Contractual

Terms for
Reducing
Food Waste
Possibilities and Potentials Within
Fresh Grocery Supply Chains

SEPTEMBER
www.tcgffoodwaste.com 2020
 AT A GLANCE

About the Foreword and

Authors Acknowledge-
ments

About the Consumer Goods Forum

4 5
Coalition of Action on Food Waste
The Consumer Goods Forum (CGF)’s CEO-led Coalition of Action on Food Waste brings
together 14 of the world’s largest consumer goods retailers and manufacturers with the Abstract Introduction Approach and
goal of halving per capita global food loss at the retailer and consumer levels. With its Methodology
explicit CEO engagement, action-oriented commitments and passion for accelerating
sustainable change on a global level, the Coalition is a leader in the effort to reduce food
loss in supply chains worldwide by driving action on key issues such as public reporting,
full supply chain engagement, post-harvest losses and regional challenges. Together, the 6 6 8
Coalition and its members play a powerful role in the effort to reduce waste, reducing
stress on the environment, benefitting the global economy and ensuring more food makes
it to stores and onto consumers’ tables in the process. For more information about the Findings Forward Second Resale
Coalition, visit www.tcgffoodwaste.com. Contracts Contracts

Disclaimer
The research for this report was supported by the ECR Retail Loss Group. The document 8 10 13
is intended for general information only and is based upon the findings of a qualitative
survey of industry experts and extensive literature review. Companies or individuals
following any actions described herein do so entirely at their own risk and are advised Key Take References
to take professional advice regarding their specific needs and requirements prior Away and
to taking any actions resulting from anything contained in this report. Companies Further
are responsible for assuring themselves that they comply with all relevant laws and Research
regulations including those relating to intellectual property rights, data protection and
competition laws or regulations. The images used in this document do not necessarily 14 16
reflect the companies taking part in this research. © June 2020 all rights reserved.
 Foreword and Acknowledgements
The scale of the global problem of food loss is massive and has devastating environmental
and social impacts. Every year, one-third of food produced goes uneaten and every day,
one-in-nine people worldwide goes hungry. Food loss places strain on our environment
and is costly to the economy — to the tune of some 3 trillion dollars per year.
About the Authors
Despite the heavy impact of this problem, our commitment to reducing it and making sure
Elena Belavina is an Associate Professor
more food ends up in stores and on tables is even stronger. As an organisation of the
of Operations Management at the Cornell
world’s largest retailers and manufacturers of consumer goods, The Consumer Goods
SC Johnson College of Business. She
Forum (CGF) is in a strong position to drive change in reducing food loss as it occurs in
collaborates with startups, established
industry supply chains. There are great opportunities for our industry to collaborate on
companies and public agencies to study
this problem in order to build a sustainable food strategy.
issues of sustainable urban transportation,
food waste, grocery retail and supply
This paper offers insights on the role of commercial contracts and food waste prevention
chains. Her recent research has studied
in fresh grocery supply chains, drawing the industry’s attention to how different contract
how the grocery industry’s structure and
types can impact retailers and manufacturers’ levels of motivation for addressing food
Rakesh Allu is a PhD student in Operations pricing policies influence food waste, the
waste. I hope this paper can offer guidance to our members and industry partners as they
Managements at Cornell SC Johnson environmental impact of online grocery
implement innovative ways to engage their supply chains in food loss prevention strategies.
College of Business. His recent research shopping and the design of bike-share
has studied the impact of changes in systems. She has also studied sustainable
The CGF’s Food Waste Coalition of Action represents one way industry members are
government policies on reducing leakages sourcing, relational contracts and supply
working together to address this problem. Particularly with its focus on collecting and
in distribution of food in India. Prior to his network design including the role of supply
reporting food loss data, the Coalition recognises the importance of understanding the
research career, he was a consultant with chain intermediaries. Methodologically,
scope of the problem of food waste within each member’s supply chains. This report
Deloitte’s Strategy and Operations and her research involves holistic analysis
similarly takes a critical look at how and why food loss occurs in fresh grocery supply
HSBC’s network analysis divisions. His of logistic and economic systems, and
chains and uses the data to offer suggestions on how to prevent this waste.
experience, both as a researcher and econometric analysis of large datasets
otherwise, primarily involved generating to advise on system improvements and
I would like to extend my thanks to the ECR Retail Loss Group and the authors, Rakesh
actionable insights for organizations policies. Prior to joining Cornell, Elena
Allu and Elena Belavina of the Cornell SC Johnson College of Business, for their important
through analysis of large datasets. He was on the faculty of the Booth school at
contribution to the fight against food waste through the publication of this report and its
holds a master’s degree in business Chicago, earned a Ph.D. from INSEAD and
considerations, as well as their previous illuminating research on the sustainability of our
administration from the Indian School of bachelor and master’s degrees in applied
food systems.
Business and a Bachelors in Engineering mathematics and physics from the Moscow
from the Indian Institute of Technology. Institute of Physics and Technology.
As our work on tackling food waste continues, I hope this research and the ongoing
actions of the Coalition will continue to spark discussions about the prevalence of food
loss in supply chains and, most importantly, how the industry can make the strongest
impact through ongoing collaboration and partnership.
About the ECR Retail Loss Group
The Group is part of ECR Community, a voluntary and collaborative retailer-
manufacturer platform with a mission to ‘fulfil consumer wishes better, faster
and at less cost’. Over the last 21 years, the Group has acted as an independent
think tank focused on creating imaginative news ways to better manage the
problems of loss and on-shelf availability across the retail industry. Championing the
idea of Sell More and Lose Less, the Group is open to any retailer and manufacturer
Ignacio Gavilan
to join. Its work is supported by research funding provided by Checkpoint Systems,
Director, Environmental Sustainability
Genetec, RGIS and Retail Insights. For further information: http://ecr-shrink-group.com
The Consumer Goods Forum

4 The Consumer Goods Forum www.theconsumergoodsforum.com 5

 Abstract
Reducing food waste to 50% by 2030 is a global priority. Retailers across the
world are taking several initiatives such as improving store operations and demand
forecasts to step up to this target. However, estimates suggest that over 32% of
fresh food waste occurring before reaching consumers’ homes happens upstream in
the supply chain at farms, manufacturing units and distribution centres. In this paper,
we use a combination of stakeholder interviews and literature review to identify two
key reasons for this wastage and outline ways in which retailer-led partnerships can
help in profitably reducing it. We find that the primary reasons for waste are rejection
of produce by retailers/suppliers at the farms due to its inability to meet cosmetic
standards and piling of stock at various points in the supply chain to proactively
meet customer demand. A key structural determinant of wastage due to these
reasons is the design of contracts between players in the supply chain which fail
to take a holistic approach in integrating the cost of food waste into the incentive
structures of each player in the supply chain. For instance, cost of produce rejected
at the farm due to cosmetic reasons is largely borne either by the farmer or by the
end consumer but not by retailers or produce aggregators. To address this issue,
we outline five innovative contractual types categorized into two broad sections
that are either being used or being considered by retailers across that globe –
forward and secondary resale contracts. Forward contracts include strategies to
effectively purchase the produce to jointly maximize profits and minimize waste
whereas secondary resale contracts include strategies for handling produce that is
purchased but remains unsold. We particularly focus on retailer-led partnerships as
they have the highest bargaining power in most fresh food supply chains. Besides Environmental Protection Agency 2020). Businesses too have responded by piloting
enlisting contractual types, our study also provides a qualitative assessment of the and adopting various solutions targeted at reducing food wastage. Solutions such as
efficacy of each contract type in reducing food waste. We find that forward contracts waste tracking analytics, packing adjustments, donation, storage and handling and so
are more effective in comparison to secondary resale contracts. In particular, whole on are gaining popularity among the retailers (Eurocommerce 2017). For instance, from
crop purchase contracts where retailers agree to purchase the entire crop produced 2016, Sainsbury’s, the second largest chain of supermarkets in the UK, has converted
by farmers irrespective of its quantity or cosmetic standards are most effective its food waste into green gas which accounts for ~10% of its annual gas needs
wherever applicable. (Sainsburys 2017). Similarly, Walmart is currently piloting smart labelling technology to
consistently monitor spoilage of food products in transit to their stores (Prudy 2016).

While these solutions are undoubtedly a progressive step towards reducing food waste,
they are largely driven by the retailers and are confined within the boundaries of the
Introduction firm. However, estimates suggest that only ~ 23% of the food wasted before reaching a
consumer’s home happens in retail stores. Other consumer facing businesses such as
A third of all food harvested in the farm never reaches the fork for human consumption. the restaurants and institutional food providers contribute to an additional 46% whereas
In the US alone, the economic value of food wasted is estimated to be ~$ 218bn every the remaining 31% occurs at farms, suppliers and manufacturing units (ReFed 2016).
year, about 1.3% of the country’s GDP. Alarmingly, over 40% of wastage is estimated
to occur at consumer facing businesses (retailers, distributors, restaurants, food In this study we consider the role of supply chain partnerships and revisions to commercial
service providers) and another 43% at individual homes (ReFed 2016; Wrap 2020). terms in extending retailers’ efforts to reduce waste across the supply chain. We particularly
The scale of this waste has been recognized as a major concern by governments focus on partnerships led by retailers as they have the highest bargaining power in the
and businesses around the globe. The United Nations has included reduction of fresh food supply chain. Also, we extensively focus on preventive measures as they are
per-capita food wastage by 50% as a key Global Sustainability Goal for 2030 (FAO estimated to have a potential to save over 75% of the annual economic value of food
2020). Countries such as the US and the UK have also set similar targets for their waste, in contrast to 23% and 2% from food recovery and recycling measures respectively
own countries (Department for Environment, Food & Rural Affairs 2019; United States (ReFed 2016).

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Approach and Methodology of inventory. Stock piling can happen either conducive towards stock piling. That is, the
at the beginning of the supply chain, that is cost of storing and trashing an SKU (if not
Interviews were conducted with eighteen (18) executives specialising in commercial at the farm or far into the supply chain at sold) is significantly lower than the expected
procurement and related fields in fresh grocery supply chain across various geographies distribution centres of suppliers and retailers. profit margin from the SKU (if it were sold).
and industries. Figure 1 shows the distribution of interviewees by industry and Primary reason for stock piling at the farm This too encourages several retailers and
geography. These interviews were supplemented with over 100 hours of desk research is a crop flush. When seasonal fruits and suppliers alike to stock more and thereby
involving review of literature from various academic journals and policy think tanks. vegetables such as cauliflower, strawberries waste more. Beyond cosmetic standards
and avocados are overproduced, there is an and stock piling, other major reasons for
Figure 1: Breakdown of Interviewees excess supply of them within a short period food waste include inaccurate demand
of time without commensurate demand. forecasting and unconducive packaging.
This supply-demand mismatch is often
observed to lead to waste. While there are A major structural determinant of these
multiple strategies such as cold storage, reasons is the design of prevailing contracts
price drops and produce promotions that between retailers and suppliers which
could be adopted to consume/preserve take the form of a fixed price for a fixed
the excess produce, it is often observed quantity of produce over a fixed period of
that retailers and suppliers continue to time. With each player maximizing his/her
place purchase orders solely based on their own profit, such fixated nature of contract
demand forecasts and leave the excess design fails to account for costs associated
produce at the farm. Given that farmers in with food waste at each step in the supply
most countries are disaggregated, they chain. Given the heterogeneity in market
neither have the scale to invest in capital power among the players in the supply
intensive technologies such as cold storage chain, typically, it is either the consumers
nor have the market power to influence the or the producers who inadvertently pay
price to push further demand. Thus, they for food waste. For instance, in a season
aren’t left with many options beyond turning where a large proportion of produce does
the harvest into waste. not match cosmetic standards due to
unforeseen climactic conditions, supply of
Next, once the produce is lifted from the commodity in the market reduces as
Findings the farm, it spends a large proportion of retailers leave the ‘not-so-good-looking’
its shelf life flowing through the supply produce at the farm. Not only does this lead
Our analysis identified two major reasons for wastage of food before it reaches the retail chain. Retail store managers, in order to to an increase in price for the final consumer
store – (i) cosmetic standards and (ii) stock piling. be able to meet the consumers’ demands due to supply-demand mismatch but also
proactively demand high responsiveness leads to an increase in wastage of produce
Cosmetic Standards from their suppliers/distribution centres. at the farm as most farmers do not have
Consequently, suppliers/distribution other sale outlets to consider. This stark
One of the major reasons for perfectly edible produce getting wasted at the farm is centres tend to accumulate perishable simultaneity of producers wasting the crop
produce not meeting cosmetic standards demanded by the retailers. Farm waste report by inventory at several points in the supply and consumers overpaying of the same
Feedback estimates that in the UK alone, over 37,000 tons of food, about 16% of the total chain in anticipation of demand from retail crop a major drawback for such fixated
food grown is rejected by retailers due to their cosmetic inferiority (Bowman 2018). Often, stores leading to wastage. Occasionally, contract designs.
farmers complain of not having clearly defined cosmetic standards that are contractually we also came across instances of suppliers
enforceable and attribute retailers’ rejection based on cosmetic standards to their revised sending such accumulated inventory that is In this study we identify innovative contract
forecasts. When faced with such vagaries, farmers, due to lack of other sale outlets, typically close to its expiry free of cost to the retailers types where this fixated nature of traditional
turn the harvest either into food waste or use it to replenish organic matter in the soil. allowing them to decide if they want to sell contract design can be relaxed. To this effect,
it at a subsidized price or trash it as waste. we find five innovative types of contractual
Stock Piling Further, we find that in several cases, agreements categorized into two broad
particularly for slow moving products, the buckets either being implemented or being
Another reason for perfectly edible produce going to waste is stock piling or accumulation market incentive structures are also more considered by retailers across the globe –

8 The Consumer Goods Forum www.theconsumergoodsforum.com 9

Forward Contracts and Secondary Resale harvest which enable the retailers to plan in the UK such as Branstons are already retailers are working with suppliers and
Contracts. The current level of commitment the downstream supply chain accordingly. actively engaged in such contracts and packaging producers to enhance the shelf
from the leadership and sophistication in a push by the retailers could incentivize life of their self-branded products (Skyes
implementation is highly varied across the A key component in success of this several more to join the bandwagon. 2019).
retailers. While some retailers such as Tesco strategy is the retailer’s ability to utilize the
(Tesco 2019a) have adopted contractual produce that does not meet the cosmetic Similar to Whole Crop Purchases, Whole 3. Scan Based Trading Contracts/
agreements to reduce waste as a strategic standards effectively under the expiry time Animal Purchase Contracts between Direct Store Delivery
priority, many are yet to embark on this constraints. A prominent retailer that seems farmers and retailers/suppliers are possible
journey. A large proportion of retailers we to have successfully navigated this issue is and exist in practice. However, the issue of This strategy is particularly effective in
interviewed belonged to latter category. Tesco, the third largest retailer in the world. food waste among animal products is not contexts where the primary driver of food
It has adopted this strategy since 2013 and as worrisome as it is in the case of fresh waste is stock piling in the supply chain.
Below, we describe these agreements, their engages in long-term contracts of 3 – 5 years produce. Supply chains for animal products It involves retailers acting solely as shelf-
variants and contexts in which we expect with over 2,500 farmers of all sizes across are largely demand driven unlike fresh space providers allowing the suppliers
them to be effective. the UK. Produce that meets the cosmetic produce which are supply driven. to manage inventory from end-to-end.
standards is usually sold on the shelves That is, an animal is butchered only when Suppliers foot the costs of distribution in
and the rest is either used in the in-store there is a consumer demand at the store. exchange for their ability to manage their
live kitchen or converted into packets of Such flexibility is not possible in case of own portfolio of SKUs pre-authorized by the
Forward Contracts frozen chopped vegetables to be sold as a fresh produce, particularly among those retailer while maintaining product quality.
home brand. Some of the leftover produce commodities which are seasonal, and require
Forward contracts include strategies to is also pushed to downstream players such robust long-term demand forecasts. Also, At the same time, retailers receive a
effectively purchase/manage the produce as restaurants and food service institutions animal products such as sausages typically commission from the supplier for every
to jointly maximize profits and minimize (Tesco 2019b). Other prominent retailers to have a larger shelf life than fresh produce unit sold without incurring handling and
waste. We observed three kinds of such have adopted this strategy are Mercadona, and can afford to spend longer durations inventory holding costs in exchange to the
contracts that are usually used in different Metro Cash & Carry and Jeronimo Martins of time flowing through the supply chain. shelf space.
contexts – Whole Crop Purchases, (Eurocommerce 2017). Lastly, it is very common for slaughterhouses
Investment Contracts and Scan Based to have multiple contractual agreements In contrast to traditional procurement
Trading Contracts. Though this strategy has proven successful with different players in the downstream for practices of the retailers which involve
for Tesco and is likely to be effective for different animal parts thereby reducing the aggregation of demand across several
1. Whole Crop Purchases vertically integrated retailers at large, it is wastage burden on retailers alone. stores, this strategy out-sources the
important to note that it comes with logistical responsibility of aggregation to the suppliers.
A dominant strategy to address the issue complications of dealing with multiple 2. Investment Contracts Such outsourcing can be effective when
of cosmetics standards and stock piling suppliers (farmers) and therefore may not dealing with highly perishable commodities
is the “Whole Crop Purchase” contracts. be applicable for all retailers. For ease of Another form of purchase contract associated with high order frequencies
In this strategy, retailers engage with the doing business, it is natural for retailers to occasionally used involves capital and low order quantities at the store level.
farmer directly and commit to purchasing depend on an aggregator (supplier) who can investments. In these contracts, both Typical examples of such commodities are
everything produced by them (including ensure their daily demands are seamlessly retailers and the suppliers jointly identify bread and bakery products. Such products,
the produce that does not meet cosmetic met and there is a high possibility that such opportunities to reduce waste and agree when procured using traditional practices
standards). In return to the surety, farmers dependence is more cost effective than upon making necessary investments in are likely to spend a significant part of their
agree to sell their produce to the retailer engaging with multiple farmers. Also, not technology for sustained collaboration. shelf life either flowing through the supply
at a reduced price. In some cases, this all retailers may have in-store kitchens and Incentives for such collaboration are chain or sitting in a distribution center
strategy takes the shape of a wage contract a good network of downstream players created in the form of long-term quantity or leading to increase in wastage. However,
where the retailers agree to pay the farmer to effectively utilize the entire produce. In price contracts. Typically, these contracts in contexts where suppliers have logistical
a fixed wage for the crop. This strategy such scenarios, retailers, can use their high are typically effective in contexts where capabilities to quickly respond to customer
serves three purposes – decreases cost bargaining power to enter into conditional significant modifications in suppliers’ demand and network capabilities to
of goods for retailers, increase a farmer’s contracts with their suppliers. That is, operations are needed to meet the retailers’ aggregate demand from stores operated by
income and reduce waste. Waste reduction retailers could demand the suppliers to waste reduction objectives. An emerging several retailers, the aforementioned nature
in this form of contracting is primarily driven engage in Whole Crop Purchase Contracts area where such contracts are being of wastage can be avoided, albeit with a
by clear visibility of inventory from the time to be able get their business. Few suppliers considered is packaging. Several large slight increase in cost of logistics. Evaluation

10 The Consumer Goods Forum www.theconsumergoodsforum.com 11

of relative trade-offs between potential increase in logistical costs and decrease in waste Figure 2: Summary of Producer and Retailer Level of Motivation
can be a good starting point for consideration of these contracts.

Historically, one of the major impediments in implementing such contractual agreements

has been information asymmetry, where the supplier does not have visibility over sales
happening at the retail store. Another major impediment is shrink, and the question of
who pays for the products that are lost, either stolen, damaged or out of date (Choi 2016).
However, with store replenishment and customer check-out processes largely digitized
across retail outlets, real-time data on units sold and units on the shelves can now be
seamlessly shared with all parties involved. This has motivated several retailers to consider
engaging in such contracts to a varying degree. Currently, such contracts are a standard
practice among milk and dairy products at several retail outlets and have the potential to
be extended to other SKUs with similar demand and shelf life characteristics, particularly
in contexts where direct store delivery is a common practice.

A major flipside to this strategy is that the retailers, who are closer to the inventory located
in the store shelves, have no incentive to work towards reducing waste. In fact, one can
imagine scenarios where retailers could use their bargaining power to push the suppliers
to stock more to ensure overall customer satisfaction in their store. In such scenarios,
retailers might be leading to more wastage without paying the price for it.

Figure 2 summarizes the motivation for producers/suppliers and retailers towards reducing
food waste across different forward contract types across fresh food supply chain.

Our notion of producers includes players such as farmers and manufacturers whereas Secondary Resale Contracts
retailers includes all customer facing grocery shopping outlets. In whole crop purchases,
both producers and retailers are equally motivated to reduce food waste as the costs of These strategies entail retailers selling the unsold food products to identified partners
waste are shared by both parties. For example, Branston’s (potatoes) re-purposed and at a discounted price. While these contract types are largely focused on addressing the
processed the potatoes that did not meet the required standards into other products, symptom and not the cause of food waste, they are still important as demand forecasts,
such as ready-made meals. Whereas in investment contracts, the cost of investment is despite their increasing sophistication, could include significant errors. Unlike donations,
largely borne by the retailers and therefore they have a higher motivation to towards food secondary resale as a strategy is designed to be for profit and is observed in two forms –
waste in comparison to producers. In the meat category, an investment in new “skin tight” backward selling and forward selling.
packaging lead to a 50% reduction in the food waste supplied from a major meat producer
(Hilton Foods) Tesco 2019b However, in Scan Based Trading contracts, both retailers and 1. Backward Selling Contracts
producers play a counter-balancing role against each other with regards to food waste.
While producers may want to stock more to sell more thereby wasting more, retailers may This strategy includes reverse logistics where the retailer sends back unsold products
push back excess stocking by imposing shelf space constraints (vice-versa where retailer procured from a supplier within a stipulated time period. Unlike Scan Based Trading
being keen on stocking more and producer pushing back with supply constraints may strategies which are applicable with products with short shelf life, small order quantities
also happen). Lastly, in traditional fixed price contracts, retailers have little motivation to and high order frequency, backward selling option is more relevant for products with
address food waste as the cost of waste is not often included in the contractual terms. The reasonably long shelf life, large order quantities and low order frequency. In most cases,
figure also provides examples of Tesco’s engagement with its suppliers to across all three the supplier bears the cost of logistics and in return gets the opportunity to procure raw
types of forward contracts for sale of fruits (Tesco 2019b). materials for re-use/re-manufacture at a significantly lower cost. Evidently, the success of
this strategy is largely dependent either upon the suppliers’ ability to re-use the products
or upon their downstream network of discount stores, restaurants and food institutions
that are open to purchase such re-used/remanufactured products. While this strategy is
rather uncommon among large retailers which themselves have a strong downstream
network, it is occasionally considered by small and medium sized retailers, specialty and
convenience stores.

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2. Forward Selling Contracts power to create conglomerations of all players in the supply chain that stand to benefit
from such an investment. Lastly, the ease of implementing this contract type comes from
Forward selling includes offering goods that are unsold to downstream players at a the fact that the networks of farmers and suppliers needed to operationalize it already
subsidized price. A notable example to this strategy is the Carrefour group which converts exist in the current supply chain. All that is needed is a nudge from the retailers to modify
unsold food products in each store into mini-meals and sells it to consumers in the the contractual terms under which these networks currently operate.
neighbourhood through a new technology platform called Too Good To Go (Carrefour In order to ensure the intended results are obtained, the design of any of these contracts
2018). However, this strategy is not very popular among large retailers as they tend to slash needs a careful consideration of the context and the capabilities of the players involved. For
prices and push the products to consumers’ purchase basket. It is more often employed instance, as discussed above, Scan Based Trading strategies, if not designed appropriately
by discount retailers such as Grocery Outlet and Daily Table. might incentivize retailers and willing suppliers to encourage more wastage in certain
contexts. While the models followed by retailers such as Tesco and Mercadona offer a
good headway into designing such contracts, in most cases it is not possible to replicate
the same structure across several retailers. Therefore, retailers should consider running
Key Take Away and Further Research small pilot studies on the aforementioned contract types and document their pros, cons
and implementational challenges. More generally, a clear framework that elucidates an
In times when retailers are largely focused on food waste initiatives confined to the exhaustive list of the pre-requisites that are needed, computes optimum price points and
boundaries of their firm, this research highlights the potential and possibilities of developing provides specific operational guidelines for each supply chain of fresh produce based on
retailer-led contractual agreements that could significantly reduce food waste across the strengths and weaknesses of retailers (and their suppliers) is needed.
supply chain. Contractual agreements currently used by the retailers largely take the
form of a fixed price for a given quantity over a mutually agreed time period. Often the Further, it is important to study the pre-requisites needed for design of conditional contracts
price, quantity, time period and in some cases quality too, are decided based the retailers’ as there aren’t many precedents of this kind and evidently these require more logistical
assessment of their store-level demands. streamlining to operationalize. A major component of such operationalization would be
investment in information sharing platforms where retailers can monitor suppliers’ actions,
Our research finds that not only is such form of contracting restrictive from a food waste their costs, prices and quality of commodities. In fact, Tesco is already working with its
prevention standpoint but also limits the overall profit potential of the entire supply chain. suppliers to put such data sharing infrastructure in place (Askew 2018). The retailer is also
We highlight innovative contractual types where price, quantity and time are decided using urging other supermarkets to publish their data in a manner conducive to track and tackle
a holistic approach which includes store-level demand forecasts along with incentives/ waste (Grant 2019).
disincentives of other players in the supply chain. For instance, in the case of Whole Crop
Purchases, by considering the farmers’ concerns over rejection of produce, retailers can In the long run, more studies focused on suppliers and producers are needed to understand
obtain their commodities at a reduced price in return to relaxation of their fixed quantity the circumstances in which suppliers will willingly engage in Whole Crop Purchases without
clause. The implicit idea in such contracts is that there is a joint responsibility assumed the retailers having to use their bargaining power. If we could achieve that, we would have
by both farmers and retailers to reduce waste and costs associated with it in a mutually created a self-sustaining supply chain where incentives to reduce food waste across the
profitable manner. In the case of Scan Based Trading, retailers agree to relax the fixed supply chain are aligned with each individual player’s sustainability goals.
quantity clause in order to transition the responsibility of managing inventory to those in
the supply chain who are most capable of reducing food waste. In doing so, they facilitate
the overall reduction of waste in the supply chain thereby enabling the possibility of
benefits from reduction being shared among all players in the supply chain.

Our research also takes a leap forward in qualitatively assessing the potential each type
of contract holds in reducing waste. We find that by engaging in whole crop purchases or
in conditional contracts with suppliers, retailers can play a significant role in decreasing
waste at the farm which constitutes ~16% of the total food waste (ReFed 2016). Beyond
being highly impactful in reducing food waste, we also find that these contracts are more
feasible to operationalize in comparison to others. This is primarily because, store presence
of most large retailers is geographically widespread providing them ample opportunities
to utilize the whole crop. Also, among all the players in the fresh food supply chain, in
most cases retailers have the highest working capital to be able to drive investments
in necessary infrastructures such as cold storage warehouses and information sharing
platforms, which are essential for the success of whole crop purchases. While retailers
need not engage in such investments all by themselves, they can use their bargaining

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(iv) Choi Min (2016). Moral Hazard, Power, and Risk Sharing in Scan-Based Trading.
Retrieved on May 4, 2020 from https://repository.asu.edu/attachments/175020/content/ Notes
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1. Authors calculations based on data reported on ReFed 2016
(v) Department of Environment, Food and Rural Affairs (May 2019). Slashing food 2. Authors calculations based on data reported on ReFed 2016
waste: Major players urged to ‘Step up to the Plate’. Retrieved on May 4, 2020 from https:// 3. Based on ECR Shrink group’s interactions with Branstons group
www.gov.uk/government/news/slashing-food-waste-major-players-urged-to-step-up-to-
the-plate.

(vi) Eurocommerce (2017). Rising to the food waste challenge. Retrieved on May 4, 2020
from https://www.eurocommerce.eu/media/134575/Food%20Waste%20Brochure%20
-%20final.pdf.

(vii) FAO (2020). Sustainable Development Goals, Global Food Loss and Waste.
Retrieved on May 5th 2020 from http://www.fao.org/sustainable-development-goals/
indicators/1231/en/.

(viii) Grant, K. (2019, September). Order supermarkets to publish food waste data,
Tesco boss urges Government. Retrieved on May 5, 2020 from https://inews.co.uk/news/
consumer/order-supermarkets-to-publish-food-waste-data-tesco-dave-lewis-urges-
government-636885.
(ix) Prudy, Chase (2016, July). Walmart has a smart new ploy to reduce rampant food About the Consumer Goods Forum
waste. Retrieved on May 4, 2020 from https://qz.com/739772/walmart-has-a-smart-new-
ploy-to-reduce-rampant-food-waste-selling-ugly-produce. The Consumer Goods Forum (“CGF”) is a global, parity-based industry network
that is driven by its members to encouage the global adoption of practices and
(x) ReFed. (2016). A road map to reduce food waste in US by 20 percent. (2016). standards that serves the consumer goods industry worldwide. It brings together
Retrieved from https://www.refed.com/downloads/ReFED_Report_2016.pdf. the CEOs and senior management of some 400 retailers, manufacturers, service
providers, and other stakeholders across 70 countries, and it reflects the diversity
(xi) Sainsburys (2017). Helping customers to cut food waste. Retrieved on May 4, of the industry in geography, size, product category and format. Its member com-
2020 from https://www.about.sainsburys.co.uk/making-a-difference/our-values/our- panies have combined sales of EUR 3.5 trillion and directly employ nearly 10 million
stories/2017/helping-customers-to-cut-food-waste. people, with a further 90 million related jobs estimated along the value chain. It is
governed by its Board of Directors, which comprises more than 50 manufacturer and
(xii) Skyes. T. (2019). The Shelf-Life Challenge. Retrieved on May 4, 2020 from https:// retailer CEOs. For more information, please visit: www.theconsumergoodsforum.com.
packagingeurope.com/the-shelf-life-challenge-iffa.

16 The Consumer Goods Forum www.theconsumergoodsforum.com 17

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