NIS 4.5 billion
Worth of food is wasted in the retail and distribution sector
Food Waste and Rescue in the Retail and Distribution Sector
The volume of food sales in Israel is about NIS 81 billion a year, marketed to consumers in supermarkets, open markets, grocery stores, small retailers and the institutional sector. The total loss in the retail and distribution sector is about 440,000 tons of food, valued at approximately NIS 4.5 billion, which constitutes about 6% of retail food sales. Of this amount, the value of the rescuable food is approximately NIS 3.6 billion (21). Moreover, the environmental cost of food waste in the Retail and Distribution Sector is approximately NIS 400 million (22).
The main causes of food waste in the retail and distribution sector are food that has reached, or will soon reach, its expiration date, food with aesthetic defects in the packaging or product, and food damaged in the marketing process. Food manufacturers, distributors, and retailers have a clear economic incentive to minimize food waste by effectively managing the supply chain, maintaining proper storage conditions, and planning inventory.
Nevertheless, surplus food in the retail and distribution sector is inevitable, even with optimal planning of the distribution and marketing systems. This is because retailers are required to ensure a wide, varied and available food supply at all times. Food consumers will not tolerate a shortage of the food items they seek, so the potentially loss caused to retailers due to unavailability of food products is far higher than the cost of creating surpluses. In other words, excess food is an inherent part of the retail sale process.
From an economic perspective, the fact that excess food is discarded rather than rescued represents a market failure, and therefore one of the government’s policy challenges is to create a system of incentives that will save these surpluses and transfer them to the populations in need.
Naturally, the rate of loss is higher for fresh products and short shelf-life products, such as fruit, vegetables, bread and baked goods.
Compared to international data, Israel’s rate of waste in the retail and distribution sector is similar to the accepted level in the developed world, despite the potential for higher losses because of Israel’s warmer climate. This is evidence that the retail and distribution sector in Israel manage their inventories according to a relatively high standard. The percentage of food waste in developing countries is higher, primarily due to the poor conditions during distribution, storage and marketing.
Food marketers’ investment in establishing advanced logistical centers, online inventory and demand management systems, and keeping an unbroken cold chain have contributed to reducing the volume of loss in the retail and distribution sectors.
Simultaneously, changes in consumer preferences have increased the volume of food purchased from the large retail chains, and the transition from open markets to indoor, air-conditioned retail and distribution channels also has contributed to a reduction in waste. Moreover, research shows that the transition to large stores with a high volume of activity also contributes to waste reduction. Even more recently, there is nascent trend towards purchasing food on the internet. The development of direct purchase channels, in which food is transported directly to the end customer from a dedicated e-fulfillment center, bypassing the retail branch, may provide an additional contribution to a reduction in food waste levels in the future, as well as a potential reduction in GHG emissions.
Percentage of Waste in the Retail and Distribution Sector for Selected Food Items
Financial Loss in the Retail and Distribution Sector
Online retail may be more environmentally friendly than physical retail, in part because of the decrease in the number of individual trips required to various stores, and because many items are consolidated and delivered to multiple addresses in a single trip. A University of Washington (23) study from 2014 showed that if routes are planned efficiently, delivery service has the potential to save up to 80% of the carbon emissions produced by consumers travelling to stores.
Waste in the retail and distribution sector has a high economic value because it includes the entire previous investment in growth, manufacturing, packaging and transportation. It is food that is ready for marketing and consumption that is wasted before reaching the end consumer. In addition, due to the characteristics of waste at this stage, the vast majority of the food at this stage is rescuable, whose loss can be prevented. As a result, this sector constitutes about 50% of the potential for rescue in monetary value, about NIS 3.6 billion, out of total potential for rescue worth NIS 7.1 billion to the economy.
International Comparison: Rate of Waste in the Retail and Distribution Sector
Consumers Transition to Purchasing in Stores with Lower Percentages of Waste
Food waste in the retail and distribution sector stems from three main factors:
Rescue operations in the retail and distribution sector
Retailers and food manufacturers are working to reduce loss and rescue food due to economic considerations. Surplus food can be donated in several ways:
1. Selling surpluses at reduced prices
When there are products that have short expiration dates or are damaged, retailers sometimes offer them at a reduced price. Economically, the transfer of these products to the needy at reduced prices the fear of decreased sales.
2. Contribution of food
Centralized and coordinated on the basis of agreements with food rescue initiatives and/or as a local initiative on the branch level.
Food producers are also involved in food rescue: Some food manufacturers contract with NPOs and donate food with short expiration dates or production surpluses. In addition, products with defective packaging or an aesthetic defect in the product are sold in various secondary markets, if the flaws are detected in the factory, and the food is still safe and fit for human consumption.