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Grocers and food retailers are preparing for a fresh round of new tariffs. In 2024, the US imported more than 200 billion dollars worth of agricultural products. According to the USDA, a large portion of those imports were fresh fruits or vegetables that, given climate differences, they can't be easily produced in the US. That leaves sellers with little alternatives to higher tariff goods. Joining me now is Abhi Ramesh, CEO of Misfits Market. It's an online grocery store that offers sustainably sourced groceries with a focus on rescuing food that might, food that might otherwise go to waste. Abhi, thanks for being here. So, obviously, you guys are watching this very closely. Um, how are you guys preparing for this and what part of your assortment could be affected by these tariffs?

Yes. So we've been, um, we've been doing preparation work for, uh, the tariffs on on produce specifically for, for a couple of months now. Obviously, it's been, whether or not they've been, they're going to go in effect has been changing every other week. So, so it's been a little bit of whiplash. Um, but a lot of it has been doing some planning with our vendors, uh, with our freight providers and coming up with kind of a pricing strategy internally as well. Um, today, you know, at Misfits we offer north of a thousand different items in our catalog. It's probably around 40 of them that will be impacted directly by, um, by tariffs from Canada and Mexico. Now, these are also 40 of the highest velocity, most popular items, probably. Um, so when you think about produce, a lot of the avocados, uh, probably close to 90% of the limes that we, uh, that we sell in the United States, uh, bell peppers, tomatoes, those are all items that, uh, at least for, for this time of the year are coming largely from Mexico. Um, so those will be items that will be mostly impacted. So we've been doing a lot of prep work on pricing strategy, uh, and working with our vendors as well.

And, and how about alternative supply chains? I was reading, uh, earlier this week in the Wall Street Journal about Chipotle trying to find other supply chains for avocados, for example. But the problem is, is that we in the US like Haas avocados and there aren't that many countries that grow them at this point. So have you run into, have you been trying to diversify at all? And if so, have you run into some of those kinds of hurdles?

Um, it's a great question. So we, we generally source in the US, uh, when we can for most of our commodities. And so we've done, our team's done an excellent job of diversifying, uh, the supply chain and focusing on, on local growers, uh, over the past couple of years. The reality of the situation though, which I'm not, you know, which we've been spending a lot more time on is, um, a lot of the items that, uh, that grocers and, uh, and, and restaurants are buying from Mexico today, they can kind of only be grown in Mexico given, uh, the growing environment. So let's use limes for example. So people don't think about this, but, um, close to 90% of the limes that are sold today in the United States are grown in Mexico. And it's not because, you know, people don't want to buy limes that are grown in the United States. It's that the very specific tropical or subtropical, uh, climate that is required to grow limes doesn't exist in the US outside of a couple small parts in California and Florida. And so the vast majority of limes have to be imported from Mexico. Um, so, you know, we have been looking for alternative supply. Uh, we try to, uh, to obviously source locally in the US when we can, but I think, you know, a lot of other, uh, grocers and retailers are going to be in the same boat where some of these items you simply cannot, um, source from the US in certain times of the year.

Yeah. Yeah. It's not a reassuring, uh, proposition here. So you talked earlier about your pricing strategy and having to sort of attack that. So are you planning to pass the full additional cost of those tariffs onto your customers?

Um, so right now our plan is not to pass on the full cost. Our plan is to probably pass on a portion of the cost. Now, Misfits is in somewhat of a unique situation because of the way we purchase items with our kind of rescue mission, our ability to buy opportunistically. We generally have a little bit more flexibility on pricing strategy, uh, than a lot of other grocery retailers. I think we're going to probably be able to shield our customers somewhat from the full burden of the tariff impact. That being said, I think consumers on our platform plus probably any other grocery store can more likely than not expect higher prices than they, than before. Um, and certainly on some of these commodities like avocados and limes and bell peppers and field grown tomatoes where 80, 90% of the supply right now in the US is coming from Mexico and there's not a viable alternative, I think consumers will see higher prices more likely than not over the next couple of weeks.

And Abhi, just quickly, you guys have a direct line to your consumers because they are buying it directly from you online. Are you going to tell them? Like are you going to send a note and say, you know, sorry, we're raising some of our prices because of what's going on with the tariffs?

We plan on being really transparent about it, right? I think, I think most consumers are really savvy, they're educated, and they also are interested in understanding what is going on in the food supply chain, especially, uh, especially recently. So our plan is to communicate this transparently. Our plan is to probably send an email out, um, you know, push notification out via the mobile app and saying, you know, here is, here's what we're doing, here's why. Um, we've also generally kind of focused on storytelling to our customers explaining how products got from the farm to their doorstep. So this is just going to be another, uh, another piece of that story.

Abhi, thank you so much. Really interesting stuff, um, and good luck navigating all of it.