Food Waste and Rescue in the Retail and Distribution Sector

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.