4 Ways Grocers are Winning Market Share & Boosting Margins by Reducing Food Waste
By Stefan Kalb
It’s no secret the retail industry struggles with food waste. More than 43 billion pounds of food is thrown away each year by supermarkets — that’s 10% of all U.S. food waste — due to administrative mistakes, breakage, spoilage, theft, and other losses. Worse, the majority of grocery chains do not have an accurate picture of their food waste volume, leaving the true number grossly underrepresented in the industry.
Although most retailer grocers calculate their food waste below 15%, the reality is they are typically wasting between 35% - 40% of their fresh products when comparing inventory delivered to inventory sold. The cause of this alarming undercalculation can mainly be attributed to outdated forecasting methods and waste management challenges that have long plagued the industry.
While excessive food waste is bad for business — costing the grocery industry more than $50 billion in lost profits annually — it’s also bad for our planet. The environmental cost of retail food waste that goes unaddressed equates to 30 million acres of cropland and 4.2 trillion gallons of water, according to a recent study by the U.S. Department of Agriculture’s Agricultural Research Service.
These points may paint a daunting picture for the industry, but the future of retail and how it tackles food waste is bright. This is because some major grocery chains are placing big bets on sustainability efforts that have the potential to take a significant bite out of food waste while boosting profits. Below are 4 ways leading retailers are using innovative approaches to materially reduce food waste, improve margins, and enhance the shopper experience:
1. Supply chain transformation
Kroger is working at the nexus of food waste, hunger, and waste diversion. Through its Zero Hunger | Zero Waste program, the company plans to reach zero food waste by 2025. This includes transforming logistics, urging partners to reduce waste, investing in hunger intervention for families, and shifting wasted food from landfills to other recycling methods or industrial uses. The company has already said its total food waste has decreased by 13%, while the food waste diversion rate has improved by nearly 18%.
2. Improved merchandising and auditing
Target has transformed its replenishment strategy to significantly reduce food waste. In the company’s 2020 Corporate Social Responsibility Report, Target outlined numerous plans to align with climate science, a key pillar behind its intention to invest in new methods and technologies that ensure its stores don’t hold more food than they expect to sell. Through novel forecasting, ordering tools, merchandising solutions, and offering guests discounts on food close to expiration, Target is positioned to significantly reduce food waste and grow its fresh food margins.
3. Sustainability as a core business goal
Whole Foods follows a robust green mission. Environmental stewardship is a core tenet of the Whole Foods brand, and the company is the most prominent success story of an environmentally focused business going mainstream. Today, the company continues to differentiate through a variety of conservation initiatives across packaging, food waste, employee transportation, and zero waste certification. These efforts coalesce to improve sustainability, reinforce brand authenticity and improve margins by reducing waste.
4. Intelligent forecasting
Grocers have also been turning to AI as a solution to evaluate the impacts of food waste. With accurate, intelligently analyzed data about product ordering, use, and waste, retailers gain clear insights into where they are losing money and use that data to inform effective waste-reduction strategies. Panda Express is a great example of this, as the company found through waste audits that unused soy sauce packets were creating a significant environmental and financial impact on the company. Wastedive reported that after the fast-food chain reset its ordering and use of individual soy sauce packets, stores were seeing significant improvements in waste-related costs and diverting more food waste from landfills.
While the amount of food wasted by the grocery industry can feel grim, it’s highly encouraging to see major national retailers embrace innovative sustainability practices and experience market share growth from those efforts. The time is now for the rest of the industry to catch up and realize that reducing food waste can be one of the best business strategies for achieving long-term financial success.
Author Bio: Stefan Kalb
Stefan Kalb is the CEO and co-founder of Shelf Engine. Kalb co-founded Shelf Engine in 2016 to address the global food waste pandemic he experienced first-hand with grocers. Prior to Shelf Engine, Kalb spent 7 years as the CEO of Molly’s, a healthy grab-and-go food company he started in 2009. While Kalb grew the company to more than 400 regional retail locations, food waste was eating into Molly’s bottom line. Hungry for a solution, Stefan and Shelf Engine co-founder Bede Jordan developed a model to considerably improve perishable food forecasting. After successfully cutting Molly’s food waste in half, Kalb and Jordan quit their day jobs to launch Shelf Engine with a mission of transforming the food supply chain by helping grocery stores reduce waste and increase sales through intelligent forecasting. Today, Shelf Engine has more than 100 employees and manages orders for leading grocers at thousands of locations nationwide.
Stefan is a graduate of Western Washington University. He’s an avid skier, cyclist, climber and soccer player. When Stefan is not enjoying the outdoors, he’s likely busy at work in his woodshop.