Could a grocery chain grow more profitable by creating less waste?

By

EY Global

Multidisciplinary professional services organization

6 minute read 30 Mar 2019

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Grocery stores must shift their practices from protecting what they already have to creating what they need to become.

There are 7.7 billion people in the world today. By 2050, the global population is expected to grow to 9.8 billion. This is a staggering number of mouths to feed, and many are already going without. Globally, one out of four children have stunted growth due to hunger and malnourishment. Even in the US, nearly one out of eight people do not regularly have access to safe and nutritious foods.

So how is it possible that we waste 30% to 40% of the world's food production?

Food security is one of the biggest overarching issues we face as a global society. It requires us to address immense and complex challenges, from climate change to consumer behavior. Long before we reach 9.8 billion people, global economies will be struggling to address mass starvation and the societal impacts that result — poverty, mass migration, civil unrest and, potentially, war.

Reducing food waste is a meaningful and necessary step in the right direction. And there is a path forward.

Four ways to reduce food waste, improve corporate profits and save the planet

1. Adapt with the consumer

Consumers today want food facts, not fiction. They want to understand what they're eating and its impact on what they value — whether that is their own health or the planet's health. However, food waste today is still at its highest when it leaves the store and enters consumers' hands.

Grocery chains historically have sought to address this by connecting consumers with the on-target choices. However, to have a greater impact we must encourage and enable changes in consumer behavior. New and evolving concepts, such as smart fridges and meal delivery services, are making it easier for consumers today to make informed choices about what, when and how much they purchase. Artificial intelligence increasingly nudges and guides the future consumer, and grocery stores need to shift their practices from protecting what they already have to creating what they need to become.

Grocery chains need to integrate and enable consumers to leverage these technologies to make sure they are not wasting what they take home.

Blockchain technology will further change the game, because it facilitates a completely transparent food system. This enables a stronger partnership with suppliers. Consider, for example, the challenge of quickly launching an on-trend product such as locally grown, responsibly sourced produce.  Is there sufficient and available supply? Is the produce safe for consumers? Will marketing assertions (e.g., organic) withstand scrutiny? Are consumers empowered with knowledge, influencing and improving their shopping experience?

In learning to better respond to consumer behaviors, grocery chains can help societies live out the proverb "waste not, want not" and improve their profitability.

2. Improve performance along the food supply chain

Today, it is still a challenge for most grocery stores to fully understand what is on every shelf of their stores, making it difficult to understand what needs to be ordered from manufactures and farmers. The process is still very manual, however there is hope for increased visibility. Integrated planning between food and beverage manufacturers and suppliers will improve performance across the supply chain. Opportunities include:

  • Making better use of enterprise resource planning (ERP) systems
  • Improving control of goods deliveries to stores
  • Matching order volume with customer demand
  • Analyzing and identifying goods that are most likely to go to waste and making appropriate adjustments
  • Providing visibility into food waste in manufacturing
  • Adjusting purchasing routines to consider consumer demographics, income and buying trends, as well as upcoming promotions and holidays
  • Improving good manufacturing practices (GMPs) regarding food storage and staging for temperature-sensitive perishable products
  • Making use of GPS and satellites to adjust transportation routes so that perishable goods can get from point A to point B in a way that gives the products maximum shelf life
  • Improving waste disposal procedures, such as product donations to charities or local farms and anaerobic digestion of food waste

By teaming with their suppliers, grocery chains can limit food waste, improve operational efficiency and pursue more profitable growth.

3. Prioritize food quality and safety

In 2018 alone, North America experienced three consecutive E. coli outbreaks in romaine lettuce, an outbreak of salmonella in 12 million pounds of beef products, and a Cyclospora parasite in veggie trays and fast-food salads. Globally, we cannot ignore South Africa, which experienced the largest listeriosis outbreak on record and was linked to 216 deaths. In this case, significant challenges existed to get a recalled product off the shelf and out of the hands of consumers. Best-case scenario, unsafe food is identified and wasted. Worst-case scenario, people eat it, impacting public health.

Investment in traceability can significantly reduce the impact from a food recall given food safety concerns. This may mean leveraging consumer buying data for proactive and targeted recall communication. It also benefits from an enhanced relationship between suppliers and retailers, potentially involving a blockchain solution, which remains a hot topic given advantages of security, speed and cost.

Further, innovations in organizational culture, learning and governance allow companies, including grocery chains, to more effectively implement food safety programs. This could lead to grocery chains exploring their current good manufacturing practices (GMPs) to understand the risk their operations may pose to the quality of their food, such as leaving control-monitored prep room and cooler storage doors open. Organizations could also consider emerging biological, chemical and nonthermal physical technologies for decontamination.

Investing in food safety prevention is in both the general public's and the company's best interests.

4. Reimagine the farm

While food waste is one very important component in the larger issue of food security, another key part of the solution begins at the farm. Farms are, and will always be, the first link in the global food supply chain. As farms evolve, so will the rest of the chain. From predictive analytics to blockchain to sensors and the Internet of Things (IoT), technology can help farmers determine what to grow and where, how much to plant, and what feeds and fertilizers to use.

Drones can share information on crop health and harvesting. Driverless tractors and other robotic labor can help to provide self-sufficient seeding and planting, watering and irrigation, crop monitoring and maintenance, and harvesting, using real-time weather satellite information and other big data to identify and take advantage of the best climate conditions.

Additionally, new products are being introduced to the market to increase the shelf life of produce and shorten the supply chain for goods. Combined, these technologies and innovations form the backbone of "smart farming," which will help farmers to increase crop yields, speed to market, production efficiency and product quality, and to meet the growing demands of our rapidly expanding population.  

As food security becomes a growing concern, the proverb "waste not, want not" assumes heightened significance. New and emerging technologies have the ability to better enable grocery chains and other organizations to reduce food waste and improve food security — while also bringing value to the bottom line.

Summary

Reducing food waste is crucial to overcoming one of today's biggest global challenges: food security. The path forward is also good for corporations’ bottom line.  

About this article

By

EY Global

Multidisciplinary professional services organization