How inflation and food waste plays a role in rising costs of food

August 24, 2022

4 minutes, 28 seconds read

How inflation and food waste plays a role in rising costs of food

The cost of food continues to skyrocket. The Consumer Price Index (CPI) showed a 10.9% increase in food costs between July 2021 and July 2022. According to the Bureau of Labor Statistics, which manages the CPI, this includes a year-over-year increase of 13% for food at home, the largest 12-month increase since March 1979. Major grocery store food groups posting increases ranged from a 9% price increase for fruits and vegetables to a 15% jump for dairy and related products.

These are massive increases, made all the more shocking when considering that the average grocer in the United States is estimated to trash between $5,000 and $10,000 worth of food each week.

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Forbes, through interviews with grocery retail CEOs and consultants, reports that there are a number of factors that contribute to this food waste. From disincentives to track waste to a lack of data into the types of goods being tossed, there’s been little movement to rein in food waste in grocery stores until recently. However, the dramatic increases in food prices in recent months are pushing consumers to look for discount alternatives; this may be the reason for more major retailers to set goals for the reduction of their food.

The business case for reducing food waste

To offset some of the pain of the inflation in food prices, many consumers are turning to discount grocery chains. Aldi tracked a 15% jump in U.S. monthly visits from Oct. 2020 through Oct. 2022 while Lidl saw an increase of 24% within the same time period. These grocery brands promise low prices through actions such as not giving away grocery bags and operating only during peak shopping hours. However, the stores also help cut down costs by limiting their selection of produce and perishable items.

Not only does it cost more to store and unpack large amounts of perishable goods, but it also encourages waste. For stores like Aldi and Lidl, a smaller footprint and produce offering is an important step toward minimizing food waste. This is only one part of a broader food waste reduction strategy, as both stores have joined grocery retailers Kroger, Weis, and Wegmans, among other food producing companies, as U.S. Food and Loss and Waste 2030 Champions. These champions are committed to reducing food waste by 50% by 2030, compared to 2020 levels of waste.

With the rising cost of food, grocery retailers may find they need to take steps to reduce costs passed to them by producers, including better managing their inventory and food waste. Not only can this lead to an increase, or at least prevent a drop, in consumer traffic, but it may also uncover new opportunities for savings. For example, when grocery retailers donate their food waste and track it, they may apply for a sizeable tax subsidy.

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Securing data around food waste

The biggest obstacle standing in the path to reductions in grocery store food waste may simply be a lack of data. James McCann, the former CEO of grocery chains Tesco, Carrefour, and Ahold USA and founder of investing firm Food Retail Ventures, explained to Forbes that, until recently, most grocers didn’t have insight into how much food they were wasting.

That’s slowly beginning to change. Nonprofit Refed reported that more than $2 billion was invested in food waste solutions in 2021, the most money ever dedicated to the problem in the years Refed has tracked such data. By gathering more insight into the problem of food waste, grocers aim to identify potential solutions.

Even with this uptick, however, a 2022 study released by Coresight Research found that more than half of surveyed grocery retailers (51%) do not have technology needed to prioritize food waste reduction. In addition, 52% of those retailers reported a lack in management support for investing in this technology.

Grocers may get stronger support by investing in multi-tasking solutions that manage waste while providing greater insight into food waste trends, and do all of this with a rapid ROI.

It is unlikely that there will be zero food waste in retail stores in the near future. For example, Kroger—which has an aggressive food waste reduction program—sees an estimated 4% of loss within its nearly $140 billion in annual sales, amounting to about $5.6 billion in food waste. Because of this, grocery retailers may best be served by an on-site biodigester.

This sealed equipment not only disposes of a wide range of food waste in a clean, environmentally responsible way, but it also generates data about the waste. Solutions like the LFC biodigester provide, through the LFC Cloud, access to real time data analytics that guide effective food waste management programs. This data is helping organizations gain visibility into their organic waste stream, making it easier to identify key areas of waste, accurately forecast inventory demand, and attain higher levels of operational efficiency. Moreover, many companies find they see a return on their LFC biodigester investment within two years by the reduction in disposal costs.

Take charge of food waste

There’s no single right solution for reducing food waste at the grocery store level. However, the most impactful solutions will be driven by clear data and account for the many causes of food waste. With strategic planning and targeted investments, more grocery stores can reduce their food waste and pass potential savings on to their customer base.

If you’re ready to take the next environmentally responsible step for taking charge of your food waste, contact Power Knot today.