Ways for manufacturers and retailers to curb food loss
There are specific ways in which manufacturers and retailers can address food loss. According to the McKinsey & Co. report, “Reducing food loss: What grocery retailers and manufacturers can do,” food manufacturers and retailers could reduce food loss by 50 to 70% by working closely with all participants in the value chain. Two-thirds of the food that would otherwise be lost could be redirected to human consumption; the remaining one-third would go to alternative uses, such as bio-based materials or animal feed.
The business rewards would be significant: companies would reap economic and cash flow benefits while simultaneously improving their scope 3 emission footprint. The research shows that retailers could reduce their cost of goods sold (COGS) by 3 to 6%, manufacturers by 5 to 10%. Grocers and manufacturers could capture $80 billion in new market potential by developing new businesses from food that would otherwise be lost. And they could cut CO2 emissions and the associated costs by 4 to 9%. The McKinsey & Co. report also notes that food loss reduction must be treated as a strategic priority and have the buy-in of the C-suite of the company. Food loss reduction won’t be treated as a strategic priority unless it has the sponsorship of the C-suite, the authors emphasise. Indeed, in an informal poll of a dozen industry leaders, two-thirds pointed to weak governance as the biggest roadblock to the implementation of food loss programmes in their companies. One of the most important enablers for significant and sustained change, therefore, is a strong governance model – with cross-functional accountability encompassing procurement, R&D, the supply chain, manufacturing, marketing, and finance; clear responsibilities and objectives; and KPIs at the individual, functional, and enterprise level. Designating an owner for each food loss initiative and aligning on measures of success will help ensure progress, they note.
Seeing food loss as an inefficiency not an inevitability
Stakeholder management, too, is a critical enabler. Suppliers, consumers, and other participants in the value chain can be persuaded to become allies and supporters of loss-reduction efforts rather than inhibitors. Manufacturers and grocers can create and raise awareness of the problem – and its extent – among farmers and suppliers, to help them see food loss as an inefficiency instead of an inevitability.
Public awareness of food loss and waste will influence how retailers and manufacturers act. As the world moves toward a potential food emergency (currently, one in nine people is suffering from hunger) and as public awareness of the issue grows, external stakeholders will become savvier about food loss and, as a result, more demanding. They will compel retailers and manufacturers to act. McKinsey & Co. identified four levers that retailers and food manufacturers can pull in order to address the issue: minimizing loss during production and processing, minimizing loss during transit, selling more of what is produced and structurally preventing loss.
Grocers and food manufacturers can set targets for both their own company and suppliers, and integrate food loss visibility and reduction into incentive structures. Some forward-thinking companies are actively engaging with suppliers to map food loss “hot spots” in the supply chain and to understand their causes. These companies are developing (and providing public access to) an integrated database of suppliers’ performance across locations. Additionally, some best-practice companies are using digital technologies, like blockchain, to make products traceable at every stage along the journey from farm to store.