Sell More, Waste Less — Intelligent Pricing to Reduce Food Waste
Organic waste bans are going into place because food waste is a huge driver of climate change. Additionally, consumers are now paying attention to the brands they’re buying from.
This week, I talked with Ilan Gluck, General Manager at Wasteless, to discuss another part of the food supply chain where there is food waste. Wasteless was founded in 2016, and today is active throughout Europe and the United States. On average, Wasteless’ retail customers see organic food waste reduced by upwards of 40% and profit margin growth of more than 10%.
Wasteless is an AI-based tracking solution for grocery stores to offer customers dynamic pricing based on product expiration date, helping retailers optimize markdowns, increasing their profitability. Wasteless is a great example of how food supply chains, specifically supermarkets, are interfacing with consumers to reduce food waste. Minimizing food can reduce carbon emissions by up to 70GTon over the next 30 years.
Can you describe what your company does? What is your value proposition to your customers?
Wasteless is an Israeli company helping retailers to prevent food waste. We focus on optimizing when to mark down prices to maximize sales and prevent waste.
Today, supermarkets are marking down food by up to 50%, the day before it expires. However, there are two issues with this. First, because it is marked down only one day before it expires, it may not be attractive enough to be sold. Second, if stores do sell it, they’re selling it for 50% markdown and are not making any profit.
Wasteless more strategically optimizes prices leading up to the expiration date of food. As an example, three days before a particular product expires, the Wasteless system may mark down the price by 5%. Depending on what works for that specific item, with a specific vintage, there may be more aggressive markdowns leading up to the expiration date. The magic of the Wasteless AI is its ability to know the exact minimum amount of markdown required to still achieve the goal of selling a product before it expires and is thrown away. Wasteless helps grocery retailers sell perfectly good food.
What is the current ecosystem/market landscape?
There are 3 main sectors in the ecosystem.
- Farmers look for secondary markets, such as Imperfect Foods, to sell imperfect/ugly produce that would normally go to waste.
- At distribution centers, companies like Spoiler Alert help manage discount sales and donation processes for slow-moving, excess, discontinued, and distressed food inventory.
- Retailers look for solutions for better demand forecasting and pricing. That’s where Wasteless comes in.
The priorities, as set by ReFED and EPA are clear: preventing food waste is the best possible solution. Secondary markets and donations perpetuate the problems, rather than solve the supply chain inefficiencies that cause food waste. To pull everything together, and ReFED and Champions123 are networks of businesses, nonprofits, foundations, and governments advocating for and committing to reducing food waste.
Can you discuss both the market and policy in both Europe and the US?
The organic waste bans and supporting laws/regulation in some European countries are ahead of where they are in the US — and they’re enacted on a national level.
Italy and France have done a lot to spur innovation on the consumer and retail side to help reduce food waste. Specifically, when Italy hosted the World’s Fair, there was a whole sustainability element to it. Food waste was a huge component, and this was before food waste was really talked about.
Unfortunately, both France and Italy have increased tax rebates on donations. Which takes away the entire incentive for businesses to eliminate the scourge of food waste. No other industry wastes one third of what it produces. Imagine that one third of cars end up scrapped, before having driven a single mile!
Italy’s policies have changed how companies think about waste, as it can become a substantial drag on profitability. Wasteless is working hard to make prevention the priority.
Compared to Europe, the US will and has been implementing organic waste bans on a state-by-state basis. Organic waste bans on a state level are helpful in terms of addressing the problem and quantifying the economics. However, state level regulations are not enough to change the market.
For businesses that operate regionally or nationally, it’s tough to make decisions on a state-by-state basis. If one state passes a law, a supermarket might not change their whole operation across different states. Instead, they might just take the financial hit and pay the cost of the organic waste. It would be great, if we could work together, with business and (state) government, to make grocery retail more profitable, by preventing food waste.
When food waste bans went into effect in Europe, what changes did you observe?
The first main change was retailers began to analyze how much was being wasted and where it was coming from. Now that they’ve quantified the problem and identified the source, they can begin addressing the problem in a meaningful, efficient way.
As a result, we’ve seen increased investments in advanced supply chain planning, donation services, secondary market platforms and other waste reduction technologies, like Wasteless. In addition, we’ve seen supermarkets both in Europe and the US get a lot better at repurposing spoiled or imperfect products. So, an imperfect tomato can be repurposed into tomato salad, for example.
What does the future look like?
Generally speaking, we can look to where Europe is today to see where the US will be in a couple years with regards to food waste.
The biggest thing I’m excited about is consumer awareness and education. There will be a big evolution in consumer sentiment toward sustainability and food waste, the same way customers care today about organic — every supermarket and supplier now has to focus on organic.
We’re going to see investments from the retailers and suppliers to reduce waste, and it won’t stop there. They will put that marketing in the front of their store about how they’re reducing waste. There will be benefits financially along their supply chain, as well as from customers.
We’re already seeing a lot of momentum around food waste reduction in the US. Most conversations about corporate sustainability at least mention food waste and consumers appreciate when their supermarket takes a proactive approach toward being more sustainable. There are some great venture-backed innovators tackling this massive problem, so I’m excited to see how the movement continues to grow in the coming years.
Forecasting is a difficult problem for supermarkets. Wasteless is a solution that solves the issue of having excess food. With a combination of their technology, policy, and growing consumer awareness, we will see a decrease in food waste — but not just in supermarkets, but also along the supply chain.