Hungry for change, startup founder cuts waste by embracing ugly produce | Crain's Baltimore

Hungry for change, startup founder cuts waste by embracing ugly produce

Despite what Barbara Corcoran told him on ABC’s “Shark Tank,” Baltimore native Evan Lutz remains confident he has what it takes to run a successful business that also solves a social problem, because he’s doing it.

More than a year after appearing on the show, Lutz has grown his business' active customer base from 500 to 8,000, added 13 employees and expanded into an additional market. He's also trying to raise $2 million in funding.

His company, Baltimore-based Hungry Harvest, delivers boxed produce to customers in Central Maryland, Washington D.C., Northern Virginia, Philadelphia and South New Jersey at a 20 to 30 percent discount — a markdown made possible by the produce’s appearance, among other reasons.

“So much produce goes to waste, and not because it’s bad, but simply because it might have a little bit of scarring on the outside, or maybe it’s undersized,” Lutz said. “Other produce is rejected by grocery stores for logistical inefficiencies in the supply that cause it to go to waste.”

Indeed, roughly six billion pounds of produce end up in farmers’ compost piles and landfills each year due to cosmetic imperfections and logistical challenges, reports the Natural Resources Defense Council. Part of Hungry Harvest’s goal is to help put a dent in that problem through its delivery business model. The other part is to provide affordable produce to those in need. And there are plenty in need: More than 40 million people live in food-insecure households, according to 2015 data from the U.S. Department of Agriculture. By definition, food-insecure households lack reliable access to a sufficient amount of affordable, nutritious food.

That’s why, for every delivery it makes, the 3-year-old company donates 2 pounds of produce to families living in food deserts.

It’s a cause about which the 24-year-old University of Maryland graduate is passionate. So passionate that he wasn’t paying himself to keep the business afloat for a while. That was the case when he went before the Sharks on TV more than a year ago. At the time, the company wasn’t profitable and had a net loss of about $20,000.

While Corcoran liked Lutz, she couldn’t get on board.

“What disturbs me more than anything else, is how much you are in love with the idea. I believe in a business that’s greedy and wants to make a profit run by good people,” Corcoran told Lutz. “You’re all good, and you don’t have the grit, experience that I think it’s going to take to build any business.”

"Shark Tank" co-star Robert Herjavec, founder and CEO of the Herjavec Group, a global IT firm, saw things differently. Noting that he had been looking for a company that empowered people in an effective way, Herjavec offered Lutz $100,000 for 10 percent of his company. Lutz, who accepted, had originally sought out a $50,000 investment for a 5 percent stake in the company.

Lutz now makes a salary, and his company is profitable. It today boasts 8,000 customers, and aims to be operational in 25 cities within the next five years. Last year, Hungry Harvest raised a seed round of $500,000. Currently, Lutz said, the company is close to closing on a $2 million Series A round.

Lutz is part of a larger movement that’s taken hold as millennials — who today represent a quarter of the workforce and spend $600 billion annually — demand more social responsibility from the brands with which they choose to associate. A 2015 report from Cone Communications Research found that 70 percent of millennials would spend more on brands that supported causes they cared about.

But as a millennial himself, Lutz is less catering to the demand of the generation than he is embodying it through social entrepreneurship. A social entrepreneur, as defined by the Schwab Foundation for Social Entrepreneurship, is one who pursues solutions to social problems like poverty using entrepreneurship and business methods.

Lutz believes this is the future of what is traditionally considered “nonprofit work.”

“If you can start a business with a really great brand, with a mission that people believe in, and with a product that penetrates the market — that’s a really scalable way to solve a social issue,” Lutz said. “It’s better than having to rely on grants, donations or the government to solve a lot of social ills — I just think that’s a method of the past.”

Erin McLean, senior vice president of marketing and communications for the Herjavec Group, said Lutz’s values aligned well with those held by the Herjavec Group.

“Our overall business does believe in business with purpose, and so we emphasize the opportunity to do good not only here at Herjavec Group, but with all of our portfolio companies,” McLean said. “Evan has also created a really great online platform to help him scale.”

Lutz said Hungry Harvest’s scalability is made possible by its delivery model.

“More and more, people, especially the millennial generation, want their stuff delivered; I figured this would be the best way to seize the most amount of people and reduce the most amount of food waste while making a profit,” Lutz said.

It’s worked out well. The company has delivered more than 2 million pounds of produce and donated 471,716 more pounds to those in need, to date. It’s also expanded its Produce In A SNAP program to 10 schools in Baltimore. The subscriber-subsidized program is a partnership between Hungry Harvest and Baltimore City Public Schools to bring affordable produce to those living in food deserts, which are urban areas where such produce is hard to come by.

SNAP partner schools operate a stand once a week where anyone can grab a 10- to 12-pound bag of produce for just $7.  

Twanneshia Thomas, a community liaison at Augusta Fells Savage Institute of Visual Arts in Baltimore, said the SNAP stand at her school has been a helpful resource for those in the area.

“Normally, people have to catch buses or drive a longer way to get to the grocery store, but with this, they just walk over and grab a $7 bag of produce,” Thomas said. “And from what I’ve seen, it’s been teaching people about different types of produce.”

For example, Thomas said that some of the people hadn’t heard of leeks before grabbing their bag of produce one week.

“People were like, ‘What should I do with this?’ So we explained a few different ways they could use them in dishes. It’s been a good tool to get people familiarized with different types of produce,” Thomas said.

Lutz said Hungry Harvest will be using Baltimore’s Produce in a SNAP program as a blueprint for expansion into D.C., Miami, New York and Philadelphia.

“This is a model that is 100 percent scalable, and that we see coming along with us everywhere we expand,” Lutz said.

May 16, 2017 - 2:12pm