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Misfits Market is seeking a more (im)perfect union within the e-comm grocery space, announcing today its plans to acquire Imperfect Foods in a “mostly stock transaction,” Misfits CEO and founder Abhi Ramesh told Retail Brew.
- Philadelphia-based Misfits was valued at $2 billion last year after raising $225 million, while Imperfect was worth $700 million after bringing in $95 million in January 2021.
The two sustainability-minded online grocers, founded three years apart (Misfits in 2018 and Imperfect in 2015), share similar ethos around food-waste reduction, Ramesh noted. He said acquisition discussions began a few months ago, when Misfits connected with Imperfect investors and management as Imperfect was beginning a funding round and suggested the two join forces.
“Their team…said, ‘Hey, we agree. Capital markets are a little bit more challenging these days than they were a year ago and we see the brand alignment, we get the mission alignment, and we see the operational similarities and efficiencies, so let’s dive in,’” he said.
In the market: The two brands will “coexist” in the short term, Ramesh said, and will likely integrate over the next year (what that exactly looks like is still TBD, but they’ll eventually form a “unified brand.”). Their operations, however, will be consolidated more quickly, he noted, using both companies’ logistics networks to fulfill deliveries and merging their product assortments, including both companies’ private-label products (Imperfect has 100+ items of its own, Misfits rolled out its label Odds & Ends in April.)
- Ramesh will serve as CEO across the combined company, with Imperfect CEO Dan Park staying on during the transition.
Turning green: The deal offers “the scale that neither brand could really achieve standalone without a lot more time, a lot more capital,” Ramesh told us. That provides a “clearer path” to profitability by early 2024, with a predicted $1 billion in sales.
- On the consumer side, it’ll offer lower prices and free-shipping thresholds for consumers, plus cut down on its packaging use, he noted.
The online grocery space is “fragmented,” across players like Amazon Fresh, Instacart, and Walmart, Ramesh said. Through the acquisition—which Ramesh predicts will be one of many consolidation moves in the space—Misfits hopes to prove that e-comm grocery can actually make $$.
“This deal hopefully shows some of those large legacy incumbent players, the big brick-and-mortar retailers, that a true, pure-play online grocery company can get real scale and can get to profitability,” he said. “That’s also been something that’s been missing in this industry is people still don’t know if the economics of online grocery actually work at scale.”