Scroll through the social media feeds of supermarket chains to see a pleasant story about donating charitable food to the community. According to a study by a professor in the northeast studying food waste, it may seem like an altruistic gesture, but it actually helps the company’s bottom line.
Food giants from companies such as Kroger and Wal-Mart traditionally mean low profit margins. That is, they try to make money or take steps to save as much money as possible, says both assistant professors John Laurey, Damoa McKim Business School and Bouve Health Science College.
What is one important source of that income? According to a Lowrey survey, shoppers are charged up to 33% more fresh food, such as fruits, vegetables and meat.
The mechanism is as follows. Some chains send products that are still edible but not sold to food banks. If you don’t donate, keep the scratched product on the shelf longer for sale. While retail donations serve the food bank’s mission to help alleviate hunger, they can also have a real impact on retailers’ inventory management practices.
Lowrey explains that retailers are somewhat constrained by the lack of options available for food that cannot be sold. One option is to mark down the product. This is a more commonly referred to as “dynamic pricing”. In the case of perishable categories such as agricultural products, dairy products, bakeries, meat, etc., when the quality of food deteriorates, retail store You may decide to lower the price to increase your sales potential.
However, this is not the perfect solution, as fresh foods with dynamic pricing and quality assessment are highly labor-intensive activities.
Moreover, unlike the soaring prices of the Uber app, it’s more difficult to price because it’s difficult to instantly observe the supply and demand of food. “For example, a banana culling and pricing clerk said,” How do I price a banana with four brown spots compared to a banana with eight or nine brown spots? I have a hard time answering the question. “Raleigh says.
Markdown the products you sell at Low price As long as the product is actually sold, it may provide revenue. Otherwise, low quality discounted items compete for the same shelf space as high quality fresh items.
Instead of marking down food, retailers can take it off the shelves and donate it to food banks while it looks good, exchanging new available shelf space for more expensive and fresh items.
In other words, stores that actively donate food are less likely to have poor quality products on their shelves. Continuing to display more fresh items means that the foods they sell get higher average prices and bring higher margins.
“The effect of this removal and replacement offers the dual benefit of reducing the handling and outdated costs of degrading produce and increasing the average quality of food left on the shelves. The higher the quality, the higher the price. Will be higher, “says Lowrey.
Early removal of low-quality, unsellable products from shelves and delivery to food banks also directly offsets the cost of removing potentially expensive waste. Still, the benefits of food donations go far beyond the opportunity to reduce waste costs, including in-store pricing and margin benefits, as research shows.
Food donations are not only a charitable gesture by major supermarket chains, but also their financial self-interest.
At the D’Amore-McKim School of Business, Lowrey’s research focuses on the competitive effects of food donations in the retail industry. In a co-appointment at the Bouvé College of Health Sciences, he explores the prophylactic health benefits of food donations to patients with diet-based chronic illnesses.
Natives from Columbus, Ohio were first interested in this subject in collaboration with the largest Mid-Ohio Sports Collective. Food bank In Ohio.
Around 2016 he Food waste As a result, retailers have played an important role as suppliers to food banks across the country.
“I was shocked by the huge amount of food that food banks are collecting from these big retailers, which caught my attention,” says Laurie. That ultimately led to his current research.
“These retailers, especially Kroger, Wal-Mart and Sam’s Club, have found that food banks are effectively supporting this entire secondary market, which collects, reuses and redistributes food to feed hungry people. rice field.”
He adds that it is retailers’ food that nourishes the growing population of people with food insecurity, which can bring public health benefits. “This is a health-focused aspect of my research,” says Raleigh.
According to the United States Department of Agriculture, which oversees the US Food Stamp Program, more than 38 million people in the United States, including 12 million children, do not eat well.
According to Raleigh’s research, food banks form part of an important but overlooked food supply chain. Donating fresh food past the prime allows a large food chain to keep good-looking items on the shelves, resulting in higher prices and larger markup than otherwise.
“in order to food We don’t want to miss the sale of retailers, especially fresh and high quality perishables, “says Laurie.
Food bank and retail markup. news.northeastern.edu/wp-conte… eastern-research.pdf
Quote: Doing good works: How food banks support supermarket profits (February 23, 2022) https: //phys.org/news/2022-02-good-food- Obtained February 23, 2022 from banks-supermarkets-money.html
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How food banks help supermarkets make money
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