The economic impact of food waste is major.
Producers, retailers and households: the financial cost impacts the entire chain, at a moment where food has become the adjustment variable for people.
The entire chain of the food industry is impacted
- Producers: who leave produce unharvested
- Wholesalers: who discard edible products that do not fit the acceptable size and aesthetic standards
- Retailers: who throw away unsold or spoiled products
- Households: who waste money because of spoilage, lack of knowledge, over-purchase and confusion about best-before and use-by-dates
The economic functioning is complex and interwoven with many ties. Consumer preferences are one of the factors influencing the behavior of food producers and the generation of waste, as the chosen technology of production and the type of distribution, which counts on the consumption of resources.
Food waste in developed countries also affects pricing policy. Higher waste is associated with influencing demand, which leads to an increase in the price level of food stocks. The price of food is also largely linked to environmental causes (drought) and geopolitical events (wars, blockade).
Food waste costs the whole chain, because people have worked to harvest, transport, package, sell the goods… All the products wasted at each step are therefore passed on to the consumer, who, when he buys a product in store, also pays for part of the waste in that price.
Food waste: negatively and directly impacting the income of farmers and consumers
Farmers & food producers
Waste food can lead decision makers of the food chain to cut orders of some given products, ask for new visual standards and quality or renegotiate production, transportation and pricing conditions, giving less revenue for the farmers and producers.
The “Hungry farmer paradox” sheds light on the fact that among the millions of people suffering from hunger, 80% are farmers, breeders or fishermen. The same people who feed the world aren’t able to feed themselves. What a terrific report.
Consumers
The figures are edifying as we can see from this graph.
Housing and energy are now the main items of household expenditure.
For more than 12 years, Smartway analyzed the retail industry, its challenges and customers and the change is obvious. Food has become the adjustment variable for households: it’s on this expenditure item that they arbitrate in their global budget.
An average American family of four throws out 1,600 $ a year in produce. If we multiply that by the typical 18 years that a child lives at home, the parents could pay him a private college.
Stunning.
Inflation: further pressure for retailers
Inflation pushed up prices, to more than 20% on food products, once again hitting consumers’ purchasing power. Under pressure, the retail sector saw its sales volumes decline, and buying shifts towards distributors labels or more affordable products. This confirms the trends of recent decades: consumers are unwilling or unable to spend more on food products.
Given that many people live on the margins of food insecurity, a reduction in food waste could have an immediate and significant impact on their purchasing power. For them, the priority is clearly to have access to products that are affordable. Food insecurity is often more a question of access (purchasing power and prices of food) than a supply problem.
Given the magnitude of food waste, making profitable investments in reducing waste could be one way of reducing the cost of food.
The additional financial costs associated with collecting, managing and treating the waste
We may forget it, but indeed, in addition to the monetary cost of the food wasted, there are more costs associated with collecting, managing and treating the waste.
By eliminating unnecessary food consumption, companies preserve natural resources used in food production as well. This includes the water, gas, fertilizer, pesticides and any other inputs used in food production. This massive misuse of resources is emerging as a critical global issue, with the United Nations Sustainable Development Goals setting a target of halving food loss and waste by 2030.
As food waste has significant economic implications for farmers, food producers and consumers, it is clear that our food systems cannot be resilient if they are not sustainable. We therefore need to prioritize the adoption of integrated approaches designed to close the food waste gap. But first, understanding the root causes of the loss and waste and identifying ways to address them is an essential humanitarian undertaking.
Retail organizations and their decision makers have a key role to play. Are you ready to take action with Smartway?