You forgot to calculate your operating costs. Cost of electricity running the machine. Percentage cost of the food that goes in the machine (it's no longer waste since it has value now). Shipping and handling. Hourly labor costs for handling and packaging.

That feed is not free for you to make and provide by any means, and as you pointed out, actually has value.

It may sound small, but if you have 100,000 customers all doing this for a year, they are making $5 million in feed while paying $36 million in subscriptions plus costs mentioned.

These scams are how companies trick the plebs into siphoning more money and resources into the corporate machine.

Edit: you are literally renting a bread maker, except you mail the company your 'bread'. Slow clap