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We have this in Germany at some stores, such as Kaufland. They're sold in a section called "Die Etwas Anderen", which means "The ones that are a little different". They're sold at a reduced price, and they're just as good quality as everything else, they just look a little funny.
I really don’t understand why this doesnt happen in the U.S. more? Are ugly fruits just thrown in compost?
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No, they are used for jams, sauces, ready-made meals, etc.
And very often, unless they come from the same plantation as "good" ones, they're the tastiest ones. I've experienced so many times that the best, bigger, shinier fruits are the less naturally grown ones, and their taste often reflects that.
This is especially true for water melons. The smallest most pockmarked ones taste best by far. The big oblong ones are the wateriest.
Interesting given these represent very different segments of the grocery market in the UK (Lidl being low cost, but decent quality, Waitrose is a coop but also the most upmarket of the larger chains ).