Leaner Food in Supermarkets

Supermarkets can seem like a temple to abundant food, but the less palatable flipside is the amount that goes to waste. Billions of dollars’ worth of food is dumped each year because of retailers’ inefficiency. This matters: not just because wasting food is bad, but because food prices are so high at the moment, firms have the extra incentive to act because of the immediate impact on their profits.

It is difficult to gauge quite how much waste there is, but one analyst puts the figure at 8-10% of total “perishable” goods in America. The Food Marketing Institute, an industry body, says such sales totalled $196 billion in 2006. That means food worth nearly $20 billion was dumped by retailers. In a recent report the United Nations estimated that retailers and consumers in America throw away food worth $48 billion each year, and called upon governments everywhere to halve food wastage by 2025.

The situation in Britain is not great, but Europeans tend to do a bit better, with wastage only half the American rate. How come? The obvious answer – that food travels further - is not the whole story. A study from Stirling University raises other points. One reason is that American firms aren’t as good at capturing and using customer data to predict demand. And many American store managers believe high shrinkage is inevitable, given their enthusiasm for huge displays and the widest possible range of produce. This can feed a vicious circle of more and more choice which can backfire if displays disguise rotten food or too much choice overwhelms customers.

According to The Economist, a few firms have made a concerted effort to reduce shrink. One is Stop & Shop/Giant-Landover, a retailer with sales of $17 billion owned by Holland’s Ahold. Launched in 2006, its initiative stressed that making its supply-chain leaner would enable the chain to offer customers the freshest possible products. Stop & Shop looked across its entire fresh-food supply chain and reduced everything from the size of suppliers’ boxes to the number of products on display, which fell by almost a fifth. Last year the chain cut shrink by almost a third, saving over $50m and eliminating 36,000 tons of rotten food, while improving customer satisfaction.

Other retailers would do well to follow Stop & Shop’s example—or watch as waste takes an even bigger chunk out of their profits.