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Accenture Innovation Challenge Presentation - Food Waste Reduction
- 1. World Wildlife Fund Food Waste Prevention Solution
- 2. Grocery Retailers How can WWF influence grocery retailers OR food service kitchens to develop strategies that prevent food waste throughout their operations and supply chains? Time-sensitive PricingUgly Foods Case Question
- 3. Strategy Formation Production Postharvest Handling & Storage Processing & Packaging Distribution & Retail Consumer Ease Impact Decision Makers Along Supply Chain Ease vs Impact
- 4. Ugly Foods Situation • Up to 40% of U.S. grown produce thrown away because it is ugly* Task • Facilitate selling opportunities for ugly produce Action • Purchase ugly produce from farmers for highly discounted price • Sell ugly produce to consumers at lower price than A-grade Result • Reduction to produce losses in production and retail links on supply chain *Lee, Washington Post, 2015
- 5. Time-Sensitive Pricing Sell-by dates waste $2,300/day/store Reducing price when approaching sell-by dates would encourage FIFO purchasing behaviors Potential for $1.88 Billion in savings amongst top six national grocery retailers
- 6. High Level Gantt Projection Ugly Food and Time-Sensitive Pricing Implementation Strategy Phase Task Months 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 Planning Meetings and planning with WWF and Kroger Pilot Store Planning Early Adoption Pilot Store Implementation and Analysis Adoption of strategies from 1-2% of stores Expansion Working with Kroger to expand into 2-5% of stores WWF works with other retailers to plan and adopt strategies Continued implementation with Kroger and top 6 retailers Phase 1: Planning 0 – 5 Months Phase 2: Early Adoption 5 months – 2 years Phase 3: Expansion 2+ Years
- 7. Summary of Financial Models NetIncome[MillionsofDollars] Kroger Produce Net Income Projection The produce waste reduction target for ugly foods is conservative starting at 1% in 2016 and rising incrementally to 25% by the end of 2020. We assumed an ongoing incremental investment of $0, $10M, $20M, $50, $100M, and $200M. With respect to the time sensitive pricing, if Kroger can reach a food waste reduction target of 1% in 2016 followed by 2%, 4%, 7%, and 10% for the following years. Kroger can reach net savings of $18M at the end of 2016 and $170M at the end of 2020. Sources: The Food Marketing Institute, The Kroger Co- Reports & Statements
Notes de l'éditeur
- When deciding where WWF should focus its efforts On the left the graphic illustrates the number of decision makers along each part of the supply chain. So at the production stage, i.e. farmers, there are more individuals making decisions. We see the number of decision makers reach a minimum at distribution & retail. On the right, is a plot illustrating the ease vs the impact of working with each part of the supply chain. Ease includes how many decision makers WWF would need to collaborate with, the feasibility of implementation, and cost devotion necessary. Impact is reducing the most amount of food waste. We believe WWF should focus its efforts at the distribution level for two reasons: Just 6 retailers have 59% of the market share in the U.S., 25% is Walmart, 12% is Kroger (and WWF already has a partnership with Kroger), so WWF working with just 6 retailers will be much easier and cheaper to implement vs working with thousands of kitchens or farmers Secondly, by focusing on grocery retailers WWF will be able to cut food waste not only at the grocery retailer level, but also the producer level. The two most feasible and effective ways of doing this are through ugly foods and time sensitive pricing.
- Currently, farmers are producing ugly produce and just throwing it away because it does not meet cosmetic standards. This is an example of culling at the production stage and it creates about a 20% shrink. This is a sunk cost that farmers will incur regardless of whether or not this produce is purchased. If we took steps to facilitate ugly food selling opportunities along the supply chain, farmers could increase sales revenue without incurring additional costs. Similarly, grocery retailers could increase revenues by selling ugly produce at a price discounted from A-grade produce. Because this is a relatively untapped market in the united states, there is a large potential for high contribution margins on this item.