The five pillars of innovation for a sustainable Food Retail Industry

Although being one of the slowest sectors in terms of innovation, companies belonging to the food retail industry have been forced to rethink their business models due to Covid-19. The pandemic has not only highlighted the vulnerabilities of our food chain but has also accelerated the process of awareness on the need to remedy food loss and waste, both locally and globally. According to an Accenture research, the pandemic has led to the creation of a new class of “conscious customers” and found out that two out of three consumers are increasing the choices they make based on sustainability. Due to this increased awareness, reduced waste in groceries as well as in restaurants has become a hot topic in the food retail industry. Here are some examples of companies who are changing the industry in a more sustainable way, following the five aspects that  BCG analysts have underlined as the initiatives to be prioritized: Product specifications reviews, Marketplace setups, Too-good-to-waste-campaigns, donation programs and Dehydration initiatives.

What usually happens in the food retail value chain is that if the products do not respect some aesthetic rules, they would not be sold in the market and therefore be completely wasted. In order to reduce its waste, the company Sonae – the food retail market leader in Portugal – has worked with BCG to review its product specifications. As a matter of fact, Sonae has redefined the acceptability benchmarks in some products’ categories; for example, it has started accepting pears and apples of smaller dimension that account for the 12% of the supplier’s products which was previously rejected. Overall, this has resulted in a boost of suppliers’ bottom lines as well as a general increase in sales, meaning a win-to-win opportunity for both retailers and producers.

Although saving some waste, product specification review is not enough because an important amount of fresh food still cannot be sold. However, through an innovation of the market setup, much of this can be used by processors for products such as juices, soups, powders and additives. This is what is done by startups such as Kromkommer, which turns imperfect vegetables into soups and represents the misshapen ingredients inside the products on its packaging.

In order for all of this to be effective, consumers’ preferences should be changed as well and this could be done through an extensive “too-good-to-waste campaign”, which is exactly the idea behind the Danish start-up “Too Good To Go”.  Through an innovative business model aimed at saving thousands of products from restaurants, bakeries and supermarkets, the app is representing a marketplace for all these activities to sell the products they would throw away through the distribution of a “magic box” at a cheap price. 

Another idea is to sponsor donation-programs, which result in a lower taxation and reduced waste disposal for companies. In 2020 for example, many retailers including Aldi and Walmart have saved an equivalent of 10,6 million meals by taking part in the Retail Store Donation program that enabled the Regional Food Bank to increase the emergency food distribution for the families in financial hardship in New York.

Since not all of the food waste could be eliminated through the previously listed practices, it is important to take into consideration recycling. To tackle this challenge it is fundamental to anticipate the products that may be soon lost or wasted and direct them to the most promising technique called Dehydration, that turns them into powder used to manufacture a huge amount of food such as pet food and snacks. An example of a company realizing food using this technology is the innovative Treasure8. 

To conclude, the many startups and new technologies that have entered the food retail market have started a long-term evolution of the sector that will hopefully minimize the inefficiencies that yet characterize the value chain. Nonetheless, the main challenge is for retailers, producers and intermediate players to cooperate in order to create as many synergies as possible.

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