Retailers can take the high ground in the debate over food waste with a little help from supply chain technology and expertise.
As food waste climbs up the national agenda, RELEX Solutions’ Group CEO Mikko Kärkkäinen, says it’s both an opportunity for retailers to show just how much they’re already doing, to do more, and to seize the high ground by taking the lead.
It’s hard to quantify precisely how much food is wasted but a recent UN report put the amount thrown away in the developed world at around 30-40% of all that produced. With growing concerns about the impact of a rising population and climate change, food waste and security is becoming an increasingly potent issue. It’s hardly surprising. After all nothing leads to social and political upheaval faster than food shortages.
So where does this leave food wholesalers and retailers? Simple: right in the firing line.
There’s an irony there. The UK’s waste-advisory charity WRAP estimates that out of 41 million tonnes of food bought in Britain in 2013 15 million went to waste. And yet, based on businesses’ own declarations, only 0.25 million was generated by retail – less than 2%. Though other estimates put it higher, it’s clear that the major supermarkets have become increasingly good at reducing waste and spoilage. Indeed with the next generation of demand forecasting and inventory planning systems there is no excuse not to. These days even the most problematic items, such as bread and loose fresh vegetables that account for the bulk of avoidable food waste can be managed optimally.
By breaking down data by product/day/week/store/sell-by dates/weather and telling the system what is needed to maintain displays, sustain promotions and so forth, it’s possible to keep stock and thus spoilage to the necessary minimum. Indeed, some supermarkets and wholesalers have routinely cut spoilage by 20% and reduced waste by as much as a third.
Optimised supply chains deliver other benefits, most of which save money and safeguard the environment; for instance cutting overstocking of chilled and frozen products can reduce the amount of temperature controlled storage needed and cut electricity usage. The next generation of supply chain systems also allow retailers to analyse their data better and find the ideal combination of display options, price-reductions, stock levels and so on that can help both cut waste and improve profitability.
So why, when most are doing so much, and doing it increasingly well, are food retailers and wholesalers in danger of taking the flack for food waste?
Fundamentally, food retailers are seen as having the biggest stake, the most control and the lion’s share of the profits. The UK’s four largest retail companies are the big four supermarkets. They’re therefore also best placed to take a lead.
Good supply chain data and a good supply chain management system allows retailers to help producers, manufacturers, wholesalers – and consumers. We’ve seen it on both big and small scales. Booths, leading supermarket in England’s North West, liaises closely with farmers, growers and bakers so they get as much advance warning as possible of likely demand. A ball-park figure can be given well in advance based on historic data. That can be honed as other factors in play, such as weather, become clearer. Then, the day before a definitive order can be placed that is both accurate and quite close to the advanced estimates.
In addition, campaign forecasts and year round sales data can be shared to help manufacturers and producers plan better. It all helps to cut waste. Collaboration over what to do with such waste as it arises also helps. Reusable, recyclable or biodegradable packaging all conserves resources, saves on raw material usage and minimises landfill use. Likewise, schemes, such as that recently introduced in France, that encourage supermarkets to give food away rather than throw it away or to compost it where that isn’t possible.
But the largest group of contributors to food waste is also the toughest to help; consumers. They account for more than 40% of waste in the UK.
The key here is engagement and this means retailers showing what they’re doing, helping customers to waste less and constantly communicating and educating. It’s a great opportunity, for instance, to show that the retailer is ensuring that fruit, vegetables, baked and dairy products all reach the customer as fresh as possible, maximising their opportunity to enjoy them.
In-store some retailers have gone the extra mile to show how serious they are about cutting waste. Having previously introduced a ‘buy one get one later’ option for some products retail giant Tesco has now also stopped two-for-one deals on salad.
So, rather than structure deals to encourage people to buy more perishable products, retailers could pair bread, vegetables or dairy with other items to make a meal – baby corn with rice, potatoes with fish, salad with wine. Of course it helps if you explain to customers why you’re doing this.
Likewise, displays; availability and display requirements still cause food retailers a lot of headaches with spoilage. Customers expect shelves to be full of bread even at 9pm. Can display frontages be reduced during the day? Could a display carousel be brought in at 8pm so that all the remaining store baked bread can be brought together in a more attractive fashion?
Can fruit and veg displays be re-engineered so that smaller quantities look better? Obviously staff may spend more time re-stocking but if the spoilage savings justify their time, it benefits the bottom line.
Another problem is caused by sell-by dates. Most of us rifle through bags of vegetables, especially salad, looking for the most recent. You have to bring out a box with bagged salad dated October 10th before all the salad dated October 9th has sold. Once that happens who is going to want to buy the October 9th dated salad. So why not immediately discount the older bags, even if it’s only by 10p? The incentive may be marginal but at least it differentiates the two. Otherwise no one who is paying attention has any reason to buy the older bags.
Above all the public needs to be brought into the process so they understand the reasons for the changes, because it’s customer expectations, such as expecting to find items both constantly in stock and displayed attractively, that partly drive waste in retail.
You might say that it’s counterintuitive for supermarkets to help cut consumer waste. After all that bag of salad turning to brown sludge in someone’s fridge is still a bag of salad sold, and retailers are above all businesses and are answerable, first and foremost, to shareholders.
True. But supermarkets are also part of a culture that has promoted cheap food over good or sustainable food. It leads people to under-appreciate the things food retailers sell.
Why do I say that? Because, according to the UN, food waste in the poorest countries amounts to 6-15% against that 30-40% in the developed world. Poorer countries don’t have the same access to sophisticated supply chains, logistics, refrigeration and technology that we do. Climates are often warmer and that can increase spoilage risks. And yet they waste less. Why?
The most obvious answer is that they treat food as fundamentally more precious than we do. They don’t allow it to be wasted if it can be helped. People know what it’s like not to have enough. Better a knobbly yam that’s the last yam in the shop than that yam gets thrown away because it’s not cosmetically perfect, or has been buried at the bottom of a display.
So yes, food retailers can and must lead. They can lead by showing how much they’re doing to cut waste and they can lead by getting yet more out of their supply chain management systems to inform predictive analytics, identify trends and make sure that those bags of salad are discounted at exactly the right time and by the right amount to help change consumer purchasing behaviour.
And perhaps one day that supply chain technology will face the other way and retailers will be sending customers a reminder that the mozzarella they bought two weeks ago needs using up. Who knows? But every which way retailers manage to help cut waste, they’ll be doing a favour, for us, themselves and, ultimately, the planet. It’s one of those almost perfectly virtuous circles where no one loses. All it needs is courage (and, of course, good supply chain technology).