“We have largely completed all components of the integration of the two companies, which was a massive undertaking... So, you can imagine bringing two supply chains together, two merchandising organizations together, two different technology stacks and ... two different teams with slightly different cultures ... We've been able to accomplish all of that over the past nine months and have seen really good results from that integration.”
The recipe for success: Leveraging the best of both, tapping into sustainability trends.
Last fall, Misfits Market announced the acquisition of Imperfect Foods and set a goal to reach profitability and cross $1bn in sales by early 2024. Over the last year, Misfits Market has focused on integrating the two companies and finding areas where they can streamline their business and create new opportunities, Farrell explained.
“The recipe for success was having a really clear idea of what we wanted to accomplish as we brought the two companies together,” Farrell said. “If you look at what Imperfect's strengths were and what Misfit's strengths were, what we wanted to do, as we brought the two companies together was leverage the strengths of each company.”
For instance, Imperfect Foods had a first-party middle- and last-mile delivery service, and Misfits Market is filling those trucks with orders that would have originated from the Imperfect Foods' side of the business, he added.
Misfits Market also is combining the two private-label brands under Misfits Market’s Odds & Ends brand, Farrell said. He explained merging the brands reduces prices, creates a “very sustainable private label brand and reduces food waste with the products.”
A major focus of the united Misfits Market brand will be to expand the offerings on Misfits Market's and Imperfect Foods' website, including private label options, Farrell noted. Misfits Market is also exploring expanding its private-label brand by tapping into the upcycled ingredient trend, he added.
“As part of the acquisition, we've expanded our assortment from around 550 items that we offer to customers to around 700. So, as we brought the two companies together, we've taken the best assortment from Misfits and Imperfect and are now offering it to customers. I really see an opportunity for us to potentially double that over the next year."
Another growth opportunity is using its online grocery platform to incubate CPG brands, Farrell said. “We can make small purchases and give the brand an opportunity to see if it resonates with our customer set. And if so, then we pick up the buying, and we order more."
What’s next for online grocery, Misfits Foods?
At the same time that Misfits Foods is looking to grow its business, online grocers have faced several key obstacles despite the proliferation of digital shopping apps and online shopping options. More consumers have returned to brick-and-mortar stores in search of deals and discounts, resulting in slight dips in digital grocer sales earlier this year. Consumers also face increased fees with online grocers, which influenced where and how they shop, Farrell noted.
“It's hard to make money selling groceries online, and so most of the companies had been historically investing heavily in loss-making online grocery shopping businesses, and the trends have changed on that. And so, consumers are being asked to pay more, whether that's through higher delivery fees or service fees or just different ways of passing the cost along to the consumer.”
To keep up with the changing online landscape, Misfits Market has focused on cutting costs through streamlining and improving profitability while staying true to its mission of reducing food waste, he said. And through its acquisition of Imperfect Foods, it can meet both objectives, he added.
“At Misfits, our objective is to reduce food waste and deliver great value high-quality products to consumers and make it easy for them to shop online. And as part of the integration, we've actually been able to reduce prices, both product prices [and] delivery prices." Farrell said. "Many of our customers we're now offering free shipping where they were paying for shipping before... At a time where a lot of other companies are increasing their fees, we are improving profitability while decreasing our fees.”