessed considerable growth, some of which it is farming into a robust private brand program.
The San Francisco-based e-grocer recently announced a $95 million round of financing that will help build its private brand portfolio, including namesake cooking oils, quinoa, grains, and even bath and body products like facial oil, avocado honey body butter, and shampoo. Imperfect Foods claims a subscriber base of 350,000 customers and said it reported triple-digit sales growth in 2020 versus the year prior and generated a revenue run rate in excess of $500 million.
As it looks to expand into being more than just an ugly fruit supplier, Store Brands spoke with Martha Hale, chief merchandising officer, on its store brand plans and more.
Store Brands: Tell me the Imperfect Foods story.
Martha Hale: Imperfect Foods started with an idea from our co-founder, Ben Simon, when he was a student at the University of Maryland. He noticed a lot of perfectly good food was being thrown away in the cafeteria, and in response, started a nonprofit on campus called the Food Recovery Network. From there, he joined forces with co-founder and chief innovation officer Ben Chesler and set out to make an even bigger impact outside campus walls. In 2015, they founded Imperfect Produce to take a bite out of food waste in an effort to create a better food system in this country. In 2019, we became Imperfect Foods as we expanded our categories and distribution to include everyday pantry items.
SB: How does the company source its imperfect produce?
MH: Our supply chain allows us to connect directly with farmers as well as wholesale distributor partners — it all depends on need. We have an incredible network and pipeline for learning about excess products and are proud to continually offer a viable revenue stream to our partners. With the majority of our partners, we step in once traditional retailers have rejected food because of arbitrary standards or because of surplus.
Our partnerships are highly collaborative which allows us to understand their challenges and changing needs. It’s not uncommon for farms to call Imperfect before tilling a field of produce after grocery partners turned down their supply due to unusual shapes and sizes. In situations like this, Imperfect Foods is happy to work with farmers to purchase their supply at a fair rate so that they can avoid writing it off as a loss.
SB: How has the pandemic and its shift to e-commerce impacted your business?
While our demand was high pre-pandemic, we saw a bump in subscribers at the onset of COVID-19. We accelerated back then, but continue to see growth and retention since last March when the shutdowns began. Being delivery-only and offering our own private label products, we already had a model in place that allowed us to serve our customers. We've also been able to act quickly and nimbly to support small producers who have been hit hard by the pandemic and rescue food from other unlikely industries. For example, we sourced snack trays destined for JetBlue flights, popcorn destined for movie theaters, granola destined for college cafeterias, and more.
SB: When did the company begin to think about private label and what was the strategy/mission going into it?
MH: When it took off in 2019, our private label program was focused on food rescue buys and as we began to expand, we evolved into what we offer today. To us, private label is where companies gain their distinction from other companies. We knew that our private label should be about storytelling but also that each item has to taste good and delight the customer as well. From our chocolate-covered pretzel pieces to our dried mango, the main ingredients have a story that helps drive our mission. Plus they’re delicious!
SB: How many total private label products are available from the company and in what categories?
MH: We currently offer up to 103 products under our private label (dependent on seasonality), and by the end of 2021, we hope to be at 200. As of 2021, our private label makes up 34% of our overall offerings. Customers can find anything from meat and seafood to pantry items, and most recently, health and beauty items.
SB: What are some of your favorite private brand products and why?
MH: My personal favorite private label items to launch were the items in the holiday collection last year, including Nutty Toffee Morsels, Broken Almond Pieces, and Peppermint and Dark Chocolate Covered Pretzel Pieces — a holiday twist on the pretzel pieces we currently offer. The holiday assortment was our first venture into whimsical packaging design, and our customers really loved them.
SB: What’s the process of coming up with an item to include in the private label assortment — do they need to reflect the roots of the company in some way?
MH: Similar to our company values, each product under our private label touches sustainability in some way. Whether we’re buying misshapen or off-colored pantry items, like our spaghetti and not so tri-colored quinoa, or chunks of poultry and seafood, like our bacon ends and broken shrimp pieces, the products must align with our overall mission of eliminating food waste.
SB: How do you source suppliers for your private label products?
MH: Every source is vetted. Whether they have a sustainability mission similar to ours or they’re mission-neutral, but purchased at a great price, we like for our products to have a story at the very least.
SB: What trends are you looking at for future Imperfect Foods private label products?
MH: We definitely want to grow into more categories — this has been proven successful with our health and beauty launch. What’s next for our private label products depends on what the customers are looking for. We really enjoy listening to what their needs are and implementing them into what we offer.
SB: How do you promote your private label products on your site and through your program?
MH: During customers’ shopping windows, they can easily navigate through our website to find what’s “Exclusively at Imperfect.” There, they will find our wide assortment of private label products from our dried mango to our delicious cinnamon bread. In addition to this, we share information on our private label assortment on our blog, The Whole Carrot, our podcast, Unwasted, and email newsletters packed with recipes.
SB: What’s the ultimate goal for the company, where should we expect to see Imperfect Foods in the next five years?
MH: Long term, we aim to be stronger in our product assortment and accelerate our private label to reach at least 80% of what we offer on ImperfectFoods.com.