Research Paper
Exploring the true cost of unsold food in retail
Focus area: Food waste
Foreword Food waste reduction is a priority for all food retailers, in all parts of the world. This study was commissioned to bring new insights as to the cost of
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Food waste FAQS
Around one-third of all food produced around the world is lost or wasted. Decomposing food waste produces methane, a greenhouse gas that contributes to climate change.
Meanwhile, the extra emissions caused by producing, transporting and storing this wasted food only add to the problem.
The United Nations states: “If food waste were a country, it would be the third biggest source of greenhouse gas emissions.”
The ECR Retail Loss Food Waste and Markdowns Working Group has been working for years to find innovative approaches to the challenge.
Our research shows that increasing a product’s shelf life by just one day will reduce waste by 42.8%, while unpacking items in the distribution centre can cut food waste by 32.5%.
By exploring these and other options in detail, we help our 300+ retail members make a big difference by reducing food waste in supermarkets and helping protect the environment.
When it comes to cutting the amount of food that we throw away, language matters. The distinction between waste and surplus is important for managing retail losses.
Food surplus is when the supply of food exceeds demand, while food waste is when food is ultimately not consumed by humans.
When retailers have a surplus and it spoils, it becomes food waste. Some food waste is inevitable. But smart planning, storage, and redistribution can help to reduce the problem.
A variety of factors throughout the supply chain and store operations can cause food surplus and ultimately increase the waste bound for landfills.
Understanding these potential drivers is critical for minimising waste and maximising profitability.
1) Ordering/Forecasting
Over-ordering or inaccurate demand forecasting can result in inventory sitting on shelves, and lead to expired or unsellable stock.
Perishable goods, such as fresh produce or prepared foods, are particularly vulnerable to poor production planning. This excess stock quickly spoils.
2) Receiving
Mistakes in the receiving process, such as incorrect quantities or damaged goods, can contribute to surplus if not identified early.
Different delivery methods—whether via Direct Store Delivery (DSD), third-party distributors, cross-docked merchandise, or internal warehouses—affect how inventory is managed.
It’s important to coordinate these processes to reduce excess stock.
3) Product Handling
Once inventory reaches the store, your merchandising strategy can impact surplus levels. The placement of products, especially perishables, affects their sales rate.
While failing to maintain proper cold chain protocols and sanitation practices can cause perishable items to spoil prematurely.
4) Administration
Admin errors at the store, corporate, or supply chain level, such as inaccurate reporting or communication breakdowns, can lead to overstocking or missed markdown opportunities.
5) Pricing
Inaccuracies in price management can delay markdowns for perishable items, leading to inventory left unsold.
Effective markdown tracking ensures that items close to expiration are sold before they spoil, helping to avoid surplus.
6) Back Stage
Discrepancies in inventory accounting can result in mismatches between available stock and demand, leading to excess products remaining unsold.
7) Accidental Factors
Damaged products or cashier errors, such as incorrect scanning or applying wrong discounts, can increase waste.
While mistakes made by store associates, particularly in departments like produce or bakery, can result in the creation of unnecessary surplus.
8) Theft
Stolen products may result in record discrepancies, leading to over-ordering or overstocking as stores try to replenish missing items.
Markdowns are price reductions applied to products near their expiry date or that have become less desirable to customers over time.
For retailers, markdowns are a powerful tool for reducing food surplus, increasing sales of perishable items, and optimising inventory management.
By regularly applying markdowns to perishables, retailers can encourage shoppers to purchase food that’s too good to waste.
Markdown strategies can both prevent the need to re-purpose or donate unsold but very close to expired stock and boost customer satisfaction, as shoppers appreciate deals on everyday products.
Scannable 2D codes will be an increasingly important tool in the fight against food waste. The detailed information they convey on the age of the inventory can boost inventory management.
2D codes provide more comprehensive data than traditional barcodes, enabling retailers to track critical information such as expiration dates, batch numbers, and storage conditions.
They allow employees to quickly identify products nearing the end of their shelf life, allowing for timely markdowns or promotions, improving productivity and compliance to food safety standards.
The use of 2D codes offers retailers greater visibility into the entire supply chain. With the ability to track a product’s journey from farm to shelf.
Using RFID tags to track products through the supply chain, also gives retailers real-time visibility of inventory improving stock management so less food passes its sell-by date.
RFID readers can receive alerts when products are near the end of their shelf life. This enables timely markdowns or promotions.
The technology helps ensure proper stock rotation by facilitating the “first in, first out” (FIFO) method.
By identifying which products arrived first, store employees can ensure that older items are sold before newer ones.
Automating the inventory process significantly reduces human error in stock management and ensures that critical data, such as expiry dates and quantities, is always accurate.
Supermarket customers expect large ranges and abundant displays of fresh food. But giving shoppers the choice they demand adds pressure to initiatives aimed at reducing waste.
Optimising and balancing the trade-off between food waste rates and on-shelf availability (OSA) right can boost profits and support corporate ESG goals.
Our research identified 65 interventions aimed at helping to reduce food waste in the supply chain. And our Working Group continues to identify many more tools and techniques.
If you would like to join dozens of other retail loss experts on our Food Waste Working Group, we would like to hear from you.
The group has been helping to find innovative solutions to the problem of food waste since 1999. To take part, email colin@ecrloss.com.
