Cutting losses helps maximize profits -- an age old business philosophy not news to any businessperson. So why is $47 billion worth of product going to waste in supermarkets alone? And what are some of the opportunities for retailers and other food businesses to reduce food losses? Let’s take a look at a few businesses that have found real gains through reducing the outrageous 40 percent of food that never gets eaten in the U.S. (see our recent issue paper on food waste here).
You manage what you measure. One of the key themes to note throughout these success stories is that businesses invested upfront in understanding their waste streams to achieve big savings. They often did this by using software that tracked purchases, sales and product losses with enough detail to inform specific and actionable changes.
In the supermarket
The USDA estimates the food retail industry takea a $47 billion hit in the form of food losses, about 9 percent of its food supply. Seeing its losses as more than just a chunk of change, in 2007, the $16 billion grocery chain Stop and Shop/Giant Landover took a close look at purchases, sales and shrink (the industry term for losses) in all of its perishables. It found whole stock-keeping units (SKUs) that weren’t necessary. It also found that their philosophy of “pile ‘em high watch ‘em fly” -- the belief that abundant piles of produce sells more — led to spoilage on the shelf, displeased customers who came upon spoiled product and required more staff handling to sort out the damaged items. In the end, Stop and Shop was ultimately able to save an estimated annual $100 million by making small changes that reduced its loss in perishables. Equally important, customers did not notice reduced choice and less-full displays, but in fact customer satisfaction rose as produce was on average three days fresher than before.
Similarly, PriceChopper conducted an analysis that led to elimination of 680 SKUs from its bakery department, reducing shrink by $2 million and producing a 3 percent lift in sales the first year after implementation. Smaller store chains (about 30 stores) such as Market Basket in East Texas and Louisiana and Strack and Van Til in the Chicago area were able to reduce shrink 29 percent and 27 percent respectively in perishables alone using an integrated solution by Retail Control Group.
New packaging innovations are helping to reduce shrink. Tesco and Marks & Spencer, both U.K. retailers, are testing use of an ethylene-absorbing strip to prolong produce life. The retailers estimate it could save 1.6 million packs of tomatoes, 350,000 packs of avocados and 40,000 packs of strawberries.
Of course, some produce is bound to age in the store. The popular Berkeley, Calif., grocery store Berkeley Bowl bags up nearly expired and damaged produce and sells it on its “bargain shelf” for $.99/bag. Customers love the treasure hunt. The shelf is swarmed by shoppers when new bags come in. The produce manager estimates the company sells $1,500 per day of damaged produce at each store.
Next page: In the restaurant kitchen