Pricing algorithms to prevent ­food waste

According to the latest findings from the Boston Consulting Group from 2018, around 1.6 billion tons of food end up in the rubbish every year worldwide. Prior to this, the figure published by the FAO was 1.3 billion tons of wasted food worldwide. Almost 13 million tons are generated in Germany, according to a study by the University of Stuttgart. Around 5% of the wasted food is disposed of at supermarkets.

Campaigns like SAVE FOOD (www.save-food.de), a consortium including Messe Düsseldorf, the Food and Agriculture Organization (FAO), the UN Environment programme and various economic, industrial, social and political stakeholders, make a joint effort to fight food waste and loss, develop counter-strategies and solutions and give the subject a platform so that the public can access it. 

Now, a new software is set to help us out in the fight against food waste. Wasteless, an Israeli start-up company, is using intelligent technology to reduce food waste for products with a limited use-by date.

This project has been running since June 2016. In the project, goods that are about to expire are labelled electronically on the shelf via the display instead of having a reduced price label applied by hand. The price display change is executed automatically by a pricing algorithm. Influencing factors such as popularity and the expiration date, availability and sales trends for a product are taken into account, along with competing special offers and even local weather conditions. The system therefore discounts barbecue meat, for example, when rain is expected, and if the sun comes out again then the special price stays up. As the sell-by date approaches, the discount increases automatically. It starts at 10% and increases to a maximum of 60%.

The digital price displays change continuously but the price does not increase. This means that anyone with ample time can simply wait for the next discount to appear. The original price is always displayed to the customer alongside the electronic price displays.

Currently, the distribution of dynamic pricing algorithms is focused on the European market. Electronic shelf displays are a prerequisite for implementing this system.

The first tests began with a leading Spanish food retailer at the start of 2019, and they proved to be a success: At the end of the pilot project, food waste from the supermarkets involved was reduced by about a third and turnover was increased by 6.3% at the same time. A branch of the Dutch supermarket chain Albert Heijn is currently running a two-month test phase. According to the company’s statistics, Albert Heijn threw away one percent, or 63 million kilograms, of unsold food in 2018 due to exceeded use-by dates. Computer-controlled price reductions should help to curtail waste. If this process proves successful, a hundred more branches will be fitted with the dynamic digital price displays.

Some countries have already implemented specific solutions. French supermarkets have been legally obliged to donate unsold food to charities since February 2016. Italy implemented a similar measure just under six months later. In Germany, legalisation of dumpster diving, where food is taken from supermarket skips, is currently being debated at federal level, despite the conference of the Ministers of Justice in June 2019 not managing to reach a consensus on legalisation. Debates on whether the expiry dates for non-perishable food items such as pasta, rice, coffee and similar products should be dispensed with are also running within the EU.

“Smell me! Try me! I’m usually still OK to eat!” This campaign, which is thus far unique within the German food retail industry, is set to sway customers of the south German ALDI supermarkets to purchase fresh milk that has almost expired and therefore prevent wastage of goods. 

Intelligent packaging technology is not only reserved for supermarkets. Private households could also benefit from smart packaging. This means that packaging with integrated freshness, time or temperature indicators can tell the consumer about interruptions in the cooling chain, leaky packaging or expired content via colour changes, for example.