How Imperfect Foods adapted to doubled demand during coronavirus

<p>Thanks to its ability to quickly scale, <a href=\"https://www.imperfectfoods.com/\" target=\"_blank\">Imperfect Foods</a> has seen immense growth throughout the COVID-19 pandemic. Since January, the San Francisco-based food subscription service says that its&nbsp;weekly order volumes have doubled and they are “on track” to save more than 200 million pounds of food from going to waste in 2020.</p>\n\n<p>Ed O’Malley, Imperfect Foods’ vice president of merchandising, says that the company — originally launched as Imperfect Produce in August 2015 — has seen “more than a 40% growth in our active user base.”</p>\n\n<p><img alt=\"Ed_OMalley_x_DSC0655_(2).jpg\" embed-exclude=\"\" src=\"https://www.supermarketnews.com/sites/supermarketnews.com/files/Ed_OMalley_x_DSC0655_2.jpg\" style=\"float:left; height:260px; margin:10px; width:300px\"></p>\n\n<p>O’Malley (left) declined to share additional specifics about the number of active users or customer totals post-coronavirus, but says&nbsp;that&nbsp;“the positives have been taking on more food and the growth of our subscriber base.”</p>\n\n<p>That agility resonated with the investors&nbsp;who helped Imperfect Foods raise $72 million in a Series C funding on May 20 led by capital from Insight Partners.</p>\n\n<p>“The grocery industry has been evolving for years, yet this particular moment highlights&nbsp;an urgent need to reinvent our food supply chain with innovative technology, and keep people safe,” said&nbsp;Adam Berger, managing director at Insight Partners, who will be joining the board of directors at Imperfect Foods.</p>\n\n<p>It hasn’t hurt to have celebrities including the&nbsp;NBA’s Kevin Durant and Chancelor Bennett, AKA “Chance the Rapper,” invest either.</p>\n\n<p><strong>The biggest challenge? Increasing production</strong></p>\n\n<p>That doesn’t mean the road to ramping up production in the past few months has been easy.</p>\n\n<p>“There have been a lot of difficulties because of coronavirus,” O’Malley said.</p>\n\n<p>The biggest challenge, according to O'Malley, has been adjusting to “the huge ramp-up in volume” and having the operational capacity — and management — to quickly handle that kind of volume increase. This has greatly&nbsp;impacted the company’s fulfillment centers.</p>\n\n<p>“It’s just not easy to manage a huge increase in volume like that,” he says. “We've been doing it week in week out, but it's a people business, and people are worried about [COVID-19]&nbsp;as you've got this additional workload.”</p>\n\n<p><strong>Leaning on a local food&nbsp;supply chain </strong></p>\n\n<p>Last October&nbsp;the company rebranded as Imperfect Foods&nbsp;after the boxed fruit-and-vegetable delivery company known for its “ugly produce” expanded to include meat, dairy, seafood and other shelf-stable items such as&nbsp;coffee and avocado oil that had slight variances, surpluses or were “short-coded” with an expiration date less than several months away, making it unworthy of being stocked on a grocery store shelf.</p>\n\n<p><img alt=\"Imperfect_Foods_Grocery+Produce_Lifestyle_(1) (1).jpg\" data-caption=\"Although Imperfect Foods sources from Mexico and Canada, the company says “well over half” its food comes from the U.S., among approximately 300 growers and producers.\" data-credit=\"Imperfect Foods\" embed-exclude=\"\" src=\"https://www.supermarketnews.com/sites/supermarketnews.com/files/Imperfect_Foods_GroceryProduce_Lifestyle_1%201.jpg\" style=\"height:442px; width:800px\" title=\"\"></p>\n\n<p>Several months later, COVID-19 hit the United States.</p>\n\n<p>O’Malley says Imperfect Foods’ ability to source food and manage its logistics during coronavirus has significantly helped the company stay afloat.</p>\n\n<p>Although Imperfect Foods sources from Mexico and Canada, O’Malley says “well over half” comes from the U.S., among approximately 300 growers and producers.</p>\n\n<p>“About 80% are family farms and another 15% or so are co-ops, food hubs and brokers representing small farmers,” O’Malley said. About 45% of the total volume is organic farming.</p>\n\n<p>Imperfect Foods has six U.S. fulfillment centers located in the Baltimore, Chicago, San Antonio, Los Angeles, San Francisco and Portland areas. Workers are able&nbsp;learn about each market on a deeper-than-usual level.</p>\n\n<p>“We were fortunate as a company to have our infrastructure in place,” said O’Malley, who manages the inbound logistics of getting food from farms onto trucks to ship it to the fulfillment centers.</p>\n\n<p>Imperfect Foods soon implemented new safety procedures that have quickly become industry standards including adding plastic guards, making masks mandatory and temperature-checking workers.</p>\n\n<p><strong>A purpose for unsold produce</strong></p>\n\n<p>Ask any grower-shipper: trying to predict how much to grow or what to grow can lead to problems.</p>\n\n<p>“The growing costs before you even get into the harvest, the packaging and cooling can be $10,000 an acre,” O’Malley said. “That’s a sunk cost.”</p>\n\n<p>And with most people farming&nbsp;3,000 acres or more, the costs start to pile up.</p>\n\n<p>Grower-shippers have to decide if they can recoup their “pick, pack and cool” costs for unsold&nbsp;produce or not.</p>\n\n<p>If you can’t recover those three costs, sometimes it’s not worth it. And when the quality of the produce doesn’t meet the marketplace’s cosmetic standards, that also leads to food waste.</p>\n\n<p>The juxtaposition of farmers who needed to get rid of surplus and consumers who were looking for alternative&nbsp;food sources during coronavirus ended up being the&nbsp;perfect storm that&nbsp;helped Imperfect Foods grow as a go-between company.</p>\n\n<p>“Most of the growers and coolers have not had problems with COVID-19 in their own facilities where they say, ‘We can’t harvest, we can’t pack or we can’t distribute’ because of COVID,” said O’Malley. “There’s only been a smattering of issues, and I haven’t really seen them cause any disruptions in the supply chain.”</p>\n\n<p>Imperfect Foods currently serves 400,000 subscribers in 38 states.</p>\n\n<p><em>For our most up-to-date coverage, visit the&nbsp;</em><a href=\"https://www.supermarketnews.com/coronavirus?pk=umblock\" target=\"_blank\" title=\"https://www.nrn.com/coronavirus\"><em>coronavirus homepage</em></a><em>.</em></p>\n\n<p><em><img alt=\"\" src=\"https://cet.informabi.com/sites/cetbi.com/files/NewHopeHeader_3_3_1_5_0.jpg\" style=\"float:left; height:56px; margin:10px; width:200px\"></em></p>\n\n<p>&nbsp;</p>\n\n<p><em>This article originally appeared on&nbsp;<a href=\"http://www.newhope.com/\" target=\"_blank\">New Hope Network</a>, a Supermarket News sister website.</em></p>