Evan Lutz on “Shark Tank.” (ABC/Tyler Golden)

This week, a “Shark Tank” success story talks about the challenges of selling surplus fruits and vegetables. –Dan Beyers

The entrepreneur

Evan Lutz was a senior at the University of Maryland when he started selling surplus fruits and vegetables to fellow college students outside the student union. The endeavor spun out of another campus social enterprise, Food Recovery Network, that delivers unused dining hall food to people in need.

After 10 weeks, Lutz’s Food Recovery CSA project had 500 paying customers a week – the proof he needed to launch a full-fledged start-up after graduating in May 2014. He’s been running Columbia, Md.-based Hungry Harvest ever since – “more than full-time: I literally live, breath and eat it,” says Lutz.

Lutz’s pitch for his food surplus delivery business appeared on an episode of ABC’s “Shark Tank,” on Jan. 8, where he landed an offer for $100,000 from celebrity investor and businessman Robert Herjavec for a 10 percent equity stake in his company. He’s using the momentum from the popular television show to catapult growth outside the Washington, D.C.-Baltimore region.

The pitch

Lutz, co-founder and CEO of Hungry Harvest

“We are a produce delivery service and our mission is to reduce food waste and feed hungry families. We work with local farms and wholesalers to recover their surplus – fruits and vegetables that are perfectly fine to eat, but that would normally get thrown away.

“This food is often discarded because of aesthetic imperfections (think misshapen eggplants or off-color apples) or logistical inefficiencies. When grocery stores over-order produce, they can reject truckloads, and that usually gets thrown away. So we take that produce, box up a nice variety, and deliver it weekly to subscribers in Maryland, D.C. and Northern Virginia for discounted prices. We are expanding to Philadelphia in the next month. For every box we deliver to a customer, we also donate a healthy meal to someone in need.

“Customers save time – they don’t have to schlepp to the grocery story; they save money – starting at $15, our prices consistently beat competitors by 20 percent to 30 percent; and they are helping the community.

“Our business model innovation comes in our partnerships with produce wholesalers. We buy their surplus produce, use their space on weekends to box it, and we employ people from local homeless shelters to pack the produce. Then we use independent contractors to make deliveries with their own cars. We load up their cars with the boxes and give them their route through our app.

“To date, Hungry Harvest has recovered more than 300,000 pounds of produce from going to waste and donated 100,000 pounds to those in need. We’re expecting to double our subscribers because of the ‘Shark Tank’ appearance.

“Right now, our biggest challenge is market education – teaching people that there is nothing wrong with surplus produce. It’s the exact same quality as produce you’d find at the grocery store or farmer’s market. Getting that image in people’s heads has been tougher than expected. How can we overcome this challenge to take this to a national level?”

The advice

Sara Herald, associate director of social entrepreneurship at the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business

“The goal of trying to teach people that there is nothing wrong with surplus produce is too broad. You need to understand consumers’ specific hesitations with surplus produce. Find out more about what is ‘wrong’ in their minds. Do they think it isn’t as fresh? Do they think it won’t taste as good? Consider the ways people evaluate quality. If you understand their perceptions, you can clearly address those objections up front.

“To scale this to a national level, you really need to understand your total addressable market. Be specific about who your customer is and why they would choose you over grocery stores, farmers markets or CSAs [Community Supported Agriculture]. Your value proposition is built on your delivery and pricing model and your social mission. But be careful about relying on your social mission to carry your business. Social enterprises rarely succeed if it’s only about mission – their offering has to be at least as good as the other options in the market. Ultimately, you should focus on expanding to locations where all the components of your business model will work.”

The reaction

Lutz

“Our goal is to be the largest direct-to-home produce delivery service on the East Coast in five years, and the largest in the U.S. in 10 years. Our mission is at the forefront of what we do, and we’ve created a product that fits within that mission that consumers absolutely love.

“In business terms, a ‘product that consumers love’ means that on average, the customer lifetime value is over $300. It also means that our current customers recruit other customers to our service – 25 percent of our new customers were referred by a friend. We’re constantly improving our products to increase our referrals and customer lifetime value. For example, we just implemented a ‘Never List,’ where customers can choose items that they don’t want, and we’ve added add-ons, where customers can choose fruit juices, pesto, artisan breads, and kale or apple chips to add to their order. These product improvements came from our tight customer feedback loops.

“I think your point about specificity is a good one – what aspects of surplus produce are consumers most afraid of? If market education is our biggest challenge – then we have to do a better job at educating the consumers on specifics of surplus produce.

“Customers have provided feedback that the social value is why they sign up – but I believe that the social value is what interests customers, and they make the purchasing decision based on the free delivery and our low price point.”