The reality is that every year, at least one third of all food produced globally is wasted or lost along supply chains. In Canada, that equates to $31 billion worth of wasted food every year, with an average loss (shrink) of 5% for retailers happening in the produce department alone. “Grocers really aren’t aware of the opportunities that can come from reducing shrink,” says Martin Gooch, CEO of Value Chain Management International, an Oakville, Ont.-based consulting firm focused on this very topic. “They see food waste as a cost of doing business, but it’s also a business opportunity.”
Gooch says every 1% reduction in food waste can result in at least a 4% increase in revenue. “Not many opportunities offer that level of benefit, but retailers are often stuck in this mentality of volume and price only.” He also points to a common misconception among grocers that shrink happens in isolation. “That’s never the case,” he says, adding that grocers need to choose a produce item where they’re seeing a waste issue, and then map out the processes around it across the entire supply chain to get to the heart
of the problem.
He cites one example where a grocer had more than six weeks of perishable product on hand due to a lack of communication around promotions with the vendor and procurement department. Adversarial relationships among departments is a big contributor to the problem, says Gooch, with procurement, operations and merchandising often at loggerheads. “Every time you reduce shrink you also reduce the inefficient practices that go with it.”
Grocers like Choices Markets in British Columbia have been ahead of the curve in implementing supply chain strategies to curb food waste in the produce department. By designing all of its stores with minimal storage space, Choices relies on just-in-time ordering so it can’t overstock. “We don’t buy anything we don’t think we can sell in three days and we are always looking at improving efficiencies from the front lines back to the supply chain,” says David Wilson, program manager for Choices’ produce department.
For one, the grocer works with wholesalers and growers to alleviate their excess food supplies by taking smaller margins on both ends. “I’d rather take a lower margin than see something go into the compost,” says Wilson. When composting is the only option, Choices donates the excess to farmers who can use it for pig feed, or composts the produce itself through a local facility. The compost is then used to make topsoil that Choices brands and sells back to its customers. As well as making some profit on the topsoil, he says this system has helped divert 50 metric tonnes of waste from landfills over the last decade.
A few years ago, Choices also partnered with Vancouver’s Discovery Organics on its Rebel Food label initiative. This program repackages perishable food items (e.g. avocados, citrus and carrots) that don’t meet retail standards—due to size or scarring—to sell through retail channels at a 30% to 50% discount to the customer. “We typically have four to 10 items that we bag every week for retailers,” says Discovery’s general manager Damien Bryan, who works with mostly independent grocers from Western Canada to the Yukon. “Those that do best with the program are the ones who have produce staff on the floor helping customers understand what Rebel Food is.”
Even grocery giants like Walmart are making the reduction of food waste a key priority. In addition to heavily discounting perishable items to encourage sales prior to their best-before dates, the company works with Food Banks Canada and its affiliates and has donated 11 million pounds of unsold food to these organizations since 2011.
In this time, Walmart Canada and the Walmart Foundation have donated more than $12 million to help food bank processes. “This funding helps food banks invest in vital infrastructure including new trucks, refrigerators and staff to collect food donations from Walmart or any other organization including other retailers who have unsold food to donate,” says Rob Nicol, vice-president, corporate affairs at Walmart Canada. “… as a large retailer, we have a unique role to play in addressing this problem and we take this responsibility seriously.”
Technology and education the key to less waste
In the meantime, a big part of the food waste solution still rests with the consumer, according to Smart Reduction of Consumer Waste, a global report released in March 2018. The vast majority of food waste still happens at home, with food gone past use or its best before date as the No. 1 reason. Other explanations for waste are consumers buying additional fresh food before they’ve consumed items they already have.
The report, which was produced by Capgemini and the Consumer Goods Forum (a network of 400 retailers, manufacturers, service providers and other stakeholders across 70 countries), points to key strategies for curbing food waste using retail and consumer technologies. It notes that food retailers could use technology to have an influential role in helping consumers buy, cook, store and dispose of food at home, resulting in higher store profits as well as more cross-selling of products.
One suggestion is to provide downloadable store apps with recipes for leftovers as well as online shopping lists. An app called Food Storage and Shelf Life, for example, helps consumers reduce waste by providing information on how to store some 350 foods. Or have shoppers validate product freshness through smart labels and receive customized store offers based on pre-identified factors, such as their preference for ugly produce or their willingness to buy products close to their sell-by date.
Toronto-based Josh Domingues was so fed up with the food waste he was seeing in his own community, he left a successful job in finance to develop Flashfood, an app that allows shoppers to purchase discounted surplus food from participating grocery stores directly through their phones. The company is working with Ontario grocery chain Farm Boy and just completed an eight-month pilot with Longo’s.
“Around 70% of our customers are new to these stores and if they are spending $10 on Flashfood, they are spending at least $15 on other full-priced products in these stores,” he says, noting that millennials make up the bulk of Flashfood users. “We’ve seen people take a streetcar for 30 minutes in downtown Toronto to pick up Flashfood, which proves our customers are taking a real stance against food waste,” says Domingues.
A Flashfood fridge is installed right on-site free of charge for participating grocers (requiring 7 to 12 feet of floor space) and is stocked with the discounted food for pickup. Shoppers still go through the regular store cashier so they can pick up other store items along the way.
The company is also in the middle of a pilot program with London, Ont.- based farmers and institutional growers who have food that would be rejected by grocers. “Whether it’s a partnership with forward-thinking grocers or we source the food ourselves, the research is showing that consumers want this because they are concerned about food waste,” says Domingues.
Richard Baker, CEO and founder of Food Distribution Guy, says grocers can make a real difference by initiating in-store campaigns that help consumers recognize the real value of food—including ugly produce and items near (or past) their best-before date. “I really question whether the average consumer understands how much food we are wasting every year,” he says. “I would that hope every grocery banner in this country is playing some sort of role in addressing the problem.” If not, he says grocers do so at their peril. “Eventually the government will intervene to curb food waste and we all know that will mean more taxes,” he says.
This article appeared in Canadian Grocer’s March/April 2018 issue.