Reasons and influencing factors for food waste in retail

There are multiple reasons for food losses at retail level, some of which are described in detail by Kantor et al. (1997), Schneider and Wassermann (2005), Mena et al. (2010), Leber- sorger and Schneider (2014a), Canali et al. (2014), Buzby et al. (2015) and Lewis et al. (2017). Common reasons for food being discarded in supermarkets are: expired shelf-life (past the best-before or use-by date), visual defects/damage to the food item itself or the packaging, which make food unsellable (at least at full price), and overstocking due to difficulties in accurate sales prediction. Some of these issues are addressed below.

Because food can be wasted for a large variety of reasons, the food waste issue is difficult to solve with a single solution. As pointed out by Lindbom et al. (2014), it is important to identify not just the reason for food being discarded, but also the underlying root cause of the problem. However, such identification is problematic, since there are so many potential root causes: for example, expired shelf-life, shortened shelf-life due to high piles at display, too large inflow of products, unexpected lack of demand, or a combination of all these.

Since it is very difficult to identify a single root cause, it may be more useful to assess risk factors, since these can potentially better capture the multiplier effect when several risk factors are present and include factors not necessarily leading to food waste, but increasing the risk of waste. Possible risk factors can be low demand, short shelf-life, unsuitable packaging or storage conditions and inappropriate handling by staff and customers.

Among others, Mercier et al. (2017) show that a poor cold chain due to long transport distances, improper or overloaded display cabinets in retail outlets and permanent rotation of stock between display and cooling facility' within outlets leads to significant reductions in the shelf-life of perishables, even in developed countries such as Canada. This may have an impact at the retailer level or ultimately in the household, but is difficult to identify.

From an economic perspective, retailers try' to order just the right amount of all products, meaning that there are no empty shelves (to avoid opportunity' costs) and no unsellable surplus (to avoid loss of purchase costs). Unfortunately', there are several influencing factors that can introduce variation in demand and make prediction difficult. These include the weather, public holiday's and school holidays, and also greater product variety (Lindbom et al., 2014), since having more different types of products decreases turnover for each and makes forecasting more difficult. On the other hand, providing a large variety of products also means freedom for customers, which supermarkets might use as a competitive advantage to differentiate them from their competitors. Since a larger variety might thus be expected to increase profits, retailers may be unwilling to reduce their product range, with waste simply being part of the price they' have to pay' for the larger range of products sold. In practice, Lebersorger and Schneider (2014b) show that food discounters with a smaller assortment of products generate less in-store food waste.

Promotions have a similar effect on food waste, since they temporarily shift the turnover of products and make forecasting more difficult. According to Eriksson (2015), some promotions prompt the customer to buy' the promoted product, but to reject similar products (so-called substitute goods) as a consequence. Since forecasting of sales is more difficult when there are many aspects to consider, temporary shifts in sales can be difficult for retailers to predict accurately'. This leads to a larger than necessary stock of non-promoted products and, since the store must not run out of the promoted product, a surplus of the promoted product. The result of the promotion is increased waste of the promoted product and also increased waste of similar products. Added to the cost of the waste is the lack of profit that arises when the store sells products at a lower margin than usual. Thus promotions can seem like a waste of effort, but they' are unlikely to disappear since they' are there to attract customers and thereby increase overall profits. Promotions can thus be viewed as a marketing cost, and waste as simply part of that cost.

The literature is somewhat inconclusive regarding the effect of supermarket outlet size and the corresponding food waste generated within the outlet. Based on a review of a large range of results in the literature, Alexander and Smaje (2008) concluded that larger retailers have more losses as only' perfect fruit and vegetables are offered to consumers. In contrast, Parfitt et al. (2010) concluded that future demand is more difficult to predict for small grocery outlets, as slight changes in consumer behaviour have more impact on stock and therefore generate a greater proportion of waste than in large supermarkets. Based on a detailed statistical analysis of 612 outlets of an Austrian supermarket chain, Lebersorger and Schneider (2014a) found that food loss rates decline with increasing sales area, increasing number of purchases per year and increasing sales of the retail outlet. They also found that these factors only explain 33% or less of the variation in food loss rates within the outlets of the same retailing company, depending on food category'. This indicates that food loss rates depend on other influencing factors such as individual work routines, planning approaches or staff experience (Eriksson et al., 2014; Leber- sorger and Schneider, 2014a). A closer assessment of 83% of Austrian food retailers indicated that food retail discounters achieve a lower level of food waste than other supennarkets, which may be due to restricted assortment (Lebersorger and Schneider, 2014b).

Unexpected external events may cause irregular food waste at retail, e.g. if customers decide to stop buying a certain product. This decision might be caused by food scandals, such as presence of toxin-producing Escherichia coli, and it makes no difference whether the suspicion is proven or not. Several thousand cases of E. coli illness were reported in Germany in early summer 2011 and for some weeks it was not possible to identify the source. However, consumers were cautioned by the authorities about the safety of cucumbers and other vegetables and the market for these items collapsed after the first notice of suspicion, not only in Germany but also in surrounding countries. Beside the economic loss due to price deterioration, thousands of tons of good-quality fresh produce were wasted at production and retail levels (Gaul, 2011). In less dramatic cases, such as discussions about unhealthy food, affected products are also likely to end up as food waste if the supplier cannot stop production fast enough or find an alternative market. According to Taylor (2006), there are a number of actions in the supermarket that can lead to a “bullwhip effect”, where the amplitude of the customer reaction increases from retail to wholesale, from wholesale to industry and from industry to primary production, and everyone along the chain increases/decreases production and increases/decreases stock in order to compensate for the customer reaction. Increased communication along the logistics chain, so that primary producers get their signals directly from the end customers, could be one way to deal with this problem. Another way to decrease the risk of a bullwhip effect could be to reduce the activities that increase variation. According to Taylor (2006), these activities include promotions, large numbers of products and/or actors in the logistics chain, and ordering and producing in large batches with large stocks. Therefore, the same risk factors for food waste can be problematic both within supermarkets and in other parts of the FSC.

Literature from emerging and developing countries mentions other reasons for losses in the food retail sector. Improper storage (e.g. lack of cold chain during transport and retail), poor transport conditions (such as poor roads, lack of protecting packaging, huge distances), poor quality of produce coming from smallholders, and challenging environment (such as temperature, humidity, rainfall) are some of the problems, in addition to those reported for industrialised countries (Tofanelli et al., 2007, 2009). Lack of sufficient transport capacity and lack of regular access to new stock due to the rural location of retailers can also result in even non-perishable products having already reached their expiry date before the products reach the retailers. This situation has been reported, for example, in South Africa and leads to losses for the shop owners (Pereira et al., 2014).

Prevention measures

The varying food loss rates indicated by Table 7.1 and the weak influence of the outlet characteristics described above suggest that there is great potential for further food waste prevention in retail in practice. In recent years, many different prevention policies have been developed and implemented at retail level. These policies can be categorised as: [1]

• focusing on prevention of surpluses before generation, or finding alternative purposes for already generated surpluses.

Most types of waste and loss are unintentional, but since several risk factors are inevitably a natural part of any activity, waste must also be accepted as natural. A common reason for accepting the presence of risk factors is that they are too expensive or too difficult to prevent. There can also be a conflict of interest between waste reduction and increased profit, with waste reduction likely to be a lower priority. On the other hand, there are also many measures that could easily be economically justified and therefore should be implemented in order to reduce food waste (Eriksson & Strid, 2013). The problem is knowing which problems have low required management intensity (Garrone et ah, 2014), meaning that they are cheap and/or easy to solve.

Possible measures include in-house measures, training of staff, restrictions on BOGOF offers and multipacks, reduced product range toward the end of opening hours, use of dam- aged/ripe products for in-house catering or ready-to-eat products, selling imperfect products, selling surplus products at a cheaper price, food donation and fair trading rules. A retail company in the UK tested a change in promotion strategy' from BOGOF to “buy one, get one free later”, where consumers were able to convert a coupon within two weeks and did not have to purchase double amounts of perishable food at once (Gooch et ah, 2010).

A well-known nationwide voluntary agreement on prevention of food waste is the Courtauld Commitment, which was introduced in the UK in 2005. The latest version, called Courtauld Commitment 2025, sets clear targets for the whole FSC, e.g. a 20% per person reduction in food and drink waste associated with food production and consumption (WRAP, 2018). The signatories from retail comprise 95% of the UK grocery retail sector by value of sales and have promised to report their food waste separately from other waste streams on an annual basis (WRAP, 2018). Another voluntary agreement, set up by The Consumer Goods Forum in 2015, aims to “first prevent food waste, then maximise its recovery towards the goal of halving food waste within our own retail and manufacturing operations by 2025, versus a 2016 baseline” (Consumer Goods Forum, 2016). About 400 retailers and manufacturers around the globe are affected by this agreement. Implemented actions include advanced forecasting, pricing down food items near expiry date and partnerships with social organisations or restaurants using surpluses from retailers (Consumer Goods Forum, 2016).

Reducing the price of products near their expiry date in the course of routine monitoring of shelves is a widespread prevention measure targeted at consumers who value reduced costs for slightly imperfect products. In order to increase demand for those price-reduced products and to automate recognition of expiry date, a mobile app called Chowberry has been developed in Nigeria. It informs supermarket owners about products expiring soon and infonns deprived clients and social organisations about the price reduction. In 2018, the app already succeeded in tests covering 20 shops and 300 clients in Lagos and Abuja (http:// chowberry.com/). Other research indicates that issues such as the introduction of dynamic shelf-life for perishable products, in combination with price reduction, could be a more effective strategy' for retailers than single measures (Buisntan et ah, 2017).

Donation of edible surplus food from retail to social organisations is gaining increasing attention. This measure has been applied globally through voluntary agreements since the 1960s, and on an obligatory basis since 2014. A particular characteristic of surplus food donation is that it must make a threefold contribution to sustainability, by' resolving ecological, economic and social issues for all stakeholders. Long-time experience of voluntary agreements on donation of food surpluses shows that almost the total amount of food items offered by retail is suitable for redistribution to people in need (Alexander and Smaje, 2008; Schneider, 2013). Nevertheless, case studies show that the potential for food donation has not yet been exploited to the full, although some products are donated in amounts that exceed demand (Schneider, 2013; Capodistrias, 2017). Following years of voluntary activities, legislation governing surplus food donations from retail to social organisations was implemented in Wallonia in 2014 (Wallex, 2014) and in France in 2016 (Journal Officiel dc la Repnbtique Franfaise, 2016). Similar legislation has been recommended in other countries, such as Norway, in order to exploit a greater share of the existing food waste reduction potential (Capodistrias, 2017).

Another statutory activity is mentioned by Lee (2018), who suggests introducing a regulatory framework for food retailers’ marketing procedures, especially for developing countries, in order to avoid the development of disadvantageous lifestyles from the outset, including over-buying of food which leads to household food waste.

Food waste reduction measures that promote alternative uses for surpluses already generated are also addressed within the literature as valorisation measures. These aim to create value from the surplus/waste occurring and thereby reduce the negative effect of the waste. Donation of surpluses to charity can be considered a valorisation measure, since it handles the surplus food rather than reducing the production of food. Using surplus bread from bakeries for the production of beer is another example.

The order of different waste prevention and valorisation options for supermarkets is shown in Figure 7.2. The concept of waste prevention differs depending on the perspective.

Waste management framework showing the priority of different destinations for retail food waste

Figure 1.2 Waste management framework showing the priority of different destinations for retail food waste.

Source: Eriksson (2015).

From an environmental perspective, waste is prevented as long as the food is never produced or used for its intended purpose, i.e. eaten by humans. From an economic perspective, it would be a waste to sell the food at a reduced price, since that is a loss of money. With this logic, the measure of cutting the price by 50% on the day before the best-before date may prevent food from being wasted, but still wastes some of the value of the product. However, since a price reduction also means that half the value is saved, this type of measure can be categorised as prevention through economic valorisation (Figure 7.2), as the food is sold through normal channels with a price reduction in order to save some of the economic value and possibly the whole environmental value.

In Figure 7.2, there are also a few important trends that follow the order of priority in the EU waste hierarchy. First, the less prioritised measures are all general and do not require food waste with high levels of product quality, biosecurity, separation or storage conditions. Therefore, these options are cheap and general, but have an outcome with much lower economic value than the original food products. In order to prevent food from being wasted (i.e. using it for human consumption), there are high hygiene requirements that need to be met, which makes separation and proper storage important. These options, therefore, need more effort from the supermarket, but in return provide a more valuable outcome. The problem is that the outcome of most waste management options is profitable for society (SEPA, 2011, 2012), but not necessarily for the supermarket.

Prevention measures suggested to have an impact on retail located in emerging and developing countries include optimisation of infrastructure (e.g. roads, cold chain), prioritising regional suppliers in order to cut long shipping distances and avoid damage during transport, and increased product quality from the start (Tofanelli et al., 2007, 2009).

  • [1] targeting internal staff only, or including external stakeholders too; • brought into force by law (obligatory measures) or developed as voluntary agreements;
 
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