IN THE FIELD OF TECHNOLOGY DEGREE PROJECT
DESIGN AND PRODUCT REALISATION AND THE MAIN FIELD OF STUDY MECHANICAL ENGINEERING, SECOND CYCLE, 30 CREDITS
,
How does the perception of food
waste and its root causes differ on
different levels within a grocery
retail organization?
A case study
MAX WIMBY
KTH ROYAL INSTITUTE OF TECHNOLOGY
How does the perception of food waste and
its root causes differ on different levels
within a grocery retail organization?
Max Wimby
Master of Science Thesis TRITA-ITM-EX 2020:390 KTH Industrial Engineering and Management
Hur skiljer sig uppfattningen av matsvinn
och dess rotorsaker på olika nivåer inom en
dagligvaruhandelsorganisation?
Max Wimby
Master of Science Thesis TRITA-ITM-EX 2020:390 KTH Industrial Engineering and Management
Examensarbete TRITA-ITM-EX 2020:390
Hur skiljer sig uppfattningen av matsvinn och dess rotorsaker på olika nivåer inom en
dagligvaruhandelsorganisation? Max Wimby Godkänt 2020-06-22 Examinator Sofia Ritzén Handledare Johan Arekrans Uppdragsgivare Kontaktperson
Sammanfattning
Master of Science Thesis TRITA-ITM-EX 2020:390
How does the perception of food waste and its root causes differ on different levels within a grocery retail
organization? Max Wimby Approved 2020-06-22 Examiner Sofia Ritzén Supervisor Johan Arekrans
Commissioner Contact person
Abstract
Table of contents
1 INTRODUCTION
1
1.1 Background 1 1.2 Purpose 3 1.3 Delimitations 42 FRAME OF REFERENCE
5
2.1 Definition of food waste 5
2.2 Occurrence of food waste 5
2.3 Reasons behind food waste 6
2.4 Franchise organization 9
2.5 Research gap 10
3 METHOD 11
3.1 Research design - Case study 11
3.2 Data collection 12 3.3 Data analysis 14 3.4 Method reflection 15
4 RESULTS 16
4.1 Root cause 1 16 4.2 Root cause 2 17 4.3 Root cause 3 18 4.4 Root cause 4: 20 4.5 Root cause 5 21 4.6 Root cause 6 22 4.7 Root cause 7 23 4.8 Root cause 8 24 4.9 Root cause 9 25 4.10 Root cause 10 27 4.11 Root cause 11 28 4.12 Compiled result 305 DISCUSSION AND CONCLUSIONS 32
5.2 Conclusions 35
6 FUTURE RESEARCH AND RECOMMENDATIONS 36
6.1 Future work 36
6.2 Limitations of study 36
6.3 Recommendations for Organization X 36
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1 INTRODUCTION
This chapter describes the background, purpose and limitations of this thesis as an introduction for the rest of the report.1.1 Background
This thesis revolves around the root causes to food waste and how they are perceived, interpreted and viewed upon on two different levels within a major grocery retail organization. The organization has asked for anonymity, its name has therefore been referred to as Organization X in this thesis. This section describes the organization in short and the background to food waste from a retail perspective.
1.1.1 The organization – Organization X
The thesis is written in cooperation with Organization X which has a leading position on the Swedish grocery retail marker. Organization X is a decentralized organization applying a type of franchising owner structure. The parent company handles the overall logistics, marketing, development and provides investments to establish new stores. While the stores are privately run and owned but pays royalties to the parent company based on their revenue. Store owners are highly independent despite the franchise contract. For example, they are not obligated to purchase their products from the parent company and has therefore a certain bargain power. The stores also own the majority of the shares in the parent company while investors and the public stock market owns the rest. The philosophy within Organization X is that stores possess local expertise and therefore should be run independently while the parent company provides a foundation with the advantages a large organization possess such as more favorable purchasing costs from suppliers and a strong brand.
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waste hierarchy framework developed by Papargyropoulou et al. (2014), which suggests to primarily prevent the cause and origin of food waste as far as possible.
1.1.2 Food waste
Gustavsson et al (2011) claims that food waste is a global problem. Even though food waste has gained more focus lately, there is no global standardization on how to categorize food waste. Therefore, it is hard to give a precise number of how much food that is being wasted globally (Garrone et al., 2014). As a result of this, Hanson et al. (2016) claims that it is difficult to monitor any trends related to food waste. Although, according to FAO (2013) the most common estimate is that about one third of all food produced for human consumption globally is wasted which is equivalent to approximately 1,3 billion tonnes yearly. In general, developed counties generates a larger amount of food waste per capita than developing counties. However, food waste is a rapidly growing problem in developing countries due to growing economy and increased consumption in many of these countries. European food waste is estimated to be about 88 million tonnes annually which equivalents to about 5% of the global total (Hanson et al. 2016). However, recently some reduction in food waste has been seen in Europe (Garrone et al., 2014). Although it has potential to decrease substantially, 80% of all food waste can be avoided (Vanham et al., 2015). The grocery retail stage is estimated to correspond to 5% of the total global waste (European Commission, 2011). Despite the relatively low food waste numbers within grocery retail, it is an important stage in the value chain from a food waste perspective. The high concentration of food waste within the stores makes it easy to monitor and measure in comparison to other stages in the value chain such as households (Gruber et al., 2016). Reducing food waste will have both economic, environmental and social benefits.
1.1.3 Economic benefits
The economic losses globally due to food waste is estimated to be about 10 000 billion SEK yearly (FAO, 2013). Further, the total value of the waste within Organization X is estimated to be about 1,3 billion SEK yearly which is equivalent to about 1,5 percent of the total revenue. The grocery retailing industry has low margins, reducing waste can be an efficient way to increase profits.
1.1.4 Environmental benefits
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methane and carbon dioxide in the decomposition process. Secondly, pollution and emissions of GHG during the earlier stages of the supply chain as a result of pesticides, transport energy consumption etc. (Papargyropoulou et al., 2014). Therefore, reducing food waste will have great positive impact on the environment. Barret and Scott (2012) estimates that GHG from the food waste can be reduced with over 450 million tonnes until 2050.
1.1.5 Social benefits
Today, over 800 million people around the globe do not have enough food. Still, one third of all food produced is thrown away, although a lot of that food is safe for humans to eat (WFP, 2019). Reducing food waste is one of the main actions in order to fight starvation (Haberl et al., 2011). A way for the grocery retailer to reduce food waste and simultaneously contribute to social sustainability is to donate to charity. Products close to or beyond expiration date or with minor damages are common in grocery retail and generally considered as unsalable but still safe for humans to eat. Yet, only a fraction of the discarded food within retail is donated. (Lebersorger & Schneider, 2014)
Despite the economic, environmental and social benefits reduced food waste in grocery retail has, research within this area is lacking. The existing literature focus rather on other stages in the value chain and with a wider perspective, (Papargyropoulou et al., 2014). Therefore, this thesis focuses specifically on the retail stage in the value chain. As mentioned, a reduction in food waste will benefit all three sustainability aspects. However, in this thesis, the economic aspects will be the dominant due to the commercial driving force within the grocery retail industry.
1.2 Purpose
4
1.3 Delimitations
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2 FRAME OF REFERENCE
This chapter describes the theoretical background to this thesis by reviewing the literature regarding food waste, its root causes and characteristics of a franchise organization. Moreover, a research gap is highlighted for food waste within the retail stage.2.1 Definition of food waste
Even if food waste has gained more focus lately, there is no general standard in how to categorize food waste. Therefore, it is difficult to give a precise number of how much food that actually is being wasted globally. (Garrone et al., 2014) A contributing factor to this is the great number of different aspects involved, such as local legislations, different policies and operations within organizations and methods of registering data (Parfitt et al. 2010). Organization X uses the Food Loss Waste Protocol standard (FLW Standard) in order to classify food waste. FLW is a global standard for accounting and reporting food waste for governments, companies and other organizations in order to highlight where it occurs. The standard defines food waste as food and inedible parts of food that were intended to be consumed by humans from the beginning but for some reason were not. This includes for example food that ends up as animal feed, landfill or biomaterial (Hanson et al. 2016). This is also the definition used in this thesis unless otherwise stated. However, secondary sources might use other definitions.
2.2 Occurrence of food waste
The food supply chain can be categorized into the following four main stages: Manufacturing, Retail/Wholesale, Food service/catering and Households. Table 1 shows the percentage of the total food waste within the different stages.
Table 1. Food waste occurrence in the value chain (European Commission, 2011)
Stage Percentage of total food waste
Manufacturing 39%
Retail/Wholesale 5%
Food service/catering 14%
Households 42%
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growing economy and increased consumption in many of these countries. (FAO, 2013) Today, it is estimated that 80% of all food waste can be prevented. (Priefer et al., 2016) The literature has identified the following four product categories as the most critical in terms of food waste in retail: Bread and bakery, fruit and vegetables, fresh meat and fresh dairy products (Lebersorger & Schneider, 2014). However, the amount of food waste differs between retail chains and store formats. Generally, according to Teller et al. (2018) large stores are having a greater struggle with food waste.
2.3 Reasons behind food waste
There is a lot of different reasons for food waste in the retail stage of the food supply chain and the literature does not agree that a specific one is dominant. An overall issue is the customers reluctance to buy food that is fully consumable and safe to eat but is about to become unsalable (Papargyropoulou et al., 2014). Another problem is the difficulty to forecast sales due to varying customer demand resulting in the stores over-stocking groceries in order to avoid selling out, which might lead to food waste (Mena et al., 2010). Teller et al (2018) suggests the following 11 root causes to food waste, based on previous research by the European Commission (2010), Mena et al. (2014), and Lebersorger and Schneider (2014).
2.3.1 Root cause 1
Problems with forecasting and replenishment related to internal requirements to maintain a 100%
on-shelves availability
Many grocery retailers assume that by avoiding empty shelfs, revenue and profit will automatically increase. There is no consensus in the literature weather this is true or not. A high on-shelf availability increases sales, but 100% on-shelf availability is extremely expensive in terms of labor and food waste. Tests by the English grocery retailer Mark & Spencer show that the sales increases with a higher on-shelf availability but so does the waste. As a result of this, the revenue increases while the profit in the end decreases (Trautrims et al, 2009).
2.3.2 Root cause 2
Width and depth of assortment
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some studies show that the customers expect a certain assortment (Andersson et al 2010). Further, Teller et al. (2018) claim a wider range of products results in lower turnover for specific products which might lead to more waste. Specifically, for small retailers with a low turnover.
2.3.3 Root cause 3
High customer demands on the appearance and quality of groceries
Customers tend to choose the most appealing groceries which results in making them unsaleable even if they are completely safe to eat. Further, it is common among retailers to emphasize their overall high quality standard by showcasing fresh products, which makes them more prone to discard products that are not visually appealing. (Thyberg & Tonjes, 2016) One way to tackle this problem is to up-cycle unsaleable products in an in-store kitchen or a juice bar. Therefore, larger stores that can accommodate such operations have an advantage over small stores when it comes to reducing food waste (Teller et al., 2018).
2.3.4 Root cause 4
Undesirable customer behavior when handling and selecting products
Customers tend to grab the freshest and newest groceries from the shelves, this behavior is referred to as last in first out (LIFO). Which is opposite to the desired customer behavior, first in first out (FIFO). As a result to this, the stores try to design their shelves in order to prevent LIFO but with limited success. (Teller et al., 2018, Naturvårdsveket, 2008)
2.3.5 Root cause 5
Delivered products with too short expiry dates
Fresh groceries are the largest source of food waste, this is mainly due to the limited time the products are saleable before they expire. Therefore, products too close to expiry date when delivered have a greater risk ending up as waste. The supplier is mainly responsible to this cause (Teller et al., 2018).
2.3.6 Root cause 6 Over-stocking
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2.3.7 Root cause 7
High internal quality standards
An organization with high quality standard will be less tolerant to defects and damages resulting in discarding food at an earlier stage. They are also less prone to sell these groceries with a discount since it might dilute the brand.
2.3.8 Root cause 8
Insufficient quality on delivered products
The product quality is not sufficient in order to be sold in the store. In the grocery industry, often whole package units are discarded due to one bad item in them (Salhofer et al 2008).
2.3.9 Root cause 9
Too large secondary package unit
The packaging units delivered to the stores decides the minimum order quantity. Smaller or a wider range of size options on the secondary package units makes it possible for the suppliers to adapt the customer demands (Hellström & Saghir, 2007, Naturvårdsverket 2008). If the package units are too large, stores will be forced to overstock which might result in waste.
2.3.10 Root cause 10
Problems related to fluctuation in demand due to promotions, holidays and marketing.
With promotions come uncertainties due to the unpredictable purchasing behaviors by the customers and lack of accurate sales data. It is not only the promoted products that suffer from incorrect forecasts. The demand for products related to the promoted ones will also fluctuate. In the industry, it is called cannibalism when a promoted product gain sale at the expense of another (Bultez et al, 1989). Since it is very hard to determine how the demand for a related product will be affected by a promotion, it often results in an incorrect forecasting.
2.3.11 Root cause 11
Poor execution by the employees due to insufficient engagement, knowledge and leadership.
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problem within the grocery retail business. A result of this is lack of knowledge in how to handle the products, especially sensitive products such as fruit and fresh meat (Andersson et al 2010).
2.4 Franchise organization
Organization X has a business model built upon franchising. The parent company handles the overall logistics, marketing and development while the stores within the organization are privately run and owned. The stores also own a significant part of the parent company which makes Organization X quite unique. This section gives a brief overview of the franchising concept in order to explain the opportunities and challenges a franchise business model might imply.
Franchising organizations have three things in common: The sales units are widely distributed over geographical area, joint production and joint ownership by the parent company and the sales units, in this case the stores (Castrogiovanni & Justis, 1998). The parent company is called the franchisor and the sales units are called the franchisees. The franchisees pay the
franchisor in exchange for the right to use the brand and services provided (Combs et al., 2004). A franchise organization is considered to have a decentralized structure where the decision making is spread out on the franchisees (Yin & Zajac, 2004).
2.4.1 Positive and negative aspects with franchising
Studies show that franchising organization in general performs better than their competitors (Yin & Zajac, 2004). Brickley and Dark (1987) suggest that one reason for franchisees high
performance is an in general higher provision to sales managers compared to company-owned sales units, and therefore greater motivation. Another reason to better performance might be that franchisees tend to adopt more complex strategies that are tailored for their specific market. (Yin & Zajac, 2004) Further, franchising can have a positive effect on internal conflicts. Since the ownership is spread out on the sales units, potential conflicts between the owners and the operating managers are reduced. However, one overhanging risk with franchising is freeriding, when a franchisee exploits the brand reputation of the parent organization by offering lower quality or service (Kidwell et al, 2007). Another problem franchising organization might run into is lack of knowledge transfer (Navarro & puig, 2017).
2.4.2 Communication and knowledge transfer
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for the franchisor to communicate is with written standardized operation instructions. Yet, it is not possible to standardize all knowledge transfer to the franchisees since their needs might vary. Therefore, continuous support and communication, both written and verbal are important.
(Navarro & Puig, 2017)
2.5 Research gap
Despite both commercial and ethical positive outcomes from lowering food waste and the large focus it has gained from the food retail industry, research literature in the area is lacking (Gruber et al., 2016). Especially at store level in the organizations involved in grocery retail. The modest existing literature regarding this stage of the process tend to focus on higher levels in the
hierarchy of these organizations rather than the personnel working in the stores. Alternatively, it investigates how food waste can be reduced by finding new business opportunities for waste rather than investigate its root causes. Further, the literature fails to explain the responsibilities between the different stakeholders of this stage in the supply chain, which is necessary in order to take action against food waste. (Teller et al, 2018) The majority of the existing research on the retail stage rather focuses on the importance of having a high on-shelves availability (Corsten and Gruen, 2003). Notably, this is ironically believed to be one of the root causes of food waste (Mena et al., 2010). Mena et al. (2014) claim that the lack of research in the area is due to the ethical and commercial dilemma food waste imply. Further, no literature explains what role the organizational structure has on food waste. Yet, a lot of research has been done regarding franchising and the importance of knowledge transfer in order to improve the operations. The majority of this research investigates the knowledge transfer from the franchisor to the
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3 Method
This chapter describes the method applied to this thesis in-depth. A short theoretical background regarding case studies is given followed by an explanation and motivation of the working process step by step, the chosen methods are then reflected upon.3.1 Research design - Case study
In order to gain deeper knowledge in the perception of food waste at two different levels in a large grocery retail organization, a case study at Organization X was performed. By collecting data from multiple sources, case studies allow for triangulation which means that findings can be validated from several observations (Saunders et al., 2016). Since a case study provides the ability to gain deep insights when there is a lack of previous research, it is suitable for preliminary investigations and as a foundation for future research. Hence, it is also suitable for this thesis as the objective is not to suggest any solutions, but to inspire to further research and work to prevent food waste. However, case studies have some shortcomings. Some of the most common criticism is the lack of objectivity and structure. Therefore, it is important to be careful when designing the research method. (Rowley, 2002)
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3.2 Data collection
This section describes how the data was collected in the three phases of the research. The phases were mainly conducted in chronologic order. Yet, some additional research literature was collected at a later stage in order to support the interview findings. The questions in all interviews were open ended in order to encourage reflection and allow for follow up questions. In the beginning of each interview, the interviewees were asked for permission to record in order to facilitate transcription. The interviewees were also asked for permission to be anonymously quoted in the report. The anonymity is important in order to promote honest answers. This is especially important when conducting research within a company. (Bryman & Bell, 2007) Due to the Covid-19 outbreak during the spring 2020, the interviews were conducted at a distance with the communication tools Microsoft Teams and Skype.
3.2.1 Phase one – Research and documentation
During the first phase, documentation and public information regarding Organization X were collected, such annual reports and information from their webpage regarding organizational structure and value proposition. In combination with the public documents, non-public internal reports and data were collected and analysed, such as ongoing projects regarding food waste and KPIs from the stores. This gave an overview of the current situation within Organization X. The search tool Primo in combination with Google scholar has been used to collect scientific articles and publication. Mainly two research areas have been literature reviewed. Publications regarding food waste within the grocery retail and scientific articles regarding the characteristics of franchising organizations. The literature has been reviewed and summarized in the frame of reference chapter. Further, the root causes of food waste suggested by the literature have been used as a foundation for the interviews in phase two and three.
3.2.2 Phase two – Interviews at the parent company
This phase consists of semi-structured interviews at the parent company with internal experts within each root cause in combination with observations from a workshop with internal operations consultants. Semi-structured interviews encourage the interviewee to explain more freely and therefore allow for deeper understanding in comparison to more structured interview techniques. (Bryman & Bell, 2007) The interviewees shown in table 2 have been singled out for each root cause. The interviewees were suggested by the supervisor at the parent company due to their insights in each specific area.
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Root cause Interviewee Interview
length [min]
1 – Problems with forecasting and replenishment related to internal requirements to maintain a
100% on-shelves availability
Internal automatic ordering expert
30
2 - Width and depth of assortment Manager for space
and product range
36
3 - High customer demands on the appearance and quality of groceries
Sustainability manager
28
4 - Undesirable customer behavior when handling and selecting products
Sustainability manager
-
5 - Delivered products with too short expiry dates CR logistics
manager
34
6 – Over-stocking Promotion strategist 32
7 - High internal quality standards Sustainability
manager
-
8 - Insufficient quality on delivered products CR logistics
manager
-
9 - Too large secondary package unit Manager for space
and product range
-
10 - Problems related to fluctuation in demand due to promotions, holidays and marketing.
Promotion strategist -
11 - Poor execution by the employees due to insufficient engagement, knowledge and leadership.
Internal store operations consultant
42
In total, six interviews were held at this stage, each with a unique interview guide. All the interviews were scheduled for 30 minutes and conducted with video call through Microsoft teams.
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In order to get the perspective of the stores and their personnel, semi structured interviews have been conducted. Four employees from four different stores have been interviewed. The same interview guide was used for all four stores. The interviewees have been asked open questions about the daily operations and how they perceive the root causes suggested by the literature. There is a wide range of different types of stores within Organization X throughout Sweden. In order to get as diverse picture as possible, stores with different sizes, types of location and revenue were chosen. The characteristics of the stores are listed in table 3.
Table 3. Store characteristics
In order to guarantee the anonymity of the interviewees and the stores, the characteristics of the stores have been specified in ranges instead of exact numbers. Each interview was scheduled for 30 minutes and conducted through Skype.
3.3 Data analysis
The interviews were transcribed, and theme coded. The coding was done on the transcribed interviews by coloring the text in different color codes. The codes themes were not decided upon before. Each time a new theme was recognized a new code was created. In total, 15 different codes were used for all ten interviews.
• Food waste – This code was used to highlight everything regarding food waste that was not directly related to any of the root causes but still revolved around food waste.
• Organization and business – This code was used to highlight everything that had to do with the Organizational structure such as decision making and management.
• Communication and documentation – This code was used to highlight everything that involved knowledge and information transfer and storage.
• Root cause 1-11 – One code for each root cause was used Store Size [m2] Location Revenue
[mSEK]
Waste % Role of interviewee Store A 1200-1500 Suburb 125-175 1,0-1,1 Fresh goods
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• General/Other - This code was used for highlighting everything that was not falling into any of the other themes.
An additional document was created where the data was sorted based on the codes. The relevant quotes were then selected and pasted into the report under the result. In order to minimize the risk for using the quotes out of context, whole paragraphs were pasted and later slimmed down to include only relevant information.
3.4 Method reflection
When collecting data by interviews, it is desirable if the interviewee is in a relevant setting in relation to the interview topic (Bryman & Bell, 2007). However, since most of the interviewees were working from home during the period for this research due to the Covid-19 outbreak, you can argue that the unnatural conditions were not optimal and have to be considered when reviewing the interview answers. Bryman and bell (2007) claim that due to the large amount of information handled in a qualitative study, it tend to lose focus through the research process. Further, they highlight four general shortcomings with qualitative studies.
• Subjectivity
Research should strive to be as objective as possible. However, complete objectivity is extremely hard to achieve, especially when collecting and analyzing qualitative data. Factors such as personal relationships with the research objects or preconceptions by the researchers might be unavoidable and must be considered.
• Difficult to replicate
Since there is a lack of standardized procedures in qualitative research it is hard to replicate the research process. Further, the qualitative researcher decides what information and data that is relevant and does not present all information gathered. Therefore, two different researchers will never come to the same findings from the same source of information.
• Problems of generalization
Qualitative studies often contain a small sample size with few sources of information. Therefore, it is very hard to conclude that the findings are applicable in a general context. The findings from a qualitative study should therefore be viewed upon in comparison with other relevant research rather than as a generalization for a population or society.
• Lack of transparency
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4 RESULTS
In this chapter, the results from the three phases are compiled and compared. Areas where there is an agreement or dissent between or among the stakeholders and the theory are highlighted. The result is divided into 11 section where each section process one route cause. In the end of each section, a visualization of the perception of the root cause between the different stakeholders and the theory are presented. Lastly, a compiled result from the 11 root causes are presented.4.1 Root cause 1
-Problems with forecasting and replenishment related to internal requirements to maintain a 100% on-shelves availability
In accordance with the great amount of literature about on-shelf availability, Organization X has a general policy to try to avoid empty spaces on the shelves as far as possible. In order to provide the customers with the best possible shopping experience and thereby increase sales. Paradoxically, this results in food waste since it increases the risk of overstocking. In order to cope with that, the automatic ordering system allows the stores to tailor the settings for their store. For instance, by changing at what item-level a new order is triggered in the system.
“It is up to the stores to give correct inputs to the automatic ordering. A store with good routines for the ordering and replenishment will rarely overstock.” -Internal automatic
ordering expert
Further, the belief that high shelf availability is good for profit is shared by the stores. Everyone values the positive effects full shelves have on sales and the overall shopping experience and believe that it is possible to minimize overstocking by working more actively with ordering and routines.
“The problem is rather that the routines are not good enough. I believe it is possible to keep 100% shelf availability without creating more waste, if you have good enough routines with managing the orders you can avoid overstocking.” -Store employee D
However, one of the stores mentions that they have started to allow some empty spaces on the shelves in order to reduce the food waste related to promotions.
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The overall perception, from the parent company and the stores is that 100% on-shelf availability is not a major reason for food waste as long as there are routines on how to order and replenish. Yet, not all stores have strong routines for ordering and struggle with some overstocking, but mainly on dry goods that do not result in waste due to their long expiry dates. The literature agrees that high shelves availability results in increased food waste but disagrees whether high on-shelves availability is profitable or not. The current situation is visualized in figure 1.
Figure 1. Perception of root cause 1 visualized
4.2 Root cause 2
-Width and depth of assortment
The parent company claims that a too wide assortment is a common problem among the stores. A reason for this seems to be the stores willingness to accommodate the customers and their demands. Yet, the theory suggests that a moderate reduction of the assortment can be made without having a negative effect on the customer experience.
“A large part of our job when helping the stores is to clean out products from the assortment that do not sell, that is where they usually fail. […] The stores must ask themselves, do we really need 30 different sorts of ketchup, is this where we should be the best or is it just enough to fulfill the basic customer needs?” -Manager for space and
product range
Which is further confirmed by the internal store operations consultants
“They (the stores) have a tendency to bring in products but never make space for them by
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One of the stores mentioned that they see their willingness to adapt their assortment to the customer as a competing factor and a way to stay ahead of their competitors.
“We try to maintain as high service as possible. Therefore, we try to listen to our customers as much as possible and develop the assortment after their desire. It might result in a little bit more food waste, but it is necessary for us in order to be able to compete.” -Store
employee B
However, this is not the standpoint in all stores. Some stores are actively working with keeping the assortment at a certain level.
“We have tried to avoid taking in products that does not sell enough. If we try a new product and it doesn’t sell, we get rid of it straightaway, that wasn’t the case before I came here, the first thing I did was to get rid of about 1000 products from the assortment.”
-Store employee C
It seems to be a consensus at the parent company that the width of the assortment is a problem today and a contributing factor to food waste. However, there are different opinions among the stores. Some stores see this as a problem while other stores embrace a wide assortment in order to offer competitive service for their customers. The current situation is visualized in figure 2.
Figure 2. Perception of root cause 2 visualized
4.3 Root cause 3
-High customer demands on the appearance and quality of groceries
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regarding food waste within the parent company. However, many stores have taken initiatives to increase the customer knowledge about food waste in order to reduce their impact.
“I believe that this is an area where we can get better and communicate that the appearance does not necessarily reflect the quality and taste by educating the customers.”
-CR logistics manager
All the stores asked also experienced this as a cause of food waste.
“I would say that the customer demand on the appearance and quality of the food is an extremely large reason for waste in our store.” -Store employee A
However, not all stores agree on the impact it may have on the food waste.
“I believe people on the countryside has better tolerance to visual flaws, we do not have to throw away a cucumber that is not straight enough, that was not the case when I worked in the city” -Store employee C
Organization X is encouraging the stores to up-cycle products by using them in the in-store kitchen or juice bar when they are still good to eat but cannot be sold as they are, due to visual flaws or damage. Nowadays, most stores prepare food ready to eat in the store and can therefore reduce their waste while maintaining a certain quality on the shelves.
“We make sure that we always have a certain quality level, products that is not appealing are refined in the juice bar or in-store kitchen.” -Store employee D
However, small stores are not always able to afford the investment and space an in-store kitchen or juice bar entails. Therefore, larger stores have an advantage when it comes to up-cycling. The current situation is visualized in figure 3.
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4.4 Root cause 4:
-Undesirable customer behaviour when handling and selecting products
This root cause involves the customer behavior and therefore has a lot in common with root cause 3. As mentioned earlier, the parent company has not any ongoing central initiatives related to customer behavior and its impact on food waste. In order to cope with food waste related to customers undesired behavior when selecting fresh products, some stores pre-package fruit and vegetables. Thereby, the customers can not only select the freshest ones. However, according to the parent company, this might only move the food waste from the store to the consumer stage in the value chain.
“We do not want to move the food waste from the stores to the customers, that does not solve anything. Even if we reach our goal to reduce food waste, the overall goal is not fulfilled if the waste is moved to another part of the value chain.” -Sustainability manager
Careless handling of the products is a problem that all the stores experienced more or less. One cause of waste is the refrigerated product that must be thrown away when they are left by customers outside the fridge. Due to the food safety regulation, the stores must discard all refrigerated products they find outside the fridge.
“It is very common that customers create waste in the store by destroying or handling products in the wrong way. It is common that we find fish or other fresh products on the shelves outside the fridge” -Store employee A
However, this is not the case in all stores. As mentioned with the previous root cause, customers in the countryside seem to be more conscious when shopping groceries.
“In my experience, people in the countryside are much more conscious when it comes to handling the products if I compare to the customers I had before in the city.” -Store
employee C
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Figure 4. Perception of root cause 4 visualized
4.5 Root cause 5
-Delivered products with too short expiry dates
The parent company is dedicated to ensuring long expiry dates on their delivered products. They have an obligation to the stores that some products should have a certain minimum lifetime when delivered. As a result of this, the stores do not experience too short expiry dates as a major problem.
“It is very rare that products have to short expiry date when delivered […] I believe parent company is very good at making sure that the products (delivered) are fresh.”
-Store employee C
The CR logistics manager considers the long expiry date standard as a major reason to waste at their end. Therefore, this root cause can be considered as a paradox in terms of food waste. Long expiry dates have a positive effect on food waste at the retail stage since the stores can sell a product during a longer period and therefore minimize the risk of having to discard it when it expires. However, it creates waste at the supplier stage since the timeframe during which they can deliver the products gets shorter. Hence, Organization X controls both the supply stage and the retail stage in the value chain, increasing the expiry dates in the stores will not necessarily reduce their overall food waste. However, there is ways to cope with this.
“One way to tackle this is to work with our suppliers and encourage them to investigate how to deliver products with longer expiry dates, e.g. by developing the package design.”
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The parent company and the stores agree that too short expiry dates on delivered products is not a major reason to food waste in the stores in contrast to the theory. The current situation is visualized in figure 5.
Figure 5. Perception of root cause 5 visualized
4.6 Root cause 6
-Over-stocking
The general opinion within the parent company is that promotion is not a major cause of food waste. Since the margins are low or even negative on promoted products, the stores tend to rather understock than overstock.
“Since the stores are privately owned, each department measures and monitors their sales and margins continuously. Due to this, it is unfortunately much more common that they order to little rather than too much during promotions.” -Promotion strategist
This might partly be due to the organizational structure with privately owned stores in contrast to its competitors with a centrally owned organization.
“If you compare to [Competitor A], they do not have the same approach since their store is not privately owned, resulting in them overstocking in order to avoid disappointed customers. Therefore, I believe Organization X is better than some of the competitors when it comes to waste due to promotions.” -Promotion strategist
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“We have tried to reduce the demand on promoted products, we do not want to create a budget-feeling in the store by selling cheap products with low margins. For example, we only have small signs for the promoted products and no advertising in the mailbox.” -Store
employee B
It seems to be a consensus regarding food waste due to overstocking promoted groceries between the parent company and the stores, it is not a major problem within Organization X. This might be due to the ownership structure and the desire to keep high margins at a store level. The current situation is visualized in figure 6
Figure 6. Perception of root cause 6 visualized
4.7 Root cause 7
-High internal quality standards
Organization X has a premium brand and is therefore proud of their high quality standard. No one within the parent company thought that this has a significant impact on the food waste in the stores. The CR logistics manager claimed that the parent company also has high quality standards and therefore always delivers high quality to the stores which lead to less waste in the stores but more waste within the parent company. The stores had very different opinions regarding this cause. One store stated that it was a major cause.
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While another store interpreted high quality as being honest and offer the customers the quality they pay for. That means, if a product is damaged but still safe to eat, offer a great discount instead of discarding it.
“I do not believe that our store is negatively affected by this, in our store, high quality means high transparency (in terms of quality).” -Store employee C
While a third store stated that they see high quality standard as something obvious.
“I guess this differs from store to store. I do not feel that the quality standard from Organization X affects us at all, we would have a high standard anyway.” -Store employee
D
The stores opinions regarding in what extent the high quality standard affects food waste varies a lot. Meanwhile, the interviewees within the parent company agreed that the high quality standard is not a cause of food waste in the stores, in contrast to what the theory suggests. The current situation is visualized in figure 7.
Figure 7. Perception of root cause 7 visualized
4.8 Root cause 8
-Insufficient quality on delivered products
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the store measures the temperature. If the temperature exceeds the limit or any other major problem occurs an investigation is started at the parent company in order to find the cause of the problem. Thereby, Organization X can learn and improve continuously. The parent company claims that the quality of their deliveries is not a major cause of food waste but says that external suppliers might not have the same quality standards.
“Since we own the delivery service, we have pretty high standards when it comes to the delivery stage. I think issues with quality is more common for external suppliers”
In contrast to the parent company, some of the stores experience quality issues with the deliveries of fresh products, both from the parent company and external suppliers. Yet, they understand it is impossible to ensure perfection.
“In almost every delivery there is problems with the quality of some products, especially from external deliveries. But you can´t blame the suppliers, I understand that it is extremely hard to control every single product.” -Store employee C
The stores do not experience this as a major cause of waste since they can return the products to the suppliers without problem. Similar to root cause 5, this can be considered as a paradox since higher quality standards on delivered products will reduce the food waste in the stores but increase food waste at the suppliers. The current situation is visualized in figure 8.
Figure 8. Perception of root cause 8 visualized
4.9 Root cause 9
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A rule of thumb adopted within the organization is that one and a half secondary package unit should fit on the shelves to avoid overstocking and waste. However, this is not always possible to achieve, especially in small stores. The parent company addresses the problem with too large package units for small stores.
“We don’t see this as a problem for larger stores, but it is certainly a big problem for the smaller ones.” -Manager for space and product range
Similar observations are made by the internal store operation consultants.
“A common problem in small stores, the second package unit is too large for some products in relation to the sales. […] It would be great if we could have secondary package units that fit all sizes of stores. Even if this would cost us more in handling, the waste would be reduced.” -WS
The stores seem to not see the secondary package unit as a major reason for food waste. However, it seems like smaller package units would ease the daily operations in the store and less overstocking which in itself might lead to waste.
“We sell enough, the minimum amount we can order is never too much. Yet, sometimes we cannot fit all the products in the shelves, this might lead to waste if they are forgotten/lost when stored.” -Store employee A
Another store put it this way.
“Generally, it is the dry groceries that have large packages but that rather results in overstocking but not waste. Of course, It would be great if some packages got smaller, but I understand that it would result in more labor and higher costs.” -Store employee C
Several improvements to the size of the secondary package units have been done lately which is appreciated by the stores.
“In my experience, Organization X has become much better to offer smaller secondary package units, now you can order 6 packages of chicken instead of 12, that wasn’t the case two years ago.” -Store employee C
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Figure 9. Perception of root cause 9 visualized
4.10 Root cause 10
-Problems related to fluctuation in demand due to promotions, holidays and marketing.
It is possible to conclude that fluctuations due to promotions is considered to be one of the major reasons of food waste. The parent company is well aware of the problem and try to reduce the negative impact of promotions by reducing the range of promoted products.
“Take raw chicken as an example, it is a completely generic product, it is impossible to differ between different brands in a blind test. Therefore, most stores have only one or two brands. […] We have national promotions for three different brands of raw chicken which “forces” the stores to order all of them. Since it is normally only the brand on promotion that sells, the sales on the other brands fluctuate a lot which results in a lot of waste. I believe we have worked a lot with this lately in order to avoid to many promoted brands”.
-Promotion strategist
The stores agree that it is usually not the promoted products that end up as food waste. It is rather related products to the promoted ones. The main reason of food waste seems to be the lack of ability to forecast how related products will sell due to a promotion.
“The biggest flaw with the forecasting system during promotions is not the forecast for the promoted grocery itself, it is the inability for the system to predict how related products get affected by the promotion. For example, if 500g grinded meet is promoted, the 800g grinded meet will sell less but the system doesn’t take that into account.” -Store employee
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This problem was highlighted by both the stores and the parent company as one of the main reasons of food waste. Today, the forecasting tool is not capable to give correct forecasts and the stores have to manually adapt the ordering of certain products which is time consuming and difficult.
“We need to develop an automatic ordering system that can in a greater extent predict how other products get affected by promotions, both internal and external promotions. […] There is a problem with cannibalism (promoted products takes sales from related products) rather than a problem with overstocking promoted products.” -WS
Everyone agrees that the inability to forecast and the effect promotions have on the demand over the whole product range is one of the major reasons of food waste today. The current situation is visualized in figure 10.
Figure 10. Perception of root cause 10 visualized
4.11 Root cause 11
-Poor execution by the employees due to insufficient engagement, knowledge and leadership
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“I would summarize the reasons (to food waste in store) like; […] lack of engagement from staff (in stores), lack of endurance from management, lack of engagement and follow-up from management, lack of clarification of goals and not enough celebration when succeeding. I am convinced that the stores can reduce their food waste by 25% just by raising the discussion among the staff and apply an overall mindset.” -internal store
operations consultant
Further, the same opinions can be observed from the food waste workshop.
“We are lacking an internal training program specified to reduce waste. […] A lot of the
stores does not have any waste goals, or at least they don’t act as they have.” -WS
The same picture can be observed among the store employees, everyone seems keen to reduce food waste but that is not always reflected in their work. It seems to be a lack of distinct goals, routines and action plans.
“I don’t feel like it is prioritized, sometimes we get reminders from the managers that the food waste is too high but no action plan, it is more like a “fix it” approach, but we do as best we can already.” -Store employee B
Similar experiences of lack of engagement can be observed in the other stores.
“We discuss food waste on a yearly meeting/seminar, but waste isn’t the main topic we discuss. I do not know if we have a general goal in the store, but my department has a set goal. I don’t know if anyone is going to follow it up though” -Store employee A
Further, lack of time results in errors in the handling of the groceries which leads to food waste.
“Sometimes, we tend to postpone crucial steps in the handling process of fresh product when we have a lot to do and then forget about them. For example, not writing expiry date on in-store cooked food resulting in a colleague throwing it away too early”-Store
employee A
One employee state that 95% of the food waste can be related to the human factor. Even if the technology does not work properly, the employees can still be proactive and minimize the consequences.
“The human factor is the greatest reason for waste. Of course, the ordering system is not always 100% correct but if you have proactive staff, you can avoid waste when the system doesn’t work properly. I would say that waste is 95% due to the human factor.” -Store
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You can say that there is a consensus between the stores, parent company and the theory when it comes to the impact the store employees have on food waste. The current situation is visualized in figure 11.
Figure 11. Perception of root cause 11 visualized 4.12 Compiled result
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5 DISCUSSION AND CONCLUSIONS
In this chapter, the result is discussed and reflected upon. The key findings from the result are summarized and put in context to the literature presented in the frame of reference. Further, a conclusion is presented based on the discussion.5.1 Discussion
The variation in the result shows the complexity of the food waste issue at the retail stage in the value chain. The large number of different stakeholders at this stage and their different values interferes and creates a complex problem. First, there are over 1300 privately owned stores within Organization X. Each store has its unique owner, personnel, location, customer base, assortment and profile. Secondly, the parent company which has a complex owner structure, with the stores at one end and the owners of the stock market shares at the other. Even though reducing food waste is a common goal for everyone involved, the incentives might differ among the stakeholders. Within a grocery retail organization, it can be assumed that the economic incentives are dominant. Nevertheless, the perception of the root causes of food waste between the stores themselves and the parent company sometimes differs, as shown in the result.
Neither the parent company nor any of the stores thought that the 100% on-shelves availability was a major cause of food waste. This can be said to be in accordance with the findings from Teller et al. (2018) which states that this root cause was considered to have the lowest impact on food waste. The overall perception within the organization is that a high on-shelves availability is profitable in the long run and the waste it might result in can be minimized by working more actively with routines regarding the automatic ordering tool and forecasting. However, in what extent the different stores tried to achieve 100% on-shelves availability differed between them. Some stores considered the costs too high in relation to the gains. Since Organization X has very independent franchisees, it is up to every store to commit to high on-shelves availability or not which might be the reason for the diverse answers. The literature does agree that a 100% on-shelves availability is increasing sales and revenue but there is a disagreement whether it is profitable or not due to the extra work and food waste it implies. With the continuous improvement of forecasts, an 100% on-shelves availability without any food waste might be achievable in the future.
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Organization X targets. One store stated that they have no chance to compete in price against Competitor B (budget store) across the street. Therefore, high quality and good service are important which implies a wide and deep assortment. This can be related to the root cause regarding high quality standard imposed by the brand and parent company. The stores are expected to deliver a certain quality and service which some of the stores saw as a cause of food waste. Yet, all the stores were positive to the strong brand.
Undesirable customer behaviour is considered a major reason of food waste, both by the parent company, the stores and the literature. Yet, very little is done to prevent it. The parent company does not have any ongoing initiatives to influence the customer behaviour, but some stores have. The widespread approach to the problem seems to be up-cycling of unsalable products by preparing them in the in-store kitchen or juice bar. This does not prevent the root cause but rather minimize the negative effect of it.
Bad quality and short expiry date on delivered products are not considered as a major reason of food waste by neither the stores nor the parent company, in contrast to what the literature suggests. This might be due to the franchising contract the parent company and the stores have. Due to the contract, the parent company is obligated to deliver a certain quality. If they do not, the stores can order from external suppliers. Therefore, the stores have a great bargain power on the parent company since they are the only customers. This might result in higher quality on delivered products and therefore less food waste in the retail stage of the value chain. However, this also results in a lot of waste at the logistics stage in the value chain which makes this a paradox.
Problems with forecasting due to promotions and fluctuations in demand are another reason of food waste. Since the stores in Organization X are privately owned and therefore are more dependent on commission on profit than company-owned stores, they are less keen to over-stock promoted products with low margins. Therefore, Organization X has the perception that they are better at avoiding food waste on promotions than their competitors. However, both the parent company and the stores seem to share the opinion that the promoted products themselves are not a problem. It is rather the fluctuations in demand they enforce on related products. The phenomena when one product gains sales at the expense of another is in the business referred to as cannibalism. This seems to be a major reason of food waste within the stores. The automatic ordering department at the parent company states that there are no tools available today that can forecast the impact a promotion might have on other products. Such a tool has been discussed within the organization but will probably not be possible to be developed in the near future. Until then, the stores will have to manually change the forecast on products effected by promotions.
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among root causes. This perception is not shared by Organization X, neither the parent company nor the stores consider package size as a major reason of food waste. Improvements of the package size have been made by the parent company in the last couple of years in order to suite the stores better. In this case, the communication and knowledge transfer seem to have worked well. The parent company has listened to the requests from the stores.
The most prominent cause of food waste, stated by the stores, the parent company and the theory seem to be the actions by the in-store staff, or rather the inactions. The theory suggests that this is mainly due to a lack of motivation and engagement from the staff. Therefore, it is interesting to reflect upon how the culture and structure in the organization can affect the performance of the staff. Esbjerg et al. (2010) suggests that offering career opportunities is an effective way to increase motivation, something that Organization X does. The career opportunities within the stores are generally good. Many of the stores offer internal training to their staff and the possibility to advance within the store and to ultimately be offered to acquire and run their own store. Another way to engage the staff suggested by Brickley and Dark (1987) is commission, which generally is greater in franchisees than in company-owned stores. Nevertheless, the human factor is still considered as a major cause of food waste within Organization X. One reason to this might be a lack of common goals between the parent company and the stores, which Navarro and Puig (2016) claim is crucial for a franchising organization in order to succeed. As mentioned, the parent company has a goal to reduce food waste by 50% within the organization until 2025. However, no one of the stores interviewed for this thesis was aware of this goal. Instead, they had their own, and often quite vague goals regarding food waste.
By compiling the result, it is clear that the greatest disagreement exists among the stores which can be expected due to the wide range of store formats within Organization X. They do not have to do business with each other. Therefore, you can argue that the internal dissent among the stores does not have a direct negative effect on food waste. However, it does lead to difficulties in managing food waste from the parent companies’ perspective due to the diverse needs among the stores. Yet, no complete disagreement was observed between the stores and the parent company which implies that the parent company has a certain understanding of the stores needs. On the other hand, the theory did disagree with the parties on some occasions. This might have to do with the type of research used in previous literature which mostly is case studies. As mentioned in the methodology, case studies do not provide a generalized conclusion. The findings from previous research might therefore not be applicable to Organization X.
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1300 stores where interviewed, no definitive conclusions can be made. However, the result can hopefully provide an insight to how different stakeholder perceive problems related to food waste.
5.2 Conclusions
From the result it is possible to conclude that food waste within grocery retail is a complex question with many different points of view. The perception of food waste and its root causes is overall the same at the two researched levels within Organization X. Yet, some dissents can be found between some of the store formats and the parent company. This thesis has identified three main areas where it seems to exist dissent between all or some of the three parties investigated in this research.
Customer behavior
The customers role in the food waste issue and how it should be prevented is not agreed upon. You can either prevent the problem by influence the customers to act and behave in a more desirable way or you can cope with the problem by for example up-cycle discarded products or donate to charity. The parent company seems to promote the latter while the opinion among the stores differs.
Width and depth of assortment
The opinion on the range and depth of the assortment varies a lot among parties. Some stores claim that a wide and deep assortment is their main competitive advantage while the parent company and the theory agree that a too generous assortment results in food waste and a lower profit.
On-shelves availability
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6 FUTURE RESEARCH AND RECOMMENDATIONS
In this chapter, future work is suggested. Further, recommendations based on the findings from the research is given to Organization X.6.1 Future work
As mentioned earlier, this is merely a case study at one single grocery retail organization and the findings can therefore not be generalized for the whole grocery retail business. Firstly, other food retail organizations should be researched, both franchising and centrally owned organizations. The literature suggest that the type of ownership might influence how problems are perceived on different levels in an organization. Further, a wider range of stores must be researched in order to conclude any patterns between and among different store formats. Previous research show that food waste varies a lot between different types of stores.
6.2 Limitations of study
This thesis is written in cooperation with Organization X. As it is a case study for one single organization, the result and conclusions are only applicable to Organization X. Further, only a small part of Organization X is investigated, the result might have varied if other interviewees were chosen. Due to the outbreak of Covid-19 during the research period, the stores within Organization X had to cope with increased customer demand and was therefore unwilling to set aside time for interviews. Therefore, only four stores participated in the study. A larger number would be desirably in order to draw higher quality conclusions. Moreover, due to the Covid-19, the stores did not allow external visitors due to the infection risk and the parent company recommended its employees to stay home. Therefore, the interviews were conducted at a distance resulting in less interaction with the interviewees.
6.3 Recommendations for Organization X
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