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David Niles is dedicated to combating food waste, employing various methods to ensure edible food does not go to the landfill. This 63-year-old Brooklyn resident sometimes resorts to dumpster diving in his neighborhood.
For a more sanitized option, Niles utilizes an app called Too Good To Go, which allows retailers, including restaurants and bakeries, to sell “surprise bags” of leftover food at discounted rates ranging from approximately $3.99 to $9.99 each in the U.S. Over the last four years, he has invested nearly $10,000 in this app, collecting close to 2,000 surprise bags with the help of his bicycle.
Founded in 2015 in Copenhagen, Too Good To Go generated nearly $162 million in revenue last year, according to documents reviewed by CNBC Make It. The company’s business model primarily revolves around earning a percentage from each sale of surprise bags, as well as collecting annual membership fees from participating retailers.
In the U.S. market, Too Good To Go typically retains $1.79 per bag sold and charges retailers an annual fee of $89, as per company statements.
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The mission of Too Good To Go is to mitigate global food waste, a significant challenge that costs the world around $1 trillion annually, according to estimates from the World Bank. The company, however, has not yet turned a profit, continuously opting to reinvest its earnings into geographical expansion, onboarding new retailers, establishing support offices, and acquiring startups, as stated by CEO Mette Lykke.
“We aim to operate a profitable business,” explains Lykke, noting that the enterprise reported earnings of $8 million before accounting for one-off expenses last year. “If we truly wanted to prioritize profitability, we could take a more aggressive approach. But that’s not our primary objective,” she adds.
Expanding Horizons
Too Good To Go was launched by a group of five Danish entrepreneurs: Thomas Bjørn, Stian Olesen, Klaus Bagge Pedersen, Brian Christensen, and Adam Sigbrand. Lykke became familiar with the company through a conversation with another woman while traveling on a bus near Copenhagen. She became an angel investor in the company’s initial funding round in 2016, having previously co-founded a social fitness platform named Endomondo which was sold to Under Armour for $85 million in 2015.
“I perceived [Too Good To Go] as a brilliant app, and I was captivated by its concept,” Lykke shares.
In 2017, the founders recognized the necessity for a CEO capable of elevating the company’s growth trajectory, leading them to invite Lykke to assume the role, according to a company spokesperson.
One of her initial tasks involved assessing the company’s finances, which were considerably alarming, compelling her to consider backing out of the leadership position, she recounts.
“I expressed my concerns to my husband, and he advised me, ‘It’s already public knowledge, so you might as well make it work. Just buckle up and get to it,'” she recalls.
Lykke’s strategy for growth involved initially scaling back, leading to the company’s withdrawal from four of the ten countries it had entered. She observed that they had expanded “much too rapidly” without fully understanding their business model.
Since her arrival, the company has re-entered the market with new services, introduced a grocery solution, developed software for food retailers, and amassed 100 million users across 19 countries in North America, Europe, and Australia. The app made its debut in the U.S. in 2020, currently encompassing retailers in 33 metropolitan areas, according to company data.
“Food waste is a colossal issue, and we must address it swiftly,” Lykke asserts.
The Challenge of Food Waste
With nearly $158 million in investment backing, Too Good To Go operates within a competitive landscape where numerous for-profit businesses are also fighting to reduce food waste. Venture capitalists have injected more than $1 billion into this sector, supporting various companies, including Misfits Market, a grocery delivery startup, and Mill, an at-home composting solution, as reported by PitchBook.
These companies aim to connect with consumers who may be budget-conscious, environmentally aware, or both. Although individual retailers do not make substantial profits from Too Good To Go sales, many prefer this option over discarding unsold food. For instance, Susan Prunty, the owner of Delish Bakery in Medford, Oregon, reports that several of her customers from Too Good To Go have transitioned to regular full-price buyers.
However, some users, like Niles from Brooklyn, express concerns that Too Good To Go may be “greenwashing,” misrepresenting its contributions to environmental sustainability. Nevertheless, research conducted by Chicago-based nonprofit ReFED estimates that if all food retailers in the U.S. implemented similar markdown strategies, it could result in a saving of one million tons of food annually.
“This would be the [environmental] equivalent of roughly 900,000 vehicles being removed from the roads,” explains Dana Gunders, president of ReFED.
While a profitable and environmentally conscious business model sounds promising, it does not guarantee the long-term success of Too Good To Go. Retailers might choose to eliminate the intermediary and launch their own initiatives, food safety regulations differ from one country to another, and eventually, there will be a saturation of available stores to onboard, suggests PitchBook analyst Alex Frederick.
Ultimately, the future of Too Good To Go hinges on its commitment to the long-term viability of its business model and its determination to persevere, according to Lykke.
“I genuinely believe that we possess a remarkable model here,” she emphasizes. “Having an outstanding idea or concept is remarkable, but it comprises only 10% of the journey. The real challenge lies in effective execution.”
Conversions from EUR to USD were executed using the exchange rate of 1 EUR to 1.103897 USD as of December 31, 2023.
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