How retailers are using private brands, technology to curb food waste
Food waste continues to be a problem in America. According to the hunger-relief nonprofit Feeding America, 108 billion pounds of food is wasted annually in the United States, equating to 130 billion meals worth $408 billion. Manufacturers, farmers, grocery stores and consumers all play a role.
Alone, grocery stores waste about 30% of all food inventory, accounting for 16 billion pounds annually, according to waste collection and tracking service Recycle Track Systems.
“Food waste is not just a moral concern but a business one,” said Michael Jaszczyk, CEO at GK Software USA. “Food waste can not only result in lost sales, it can also create a negative image regarding corporate responsibilities. Unfortunately, for retailers, there are too many perishable SKUs on their private label brands that have varying shelf-lives to manually navigate inventory management.”
As sustainability becomes an increased focus for both retailers and consumers alike, food waste management will become a way for retailers to not only take steps towards sustainability, but increase profit margins as well. Some retailers, such as ALDI, known for its expansive private label selection, already have limiting food waste in mind.
“As a private label pioneer, our business model gives us a leg up on reducing waste,” said Joan Kavanaugh, vice president of national buying at ALDI. “When people visit an ALDI store, they will see that we only fill our shelves with the most-popular products in the most-popular sizes. This approach helps us minimize the number of wasted products by only selling exactly what our customers need and want. Our efforts to minimize food waste start with our buying team. They work hard to determine accurate projections so we can avoid buying excess food from the start. As part of this process, we use a perishable food ordering program, which is continuously updated with data that focuses on balancing availability and customer purchases over time.”
ALDI says it aims to reduce its food waste by 50% by 2030. For retailers looking to follow ALDI’s model, emerging technology can be a tool to reduce food waste, potentially by leveraging private brand products, and in turn save money.
“Instead, retailers can use AI-based dynamic pricing, which can help them use sales and transaction data to understand demand factors on private label brands and non-private label brands alike,” added Jaszczyk. “From there, retailers can use best-before or target dates to recognize when items will be sold out, and optimize price according to demand and target date. For example, AI can predict when a private label brand item will expire and establish optimal price as that expiration date draws near. That way, they can ensure the price inspires shoppers to buy the item before it ends up in the garbage.”
AI-powered services can give retailers a more complete look into their own brand selection of perishable food, allowing staff to detect and adapt to demand fluctuations, which is critical to reducing waste.
“Despite retailer demand for insights on quality, waste, traceability and the daily production of fresh foods, many grocers have little to no visibility into their fresh inventory, both private label brands and otherwise,” said Troy Prothero, SVP of product management, supply chain solutions at Symphony RetailAI. “And the issue with this visibility gap will become more and more prevalent, and therefore detrimental to retailers’ bottom line, as the market sees increased consumer demand for healthier prepared and fresh foods. With fresh food in particular, grocers need to understand demand for individual private label items, and then properly allocate resources across the supply chain to ensure these items are delivered in an effective and timely manner.”
Prothero added that forecasting for prepared food production, in addition to meat and produce SKUs, can be used to minimize risks. This can help maintain data integrity and help facilitate collaborative communication around item availability, movement and end-to-end traceability across the supply chain.
While AI seems to be at the forefront of how retailers can eliminate food waste, Grocery Shopii, a service that aims to streamline meal planning and fuel grocery eCommerce, said it can help curb waste as well. The service is helping to reduce food waste and improve sustainability by allowing
farmers to more quickly and efficiently move their surplus produce through grocery channels, which is an added benefit as supply chains continue to struggle due to Covid-19.
“When a retailer employs a recipe shopping experience like Grocery Shopii on their website, they turn on an engine that fuels private label sales at volume,” said Katie Hotze, CEO and co-founder of Grocery Shopii. “Why? Because the ingredients in a recipe can be fulfilled in many ways. Some recipe technology providers sell those ingredient slots to brands, creating a fulfillment nightmare for the retailer. Grocery Shopii empowers the retailer to define the private label fulfillment selection for nearly every ingredient, opening a powerful channel to place store brand products into every recipe added to cart. Combine this retailer benefit with the speed and convenience of a single-click, add-to-cart recipe shopping experience for shoppers, and it’s easy to grasp how quickly recipe technology can fire up online sales.”