S1 Ep 19
The True Cost of Food Waste in Retail - Benchmarking Costs
This week Colin Peacock is joined by Richard Thaleman to discuss Lisa Jack’s report on the true cost of food waste in retail.
How to factor in the costs associated with surplus and unsold food.
And look at how the ECR Retail Loss food waste calculator can help retailers benchmark costs like marking down, sorting, and donating surplus food.
Podcast summary
This week Colin Peacock is joined by Richard Thaleman to discuss Lisa Jack’s report on the true cost of food waste in retail.
How to factor in the costs associated with surplus and unsold food.
And look at how the ECR Retail Loss food waste calculator can help retailers benchmark costs like marking down, sorting, and donating surplus food.
Cleaned transcript
Introductions and context
COLIN:
Welcome to the ECR Retail Loss Sell More and Lose Less podcast series.
Food waste is an enormous cost to the retail industry. But as we have learned from Professor Lisa Jack, we’re aware that it’s more than just the cost of throwing away the food item.
In this podcast, I’m joined by Richard Thaleman. We’ll be discussing the themes that emerged from Professor Lisa Jack’s new report, coming out towards the end of this year, on the true cost of food waste.
We’ll start to understand what the elements of those costs can be, and, critically, what that might inform us in terms of where we might want to make savings in the business.
The research project and workshop
COLIN:
We had an update a week ago on our longest ever research project, which is the true cost of food waste in retail, or food surplus. It’s been authored by Professor Lisa Jack.
The time has been consumed with waiting for data from retailers. But we’ve got to a point now where we think we need to publish something.
We had a sort of workshop‑stroke‑meeting, where we had about 40 or 50 retailers show up, plus food waste experts. They listened to the conclusions Lisa was coming to.
She’s a professor of accounting, so it was quite complicated and quite in‑depth. We then had a discussion around where this was heading.
What would be the conclusions? How would retailers be able to use the conclusions of the data, and perhaps a model?
What were your thoughts on what took place? And are you excited for this new report that’s coming out, we hope, in September?
A mixed audience and end‑to‑end costs
RICHARD:
Yes, indeed. It was a great presentation.
I always think it’s good when you think about the participants on that call. They’re from varying functions. That’s always helpful, because when we’re now looking at the full end‑to‑end cost of this, it includes so many people and so many decision‑makers.
Having those people across the board, and getting some feedback from them, really helps drive this forward.
I think one of my thoughts was that there’s a slightly invisible instigator of food waste that may need to come into that spreadsheet. That’s around the perception of consumer demand on availability.
You will always have an amount of food surplus left over due to trying to make sure you’ve got full availability at all times. That may need to come back into this as part of the full calculation.
We also need to face into the fact that we will need to have some surplus, due to availability and case sizes, etc.
The whole report, and its intent, is to give us that data back so that you can make informed decisions on case sizes and whether or not it’s a product that’s worth stocking anymore within those retailers.
What is the true cost of food waste in retail? Financial and environmental benefits
RICHARD:
The interesting thing is that, when you drive through that with that mixed audience, what we’re getting to is that we should be able to deliver on the financial benefits of reducing food waste and food surplus, and the environmental benefits alike.
Many retailers are now talking quite openly about how important the price and cost are versus the weight. The weight is the environmental measure. The cost is the business profitability.
The closer we can get to understanding both those parts, the more we’ll make really good decisions on what we need to do to drive this down.
Costs of markdowns, donations, and apps
COLIN:
We talked a lot about the various costs associated with donations and with marking down. Labour costs, having an app, etc.
One of the things that was really interesting, and I know you picked up on it, was this piece around unexplained loss and whether that should be included in the true cost of food surplus.
In my experience, working on the newspapers and magazines category, we knew that if you had a lot of surplus, you would be much more likely to have high levels of unexplained losses.
Typically, 45% of all magazines in the UK, at least, that are sent to stores get sent back.
I don’t know whether, in your experience, you’ve seen that, and what you thought about it, because it was quite an interesting area of discussion.
Bringing all loss into the calculations. Adding up the true cost of food waste in retail
RICHARD:
When we look at it, some of this data going back will be really beneficial to feed back to the commercial teams.
When you talk about it in that way, the overall loss, no matter whether it’s unknown loss or known loss, should be played back. It’s all part of operating as a business and stocking that line inside the retailer.
Any loss, whether it’s explained or unexplained, should all come back into that equation. It’s part of the overall cost of serving that product to customers.
In whatever way that comes about in this final report, I think it’s definitely beneficial.
Markdowns, assortment, and visibility
COLIN:
There was another metric there about how much volume is sold at markdown, below the cost of goods. Again, that’s quite a scary number for some particular items. It pushes that focus on assortment.
RICHARD:
It’s interesting to look at that. There’ll be some products where you’d maybe make a decision not to sell them if your overall profitability has gone below that marker. You wouldn’t stock that anymore.
But then again, there are some footfall drivers. I think we’ve mentioned before that, when you look at tubs of sweets, they very rarely make any money anymore. They sell them so cheaply, but it gets people to come into the shop.
There are some of those, but I don’t think that’s really what we’re talking about here.
We’re talking about if we’re ending up having to reduce it, and all that is hidden from the commercial teams or buying teams. They might think that they’re selling a lot of product and that it’s a great product to stock. But actually, we’re not making very much money on it.
COLIN:
So your point is the visibility. Providing that full visibility to the true cost, end to end, will lead to better decisions. It will also help justify investments as well.
RICHARD:
Yes.
I can visualise the conversations that the buying teams have with suppliers. Being able to play back that data doesn’t mean to say it’s a stick to say, “We don’t want to stock that anymore.”
The suppliers might make some different decisions, again going back to case sizes and product pack sizes.
COLIN:
Shelf life, yes.
RICHARD:
Yes.
Looking ahead to the report on the true cost of food waste in retail
COLIN:
Very good. We’re looking forward to the report.
It has been four years, but we’ve been promised something in September. Let’s see if it’s September 2024 or another date.
But the Professor, as you said, did a really great job there, and we look forward to seeing that.
Thanks for taking the time, Richard, and we’ll see you next time.
RICHARD:
Yes, see you next time. Thanks, Colin.
