Maryland Smith Research / January 24, 2023

Retailers Can Gain From Reducing Food Waste

Food in a trash bin

Even as the price of food continues to tick up and people are spending more on groceries, nearly 40% of food in the United States is being wasted – mostly by shoppers who never consume what they bought and by retailers who don’t manage to sell it.

Though retailers aren’t the biggest culprit of food waste, they could play a big role in mitigating waste. Large retailers in the United States and other Western economies wield a lot of power in the food supply chain – they are the main link between farmers, producers, and packaged food manufacturers to consumers. Because of that, they can play a big role in reducing waste. And they stand to benefit from reducing the amount of food thrown away.

In research published in the Journal of Sustainable Marketing, Jie Zhang and Michel Wedel, both marketing professors at the University of Maryland’s Robert H. Smith School of Business, explore solutions for mitigating food waste. Along with another co-author from Johns Hopkins University, Zhang and Wedel offer ways for retailers to cut down on wasted food with marketing solutions.

In the U.S. alone, more than $218 billion in food is lost each year. Reducing food waste has the potential to affect economic growth by creating jobs and business opportunities, write the researchers. It would also be good for the planet to make better use of food already produced, which uses up huge amounts of resources and creates about 25% of the global CO2 emissions which cause global warming.

But while so much food is wasted, driving up food prices, many parts of the world experience food shortages, the researchers say. Nearly 50 million people in the U.S. were food insecure in 2022 and 19 million people live in food deserts without access to affordable fresh food.

The United Nations has set targets to reduce retail and consumer food waste by 50% by 2030, and many retailers are stepping up to the plate to do so. Food retailers have a lot to gain, say the researchers.

“Reducing food waste has the direct benefit of lowering costs for retailers,” they write. “While part of the cost savings may be passed on to consumers in the form of lower prices, food waste reduction is likely to increase profitability and enhance corporate image.”

The researchers looked at ways retailers are already reducing, reusing and recycling materials to mitigate food waste. They point to how retailers can play a central role at all stages, including by incentivizing suppliers to reduce resources and materials used in production and packaging to minimize environmental impacts. Retailers can also use marketing to encourage consumers to make sustainable choices.

At the retail level, there are many causes of food waste. Consumers don’t want to buy food that doesn’t look good, sometimes demand forecasts are off or inventory is poorly managed, or food could be wasted because of improper packing or handling during transportation.

The two most important ways retailers can make a difference are reducing and preventing food waste, and figuring out ways to repurpose surplus food, say the researchers.

For reducing waste, that means doing things like making better merchandising decisions and streamlining the assortment of products they offer, using pricing and promotions to sell products before they expire, and using in-store displays and other marketing strategies to reduce food waste. Retailers could also work with suppliers and food producers to increase efficiency and cut down on waste.

To repurpose surplus food, many retailers also donate to charities, reprocess food, resell items to specialty discounters, or have swapping arrangements with distributors.

The researchers also explored the role of technology in food supply chains and waste reduction, such as using RFID and blockchain technology to label and keep better track of food products through supply chains. Data analytics and AI technology – especially as more people buy groceries online – can also help retailers more accurately predict demand and thus make better inventory and merchandising decisions. And digital platforms can help retailers offer consumers new ways to acquire food by creating links between stores, restaurants, caterers, consumers and charities. They can also help consumers better manage their food inventory at home.

Zhang and Wedel emphasize that marketing research can play an important role in offering retail strategies and consumer behavior insights for addressing food waste. They highlight five areas that need more attention and action from marketing researchers and practitioners:

1. Standardize food waste measurement. The researchers say retailers need better tracking systems to monitor and measure food spoilage and waste in real time. Having that data and making it consistent across markets and geographies can help retailers design and test ways to reduce and prevent waste.

2. Optimize food use. More retailers need programs to reuse and repurpose food close to expiration dates. Some retailers use dynamic pricing, discounts, charity donation and resale to discounters, but many just throw food out when it’s close to its expiration date or use-by date. Retailers need to figure out how to sell or use this still perfectly edible food.

3. Amplify good retail practices. Come up with ways to help small local retailers and retailers in low-to-middle income countries implement strategies and practices that many large retailers are already doing to better manage inventory and reduce food waste.

4. Nudge consumers to make more sustainable purchases and use what they buy. Design specific programs to incentivize and encourage shoppers to mitigate food waste, such as eliminating buy-one-get-one-free promotions, and campaigns to raise awareness about waste.

5. Reduce food waste in homes. More than 60% of food waste occurs in households, so more research is needed to figure out why and how to change behaviors. Things like a recipe suggestion tool from a person’s current household food inventory could be used, as well as smart appliances and devices to help people keep better track of their food and expiration dates.

Read the research, “Mitigating Food Waste in the Retail Supply Chain: Marketing Solutions,” in the Journal of Sustainable Marketing.

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