S1 Ep 20
Banana pricing and food waste. Selling by weight v Selling by Item
Banana pricing and food waste is a bigger issue than many people think. This week Colin Peacock is joined by Richard Thaleman to discuss the benefits of selling bananas by item instead of by weight, and how doing so affects food waste.
They look at how selling by weight adds friction and risk, and how switching to per-item pricing helped one retailer to significantly reduce losses.
When bananas can account for up to 60% of the losses of loose products, there is a big incentive to change the way they're sold.
Find out more in this week's podcast.
Podcast summary
Cleaned transcript
Introduction: Why bananas matter when it comes to reducing food waste
COLIN:
Bananas are a very big part of any retailer’s food waste budget.
For one retailer that joined us on a recent call, bananas accounted for 60% of their produce and vegetables food waste.
I’m joined on this call by Richard Thaleman, the food waste advisor for ECR Retail Loss.
We’ll be discussing a recent call where retailers shared their learnings around the benefits, and the negatives, of selling bananas by item – for example, 18 pence per banana – as opposed to selling by weight.
So join the podcast and hear more about the good, the bad and the ugly of selling bananas with item pricing.
Setting the scene: A focus session on banana pricing and food waste
COLIN:
We had a session on bananas.
It’s always an area of interest around the food surplus and waste group.
Bananas are quite challenging from a whole supply chain perspective.
It’s difficult to make sure you don’t have too much waste on these products.
One retailer shared quite an innovative approach they were taking to reduce losses on bananas.
A few others were also trying this approach.
It was interesting.
Richard, maybe you can explain what you thought and took away as their approach, and what the key learnings were for the retailers.
Why bananas are problematic when it comes to waste
RICHARD:
Sure.
I think it’s an interesting one, as you say, Colin, because bananas are one of the most wasted food items, along with bread and potatoes, as we know.
So it’s always interesting to try and find solutions for that.
I thought the case study was interesting.
There have been a number of retailers that have tried looking at single‑price unit versus weight pricing.
Nowadays, particularly in convenience stores, you see a move towards more single‑price units anyway.
My head was thinking about the larger stores and how that would fit there.
With the case study, we went through a number of the barriers they had to jump through.
Item pricing vs weight pricing
RICHARD:
When I think about it, it would be interesting to understand more clearly whether it did reduce waste.
There was a definite nod in the room that it had, but we probably want to dig a little deeper.
They had to adjust how much they assumed was in each box.
The supplier, at the point of sending them in, is still sending by weight.
I don’t suppose we’re going to be expecting suppliers to start counting individual bananas.
It would be interesting to see where those five to ten bananas per box get accounted for.
I assume that’s part of how they come up with their pricing.
Assumptions per box and impact on sales
COLIN:
It was fascinating.
One retailer said they assumed 100 in a box and another assumed 105.
What wasn’t clear, and perhaps couldn’t be shared, was whether assuming less or assuming more led to growth in sales.
Does a higher assumption mean you actually carry more inventory and therefore sell more?
RICHARD:
Yes, maybe.
It would be interesting to understand that from a financial point of view, and whether the results of it reducing waste really hold true across all aspects.
Operational simplicity in stores
RICHARD:
We also looked at the impact on people and operations in stores.
They were talking about how it’s easier because, at the end of the day, colleagues can just count items rather than go and find scales.
I guess that’s more aimed towards convenience and smaller stores.
In bigger stores, both those things probably wouldn’t ring true.
There are probably scales nearby.
And if they had a big banana section, there would be a lot of individual bananas to count.
I don’t suppose that would be too quick for large stores.
But in convenience, I can see how that makes it a lot easier.
We’ve seen on meat and protein how removing catch weight has led to lower losses, because it’s a simpler way of doing it.
You just move to “these steaks cost five pounds, they’re all five pounds”.
COLIN:
Yes, indeed.
Consumer perception and pricing in convenience
RICHARD:
We delved into what consumers thought about that.
There will always be a mixed view on whether they feel it’s more expensive per banana.
I think it is, for sure.
But when you buy most things in convenience shops, they are more expensive because of the nature of convenience.
I don’t think people always look too much into that.
It can be significantly more expensive.
In my local convenience shops they sell individual bananas at 27p each.
If you buy them in bulk from other stores, they’re between about 12 and 16p.
So it is quite significant.
Loose produce, policy pressure and home waste
COLIN:
It does play into that discussion we had earlier in the year around the push for loose.
WRAP and the government have been saying “let’s buy more things loose”, and there was that famous Italian chef involved in that discussion.
So it plays into that argument, and they might waste less at home.
RICHARD:
Yes.
I think that’s part of the point, where retailers are being responsible and trying to help consumers waste less at home.
It makes you think.
If you take a big bunch of bananas and don’t eat them all, you’re going to waste some at home.
Whereas if you’re standing at the fixture and thinking about how many you actually need – because they’re 27p each – then you’ll probably only buy what you perceive you’re going to need.
So it may well help consumers reduce waste.
There is definitely a positive side from that aspect.
Profitability and the “missing” bananas
RICHARD:
The calculation, as we said earlier, is a big part of it.
I’m sure this does become more profitable.
I guess they calculate the price per banana by saying, “If we account for 100 bananas in this box, but we pay for 110, the price goes up, and therefore the loss on those five or ten is okay financially.”
But the question is still there: where did they go?
That would be my concern.
Differentiating organic vs standard bananas
RICHARD:
Another point, when I reflected on this, was: if you moved to everything being individual, how would you differentiate between organic and standard bananas?
They all look the same.
It would be quite a challenge in some of the bigger stores where you’ve got a bigger range of bananas on the shelf.
COLIN:
Yes, that’s something to think about.
Did the discussion change retailers’ minds?
COLIN:
I don’t know whether we changed anyone’s minds.
We had some really good comments from around the world.
Not many other retailers were doing this.
We had some big retailers on, from America, Australia and Europe.
I don’t know whether many hearts were turned by this argument.
RICHARD:
I’m not clear on that either, to be honest.
We heard from another retailer saying they had tried something like this before.
It wasn’t entirely clear whether they felt it was the way forward, for a number of reasons.
Maybe there is a case that, in bigger shops where you’re doing your weekly shop, buying in bulk, as in a bunch of bananas, is the right way to go.
That’s how people shop.
When we had that conversation on loose, it’s not like people are going to start buying individual potatoes at a set price.
You buy a bag.
We’ve discussed before that the convenience of picking up a bag of potatoes – irrespective of the fact we want to get rid of the plastic bag – is important.
You pick up a bag and you walk out.
So maybe that is still true for bananas in some aspects.
Banana pricing and food waste – surplus bananas and end-of-day markdown
RICHARD:
What is interesting, and I always found that article interesting, was the one retailer that started putting surplus bananas – the ones that would be wasted that day – into a bag and selling them for 25p.
I think everybody should be doing that at the end of the day, to be honest.
That would clear through everything.
You would get a return on that.
And, as everybody knows, you can always do something with bananas.
COLIN:
Yes.
To your point, just like bread being used for beer.
We had a lot of energy around that particular discussion.
One retailer was doing exactly what you said, and others were really picking up on it.
One of the problems with bananas in bunches is that, if you don’t want that many, you peel off one or two, probably badly, and you’re left with lots of “orphans” – orphan bananas.
So that was a really good takeaway: to bag them up and sell them at a special price.
Of course, you need a work process and a certain amount of rigour, but it was a good takeaway.
Closing reflections
RICHARD:
Altogether, it was an interesting and worthwhile conversation.
But, as you say, whether or not anybody has now turned to thinking that it’s something they want to pursue I’m not entirely certain of.
COLIN:
Outside the convenience stores it felt like it was something a couple of retailers were already doing.
Anyway, thank you very much Richard.
We’re going to tackle banana pricing and food waste again next year because I sense there’s more to be had in this space in terms of innovation and new thinking because it is such a big item on the food waste side of things and especially the self-checkouts.
I had never thought about your organic versus normal bananas too – which would also be a really big issue selling by singles.
So thank you very much. Look forward to see you next time.
