All right, so we have our Too Good To Go order.

It looks like we got a half dozen bagels.

It's an app where businesses sell discounted leftover food they have at the end of the day.

The catch?

Customers don't know what food they're going to get because it comes in a surprise bag.

It's an entire sheet cake.

There's like a game aspect to it.

I got food from a local Indian place for $4.99.

The feeling of opening it and finding out that a place that you love actually has a bag available.

And if it's only like $4, you know, what's the harm in going and trying it?

Being on Too Good To Go has impacted my business tremendously.

We weren't losing several hundred dollars per day throwing out all this food.

The surprise bags cost between $3.99 to $9.99 in the United States.

In 2023, the company sold over 102 million bags.

For Too Good To Go, the main competitor is the bin.

That is really where all this food is ending up today.

Food waste costs the global economy an estimated $1 trillion per year.

In the restaurant and food service industry, over $130 billion worth of food goes uneaten.

Grocery stores, another $30 billion worth goes uneaten.

Together, it's about 18 million tons of food going to waste in those two sectors.

Here's how Too Good To Go turned its mission to save leftover food into a company that brings in around $162 million in revenue per year.

I'm Mette Lykke, and I'm the CEO of Too Good To Go.

Too Good To Go was founded late 2015 by a group of Danish entrepreneurs who initially wanted to solve the problem that buffet restaurants had when they were throwing out food by the end of the day.

But then very quickly, it evolved into bakeries and since then to retailers and supermarkets.

When Mette joined the Danish company in 2016, Too Good To Go was in 10 countries and expanding faster than it could keep up with.

My first decisions was to shut down four different countries because we simply could not maintain all those different operations when we hadn't fully figured out yet how to operate our model to begin with.

Too Good To Go debuted in the United States in September 2020.

The app first launched in New York and is now present in 33 major metro areas across the country.

U.S. is definitely an important market for Too Good To Go.

We have a very large population.

I don't say this as a way to brag, but we also drive a tremendous amount of food waste in this country that represents one of the biggest opportunities out there.

While the biggest source of food waste in the United States comes from households, 15% comes from food service and 6% from grocery stores.

Food is actually the number one product entering our landfills today.

Across the U.S., over a third of food never gets eaten, which is huge financially.

It's over $450 billion worth of food and it also has huge implications for all of our resources.

So how do the Too Good To Go Surprise Bags work?

Surprise Bag is when a restaurant or retailer has surplus food left by the end of the day.

They put that on Too Good To Go.

Consumers find the food on the app, they reserve the food, and then they go and pick it up.

They usually get around 70% discount on that food.

There are currently 100 million users and 170,000 retailers on the app throughout North America, Europe, and Asia.

Fiobun Creative, a small Jamaican restaurant, is one of the many businesses that partners with Too Good To Go in New York City.

I joined Too Good To Go in late 2020.

Before I joined, we would throw food out, put it in the garbage, and that was a bit hard and harsh.

We were losing several hundred dollars per day throwing out all this food.

The businesses on the app decide for themselves how they want to price their surprise bags.

Customers are drawn to the app because of the low prices, variety of businesses, and the interest to help save leftover food from being thrown away.

I decided to join Too Good To Go because I love a deal.

My boyfriend's been out of work for a year, and so it's kind of helpful to have an extra place to go and find food for a cheaper price.

In 2023, Too Good To Go sold over 102 million surprise bags, a 29% increase from the year before.

I like that I can take a risk but pay very little to take that risk.

There's been instances where I have maybe gotten a Too Good To Go surprise bag and then decide, you know what, I actually really like this company or this shop, and gone and spent full price and supported that business.

And so I just think it allows me to explore New York City and everything that it has to offer, but at a lower cost.

Not every customer has a positive experience on the app.

One user shared that he felt not every business on Too Good To Go understands the purpose of the app.

I'm a frequent user of Too Good To Go, sometimes as often as three times a day.

Some places don't want to give away too much food.

They'd actually rather throw it away because it might tarnish their image or feeling like they're giving you too much.

I'm not ashamed to say that I'm quite an accomplished dumpster diver.

Some of the evidence is visible.

Some of the places seem to have like a Too Good To Go meal that they prepare for people.

So they might know the price point of it, and it's often not a menu selection.

A spokesperson for Too Good To Go says that retailers are only allowed to sell surplus food, otherwise destined for waste, on its platform.

One business owner on the app says other retailers don't always completely fill the surprise bags.

How we've set the value for our boxes are that I sell them for $9.99, but that means they have to be valued over $30.

So there are lots of times we've had boxes that have been valued over $50 or $60.

I've checked out some other Too Good To Go boxes in different states, and I have to say that I've had some that looked a little light, and I was very disappointed.

So it makes me want to make sure that our boxes, when they open it, that they feel like they're really getting quite a bargain for their $10.

Because I still know that $10 is an investment.

On the app, customers can review each order they pick up by giving a rating out of five stars and sharing their review of the bag and pickup experience with others. 96% of Too Good To Go's revenue comes from transaction fees paid by the customer on each order.

In the US, the typical transaction fee is $1.79.

There is also an $89 membership fee that the retailers on the app pay on a yearly basis.

Within the past five years, Too Good To Go's revenue has been steadily increasing.

In 2023, the company brought in about $162 million, and its CEO says it expects its revenue to grow by at least 10% in 2024.

Since the company's founding, Too Good To Go says it has raised about $158 million, and it currently doesn't plan to raise more money in the future.

The business is cashflow positive from operating activities, and while the company has yet to have a profitable year due to costs of expanding the business, Meta says Too Good To Go had its first profitable month in October 2022.

The company had a positive EBITDA of $8 million in 2023 and is getting closer to profitability each year.

From the time where I joined, we started to invest a lot in our growth, which meant that we had quite a few years where we were operating at a loss, completely by design.

But then in 2022, we decided that it was time to balance profit and growth a little bit differently, so we really embarked on becoming profitable.

What we've found with our model is that it requires pretty significant scale to get to profitability, which is also why it's taken a few years.

But I think we are at that stage now, and if we really wanted to, we could go more hardcore for profitability.

But again, it's really not why we're here in the sense that we really wanna have as much impact as we can, so we're very much in an investing mode and we wanna keep expanding.

In addition to expanding geographically, Too Good To Go now includes a grocery service, a software system for food retailers, and a new partnership with Whole Foods Market.

If you pick up a Whole Foods surprise bag, you have the opportunity to get a bag that is from their prepared food section, or you can pick up a bakery bag.

But we're obviously really excited about the chance to continue to expand the type of surprise bags that we offer with Whole Foods.

As the company continues scaling its business internationally, there are several challenges that it could potentially face.

There are three main potential headwinds for the company as they continue to grow.

One is market saturation, so at a certain point they will have reached out to every grocery store, bakery, restaurant, and may struggle to continue their growth rate.

Another challenge is competition.

There are a number of other companies that have similar business models that could gain steam, although Too Good To Go is definitely the market leader at the moment.

There's also the potential that some of their big partners, like grocery stores, could perhaps start putting together their own mystery bundles of foods nearing expiration date and cut out the middleman, essentially.

Lastly, as the company continues to expand into new countries, each country has their own regulatory policy about food and food safety regulations, and so this may be a major barrier to selling these foods that are nearing their expiration date.

The food waste space is a niche industry, so it remains unclear what Too Good To Go's future looks like.

Looking at past food tech companies, M&A is the most common form of exit, and so we'd look at expecting an exit to some sort of strategic acquirer.

Too Good To Go's two main competitors are Olio, an app that allows users and businesses to give away items, including food, that would go to waste, and Karma, an app that connects users to surplus food from retailers, but allows the customers to choose what food they would like to save.

Too Good To Go is differentiating in several ways.

They are a point solution, so they're focused on working with restaurants and grocery stores.

It's very similar to Airbnb or Uber Eats.

It's a two-sided market.

The current inflation of food prices also presents an opportunity for Too Good To Go to attract customers looking for a deal.

We are completely focused on running the business and just making sure we continue to increase our impact.

We are often asked about this famous exit strategy, but I'm a very strong believer in just keeping your focus.

Even though most food waste in the United States comes from households, Too Good To Go can still help the environment.

Apps like Too Good To Go that mark product down right at the last minute and allow consumers to buy it, those have the potential to save about a million tons of food every single year across the U.S.

And in doing so, save people money and also save greenhouse gases.

We estimate that together those apps could save about the same number of greenhouse gases as taking 900,000 cars off the road would.

In the ideal world, I mean, we dream of a planet with no food waste.

In the more realistic world, I think we want to get to a point where we can help solve this issue across continents, so truly at a global level, but also be able to do it with different solutions across the value chain.

So for now we have parcels and surprise bags and platform, but I do believe there's more we can do and expanding even further.