December 19, 2005 | General

Analyzing Retail Food Loss

BioCycle December 2005, Vol. 46, No. 12, p. 40
On average, losses at small mom-and-pop restaurants, convenience stores and fast-food places are about one-tenth of their large corporate brethren. Part IV
Timothy W. Jones

FOOD RETAILERS work hard to satisfy the American demand for prepared and instant foods, yet unwittingly lose a huge bite from their profits. Each year, the nation’s restaurants (both traditional and fast food), convenience stores and supermarkets throw away at least 35 million tons of edible food worth nearly $30 billion.
You can never stop all food loss. Fallible humans and their machines that transport, handle and prepare food aren’t perfect. But losses could economically be cut in half, adding nearly $15 billion in profits to retail food companies.
Just how much food is lost and why, varies with each sector and even within sectors. Nearly every retail food sector in our study had at least one company that understood the importance of food loss. These firms allowed us to evaluate just how efficient they could be. On average, losses at small mom-and-pop restaurants, convenience stores and fast-food restaurants were about one-tenth of their large, corporate brethren.
Losses were proportionally highest at convenience stores – about 25 percent. There are two culprits. One is “instant” food. An important market niche for these stores is providing fresh sandwiches, hot dogs, pizza, fried chicken and nachos that are ready to pick up and eat. If not bought in a limited time, instant food cycles quickly into the garbage stream.
The other reason is a lack of management and training, which more than doubles their food loss and cuts into their profits. Store workers generally don’t know how long they can safely leave prepared food out for sale, or predict potential demand. They often throw food out while it is still good and prepare more food than necessary before lunch, special events and other peak demand periods.
There are exceptions. One locally-owned, four-store convenience chain makes significant profits from lunch and special event rushes. Some of their employees were well-paid, and had been with the company for more than a decade. With their experience and desire to succeed driving them, they consistently were able to predict peak demand, often selling more than 500 sandwiches in less than two hours. The four or five sandwiches that weren’t bought were consumed by the employees, a well-deserved lunch break.
Losses in fast food establishments are two to three times higher then they calculate – about 10 percent, on average. The miscalculation comes partly from inventory practices and “shrinkage.” Inventory information is only as good as the accuracy of the counts they are based on. Shrinkage is a measure of unaccounted inventory.
Retail businesses often believe their shrinkage is due to theft. Based on what we observed in our study, much of that assumed theft is probably loss. There also are losses that are not measured in the inventory system. I cannot explain the details of an inventory system that allows for uncounted food without access to the accounting system. I only am certain that food loss occurs and the companies are not quantitatively aware of the loss.
A surprise were the 20 to 40 percent loss rates we found in medium-sized fast-food restaurants, those with 40 or fewer stores in one state. These extraordinarily high loss rates resulted from the near absence of training and sufficient management. Typically, one manager ran three to five stores. New workers were trained by fellow employees with only a few months experience.
Another factor is when companies treat food the same way factories ship auto parts. Just-in-time delivery systems are at the heart of this. It means companies have redesigned stores with less frozen and cold storage capacity. If managers misjudge consumer demand and their freezers are still full, they will check with other stores or consider returning deliveries to the warehouse. If that doesn’t work, they have no choice but to throw food away. Just-in-time delivery needs a number of adjustments in order to reduce food loss.
Food losses in restaurants are relatively low, three to four percent, but could be reduced based on the data we recovered from mom-and-pop restaurants where losses were less than one percent. The greatest losses in large restaurant chains comes from miscalculating demand and preparing too much food ahead of time, particularly for salad and self-serve bars. A lack of food loss training and education, typical of the entire retail food industry, also was a factor.
Supermarkets exhibited surprisingly little loss, less than one percent. With their trash containers overflowing with food, they appear to waste a lot. In fact, they handle massive quantities of food, particularly highly perishable fruit and vegetables, and what you see out back is only a fraction of what came into the store.
Supermarket chains took on the issue of food loss years ago when their profit margins declined from intense competition in a soft economy. Unable to raise prices, they concentrated on their efficiency, with positive effect. Supermarket chains are still struggling but many exist today partly from reducing food losses. It’s a lesson that other retailers would do well to learn as a way to increase their bottom line.
The greater truth is that much of the retail food sector is as unaware of food loss as the rest of society. Food loss is not a part of the general retail food culture and therefore not a part of their reality. Like nearly everyone else in society, they have lost touch with food and how it functions in the life cycle. Foods function and the impact of loss should be an integral part of the industry. We would all profit.
Dr. Timothy Jones is at the Bureau of Applied Research in Anthropology, University of Arizona in Tucson.

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