It can be argued that the grocery industry flies under the radar in terms of news coverage as most consumers look at grocery shopping as a regular chore to tie into their weekend. That being said, for those in the industry, there are a number of factors that are potentially altering everything from how food is delivered, stored, and sold, to how profit margins are changed in the process.
One factor that plays a role is the cost of food spoilage. According to a survey from Growing and Sustaining Competitive Advantage in Grocery Retail, the annual value of spoilage for grocery companies was on average $70 million and several hundred million dollars for larger companies. For smaller retailers, this may be the difference between staying open and having to close up shop.
From increased spending of consumer food dollars to self-driving grocery delivery options and other tech-forward and consumer-friendly appeal, the grocery industry has a lot on its plate already. Throw in revenue loss due to spoiled food, and you could have a major problem on your hands.
Fresh Produce, Fresh Problems
A major loss that grocers and their vendors experience comes at the hands of fresh produce trucked across borders and highways. Tomatoes, apples, oranges, bananas, and so on, all have expiration dates and need to not only be moved quickly from the time they’re harvested but as need to be sold at their grocery store destination.
Retailers are striving to keep up with the demands from consumers when it comes to fresh produce. This has caused some companies to offer out-of-season fruit year-round, having items trucked across the country when they’re typically not supposed to be. With it’s limited window of optimal freshness, produce can spoil quickly and groceries have to take a financial hit in the process.
Currently, an estimated 40 percent of all food in the United States is thrown away, making a $218 billion loss happen. Since grocery chains have a role to play in this, they can no longer sit back. Previously, grocers factored this cost into their pricing models, but as shipping costs have increased and low-price competitors taking over the market, this is hurting their bottom line even more.
Now, grocers need to measure how spoilage will affect their year-end profits. Some may look to different ways they can cut costs. Instead of cutting costs, including necessary items like grocery store insurance and payroll, grocers need a strategy to combat food waste.
Grocers like to put out displays, especially when it comes to fresh produce, but these displays, could, in fact, be hurting their cause in cutting down on waste. Putting an abundance of produce on display can end with perishable items going bad before they’re consumed. To combat this portion of food waste, grocers can put less on display, which would cut down on overstock and would lower the amount of food waste.
Another way this can be executed is to keep an eye on what your customers are consuming. If bananas are more popular than tomatoes, maybe make the section for the little smaller.
Another way that food waste can be limited is to discount any damaged foods in stock. These items don’t usually get shelf life because grocers tend to dispose of them as they were blemished in transit. Stores assume that consumers won’t want an item that has been damaged, even in the slightest way, and even if it’s still edible. Consumers may expect grocery stores to look perfect in their displaying of food items, but people still like a deal, so pricing items down at the end of the day could make for a sale and less food waste.
It’s important for grocery stores to be proactive and creative when it comes to how they can limit waste while also including the consumer. By discounting items that are slightly damaged and limiting the amount of product out in the open, it could help to promote less waste and spoilage, and, in the long run, help the overall profit margin of the grocery chain.
About Irving Weber Associates
At Irving Weber Associates, Inc., we understand what it takes to run a successful grocery store, market or convenience store, including investing in a comprehensive Insurance Program to ensure that they are financially protected against claims. IWA can offer business insurance coverages including, General Liability, Property, Site Pollution Liability, Boiler & Machinery Equipment Breakdown, Workers’ Compensation, Business Auto, and many more. For a detailed look at how we can help you safeguard your business with a custom-tailored package, please contact our experts today at (800) 243-1811.