The Decibel - Cheap grocery apps aiming to reduce food waste

Episode Date: January 12, 2023

There’s a growing demand for food waste apps from both shoppers and grocers. They’ve been touted as a new way for people to score deals as food prices rise, while cutting back on food being thrown out by retailers.Susan Krashinsky Robertson is The Globe and Mail’s retailing reporter and she explains who uses these apps and what evidence there is that they actually help in getting food to people instead of it heading to the landfill.Questions? Comments? Ideas? Email us at [e-mail]

So I'm just looking at one of these apps right now. I've got a whole bunch of things that are popping up. So some are from Metro, where there's a bag of baked goods available for pickup. There's also a surprise bag. I guess that means I don't know what's in there exactly. Yeah, that's the idea. With food prices so high right now, it's hard to believe that food waste is still a problem in Canada. But don't worry, there's an app for that. Actually, there's a few apps, and they're expanding their reach in Canada.

These apps are almost, you can think about them as a technological version of what shoppers have always done, which is sort of coupon cutting and deal hunting. It's just another version of that, really. The Globe's retail reporter, Susan Krishinski-Robertson, has been looking into this trend. What this allows retailers to do is to try to make a little bit of money and avoid throwing things in the garbage. So they're taking the kinds of things that might otherwise, you might otherwise see in store with those big hot pink, you know, eat it tonight, 50% off discount stickers. And what they're trying to do is they're trying to get food into customers' hands before it's gotten to the point where they have to throw it away. But how much are these apps actually reducing food waste?

I'm Mainika Raman-Welms, and this is The Decibel from The Globe and Mail. Susan, thank you so much for talking to me today. Thanks for having me. Let's just go back to the beginning. For someone who's about to kind of embark on signing up for one of these apps, how exactly does that work? What do you have to do? So you can download one of these apps, a few different versions of them. There's one called Flash Food, which is a Canadian company. There's another one called Too Good to Go, which was actually built by a Denmark-based company that has now expanded into Canada. In Quebec in particular, a little bit of information. If you want to do an order, you need to input some credit card information, of course. But what you can do

is basically filter by your location, look at the stores that are around you and look for what they've posted to see basically what they're offloading at any given time from, you know, a piece of fruit that maybe looks a little ugly and is left on the shelf to a cake that might have some icing that's slightly dented, you know, still a perfectly good cake, but doesn't look so good. And so it might not sell. And, you know, there's a lot of reasons why these things may not sell at the shelf level, right? You think about shoppers in the store, people work really, really hard for their money money and they're looking for the best possible quality item they can get for the money that they're spending. So shoppers are smart. They'll reach to the back of that dairy case for dairy that's

expiring not quite as quickly. They'll look for the freshest loaf of bread. And so all of these things mean that there are things that just don't sell at the shelf level, but that are still perfectly good and can be sold through channels where people are open to buying those items. You know, no one's going to maybe reach for that last sad orange on the shelf if there's only one left, but that orange will sell if it's priced right through one of these apps. Yeah. And like when I'm on the app and I'm looking through, you're essentially buying like a bag of food, a surprise bag or that produce bag. And those bags are like $3.99, $7.99. Like they're not expensive.

So you could end up with a bunch of carrots and a potato kind of thing. Like you don't really know what you're making for dinner, right, until you actually see what the breakdown is. Yeah. In the case of the mystery bags, that's true. law executive who told me a story about a woman in one of his stores who had used flash food, gotten one of these produce boxes, and had ended up with dragon fruit, which is something that she had never eaten before and didn't know how to prepare. So she'd come back to the store for advice on what to do with it and how to prepare it and what sorts of things to make with it, and then ended up really loving it

and coming back and buying dragon fruit in the future. People are sort of, in the best cases, discovering things. But yes, there is a bit of unpredictability in those cases when you're getting these mystery boxes in terms of what it is exactly that's ending up in your kitchen. Yeah. And from the people you've talked to, how easy did they find it to use? I'm just kind of thinking of the cost of entry of something. Like, what have people told you? shoppers. But these are smartphone applications. So you have to have a smartphone. You have to have a reliable Wi-Fi connection or be willing to use data on your phone. All of that costs money.

You also have to be in an area where there's likely to be locations that are using this app. So if you're in a rural area, you may have a store that you can get to that uses this. You probably have to drive a little farther. That's going to cost you some gas money. So there are costs to using these services. And I think it's important to remember that some of the people who may be most in need of discounts probably are people who may not have smartphones, who may not have access to a car to drive to these stores on a moment's notice, who may not have all of the infrastructure, essentially, the personal infrastructure you need to access these kinds

of services. Yeah. And so it sounds like if you do have the ability to kind of go through this process, this is an opportunity to save a lot of money, which is a big deal these days, especially when we think about inflation, especially food inflation, grocery prices rose by 11.4% in November compared with the previous year. So this is like a lot of people are feeling the pinch, and this is something that essentially could really benefit them in this way. Yeah, it could. And people are absolutely feeling the pinch. I mean, if you think about how much more expensive it's got just to feed your family, I think people are looking for opportunities to save money. We've seen stories

about couponers who are really adept at finding these deals. And this is sort of another option out there for people. It's interesting that one of the things that these tech companies use to sell these services to retailers is, you know, they talk about the fact that those discount stickers you sometimes see or those discount shelves that are sometimes available in grocery stores. You know, these app developers will say to retailers, you might have someone standing in front of a meat case who's ready to buy something for tonight's dinner. And maybe they see that big discount sticker and they grab that discount item instead of buying something at

full price. And these tech companies will say to retailers, you might be cannibalizing essentially what would otherwise be a full price customer. So what we can do is we can hive off these items, sell them to people who are really motivated discount hunters and make it more likely that that full price customer remains a full price customer. That's one of the business cases that these tech companies make to retailers. You think about that from the shopper's point of view, it's a bit of a bummer, right? Yeah, because it's a business case for the grocery store, but the person who's buying the meat is actually missing out there then. That's right. And the idea that maybe you would have to be on these apps in order to see deals

that otherwise would have been visible to you and are not visible. That's a troubling prospect. I don't think we're there yet. Most retailers have told me that they're using these strategies hand in hand with those classical discounting strategies that they've always used. Things like flyers and coupons and stickers, those aren't going away. And just to be clear, so there's no subscription fee, but you are giving over a bunch of data then? Yeah, the purchasing data that these apps collect is valuable. So, you know, we spoke to James McCann, a former grocery executive who sits on Flash Foods board, and he told us that, you know, he sees a future where that app could potentially use analytics to do dynamic pricing for retailers. That means changing prices automatically based on

things like how quickly items sell, demand in certain geographies versus others. And that's a strategy that retailers use to maximize their profit margins and keep items moving. For now, these companies say they don't share this data with any third parties beyond their retail partners that they work with. But they do share some of it with retail partners to demonstrate how they're performing and the sales that they are making through their apps. We'll be back in a moment. And what's the business case for retailers? Why would they want to sign on to one of these apps?

Yeah, well, that's actually the interesting part of this from a business perspective, is that there's all this competition happening among these apps right now to get connected to those stores. So these apps are competing for retailer partnerships as we speak and trying to grow. Retailers want to minimize the amount of loss from food waste. Food that's not sold is revenue lost. It's important to state that. There is a business case for doing this. There's also a lot of pressure being exerted on companies in general, both from consumers and also from big institutional investors. Companies are facing a lot of pressure to have sustainability

initiatives in place to be paying attention to what's called environmental, social, and governance initiatives and to really take action on these kinds of things. So for example, Loblaw, the biggest grocer in the country, they didn't have a food waste committee just a few years ago. They created one in 2021, and now executives from every grocery banner in the Loblaw empire sit on this food waste committee. That tells you something about how this is a growing priority for grocers, both because there is the lost business from food that doesn't get sold, and also because there's an environmental cost. Food that goes in the landfill,

that generates methane. Methane is a greenhouse gas. And so companies that are really seeking to demonstrate their sustainability bona fides are paying attention to this issue right now more than they ever have before. I'm interested in kind of the exchange and where those exchanges are happening. So can we break this down? Who is making money where? So the retailer is making money on that sale as they would anything else that they sell in their stores. And the app companies are making money on a commission basis. It's pretty simple. They built the technology. The retailers sign on as partners. And when they sell something, they give a cut to these tech companies.

And is this process successful? How much are these apps actually selling for the retailers? Well, that really depends. One of the interesting things about grocery stores is that while they're owned by really large companies, they operate on a store-to-store basis. So their success in using these apps actually really depends on a given store's and a given store manager's investment in this process. So for example, there are locations that sell thousands of dollars a day worth of food through FlashFood. But FlashFood told us the median is actually closer to about a hundred bucks. So that tells you that there are some stores that are super sellers that are very invested in this, very active in posting items and some that are not so much.

That being said, for what is posted, these apps sell quite a lot of food. So the various apps told us that they sell anywhere between 75 to 90% of the items that retailers post on their platforms, which is a pretty high number. So these apps are obviously, they're making money for the developers, they're helping grocers and stores sell more food, food that would otherwise be discarded. So let's talk a little bit about the idea of food waste here, because this seems to be kind of the one of the significant benefits to this. And before we get into the numbers, Susan, can you just give me a sense of how grocers define and measure food waste. Yeah, you know, it's a tough thing to measure because it's a bit of a slippery category. You know, grocers direct food that they can't sell

in a number of different directions. So, you know, take Loblaw, for example. They reported in 2021 57.8 million kilograms of what they call food loss and waste destinations. And that includes things like composting and anaerobic digestion, as well as diversion strategies, things like repurposing waste for animal feed, that's something that they do, or redistributing food through organizations like Second Harvest, which takes food and distributes it to organizations in need, and food banks. And so there are a lot of different places that this food can go. And we actually don't know a lot about just how much of it is thrown in the garbage. Loblaw, for example, of that 57.8 million kilograms I mentioned, the food that goes into

landfill isn't actually included in that. Loblop says that they're working on measurement and better reporting of that figure, but it's hard to actually know just how much goes into the garbage. But it's also important to remember that the retail channel, it's a very, very visible channel of the food supply chain, but it's not where most of the waste actually happens. So there was a report from Second Harvest that was published in 2019, actually, that looked into this. And it found that more than half of all the food produced in Canada is wasted. But the food industry. More than half.

That's correct. Yeah, more than half. It's astonishing. It's an astonishing number. 58% of all food produced is either lost or wasted in Canada. But the vast majority of that, and we're talking 86% of that, that happens in the food industry consumers. We talk about how much food we throw out, right? But it's actually households only account for about 14% of the food waste in Canada. And as I mentioned before, retail stores, they're very visible. So it's easy to think of them when we think about food waste. But according to that report, they only account for about 4%. A lot more of the

waste happens at the production and processing and manufacturing levels. So food that is thrown out, you know, at the farm gate, lost in transportation, lost during processing. There's a lot that's happening along the food supply chain that, of course, these apps cannot and do not address. I want to ask you about food banks as well, because most major grocery stores do have partnerships with food banks. A 2022 report from Food Banks Canada said that the number of people using food banks has also skyrocketed recently. It was at an all-time high in Canada last year. And so are these partnerships that the food waste apps have with grocery stores, are they hurting the flow of the food that would otherwise go to the food banks? Well, it does stand to reason that if food is being sold to customers more, food is being sold through and is unavailable for diversion, that it's not going to be diverted

to food banks as much. But the retailers haven't halted those relationships with food banks. They continue to use that as one of their diversion options. And so that's not going away anytime soon. And grocers have also continued to invest in these diversion options. So for example, Loblaw committed more than a million dollars for a second harvest to build its own app to help coordinate donations. So they've got their own version of what these things are doing at the customer level to help coordinate donations at the institutional level to bring some technology into the organization of that donation flow. So I guess all of this being said, to get back to these apps, what evidence is there that these apps are making a significant difference in terms of lessening food waste that is happening

specifically at the grocery store level? Yeah. So, I mean, retail is obviously not a huge source of this waste, but it's not nothing, right? You know, Loblaw, for example, has said it's saved more than 18 million kilograms of food through FlashFood since it started using the service in 2019. In 2021 alone, it was about 8 million kilograms that they sold through the app, and it's only ramping up its use of the service. I should mention, Loblaw's in the midst of expanding this to a lot more stores across Canada. And it's also important to remember that these services are really new, right? A lot of them have only been operating in Canada for a couple of years at most. And so they're still into the development phase and they're trying to grow quickly. So part of how much of a difference these apps will make will depend on these companies' ability to sign on more partners and also, crucially,

to motivate those partners to actually use the apps and sell things more effectively through this method. Susan, it was great to talk to you. Thank you so much for being here today. Thank you. That's it for today. I'm Mainika Raman-Wilms. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin. David Crosby edits the show. Kasia Mihailovic is our senior producer, and Angela Pichenza is our executive editor.

Thanks so much for listening, and I'll talk to you tomorrow.