NIS 4.3 billion

worth of food waste in the retail and distribution sector
17,000 ton decrease in food waste in 2020 in the retail sector compared to 2019

Food Waste and Rescue in the Retail and Distribution Sector

(12)
The Covid-19 crisis proved that it was possible to reduce food waste in the retail sector by changing consumer behavior. The crisis brought about a change in food purchasing habits that involved an increase in online shopping on the one hand and a decrease in open market shopping on the other. The closing of the open markets, which are characterized by high waste rates, and the shift to online shopping, which is characterized by low waste rates, contributed to reducing waste in this sector, despite the quantitative increase it saw. Food waste was reduced by 17 thousand tons in the retail sector in 2020 compared to 2019.
12. For waste analysis purposes, this report refers to the retail and distribution sector as a single sector and includes waste occurring from the end of the production stage until the produce is sold to the consumer. This includes finished produce that goes to waste at the manufacturers’ facilities, wholesale waste, returns from retailers to manufacturers, and food wasted by retailers.

The volume of food sales in Israel in 2020 stood at about NIS 88 billion a year, sold to consumers through supermarkets, open markets, grocery stores, small retailers, and the institutional sector. The total loss in the retail and distribution sector stood at around 420 thousand tons of food, valued at approximately NIS 4.3 billion, which constitute about 5.5% of retail food sales. Of this, the amount of rescuable food was about 335 thousand tons, valued at approximately NIS 3.5 billion (13). In addition, the environmental cost of food waste in the retail and distribution sector was approximately NIS 735 million (14).

13. The amount of rescuable food in the retail and distribution sector is based on BDO’s model for the retail sector, which is based on data from the Central Bureau of Statistics and information from the leading supermarket chains.
14. The environmental cost is not included in the market price of the wasted food, meaning that the natural resources wasted due to food waste in this sector are excluded.

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 on the packaging or the product itself, and food damaged in the sales process. Food manufacturers, distributors, and retailers have a clear economic incentive to minimize food waste by managing their supply chain effectively, maintaining proper storage conditions, and planning their inventory.

Nevertheless, surplus food in the retail and distribution sector is inevitable, even when the distribution and sales systems are planned optimally. This is because retailers must ensure that a wide variety of food is available to their customers at all times, as consumers do not tolerate shortages of food items they desire. Hence, the potential loss to retailers due to the unavailability of food products is far greater than the cost of creating surpluses. In other words, food surpluses are an inherent part of the retail selling process.

Economic Waste in the Retail and Distribution Sector

Financial Loss in the Retail and Distribution Sector

* 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.

Online retail may be more environmentally friendly than traditional retail, in part due to the decrease in number of individual trips to various stores and consolidation of many items being delivered to multiple addresses in a single trip. A study conducted by the University of Washington and published in 2014 (15) found that if routes are planned efficiently, delivery services could potentially reduce up to 80% of carbon emissions produced by consumers travelling to stores.

Waste in the retail and distribution sector has high economic value as it includes all the previous investments made in growing, manufacturing, packaging, and transporting the food. This waste refers to food that was ready to be sold and consumed but was wasted before it reached the end consumer. Due to the characteristics of this waste, the vast majority of the food at this stage is rescuable. In fact, this sector holds about 55% of the rescue potential, valued at about NIS 3.5 billion out of the total rescue potential of NIS 6.4 billion in the economy. The increase in the rate of rescuable food waste in the retail sector (out of the total rescuable food waste in the economy) stems from the decrease in total rescuable food waste, resulting from the Covid-19 crisis and the shift to household consumption at the expense of institutional consumption.

International Comparison: Rate of Waste in the Retail and Distribution Sector

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

Consumers Transition to Purchasing in Stores with Lower Percentages of Waste

Source: CBS, analyzed by BDO

Food waste in the retail and distribution sector stems from three main factors

1
Short expiration dates
Food products by nature have a limited shelf life and inevitably, some products will reach their expiration date before they are sold. Food that has reached its expiration date can no longer be sold or distributed to the needy. Therefore, rescuing food in the retail and distribution sector requires incentives to facilitate inventory management that ensures food with a short expiration date is sold at a lower price or distributed to the needy before it expires. This type of inventory management is feasible, as the amount likely to be consumed can be statistically estimated and compared to the current inventory, allowing surpluses to be donated at an earlier stage and certainly before the food expires. Therefore, the food expiration classification policy should be reviewed and the meaning and differences between various symbols related to expiration dates should be explained to consumers.
2
Aesthetic defects in the product and defects in packaging
Aesthetic defects lower the market value of food products, but in most cases do not reflect damage to these products’ nutritional value. When such food is wasted, this reflects a market failure, because while the market value of the defective product is low, the nutritional value it holds for the needy is completely intact.
3
Damaged food
Damage caused to food in the logistical process is a relatively minor cause of food waste. Damage can be caused in various stages of the retail and distribution process and includes broken eggs, spilt products, fruit and vegetables that have fallen or been damaged, leftovers from butcher shops and deli departments, etc. This food cannot be rescued, but its volume is relatively small as maximal efforts have been made to limit it.
Rescue Activity in the Retail and Distribution Sector

Retailers and food manufacturers work to reduce waste and rescue food based on economic considerations. Food waste is reduced in several ways:

1. Discounts on surpluses
When products are about to expire or their packaging has defects, retailers sometimes offer them at a discount.

2. Food donation
This is done in a centralized and coordinated manner, based on agreements with food rescue non-profit organizations or in other cases, as local initiatives in supermarket branches.

Food manufacturers are also involved in food rescue activities. Some contract with non-profit organizations and donate production surpluses and food that is about to expire. In addition, products with aesthetic defects or defective packaging detected in the factory are sold in various secondary markets if the food is still safe and fit for human consumption.