(City News Service)- During decomposition, organic waste releases the greenhouse gas methane. Globally, food waste releases up to 10% of worldwide annual greenhouse gas
emissions.
Last year, California rolled out a residential composting program, and
the state Legislature recently introduced a bill to rein in ”sell by” dates from
manufacturers, which prompts consumers to needlessly throw out food, the
researchers say.
The Rady School study, to be published in Marketing Science, evaluates two
programs meant to divert waste from landfills: organic waste bans, which have
been introduced in nine U.S. states — including California — and dynamic pricing,
which is more popular outside the U.S.
”Oddly enough, fewer than 25% of U.S. grocery retailers offer any kind of dynamic
pricing at all, while most hotels and airlines will discount rooms and seats when
they have a surplus,” said the paper’s author, Robert Sanders, an assistant
professor of marketing and analytics at the Rady School. ”However, this research shows that the increased price flexibility of discounting food that is about to expire significantly reduces food waste and increases profit margins among retailers.”
More than 10% of food waste comes from grocery retailers who throw out surplus
perishables past their expiration date, Sanders found.
The organic waste ban in California requires businesses generating at least two
cubic yards of waste to recycle their organic waste by composting or donating.
Dynamic pricing, on the other hand, ”spurs retailers to throw less food out to begin
with by applying an algorithm that determines when grocery stores should reduce
the price of perishables depending on their inventory and expiration date,” a
statement from UCSD reads. With dynamic pricing, vendors can change the price of
food multiple times a day.
Sanders’ analysis found dynamic pricing reduces waste by 21% on average while
increasing grocery chains’ gross margins by 3%. In contrast, an organic waste ban,
even if it increased the cost of sending perishables to a landfill by 10 times the
amount it does today, reduces waste by only 4%, and decreases gross margins
about 1%.
”If regulators want to reduce grocery-store waste directly, they should incentivize
grocery chains to adopt dynamic pricing over imposing organic waste bans or waste
taxes,” Sanders said. ”It is also a market-based solution that the retailers
themselves could implement.”
An added benefit of dynamic pricing is that it makes perishables more affordable,
while organic waste bans slightly harm consumers by reducing retailers’
inventories, Sanders found.
The paper’s analysis is based on an economic model that ”characterizes a grocery
retailer’s behavior, as grocers have to decide how much product to order before
they know how much will sell prior to hitting its expiration date,” the UCSD
statement reads. To test the predictions of the model, Sanders used data from the
artisanal bread category of Pick ‘n Save, a large Midwestern grocery chain.