Canadian Retailer Magazine | Food & Grocery | Supply Chain & Logistics

Where retailers stand in the food waste crisis

November 15, 2018
Where retailers stand in the food waste crisis

Education, innovation and collaboration between retailers and their supply chain partners required to reduce industry food waste

BY DENISE DEVEAU

THE topic of food waste has long been a growing concern for consumers, grocers and advocates alike. In recent years, the urgency has increased, as fears around sustainability of food supply grow. In fact, the matter has become so pressing, the UN Sustainability Goals has set a target to reduce the current volume of food loss by 50 per cent by 2030.

According to the VCM International (VCMI) 2016 report Food Waste: Aligning Government and Industry Within Value Chain Solutions, by 2050 the world will need to produce at least 50 per cent more food to feed nine billion people. At the same time, crop yields are projected to decrease by more than 25 per cent. It also reports that 31 per cent of all food produced globally for human consumption goes to waste—an amount that would fill 60,000 rail cars stretching 1,000 kilometers.

“Unless we change how we produce and handle food, and manage our natural capital, food security will be at risk for our present population, regardless of location,” the report states. “Reducing the food industry’s environmental impact and feeding a burgeoning population cannot be achieved without significantly reducing the food loss and waste (FLW) that occurs along the value chain in developed and developing countries.”

Two key areas of food waste are fruit and seafood. According to VCMI research on fruit, only 63.5 per cent of a commodity produced on farms may reach consumers. The breakdown shows 10 per cent loss at harvest, 15 per cent at grading/packing, 12 per cent at distribution, and another 6 per cent loss at retail. As for seafood, up to 40 per cent can be lost at point of capture and is handled by many more (up to 20) individuals and businesses before reaching the consumer.

In Canada, $31 billion worth of food ends up in landfills or composters each year, which VCMI stresses is a conservative estimate. Food waste also accounts for eight per cent of greenhouse gas emissions.

In the U.S., 1.6 billion tons of food is lost each year for a total value of $1.2 trillion, according to Boston Consulting Group. It also predicts that by 2030 that will rise to 2.1 billion tons of food waste equaling a loss of $1.5 trillion.

STUDIES IN FOOD WASTE REDUCTION

Retailer: Walmart Canada

Walmart has been undertaking waste-reduction initiatives since 2005. Between 2015 and 2017 alone, Walmart Canada reduced food waste in its operations by 23 per cent. Programs include:

  • Discounting repackaged bruised or peak-freshness products through a $1/$2 Bag Program and reducing prices on fresh meat, bakery, dairy and produce approaching best before dates.
  • Reducing over-production in bakery operations.
  • Providing additional processes, training and resources to help support associates.
  • Implementing organic recycling programs in stores and distribution centres that take unsaleable and unsold food for conversion into animal feed, compost and energy.
  • Partnering with local food banks to assist in maximizing surplus food donations.
  • Working with suppliers to improve packaging and food handling processes to maintain quality and freshness.

Logistics provider: VersaCold

To improve efficiencies within the supply chain, VersaCold has engaged in the following initiatives:

  • Working on achieving British Retail Council standards for food safety and quality at all distribution centre and warehouse facilities.
  • Applying practices and processes to reduce spoilage within facilities.
  • Making extensive investments in technology, refrigeration systems, etc., including full sensors on all transportation equipment to monitor goods in real-time.
  • Working with the CFIA (Canadian Food Inspection Agency) to ensure high standards of legislative compliance.
  • Invested $1.2 million in upgrading food quality and safety teams and raising awareness on food spoilage.
  • Working with retailers in applying technology to better manage date codes and stock rotation.

The retail picture

Martin Gooch, CEO of VCMI in Toronto, says that overall, retail accounts for 10 per cent of all food lost by value, while processing and distribution accounts for 20 per cent. “While we know food waste is a common occurrence in retail and the degree to which it occurs, the nuances can differ by retail operation.”

Food waste and spoilage throughout the supply chain is a significant issue in Canada and around the world, from producers and logistics services to retailers and consumers, confirms Douglas Harrison, President and CEO of VersaCold in Vaughan. The major drivers behind this include: more demand for fresh food, meal kits, in-store prep, and shorter shelf lives of more “service sensitive” food. “That will create more food loss and spoilage than we see currently. Internet sales have also increased spoilage.”

Given that one-third of spoilage occurs in the supply chain, all stakeholders can play an important role in helping drive efficiencies including retailers, Harrison believes. “Each of us has to do the right thing within our role in the supply chain. We need to understand what role we play and how we fulfill our part working with growers, retailers, and manufacturers. Retailers for their part have to collaborate and get tougher on their providers in eliminating food spoilage.”

Walmart has taken a high profile stand in tackling the food waste issue, committing to achieving zero food waste in its Canadian operations by 2025 in accordance with the Zero Waste International Alliance Guidelines. “We believe food waste is a critical issue in Canada and, as a large retailer, we have a unique role to play in addressing this problem,” says Rob Nicol, Vice-President, Corporate Affairs, Walmart Canada. “Our commitment starts in our stores with reducing food waste in our operations by selling and donating as much safe food as possible and recycling food which cannot be sold or donated. Beyond our stores, our food waste reduction efforts focus on end-to-end solutions, including working with suppliers and the agricultural community to address waste upstream.”

The Walmart Foundation has gone even further, announcing a $19 million commitment to support Canadian initiatives and research working on reducing food waste along the food chain in Canada.

Commitments to food waste reduction are spreading across the industry

The root of it all

While there are many initiatives taking shape, from donating food to improving supply chain efficiencies, the most important concern is determining root causes, Gooch argues. “In addressing those you can invariably find improvement that goes beyond waste and shrinkage and address sustainability needs.”

To date, the major efforts have been focused on diversion, he adds. The problem is that diversion does not address the volumes of waste being generated, which in turn is leading to increased inefficiencies and costs. “Within fragmented systems, it is easier to deal with symptoms rather than root causes. There is a need for government and industry to interact in overcoming the misalignments that have been built over the years, and which have led to unsustainable practices.”

“UNLESS WE CHANGE HOW WE PRODUCE AND HANDLE FOOD, AND MANAGE OUR NATURAL CAPITAL, FOOD SECURITY WILL BE AT RISK FOR OUR PRESENT POPULATION, REGARDLESS OF LOCATION.”

VCM INTERNATIONAL 2016 REPORT FOOD WASTE: ALIGNING GOVERNMENT AND INDUSTRY WITHIN VALUE CHAIN SOLUTIONS

In retail, that misalignment can be external with vendors and suppliers, or internally between departments. “Misalignment between procurement, merchandising, operations and corporate can lead to underlying inefficiencies that can drive up costs and waste,” Gooch explains.

WASTE NOT, WANT NOT

+50%
By 2050 the world will need to produce at least 50 per cent more food to feed nine billion people.

-25%
Crop yields are projected to decrease by more than 25 per cent by 2050.

1/3
31 per cent of all food produced globally for human consumption goes to waste—an amount that would fill 60,000 rail cars stretching 1,000 kilometers.

63.5%
According to a value chain analysis on fruit, nearly two-thirds of a commodity produced on farms may reach consumers. 10 per cent loss at harvest, 15 per cent at grading/ packing, 12 per cent at distribution, and another 6 per cent loss at retail.

$31 billion
The estimated value of food that ends up wasted each year in Canada.

8%
The amount of greenhouse gas emissions that food waste accounts for.

10%
The amount of Canadian food waste that retail accounts for each year. Processing and distribution accounts for 20 per cent.

Source: VCM International 2016 report Food Waste: Aligning Government and Industry Within Value Chain Solutions

WHAT HARVARD BUSINESS REVIEW HAS TO SAY

A December 2017 Harvard Business Review article, How Large Food Retailers Can Help Solve the Food Waste Crisis, presents a four-pronged strategy to help retailers reduce food waste throughout the supply chain, from farming and production to stores and end use.

Upgrade inventory systems with the latest technology. Examples include software that helps retailers streamline deliveries from the warehouse to the store; or programs that reduce excess inventory and handling.

Partner with farmers in the supply chain. Retailers are encouraged to share forecast data for specific food items to prevent overplanting.

Modify or eliminate store practices that increase waste. For example, discounting “imperfect-looking” produce or donating surplus edible food to charities.

Educating consumers to cut household waste. Content shared with customers can go a long way toward helping them understand the issues around food waste and the ways the industry is working to alleviate the problem.

One of five key essential strategies in reducing shrink and food waste that Gooch shares is finding those misalignments starting with incentive systems. “It’s not uncommon to see functional department executives actually working against each other. Ask yourself how your people are bonused and how you monitor their performance? Does it encourage disconnects and drive inefficiencies? For example, someone on the procurement team may not be working effectively with their compatriots in merchandising.”

A second recommendation is improving packaging and formatting. Gooch contends that North American retailers are a decade behind Europe in terms of using the cost-effective packaging and product formatting that extends the shelf life of products. “One reason for that is that we are so focused on minimizing per unit price, we don’t look at waste-saving innovations like vacuum sealed, modified atmosphere, or re-sealable packages and smaller portion sizes. For example, in Europe a 750gm. bag of lettuce is actually sold to consumers as two 375 gm. packs, together, so they only use one packet at once.”

“WITHIN FRAGMENTED SYSTEMS, IT IS EASIER TO DEAL WITH SYMPTOMS RATHER THAN ROOT CAUSES. THERE IS A NEED FOR GOVERNMENT AND INDUSTRY TO INTERACT IN OVERCOMING THE MISALIGNMENTS THAT HAVE BEEN BUILT OVER THE YEARS, AND WHICH HAVE LED TO UNSUSTAINABLE PRACTICES.”

MARTIN GOOCH
VCM INTERNATIONAL

Data capture and integrity is another area where retailers can identify problem areas. However, data needs to be managed correctly, Gooch says. “Businesses often have lots of data, but much of that is simply noise and doesn’t always reflect what is happening in the business. In many cases, businesses are measuring the symptoms and not the causes. Data also has to be accurate in order to be able to report and act on it. No matter how sophisticated your IT system is, if you can’t verify your data, it’s not good data.”

Another recommendation—don’t over-obsess over customer demand. While it’s important that retailers understand what consumers value, they can often end up overstocking or overproducing.

Perhaps the most compelling strong motivator for engaging in food loss prevention is the economic benefits that often go unnoticed by retailers, Gooch says. “Every one-per-cent reduction in shrink equates to a four-per-cent increase in revenue. For each item lost, there may be up to 20 costs associated with it that add up to much more than the value of the food itself. The problem is, many businesses look at cost in terms of disposal. But they don’t look beyond that. Reducing inefficiencies—in which waste is only one part—is one of the key opportunities facing the industry today. I think the industry is now waking up to that.”

WHERE RETAILERS AND SUPPLIERS GO WRONG

There are a number of habits at the retail and distribution levels that can be significant contributors to food waste. For example:

  • Motivating consumers to buy beyond their needs through price discounting, promotions and new product launches.
  • Selling portion sizes unrelated to trends in household size.
  • Maintaining high levels of availability on the shelf that are not tied to shopping patterns.
  • Setting conservative use-by and best-before dates, leading consumers to throw away food that is safe to eat.
  • Seasonal – or event-driven promotions that lead to large inventories of unsold product with a limited shelf life.
  • Lack of storage guidance for consumers, particularly with respect to freezing.
  • Not using optimal package design.
  • Improperly chilled transport containers/products.
  • Modifying orders at short notice after food has been packaged.
  • Returning products to suppliers with little to no explanation as to why or what caused the issue.
    Source: VCM International

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