Daily Table sells healthy food at a deep discount

In the working-class Massachusetts neighborhood of Dorchester, south of downtown Boston, nonprofit grocery store Daily Table is on a mission to sell healthy food so cheap it can compete with fast food.

Daily Table was founded by former Trader Joe's President Doug Rauch, and it aims to keep prices low because it's sourcing food other grocers don't want or need. Whether that is due to a surplus supply, close expiration dates, or it looks too "ugly," it's food that would otherwise be destined for a landfill.

The founder is not new to the grocery store scene. He spent over three decades building a small Southern California chain Trader Joe's into a nationwide business. After retiring as president in 2008, he accepted a fellowship at Harvard and looked at ways he could use his experience to tackle social challenges.

His solution was the Daily Table.

"We're basically a hunger relief health-care agency that's masquerading as a retail store," Rauch told CBNC's "On the Money" in a recent interview.

Read MoreNew campaign issues call to embrace 'ugly' food

Food waste is a growing problem in the U.S. According to the National Resources Defense Council, 40 percent of the food we grow in this country is never consumed. In fact, food is the single biggest source of waste in municipal landfills, according to EPA data. Meanwhile, the USDA reports that nearly 50 million Americans, including 7.9 million children are "food insecure."

Rauch says he believes we can use one problem to solve the other.

"Our mission is how … we bring affordable nutrition into a struggling area where people unfortunately, due to their diets, are having epidemics of obesity diabetes heart disease, etc., because they can't afford to eat the nutritious food they should be eating," Rauch said.

In keeping with its mission, Daily Table sells produce at rock-bottom rates. Its bananas sell for 29 cents per pound, and apples go for 69 cents per pound, and those prices are about half of the U.S. city average price.

Despite being a nonprofit Rauch says he wants Daily Table to become a self-sustaining business. However, it keeps its nonprofit status to entice companies to work with them.

"The tax code incentivizes manufacturers, growers and grocers to donate wholesome healthy excess food," said Rauch. "Food that's still good, but is either too much, or it's getting close to its code date, or it's cosmetically blemished in some way."


Meanwhile, customers are embracing the concept. "In an urban area where people may be struggling financially, I think this is perfect. I could usually get two or three bags of groceries for $25," said customer Abdul Wilkins.

"We want people when they come in to have a sense of shopping, and a sense of dignity, a sense of pride that they are able to provide for their families," said Rauch.

While there is currently only one location, the company plans to open additional stores in both the greater Boston area and in cities across the country.


"On the Money" airs on CNBC Saturdays at 5:30 a.m. ET, or check listings for air times in local markets.