Money for nothing? Waste valorisation in the grocery supply chain

Date : 03 April 2019

Waste valorisation describes re-processing of wasted or discarded materials to create something new, which has market value.

Waste valorisation activities include recycling (eg: turning old newspapers into toilet tissue) and waste-to-energy (eg: turning spent cooking oil into motor fuel).

Simple re-use of products (eg: washing and refilling an empty glass milk bottle) may not count as valorisation per se, since this does not include re-processing and the value of the bottle remains unchanged.

Re-use is, however, likely to be part of future – the new LOOP concept from Terracycle is in many ways similar to older bottle-return schemes and it has excited interest from several major grocery businesses.

Why is it topical?

For as long as humanity has produced industrial or agricultural waste, resourceful people have looked for opportunities to exploit it.

Interest waxes and wanes, however, depending on the socio-political background and on market influences - the latter being critical.

It makes no sense to reprocess waste if value of the final product does not exceed the value of the effort and energy used to create it. The idea is very topical at present, however, for several reasons:

  • Consumer pressure – Shoppers are aware of the environmental impact of the food industry and, in many markets, they expect action.
    IGD’s ShopperVista research project shows that environmental impact is seen as a driver of product choice by 86% of GB food shoppers 1.
    Only 36% believe that food businesses attempt to limit food waste (33% do not believe it) and 38% believe that they attempt to limit environmental harms generally (28% do not believe it) 2..
    Waste valorisation may offer a way to address these issues, bringing businesses closer to shopper expectations.
  • Climate change – The risk presented by climate change is widely-recognised, as is the contribution to climate change that comes from food production.
    Waste valorisation may help to reduce the climate impact of food businesses if it enables food to be created with a smaller carbon “footprint” than conventional means.
    Further gains may also be achieved by keeping food out of landfill, where it creates methane as it decays – methane is a powerful greenhouse gas.
  • Government pressure – Governments around the world are increasing legislative and moral pressure on food businesses to improve environmental / resource performance.
    An example is the UK government’s current Industrial Strategy, which emphasises development of “closed-loop” supply chains
  • Need for greater productivity – Grocery demand in many West European markets is static, with little sign of change in future.
    Businesses wishing to grow profit in such a difficult environment must improve productivity and waste valorisation offers a way to do this, turning a cost (or, at least, a deadweight) into a new source of profit.
  • New technology – New technologies create new opportunities for extracting value from food and packaging waste.

Approaches to food waste valorisation

Valorisation is an exciting concept, but it should be seen as one of a range of approaches to waste and, perhaps, one that is lower down the list of possibilities.

For completed goods, the best way to deal with food waste is – of course – avoidance, which demands good forecasting and agile manufacturing. 

The second-best option for completed goods is to sell them, at a discount if necessary. In recent years, technology has made this easier helping potential users to find goods.

A good example of this sort of technology is the Too Good To Go app offered by HEMA in the Netherlands. This allows user to purchase a “magic box” containing food that would otherwise be wasted.

Waste that is not yet in sellable form may be more difficult to valorise and there is a good deal of this in the food supply chain – field stubble, manure, bones, blood, vegetable peelings …

…… all of these can be valorised, but additional effort is needed. Recent innovations in this fast-moving field include:

  • Beer from bread – British brewer Adnams has collaborated with food manufacturer Greencore. Breadcrusts from Greencore’s sandwich operation were used to brew a range of beers for M&S, replacing some barley.
  • Fuel from coffee grounds – Making coffee uses only a tiny part of the bean, wasting the rest. This waste offers possibilities for the creation of complex chemicals. Bio-Bean of London collects waste coffee from cafes and re-processes it into fuels for domestic and industrial use.
  • Fuel from store waste – In Finland, Lidl is working with local company Gasum. Lidl delivers waste from its stores to Gasum plants, which convert it into bio-gas for transport purposes.
  • Polymer from avocados – Mexican company Biofase has created cutlery and straws from avocado stones – inedible parts which would otherwise be useless.
  • Textiles from fruit – Frumat of Italy uses apple skins and cores to create paper, a soft cloth for clothing and a faux-leather material for shoes, bags and furniture. The materials are biodegradable and recyclable.

Possible challenges to valorisation

  • Creating demand – A business with an innovative material or process needs to create demand and, perhaps, displace an established competitor with a more conventional offer.
    One option is to team-up with a fashion- or opinion-leader to add glamour to the new product. An example would be Orange Fiber which makes textiles from citrus fruit waste.
    The company has associated with fashion house Salvatore Ferrragamo to launch a special range of premium clothing made from its fabric.
    The Wasteful Kitchen project at an Albert Heijn store in Amsterdam is another example of a business raising awareness of the creative possibilities of wasted foods.
  • Incentivising waste? – Waste valorisation is meant to create profit. If successful, this may create demand for waste and may encourage more wastage than would otherwise occur.
  • Need for scale – In many manufacturing processes, scale is essential, since it delivers the economies needed to compete.
    This can be a challenge to new businesses, especially where they innovate. In some jurisdictions, government provides support to bridge the gap between product launch and commercial maturity.
  • Unintended outcomes? – Markets sometimes create unexpected, even perverse, effects and this can be seen in waste valorisation.

An example has been observed in bio-gas production on cattle farms. Some farmers have invested in anaerobic digesters to dispose of cattle waste and fodder residues.

Price interactions for fodder, milk and gas sometimes make it rational to put fodder directly into digesters, by-passing cattle entirely. This, in turn, may distort markets for both fodder, milk and beef. and milk 3.

Obviously, these outcomes, although rational, may not be desirable from an environmental or ethical viewpoint and regulators may need to intervene.

Impacts on the food supply chain

Despite potential challenges, waste valorisation is an exciting prospect for food businesses. There are several considerations for supply chain functions in particular:

  • Category management – If valuable products can be made from waste, retailers may “steer” customers towards these items, in order to reduce their environmental footprint. Category management, promotional planning and other disciplines will be useful.
  • Conceptual change – Waste valorisation implies a change in the way that waste is perceived – far from being a burden, it becomes a valuable resource. It is even possible businesses will compete to obtain it.
    There may also be a change in the way that businesses perceive themselves and the scope of their activities.
    Businesses involved in waste valorisation may have supply chains extending down to consumers (to recover material) and then loop back (returning material), different to the conventional “one-way” model.
  • Product and process design – Product design may be influenced by valorisation – the need to either create or make use of recovered materials.
  • Waste recovery – This is a major challenge for those attempting to extract value from post-consumer waste.
    Where products are distributed across many locations, it may be extremely challenging to collect them cost-effectively.
    One approach may be to incentivise shoppers to complete this task, buy offering some form of reward. “Reverse vending” machines, in use in some grocery stores (eg: Iceland) are one possibility.

All of these are, to some degree, supply chain issues and, therefore, something that supply chain professionals will need to recognise and account for in future.

Sources

(1) ShopperVista, IGD Research, fieldwork: Feb 2019, base: 1,000 GB shoppers (balanced sample)
(2) Industrial Strategy – Building A Britain Fit for the Future, HM Government, Nov 2017, page 163
(3) Cattle Feed Or Bio-Energy, D Styles et al, Bangor University, 2014

James Walton

James Walton

Chief Economist

15 October, London
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