$1.2 billion

worth of food waste in the retail and distribution sector

About half of the rescuable food, by value, is in this sector

Food Waste & Rescue in the Retail & Distribution Sector

The volume of food sales in Israel is about $22 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 950 million pounds of food, valued at approximately $1.2 billion, which constitutes about 6% of the retail sales of food. Of this amount, the value of the rescuable food is approximately $973 million.

12. For purposes of analyzing food waste, this report relates to “Retail and Distribution” as a single sector that includes losses incurred from the end of the production stage to the sale to the consumer: any loss of finished products that are ready for marketing by the manufacturers, wholesale loss, returns from retailers to manufacturers and loss in retailers. These constitute the loss 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 loss potentially caused to retailers because food products are not immediately available is far higher than the cost of offering 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 needy. 

Naturally, the rate of loss is higher for fresh products and short shelf-life products, such as fruits, 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.

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 reduce 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. 

Waste in the retail and distribution sector have 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 lost 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, and whose loss can be prevented. As a result, this sector constitutes about 50% of the potential for rescue in monetary value, about $973 million, out of total potential for rescue worth $1.9 billion to the economy.

מקור: נתוני FAO ועיבודי BDO

מקור: למ״ס.

1 Short Expiration Dates Food products by nature have a limited shelf life and therefore, it is inevitable that some products will reach their expiration date before being 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 creating incentives that will facilitate inventory management to ensure that short-dated food is distributed to the needy before it reaches its expiration date. Such inventory management is workable, now that it is possible to estimate statistically the amount likely to be consumed, compare it to current inventory, and donate any surplus at an earlier stage, and certainly before the food reaches its expiration date. In addition, a review of food expiration classification policy is required

2 Aesthetic Defects in the Product and Defects in Packaging Aesthetic defects damage the market value of food products, but in most cases does not represent an impairment of the nutritional value of such products. Loss of this food reflects a market failure since the defective food products maintain full nutritional value for the needy, despite its low market price. Some retailers handle this problem, for example, by selling products that have aesthetically defective packaging at a reduced price.

3 Damaged Food Food damaged during logistical processes is a relatively minor cause of food waste. Damage can be caused at various stages in the retail and distribution process. Damaged food includes broken eggs, spilled products, fallen or damaged fruits and vegetables, remains in butcher shops and delis, etc. This food is not rescuable, but the amount is relatively small, because maximal efforts are being made to reduce damage and waste.

Rescue Operations in the Retail and Distribution Sector
Retailers, distributors 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 of Surpluses at Reduced Prices
When products 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 a reduced price, reduces the fear of reduced 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.