Four years ago Martin Gooch, partner and CEO of VCM International, drew attention his report that noted an astounding $27 billion in food is wasted annually in Canada.
It turns out the amount is closer $31 billion – up 15% from previous estimations.
Adversarial relationships within the food industry help increase waste and severely cut into profit margins, says the new report from VCM.
“Experience and research confirms that businesses who are part of a robust and closely aligned value chain are more likely to have implemented processes to reduce avoidable waste,” says the study. “They are also the companies that consistently experience higher margins and profits.”
In other words, making food waste a priority can help make the grocery industry more efficient and more profitable.
Intense competition in the retail food industry is benefiting shoppers but not the industry, the report says.
“Consumers are busy picking off deals while retailers and suppliers are busy picking off each other,” an industry insider told the study’s authors. Price promotions diminish the value consumers place on food and purposefulness of their shopping behaviour.
It can largely be avoided, especially in the retail sector, if grocers stopped thinking simply in terms of producing great volume of product and improve relations along the entire supply chain, says the report.
Through reducing food waste, businesses can reduce operating costs by 15 to 20 per cent and increase profitability by the equivalent of five to 11 per cent.
“Our industry’s obsession with volume should be considered a false economy. Industry needs to break away from a belief that volume is king. Volume can be to a business’s detriment,” the report states.
Waste costs accumulate along the chain, says the study. It also results in wasted energy, water, land, labour, capital investment, infrastructure, machinery, and transportation.
For some businesses the total cost of waste along a value chain can exceed the combined margins of the involved companies.
And for consumers, avoidable waste can up their food bill by 10 per cent.