The grocery retail industry has a food waste problem.
Supermarkets throw away between 2.5-4% of their potential revenue in the form of surplus food, a major contributor to the 16 billion pounds of food waste generated annually by food retail businesses in the United States.
But with crisis comes opportunities – retailers are more motivated than ever to reduce food waste, with 84% of retailers expressing hopes to donate food that would otherwise be wasted and handle their surplus more responsibly. Fortunately, there are already new initiatives and technologies that can help supermarkets cut down on food waste, boosting profits and lowering their environmental impact.
The challenges
Retailers often struggle with food waste due to the complexities of managing perishables without the real-time data needed to make optimal decisions.
Inventory management is one of supermarkets’ foremost challenges – knowing when to stock which items, how much to have on hand, where in the store to display them and more. Strategic inventory management plays an important role in preventing food waste and reducing both over- and understocking.
Retailers with otherwise effective inventory management still frequently face the challenge of selling perishable goods before they expire and become “surplus food items.” The traditional solution is to offer discounts on soon-to-expire products, but these deals are often implemented too late and result in increased waste, reduced profit margins and operational inefficiencies. Erratically enacting discounts also creates uneven sales patterns by incentivizing consumers to wait for these steep discounts rather than making regularly timed purchases, disrupting inventory management data even further.
The next significant challenge is largely out of a supermarkets control – unclear or misleading expiration labels. Consider that more than 80% of Americans discard perfectly good, consumable food simply because they misunderstand the expiration information. Labels like “sell by”, “use by”, “expires on”, “best before” or “best by” are confusing, and for fear of a potential foodborne illness, consumers will discard otherwise edible items.
Both the lack of consistency in labelling and the lack of consumer understanding leads to confusion, doubt and ultimately, wasted food and lost money for stores and consumers alike.
Solutions
Traditional markdown practices are inefficient and costly, often based on data that does not accurately reflect stores’ real-time inventory, which can lead to significant losses for supermarkets. And as most markdowns are not calculated and displayed on the packages themselves, cashiers have to manually enter codes or coupons, deepening discrepancies and confusion.
Fortunately, there are solutions currently available for optimizing markdowns and managing sales better overall. Predictive analytics, for example, enable grocers to create dynamic pricing models and markdown optimizations – precedents and standards for pricing and discounting inventory that leverage data analytics to better understand buying trends and competitor pricing. More and more retailers are already implementing this straightforward, tech-driven solution, which is poised to become even more effective as data analytics become faster and more powerful, further boosting profitability and minimizing waste.
When it comes to the confusion and doubt surrounding expiration dates, the solution must be more systemic. Members of Congress are catching on and have already sponsored legislation (The Food Date Labeling Act 2023), which would require manufacturers to only use pre-determined, standardized expiration labels to eliminate inconsistency and confusion.
By setting clear, detailed, consistent labelling across all products and bolstering consumer education on expiration labels, supermarkets will sell more of their supply and consumers will waste less food. For example, if food manufacturers add clarifying labels like “freeze-by”, consumers can shop for products without hesitation and eventually save unused perishables without wasting it. This initiative can be bolstered by supermarkets themselves through clear signage aimed at consumer education. For instance, in aisles with perishable food, grocers could hang signs that explain the different meanings of expiration labels.
While recent legislation and in-store initiatives are beginning to mitigate this issue, there are still over 60 different phrases used on expiration labels, evincing a further need for consolidation and education efforts.
Waste not, want not
Implementing innovative pricing models and consistent expiration labeling are two small steps that the wider food retail industry can take towards combatting this large and ongoing issue. By prioritizing these solutions and adopting the tools needed to address them – be it with tech-driven solutions like dynamic pricing and markdown optimization, or through simple signage in the aisles – grocers will not only enhance their profitability, but they will actively contribute to a more sustainable future as well.
