NIS 5.5 billion

worth of food is lost and wasted during retail and distribution
370 thousand tons of food could be rescued during retail and distribution

Food Waste and Food Rescue During Retail and Distribution

(10)

In 2022, food sales in Israel were assessed at approximately NIS 100b ($28$b) annually. This includes food sold to consumers in chain stores, open markets (shuks), neighborhood food stores, small retail outlets, and the institutional sector. About 460,000 tons of food are lost and wasted during retail and distribution. This is valued at about NIS 5.5b ($1.6b), representing 5.5% of the total retail sales of food. Of this, about 370,000 tons, worth some NIS 4.4b ($1.2b), could be rescued (11). Additionally, the environmental cost of food waste during retail and distribution is approximately NIS 860m ($244m) (12).
10. In this Report, waste from the retail and distribution sector refers to waste occurring from the end of the production phase up to sale to the consumer. This entails loss or waste of finished products that are ready to be marketed by the manufacturers, loss at wholesalers, returns from retailers to manufacturers, and loss during retail.
11. These figures for the rate of salvageable food in the retail and distribution sector were assessed using the BDO model, based on data from the Israel Central Bureau of Statistics and information from major marketing chains.
12. This environmental cost was not embodied in the market value of the lost and wasted food. That is, the market value of wasted food does not include the cost of natural resources wasted during retail and distribution.

Rate of Waste in the Retail and Distribution Sector

Waste during retail and distribution mainly involves food with a short shelf life that has passed its expiration date, or food with aesthetic defects or damage to its packaging. Food manufacturers, distributors, and retailers have an economic incentive to minimize food waste through effective supply chain management, maintaining proper storage conditions, and inventory planning.

However, this incentive is nullified by agreements that allow distributers and retailers to return a certain percentage of unsold food products to the manufacturers at no cost. Even with optimal planning for distribution and marketing, some food surpluses are inevitable because retailers are expected to provide a wide and varied food supply at all times. Consumers become quickly dissatisfied when the food products they want are unavailable. Therefore, the cost to retailers due to poor inventory is far greater than the cost of creating surplus, making surplus food an inherent part of the retail sales process. However, discarding food surplus rather than rescuing it is an economic failure of the market. One challenge facing government policymakers is to create a system of incentives for salvaging surplus and making it available to people in need. Naturally, the rate of waste is higher for fresh or perishable food products, such as fruit, vegetables, bread, and baked goods.

An international comparison found that the rate of food waste during the retail and distribution sector in Israel is similar to that in most developed countries, despite the potential for greater waste due to Israel’s hot weather conditions. This indicates that inventory management during retail and distribution in Israel is conducted according to relatively high standards. In developing countries, waste rates tend to be higher, mainly due to inadequate distribution, storage, and marketing.

In recent years, food marketers in Israel have made efforts to establish advanced logistics centers, inventory management systems, online demand planning, and maintenance of the cold chain in distribution. This has reduced food waste during retail and distribution.

In 2022 there was a trend among consumers towards purchasing online or through chain stores, both of which are characterized by a relatively low waste rate. Accordingly, the rate of food waste in this sector decreased slightly this year.

Online retail may also have an environmental benefit by reducing the number of consumers’ trips to stores, and by consolidating shipments to multiple addresses on one delivery route. A 2014 study conducted at the University of Washington found that optimizing shipment and distribution routes could reduce carbon emissions by up to 80%, as compared to when consumers drive to stores to make purchases (13).

13.Changing Retail Business Models and the Impact on CO2 Emissions from Transport: E-commerce Deliveries in Urban and Rural Areas (🔗 link)

Financial Loss During Retail and Distribution

* Numbers are rounded for ease of presentation.
**The rate of the loss refers to the loss from the total production or consumption of the same food category at each stage in the value chain.
Waste from the retail and distribution sector has a high economic cost since it includes all the investment made thus far, in food cultivation, production, packaging, and transportation. This food is ready for marketing and consumption but is wasted before reaching the final consumer. The vast majority of food waste at this stage is potentially salvageable. Some NIS 5.5b ($1.6b) worth of food is wasted at this stage; approximately 370,000 tons, including 345,000 tons of fruit and vegetables. Of this, it is estimated that some NIS 4.4b ($1.25b) worth of food could be rescued. This represents about 70% of the food rescue necessary to close the nutritional gap for people living with food insecurity in Israel [for more information, see Chapter 7]. It would also prevent excess healthcare costs valued at about NIS 4.3b ($1b) per year [see Chapter 8].

International Comparison of Food Waste

Source: Food and Agriculture Organization (FAO) data, processed by BDO

Consumers’ Transition Towards Shopping Venues with Lower Waste Rates

Source: CBS, analyzed by BDO

There are three main factors behind food waste during retail and distribution

1
Perishability (short shelf life)
Food products have a limited shelf life, and it is inevitable that some will pass their expiration date before being sold. Food that has passed its expiration date cannot be sold or given to those in need. To minimize food waste during retail and distribution, there is a need for inventory management systems that statistically assess the rate of consumption compared to the inventory. Also, incentives to rescue food could be developed. For example, foods that are nearing (but have not yet passed) their expiration date could be sold at a discount or donated to those in need. There should be a re-examination of policies around food viability classification. Additionally, consumers should receive explanations regarding the meanings of various markings related to food expiration dates.
2
Aesthetic defects in products or packaging
Aesthetic defects lower products’ market value, but in most cases do not impact nutritional value. Loss and waste of nutritious food due to low market value reflects an economic failure.
3
Damaged food
Damage during logistical processes plays a relatively minor role in food waste because extensive efforts are already being made to minimize the waste. Damage can be caused at various stages of retail and distribution, such as broken eggs, spilled or dropped products, spoiled fruit and vegetables, leftovers from the butcher shop or delicatessen, etc. This food is not rescuable for human consumption, but it can be used for feeding animals or for industrial purposes.
Actions Undertaken to Reduce Food Waste During Retail and Distribution

Retailers and distributors already make efforts to reduce waste and rescue food, due to economic considerations. This is done in several ways:

1. Sales and promotions of surpluses
Retailers offer discounts on perishables nearing their expiration date or products with damaged packaging.

2. Food donation
This may be coordinated centrally through contracts with food rescue associations or as local initiatives by various branches.

Food producers may donate surpluses or perishables to food rescue associations.

When it is noted at the factory that products have damaged packaging or aesthetic defects but are still safe and suitable for human consumption, they may be sold to various secondary markets.