Who’s investing in reducing food waste?
European food and agri companies could save up to 10 billion euros annually by introducing innovations that reduce waste in the food chain. ‘This calls for a completely different perspective on cooperation within these chains’, says Rabobank analyst Paul Bosch.
Paul Bosch is a food & agri supply chain analyst at Rabobank Food and Agribusiness Research and has conducted research into the potential of reducing food waste. The European Union wants to reduce waste generation by 30% in 2025. This aim is not only about the ethical aspects of food waste. It is also about money, lots of money.
Which part of the chain generates the most waste?
Bosch: ‘Consumers throw away 30 billion euros’ worth of food at home every year. The European sector is currently losing 60 billion euros a year in food production and distribution due to food waste in the chain. Food that never reaches consumers.’
This is a particularly critical issue for perishable foods such as meat, fruit and vegetables. Most of the losses are incurred at the beginning of the food chain during farm production and post-harvest storage and processing.
What level of cost-savings are we talking about?
‘European companies could save 5 billion euros a year by introducing innovations in the field of harvesting and post-harvest storage. They also stand to save another 2.5 billion euros through food packaging innovations and 2.5 billion more through monitoring the freshness of products more effectively.’
Could you give a couple of examples?
‘Companies can invest in machinery that causes less damage to crops during harvesting and transport. They can also invest in new treatment methods that help reduce losses during the storage of potatoes and vegetables. Further down the chain, using different packaging materials or sealing technologies can both extend the shelf life of food products and provide improved protection for products. Retailers that successfully link product freshness with dynamic pricing can optimise sales and safeguard quality. Better product quality on shelves is good for sales anyway.’
If the benefits are so obvious, why aren’t companies actively making these investments?
‘A conservative and obvious train of thought is that product waste at retailers is advantageous for suppliers because it means more is sold to retailers. What’s more, retailers that want to prevent waste often need the supplier to make an investment in order to do this. This investment weighs heavily if the players in the chain don’t know for certain whether they will continue to supply the same retailer in the coming years.’
‘Investing in less food waste produces a range of additional benefits.’
So what is needed?
‘An innovative view of the chain. Practice shows that investing in less food waste produces a range of additional benefits. A longer shelf life results in, for example, higher sales figures and a larger potential sales area. Reduced waste also makes it easier to manage stocks at lower costs. The ability to guarantee higher and consistent quality is another added advantage that multiple companies in the chain can seize and leverage to create value.’
What should this type of business model look like?
‘Companies that want to implement innovations that reduce waste must collaborate with partners that are optimally able to turn the related benefits into value. These could be companies that benefit more than others from improved stock management, have a strong focus on quality and are able to tap into the opportunities of a larger sales area quickly. We believe finding partners that can optimally benefit from these added advantages is key to profitable investments.’
Priority on food agenda
Rabobank sees reducing losses in the food chain as one of the priorities on the global food agenda this year. Reducing waste will ultimately make more food available for people and improve returns in the food and agri chain. As a leading food and agri bank worldwide, Rabobank has developed the ‘Banking for Food’ vision on the global food supply and the bank’s role in relation to it.
Rabobank is providing computer programmers and software developers with support and resources to come up with online solutions for fighting food waste. They are developing an app that will make it easier to export excess produced food and an app that will make children more aware of food waste. These ideas stem from a food waste hackathon held in late 2014.