Final report Preventing waste through good practice in ... waste through good pr… · Final report...

Final report

Preventing waste through good

practice in grocery promotions

management

This report reviews promotional planning practices in the grocery sector and how these can be managed to help prevent waste.

Project code: MAR103-103 Date: August 2014 Research date: 2011-2013

WRAP’s vision is a world without waste, where resources are used sustainably. We work with businesses, individuals and communities to help them reap the benefits of reducing waste, developing sustainable products and using resources in an efficient way. Find out more at www.wrap.org.uk Document reference: [e.g. WRAP, 2006, Report Name (WRAP Project TYR009-19. Report prepared by…..Banbury, WRAP]

Written by: Lisa Williams and Tom Gill (Promar International) and Peter Whitehead (WRAP)

Front cover photography: Sourced from IGD: Retail Analysis

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Preventing waste through good practice in grocery promotions management

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Executive summary

Promotions have been a part of the retail landscape for many years. Typically, they are conducted to increase footfall into retail stores and to maintain or increase market share. Because promotions are a key part of the competitive dynamic in the grocery market there are commercial and regulatory sensitivities. Over recent years, there has been a significant increase in the amount of promotional activity and today around one-third of all food and drink sales are on promotion. The rise in the level of promotional activity has many potential inter-linked causes, including a sustained period in which household incomes have been under pressure, switching of shoppers to the discount market and increased price competition designed to protect market share. Little evidence is available on the link between promotions and waste, though promotions are often cited as an important waste driver. To complement previous consumer focused work on the link between promotions and household waste, this project was initiated to examine the link between promotions and waste in the supply chain. We could not find evidence for an overall direct link between the increase in promotions and levels of waste. With reported waste levels from Courtauld signatories continuing to fall, coupled with high levels of promotional activity, there is no simple correlation or trend between increased promotions and increased waste. WRAP did not set out to challenge the degree of promotional activity in the supply chain and the research method was not designed with this end in mind. Rather, our approach was aimed at helping retailers and manufacturers get the best from their promotions but without adding to existing levels of waste and identifying opportunities to reduce waste through improved promotion planning and execution. To this end, we set out to understand promotional planning practices in the supply chain in order to identify where and how waste might be inadvertently created. The research examined different types of promotion across six supply chains drawn from the fresh produce and dairy categories. We had access to detailed data from a retailer on sales, and waste for three of the six supply chains and for all six conducted some 37 interviews overall, primarily with processors, packers and manufacturers. We also reviewed the available trade literature. We did not seek or conduct interviews with growers, wholesalers or importers, confining this to UK activity only. This approach was necessitated by the context of the research within the framework of the Courtauld Commitment and in particular the manufacturing and retail waste prevention target. We acknowledge that waste in agriculture both in the UK and abroad will be impacted by promotion decisions. Our work has shown that certain promotions can lead to an increase in waste and that promotions can also prevent waste in the supply chain. Overall, we were unable to reliably quantify how much waste arises (or is prevented) by promotions because the data were not available. The research did find limited but quantified evidence to suggest that ‘BOGOF’ type promotions may result in more waste compared with other types of promotion mechanic, like ‘X for Y’ (for example 3 for £2). In the table below we have summarised the key reasons how promotions can both increase and prevent waste.


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Reasons that waste could increase Reasons that waste could be prevented

There is deliberate planning to increase footfall at particular times of the year, using products that do not respond well (sales do not increase sufficiently) to price reductions, for example because their consumption is very seasonal so end up not being sold. Promotions can happen at the last minute and/or are run with insufficient input from suppliers, with the result that planning is rushed and forecasts are inaccurate. There is poor communications or a lack of flexibility in the supply chain.

There is a glut of product at harvest time (or because the crop is forward) which cannot be stored so promotions are used to shift stock. Orders (perhaps for the export market) are unexpectedly cancelled resulting in surplus products that have to be sold quickly.

We characterised the promotions-planning practices in some detail and prepared ‘process maps’ identifying steps where waste might result. It was not possible to quantify the tonnage of waste that could be attributed to the various stages of promotions management. However, we have used this insight and other information from this study to produce detailed guidance notes for retailers and manufactures on the avoidance of waste during the conduct of a promotion. These guidance notes are published separately from this report. Our key suggestion is that waste should be a performance metric for all promotions, particularly in the evaluation stage. It is good practice to evaluate the impact of a promotion, but our research shows this was not being done routinely and where it was practised the true cost of waste was not being used to assess the cost-benefit of the promotion and then subsequently to plan future promotions. We acknowledge that buyers have performance targets to meet that include waste and other metrics, but this is different to properly itemising the full cost of waste and using this as part of the financial evaluation of a promotion. Other proposals include:

More joint planning in the form of ‘standard operating practices’ that govern the conduct

of a promotion and for example provide for the use of fixed orders at the start of a

promotion and ‘lock down’ dates for key stages in planning and execution;

Joined-up forecasting and communication between the retailer and manufacturer, using

the best available techniques and best available data;

Avoidance of promotion-specific material, particularly packaging, which limits the potential

for re-work should a promotion not perform as planned.

More detailed recommendations are included in the guidance notes for retailers and manufacturers published separately.


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Contents

1.0 Introduction ................................................................................................. 5 2.0 Method ......................................................................................................... 7

2.1 Identifying Products ................................................................................... 7 2.2 Approach ................................................................................................... 9

3.0 Promotional planning: supply chain analyses ............................................. 11 3.1 Yoghurt ................................................................................................... 11

3.1.1 Promotional Planning...................................................................... 11 3.1.2 Production ..................................................................................... 13 3.1.3 Logistics ........................................................................................ 13 3.1.4 In Store ........................................................................................ 13 3.1.5 After Promotion ............................................................................. 13 3.1.6 Evaluation ..................................................................................... 13 3.1.7 Waste Arisings ............................................................................... 14

3.2 Cheese .................................................................................................... 17 3.2.1 Production ..................................................................................... 17 3.2.2 Promotional Planning...................................................................... 17 3.2.3 Logistics ........................................................................................ 18 3.2.4 In Store ........................................................................................ 18 3.2.5 After Promotion ............................................................................. 19 3.2.6 Evaluation ..................................................................................... 19 3.2.7 Waste Arisings ............................................................................... 19

3.3 Grapes .................................................................................................... 22 3.3.1 Agriculture .................................................................................... 22 3.3.2 Promotional Planning...................................................................... 22 3.3.3 Purchasing/Ordering ...................................................................... 23 3.3.4 Logistics ........................................................................................ 23 3.3.5 Production/Sorting ......................................................................... 23 3.3.6 In Store ........................................................................................ 23 3.3.7 Evaluation ..................................................................................... 24 3.3.8 Waste Arisings ............................................................................... 24

3.4 Potatoes .................................................................................................. 27 3.4.1 Agriculture .................................................................................... 27 3.4.2 Promotional Planning, Forecast and Ordering ................................... 27 3.4.3 Production – Field and Pack-house .................................................. 28 3.4.4 In Store ........................................................................................ 28 3.4.5 Evaluation ..................................................................................... 29 3.4.6 Waste ........................................................................................... 29

3.5 Soft Citrus ............................................................................................... 31 3.5.1 Agriculture .................................................................................... 31 3.5.2 Promotional Planning, Forecast and Ordering ................................... 31 3.5.3 Logistics ........................................................................................ 32 3.5.4 Re-forecast .................................................................................... 32 3.5.5 In Store ........................................................................................ 32 3.5.6 Evaluation ..................................................................................... 33 3.5.7 Waste ........................................................................................... 33

3.6 Strawberries ............................................................................................ 35 3.6.1 Promotion Planning ........................................................................ 35 3.6.2 Agriculture .................................................................................... 35 3.6.3 Volume and Purchase Orders .......................................................... 36 3.6.4 Store ............................................................................................ 36 3.6.5 Evaluation ..................................................................................... 37


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3.6.6 Waste arising ................................................................................. 37 4.0 Key Findings ............................................................................................... 39

4.1 Promotions and waste .............................................................................. 39 4.2 Impact of different promotion mechanics and waste ................................... 40 4.3 The importance of promotional planning .................................................... 40

Figures

Figure 1 – Illustrating the percentage of items on promotion in 2011 split by product category ........................................................................................................................ 8 Figure 2 – Promotional mechanics used in 2011 across product groups and retailers .......... 8 Figure 3 - Yoghurt Whole Supply Chain Product Map ..................................................... 15 Figure 4 - Cheese Whole Supply Chain Product Map ...................................................... 20 Figure 5 - Grapes Whole Supply Chain Product Map ....................................................... 25 Figure 6 - Potatoes Whole Supply Chain Product Map .................................................... 30 Figure 7 - Soft Citrus Whole Supply Chain Product Map .................................................. 34 Figure 8 - Strawberries Whole Supply Chain Product Map ............................................... 38

Glossary

BOGOF – Buy One Get One Free BOGTF – Buy One Get Two Free CPFR – Collaborative Planning Forecasting Replenishment Ladder Deals – for example 6 for £3 OFT – Office of Fair Trading POS – Point of Sale TPR – Temporary Price Reductions

Acknowledgements

On behalf of WRAP and Promar International, we would like to thank the individuals from the food manufacturers / packers / distributors and retailers who assisted and contributed towards this project.


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1.0 Introduction An increasing proportion of food and grocery products are being sold on promotion - reaching some 34% by sales value during 2010 (compared with around 25% in 2007)1. It is anticipated that the level of promotions will remain high for the foreseeable future despite some evidence indicating that there has been a slowdown in their use by retailers2. In 2011, WRAP published research on the possible impact of promotions on household food waste3. The results did not provide evidence to demonstrate that sales of food on promotion increase the amount of household food wasted; however, the degree of apparent under-reporting of food waste means it is not possible to draw firm conclusions on the relationship between promotions and food waste from this work. The work did provide evidence that certain forms of promotions (multi-buy and y for £x) are associated with the purchase of larger amounts of food. Evidence for the impact of promotions on waste in the supply chain is also difficult to identify. Previous work by WRAP on the produce sector4 suggests that promotions can both reduce waste, for example because there is a glut of perishable products which need selling quickly, but that they can also increase waste if management of promotions falls short of good practice. Work has also been undertaken on the impact of food promotions using loyalty card data5 which concludes that promotions do not always lead to category growth. However, this evidence stops short of quantifying any link between promotions and waste or identifying good practice in promotions management. Work on quantifying the amount of waste in the supply chain and its causes has been carried out by WRAP and others including Cranfield University. For example, WRAP has published estimates of the quantity of waste arising from UK supply chains in 20116. The total amount of food and packaging waste is estimated to be around 6.5mt. While we know many of the reasons why this amount of waste arises, our understanding does not provide a way to quantify the importance of each main cause and attribute a proportion of waste to that cause. Promotions are highly sensitive commercially, so we are unable to say how much waste arises from promotional activity notwithstanding the likelihood that some promotions also reduce waste. Evidence from IGD7 indicates that the increasing number of promotions is giving rise to challenges that potentially could lead to additional waste. These forces include:

More volatile demand plans make it more challenging for suppliers to secure required

quantities consistently without increasing overall stock level;

Shorter, deeper promotions also mean there are ad hoc spikes in demand signals which

affects volumes to be picked, labour to be scheduled and increases pressure to maintain

service level; and

Suppliers' ability to secure transport capacity for peaks, or to secure time slots in

capacity-constrained customer depots, which can impact delivery times and on-shelf

availability.

1WRAP, “Investigations into the possible impact of promotions on food waste” (2011) http://www.wrap.org.uk/sites/files/wrap/WRAP%20promotions%20report%20FINAL%20241111.pdf" 2IGD, What Shoppers Want: Shopper-led Innovation (2011) / IGD: Promotions challenge – how are suppliers responding (2011) 3 WRAP, WRAP, “Investigations into the possible impact of promotions on food waste” (2011) http://www.wrap.org.uk/sites/files/wrap/WRAP%20promotions%20report%20FINAL%20241111.pdf" 4http://www.wrap.org.uk/content/resource-maps-fruit-and-vegetables 5http://www.kent.ac.uk/kbs/documents/res/working-papers/2011/234-felgate-fearne-falco.pdf 6http://www.wrap.org.uk/content/estimates-waste-food-and-drink-supply-chain 7IGD: Promotions challenge – how are suppliers responding (2011)

http://www.wrap.org.uk/sites/files/wrap/WRAP%20promotions%20report%20FINAL%20241111.pdf


http://www.wrap.org.uk/content/resource-maps-fruit-and-vegetables

http://www.kent.ac.uk/kbs/documents/res/working-papers/2011/234-felgate-fearne-falco.pdf


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While these challenges do not necessarily lead to increasing quantities of waste they suggest that higher levels of waste in the supply chain could occur as a result of promotional pressures. Equally, we know that manufacturers and retailers may use promotions to launch new products or sell surplus production. Similarly, processors and growers can have quantities of products at harvest time that cannot be stored and therefore are typically sold on promotion. In these cases it is likely that promotional activity prevents waste. The pre-existing evidence did not enable us to quantify the link between promotions and waste or to identify good practice in promotions management from a waste prevention point of view. Therefore, this research was initiated with the aim of gathering and assessing evidence on promotions management and to make use of this to develop and communicate good practice designed to assist retailers and manufacturers to prevent waste across the supply chain. The project had a number of specific objectives:

Collate and evaluate evidence that shows any link between promotions and waste –

providing, where possible, quantitative estimates of the impact of different promotion

mechanics on levels of waste;

Develop detailed ‘maps’ of the promotions processes, from the planning to the evaluation

stages - comparing different mechanics across different categories in order to identify the

main steps that are likely to lead to the potential to introduce waste and identify at what

stage this waste occurs;

Identify the main causes of waste in the promotions planning process, at what stage the

impact of each cause is felt i.e. where the waste occurs, and opportunities for

improvement using evidence from the promotions - mapping and distinguishing between

learnings for retailers and for suppliers; and

Develop material, in the form of good practice guidance notes and case studies, which

can be readily communicated to retailers and suppliers, on how to prevent waste though

good promotions management.

The research was initiated in the context of the Courtauld Commitment and in particular the target for reducing waste in manufacturing and retail. In Phase 3 of the agreement, signatories agree to reduce traditional grocery ingredient, product and packaging waste in the grocery supply chain by 3% by 2015, from a 2012 baseline. Taking into account external influences, this target represents a reduction of 8% relative to anticipated production and sales volumes. As such, implementation of the guidance produced by this research will contribute towards the achievement of this target. The outcomes of this project are as follows:

A report summarising the research and its findings; and

Two guidance documents to provide advice to manufacturers and retailers on how to

improve the effectiveness of promotions in order to reduce waste.

The two guidance documents are published separately.


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2.0 Method Promotions are governed by the Unfair Commercial Practices Directive which the UK adopted in 20088. Under these regulations the UK introduced a new definition of a consumer: the average consumer. Such a consumer is reasonably well informed, reasonably observant and circumspect and able to look at the price in front of them and make an assessment of whether it is a good deal or not. That basic question underpins all sales including promotions. There are many different types of promotion and there continues to be considerable innovation in this respect9. We have not defined a ‘promotion’ for the purpose of this exercise which for example, could include ‘value lines’ or money-off petrol, rather we have used the term to relate to specific, time limited events that involve forward planning and a form of offer to the consumer that saves money compared to usual trading practice. We approached this work wanting to obtain a deep insight into this type of promotional planning practice as conducted by retailers and manufacturers. To do this we decided on a bottom up approach that involved identifying individual products which could then be followed in the supply chain through a structured interview programme. The interview approach was designed to help us assess:

If estimates of waste data (financial or tonnage) can be determined arising from different

promotion mechanics, in other words was waste identified and linked to different types of

promotion;

What are the key stages in the supply chain where waste can arise through promotional

management practices;

How the drivers behind promotions are changing and the role that waste prevention plays

in effective promotions management;

The experience of retailers and suppliers of working on promotions and evaluate the

learning’s from these supply chains.

WRAP did not set out to challenge the degree of promotional activity and the research method was not designed with this end in mind. Rather, our approach was aimed at helping retailers and manufacturers get the best from their promotions but without adding to existing levels of waste. We acknowledge that an interview approach cannot wholly be used to address the research questions identified at the outset, for example because of the commercial sensitivities of promotions or because interviewees will want to show that their ‘house is in order’. To add deeper insight we were able to supplement the interview findings with waste data provided by a major retailer across a range of products over a two year period. 2.1 Identifying Products In the previous work on promotions and household waste, WRAP used Kantar Worldpanel10 data to illustrate the levels of promotional activity against total sales volume data in 2011 for a number of different food and drink categories in the UK. These included bakery, frozen, chilled, yoghurts, milk, fresh meat, fish, and poultry, chilled juice, and fresh produce. The dataset also included:

Volume of products on promotion in each category during the year, and by month;

Brands/products on promotion each month by category;

Promotional mechanic used;

8http://www.oft.gov.uk/business-advice/treating-customers-fairly/protection 9http://www.igd.com/our-expertise/Retail/Innovation-digital/15154/Ten-innovative-promotions-from-around-the-world/ 10Kantar World Panel, 2012


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Promotions split by retailer.

From these data we were able to analyse the key categories which would be of interest to this research which initially was based on the extent of promotional activity, that is, the proportion of sales that were on promotion. Figure 1 details the categories which were found to have the highest percentage of promotions during 2011. These are shown in red on the chart.

Figure 1 – Illustrating the percentage of items on promotion in 2011 split by product category

It can be seen that yoghurts and chilled juice have the highest levels of promotion. The data available enables us to analyse the products in more detail to establish which brands were typically most often on promotion. For example, Muller and Danone were the most promoted brands of Yoghurt in 2011. It is also possible, using these data, to understand in which retailer they were most often on promotion and which promotional mechanic was favoured. A key research question is to understand whether one particular type of promotion mechanic causes more waste than another. While these data do not answer this question they do provide evidence on the types of promotion mechanic that are being widely used. We found that a wide range of promotion mechanics are used by retailers and that these varied between categories (and retailers). However, ‘temporary price reductions’ (TPRs) and ‘Y for X’ are the dominant forms of promotion mechanic and account respectively for around 50% and 30% of all sales on promotion. The Kantar data analysed identified that retailers’ preference for promotion mechanics also varies. A common theme however, does present itself across the different product groups and retailers. This is demonstrated in Figure 2 below.

Figure 2 – Promotional mechanics used in 2011 across product groups and retailers

Yoghurt Yoghurt Yoghurt Yogurt Oranges Berries Grapes

Tesco Multibuy YforX YforX BOGOFF &YforX

TPR TPR &YforX

TPR

Morrison’s Multibuy TPR TPR TPR Extra free

TPR &YforX

Asda TPR TPR YforX YforX

Sainsbury’s YforX YforX YforX

37.53 37.27 32.8843.69 42.01

59.94

28.5236.72

59.17

34.90

0

10

20

30

40

50

60

70

Total Food & Drink

Total Ambient Grocery

Total Bakery Total Frozen Total Chilled Total Yoghurts Total Milk Fresh Raw Meat Fish and Poultry

Chilled Juice Total Fresh Produce

%

% ON PROMOTION OF TOTAL CATEGORY (VOLUME)

2011


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The promotion mechanic that Sainsbury’s prefers for yoghurt (and other products) is Y for X, whilst Asda, Morrisons and Tesco adopt a varied approach to promotional mechanics including Multibuys, Y for X, and Temporary Price Reductions. This analysis adds a layer of complexity that we tried to address by approaching each of the main retailers for their input to this research because decisions on which promotion mechanic to use are strongly influenced by their buyers. While the retailers in the main were willing to help, in only one case were we able to secure access to actual sales and waste data arising from promotions. The Kantar data provided a better understanding of which products are being promoted and the types of mechanic used, but the selection of products for the research requires an assessment of the link between products, promotional mechanics and waste levels. This is further challenging because until recently (and after this research was substantially completed) there was no published data on waste by category/product level11. While Tesco has now published its waste levels by category there is still no clear indication of the causes of this waste though both product damage and product going beyond its use-by or best before dates appear, at least anecdotally, to be key waste drivers in retail. In our research we wanted to include a mix of products on promotion as well as products where waste levels generally were significant and which were items in a typical shopping basket. This resulted in the following product selection:

Cheese

Yoghurt

Grapes

Soft citrus fruit

Potatoes

Strawberries (British)

We acknowledge that this research focussed on the dairy and fresh produce categories only (although a number of interviews were with companies outside these two categories), but there are general messages that can be applied to other categories which are captured in the guidelines. 2.2 Approach Six supply chains covering the above products were the focus of our research. For this research the supply chains comprised the retailers, manufacturers and processors involved from factory in-gate to retail shelf. We did not seek or conduct interviews with growers, wholesalers or importers, confining ourselves to UK activity only. This approach was necessitated by the context of the research within the framework of the Courtauld Commitment and in particular the manufacturing and retail waste prevention target. We acknowledge that waste in agriculture both in the UK and abroad will be impacted by promotion decisions. However, while this research excludes household and agriculture/horticulture, the guidance documents that have been produced do adopt a whole chain approach. This is key in order to prevent waste from being moved from one part of the supply chain to another by promotions. We know from previous WRAP research that waste can arise when supply is switched between countries and hemispheres at seasonal cross-overs though it remains unclear how much is associated with promotional activity compared with other potential causes.

11See report by Tesco: http://www.tescoplc.com/index.asp?pageid=590


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We conducted 37 structured interviews with retailers, suppliers and supply chain operators. The majority of these were non-Courtauld signatories. Respondents were asked for their views on the causes and levels of waste in relation to all aspects of the promotion process in order to provide detailed maps and quantify level of waste throughout the whole supply chain. The research did not examine ‘losses’ in the supply chain, that is products which did not meet the market specification for which they were intended but diverted to some other use and which did not enter the waste stream. For some fresh products, grading for example can result in significant switching between markets resulting in financial losses. Although significant commercially, environmentally it is not as harmful compared to products entering the waste stream. In some interviews we had access to in-depth information on waste levels while in other interviews we encountered commercial sensitivities. Some of the data we obtained enabled us to examine the link between promotion and waste levels as well as the type of promotion and the quantities of waste arising. We are unable to quantify whether waste would have been higher if the promotion had not taken place. Our view is that this is likely to be the case in certain instances, in other words there are circumstance where promotions prevent waste. We also were unable to quantify precisely the levels of waste arising at different stages of the promotion but estimates were provided by the interviewees. It was therefore not possible to obtain all of the data we required to fulfil completely the objectives of this research. We attribute this to:

Commercial sensitivities surrounding promotions which, in the current market where price

has become a key driver of sales, can be highly competitive;

A strong belief by the interviewees that because promotions have become a ‘part of the

landscape’ the supply chain has adapted to live with this and as a result promotions are

seen as a way of minimising waste;

The lack of weight-based data held at the level of granularity that we were seeking.

Despite these constraints the research has enabled us to obtain sufficient insight into the promotional planning process to develop guidelines on waste prevention during promotions which is the key objective of our approach.


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3.0 Promotional planning: supply chain analyses The information for these six supply chains have been derived from the interview programme. Unless stated, the findings presented in the following sections, are the views and comments from interviewees which we have summarised and annonymised. In three of the supply chains we have interviews from a retailer and supplier while in three of the supply chains we were unable to obtain direct retailer input and have had to rely to the views of suppliers. 3.1 Yoghurt The yoghurt sector is heavily promoted, accounting for 59%12 of all products on promotion in 2011. Promotions in the sector have become the norm and it would be difficult for retailers (due to consumer demand), to revert back to a non-promotional based strategy. Consumers buying yoghurts on promotion have little brand loyalty and will purchase based on the price which is affected by the promotional mechanic used. Promotions generally run for three-four weeks depending upon the retailer. The yoghurt market is now less about which brand has the most market share but which brand sells the most and has the best profitability. The competition between UK retailers in regards to offering the most competitive price can cause volume problems and volatility as retailers always want a better price than their competitors. 3.1.1 Promotional Planning A year before the scheduled promotion, plans are agreed with retailers in terms of product range, promotional mechanic and positioning in store. At this stage issues can arise due to a lack of communication given that retailers do not inform suppliers as to whether competitor products will be on sale at the same time, despite this having the potential to negatively affect volume forecasts. This could be avoided by improving communication relating to the promotion of other products. The number of cases ordered for a promotion is delivered against a forecast. There is minimal seasonal change to forecasts, although typically ‘low fat products’ are sold on promotion before summer and in January. Forecasts consider volumes sold on previous promotions which used the same mechanic, retailer and gondola end. Examples of promotional activity are shown below.

Source: IGD Retail Analysis

12Kantar Data


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Details of promotional plans can be altered by the retailer up until the day the promotion occurs. Altering of plans can affect forecasted volumes and result in additional product wastage. Retail specific promotional packs require specific packaging to be purchased, so if a promotion requiring a specific retail promotional pack is cancelled, then this packaging is wasted. Agreement is reached (ideally at least 30 days before) upon the position in store of the promotion as well as the mechanic to be used. Monthly meetings occur between the supplier and retailer which consider promotions 30, 60 and 90 days out. Forecasted volume (but not a single forecast) is based upon historical data and varies depending upon several factors including: the particular retailer, promotional mechanic, and position in store - a gondola end for example. Specific promotional mechanics such as, Buy One Get One Free (BOGOF) or Ladder deals (E.g. 6 for £3) encourage customers to purchase greater volumes and have the potential to cause the waste further on in the supply chain when a consumer takes the product home13. However, these products should have reasonable product shelf life to minimise this issue. The fewer alterations made to promotional plans, results in less variance from the forecasted volume. The initial promotional mechanic selection needs to be considered in terms of creating wastage in the home, for example promotional price deals such as half price create less potential waste than volume related promotions such as ladder deals. UK retailers are keen on price/brand matching other retailers. As such, suppliers can often be asked to develop a promotion within a very short time span away from the pre-agreed arrangement. If a media campaign is being run then this will create an increase in volume sales across the five big retailers and forecasts will be adjusted accordingly. The weather can play a part in forecasting as when it is hot consumers eat less yoghurt – they use their fridge space for ‘hot weather’ products such as alcohol and BBQ foods. Short timed promotions can sometimes result in additional labour hours in order to produce enough stock to fulfil the order. A typical promotion can create an increase in sales volume of four to six times compared to the same product not being on promotion. As a result, this may displace the amount of 'day to day' product the retailer wishes to receive, and can cause a build-up of stock with the manufacturer. Providing additional planning time for quick promotions would allow the manufacturer to plan and optimise its production system and find buyers for potential displaced product. Bulk orders of frozen fruit and dry ingredients used within the production of some yoghurts, are purchased on a regular basis as they have a long shelf life. If a future promotion does not take place then ingredients purchased for this purpose can easily be transferred to another product or promotion. Standard packaging for yoghurts is ordered in bulk on a regular basis. Excess packaging not used in a promotion can be used for either other retail promotions or on standard un-promoted yoghurt packs.

13WRAP, “Investigations into the possible impact of promotions on food waste” (2011) http://www.wrap.org.uk/sites/files/wrap/WRAP%20promotions%20report%20FINAL%20241111.pdf"



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3.1.2 Production Rolling promotions mean production volumes stay fairly consistent throughout the year. If there are uplifts/falls in volume then milk purchasing has enough flexibility to work around the problem. If less milk is required then any excess can be sold on as liquid milk, if more is required then additional volumes can be purchased from farmers. This can be achieved through bonus/volume increases to provide an incentive to a retailer milk pool. 3.1.3 Logistics Breakages and spillages have the potential to occur during the logistic stage. Product packaging undertakes rigorous testing to ensure no breakage or spillage occurs during transit. Large scale branded supplier yoghurts tend to be on rolling promotions (once a promotion in retailer X finishes the product/brand will then be on promotion in retailer Y), as such no additional capacity is needed for promotion delivery. There does not tend to be peaks and troughs in terms of volume delivered. 3.1.4 In Store The last week of a promotion is the main 'pinch point' in regards to retail specific packs, given if these undersell they cannot be used in another retailer. Manufacturers tend to advise against retail specific packaging due to the wastage problems they create. Packs can be returned to the supplier and unpacked, creating packaging waste if unsold on a promotion. The product can then be sold on in singles, or repacked for another retailer, however this shortens the product shelf life creating a smaller selling window - the average shelf life of yoghurt is 25 days. If product is not sold after it has been repacked it can be distributed to local charities and staff or if not fit for human consumption sent for pig feed. No yoghurt enters the waste management stream if product remains unsold. 3.1.5 After Promotion Inaccurate promotional forecasts can result in excess product and packaging after a promotion. On the other hand if a promotion has undersold then a retailer can stop their normal delivery which can cause a build-up of stock and the potential for waste. A promotion can be extended or the mechanic changed to sell the excess product. Alternatively the excess promotional yoghurts can be sent on to the next retailer who is promoting them. If there is any waste yoghurt that is fit for consumption but cannot be resold then it is either given to charity or distributed internally amongst staff. Yoghurt not fit for consumption is taken by a recycling company which uses the yoghurt itself in pig food and recycles the waste packaging. 3.1.6 Evaluation Formal evaluations are undertaken. These take place at the end of each promotion to evaluate whether the promotion was a success for the manufacturer and highlight potential areas of change for the future. Evaluations consider factors such as: return on investment, financial implications, and product loss. Retail specific packs undergo more in depth evaluations to ensure it was beneficial as a promotion (value) for the company. During the evaluation the sales and waste volumes linked with the promotion, along with competitor promotional activity (sales volumes) are evaluated.


14

3.1.7 Waste Arisings A yoghurt promotion planning process map is shown below in Figure 4. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in yoghurt are:

Last minute changes to the original promotion plans;

No single agreed forecast between the retailer and supplier;

Dealing with residual stocks;

Production of promotion specific packaging; and

Damaged product needing to be reworked where possible.


15

Figure 3 - Yoghurt Whole Supply Chain Product Map

1 year outPromotion plan developed:

cons iders ranges to be promoted,

dates of promotions , and reta i ler

pos i tioning.

ESTIMATED WASTE

ARISINGS

90 days outReconfi rm promotional activi ty and

promotional forecast volumes

Promotional

Planning - Part 2

Promotional

Planning - Part 1

POTENTIAL ISSUES/

CAUSES OF WASTE

Dry ingredients and packaging are ordered

* Bulk orders of frozen fruit and dry ingredients used

within the production of some yoghurts, are

purchased on a regular basis as they have a long

shelf l ife. If a future promotion does not take place

then ingredients purchased for this purpose can

easily be transferred to another product or

promotion.

* A degree of flexibility occurs in purchasing milk for

the yoghurts which has a shorter shelf l ife than the

dry and frozen ingredients.

********************

* Standard packaging for yoghurts is ordered in bulk

on a regular basis. Excess packaging not used in a

promotion can be used for either other retailer

promotions or on standard un-promoted yoghurt

packs.

********************

* Retail specific promotional packs however require

specific packaging to be purchased. If a promotion

requiring a specific retail promotional pack is

cancelled between now and the proposed date then

this packaging must be wasted as it would have been

a bespoke design for a specific retailer.

Plans are agreed with retailers in

terms of product range,

promotional mechanic, positioning

in store

* Retailers cannot inform

suppliers whether competitor

products will be on promotion or a

price reduction at the same time.

* Positioning of promotion in store

is agreed, but this can be changed

up until the promotion occurs.

PROMOTIONAL

DECISION MAKING

PROCESS

SUPPLY CHAIN

1% WASTE - Retail specific packaging

6-8 weeks outRe-confi rm activi ty and order

ingredients

1 week outPromotional volume confi rmed and

locked down

Purchasing / OrderingPromotional Planning -

Part 3

Monthly meetings occur between the

supplier and retailer which consider

promotions 30, 60 and 90 days out.

* Forecasted volume is based upon

historical data and varies depending upon

several factors including: the particular

retailer, promotional mechanic, and

gondola end.

**********

* A typical yoghurt promotion in a BIG 4

retailer can increase normal sales volume

for that product by c. fivefold.

**********

* Specific promotional mechanics such as,

Buy One Get One Free (BOGOF) or Ladder

deals (E.g. 6 for £3) encourage customers

to purchase greater volumes and have the

potential to cause the most waste further

on in the supply chain when a consumer

takes the product home and stores it in

their own fridges.

1% WASTE - Retailer Alterations

Confirmation of final promotional details locked

down between supplier and retailer.

********************

* Despite final details being secured, retailers

are stil l able to change aspects of the promotion

including mechanic and length, or even cancel a

promotion if necessary over the next 7 days. If

alterations to the promotion do occur over the

next 7 days this has the potential to cause waste,

particularly if the alteration negatively affects the

forecasted volume.

* UK retailers are keen on price/brand matching

other retailers, as a result suppliers can often be

asked to develop a promotion within a very short

time span away from the pre agreed promotional

plan. This can affect future pre agreed 'day to

day' orders between the retailer and supplier

which can cause build up of stocks in some

instances and a potential for waste - although

this is infrequent and minimal,


16

* Product packaging undertakes

rigorous testing to ensure no breakage

or spillage occurs during transit

*********

* Large scale branded supplier

yoghurts tend to be on rolling

promotions (once a promotion in

retailer x finishes the product/brand

will then be on promotion in retailer y)

as such no additional capacity is

needed for promotion delivery. There

does not tend to be peaks and troughs

in terms of volume delivered.

* In rare circumstances where there is

excess product after a promotion that

promotion can be extended or the

mechanic changed. Alternatively the

excess promotional yoghurts can be

sent on to the next retailer who is

promoting them.

* If there is any waste yoghurt that is

fit for consumption but cannot be

resold then it is either given to charity

or distributed internally amongst staff.

Yoghurt not fit for consumption is

taken by a recycling company which

use the yoghurt itself in pig food and

recycle the waste packaging.

* If a promotion has undersold then a

retailer can stop their normal delivery

which can cause a build up of stock

and the potential for waste

* An evaluation is undertaken after

each yoghurt promotion is run. It

considers factors such as: Return on

investment, financial implications,

and product loss.

**************

* Retail specific packs undergo more in

depth evaluations to ensure it was

worth it as a promotion for the

company.

1% WASTE

Logistics

Promotion in Store

EvaluationStore

1% WASTE - Unknown factors and

packaging waste

1 week outProduction

Production

1-5 Days

Retailer and Supplier

actions after promotion

After Promotion

* Promotions generally run for a period of 3-4

weeks

* If a competitor product is also on

promotion during this period then this can

reduce forecasted promotional volume sales,

as this factor was not considered at the

planning and forecasting stage.

*****

* The last week of the promotion is the main

'pinch point' in regards to retail specific

packs as if these undersell they cannot be

used in another retailer. Instead packs must

be returned to the supplier and unpacked

creating packaging waste. The product can

then be sold on in singles or repacked for

another retailer, however this shortens the

product shelf l ife creating a smaller selling

window.

************

* When one supplier's range is on promotion

it can cause a fall in sales in some of its other

yoghurt ranges, this displacement of sales is

considered in the initial promotional

planning forecast.

* Milk purchasing is flexible: if less is

needed then this can be sold on as l iquid

milk, if more is required for processing

then additional can be purchased from

farmers.

*********

* Rolling promotions mean yoghurt

production stays at the same level

throughout the year.

*********

* Production occurs 7 days a week


17

3.2 Cheese The cheese sector is a very competitive market and promotions are used in the sector to keep customers purchasing the brand. Comparative to other sectors, cheese only accounts for a small proportion of all products on promotion in 2011 – accounting for approximately 8%14. Despite this small proportion, promotions in the sector have become the norm and it would be difficult for retailers (due to consumer demand), to revert back to a non-promotional based strategy. In order to maintain a leading position in the cheese sector promotions are undertaken, otherwise customers will switch to competitor products. Promotions traditionally last between two and four weeks. Typical promotion mechanics used include BOGOF or BOGTF (Buy One Get Two Free), Multi-Buy, Half Price and Temporary Price Reductions (TPR). Analysis of Kantar data identified that BOGOF and Multi-Buy were the most common mechanic utilised by the supply chain. 3.2.1 Production Production levels are monitored at the creamery and cheese is produced and cut between 12-24 months before being sold, dependant on required maturity levels at point of sale. Cheese cutting is arranged with modern machines to ensure each piece is cut in the most efficient manner. Any off cuts are sent to be grated and used in retail and foodservice packs. Stock levels are also monitored to ensure there is enough stock for cheese promotions. The lengthy production process of cheese making can result in periods when a surplus or under-supply of stock is available for promotions. The creamery ensures through product planning that there is enough cheese stock at the right age of maturity for each promotion that year. Rolling promotions ensure that there are few peaks and troughs in terms of production levels. If a surplus of cheese exists then the supplier will approach the retailer to create a promotion to remove some of the additional stock. If there is a lack of cheese for an agreed promotion then there is flexibility within the supply chain to adapt timings of future promotions to ensure the right level of maturity. 3.2.2 Promotional Planning Plans are agreed with retailers in terms of product range, promotional mechanic, positioning in store, promotional volume and timing of the promotion 12 months out of promotion. Retailers cannot inform suppliers as to whether competitor products will be on sale at the same time due to competition rules, despite this having the potential to negatively affect promotional volume forecasts. Improved promotion planning by the retailer would ensure that similar products were not both on promotion at the same time. Details of promotional plans can be altered by the retailer up until the day the promotion occurs. Altering of plans can affect forecasted volumes and result in additional product wastage. At the 90 days out from promotion stage, the altering of promotional mechanics can negatively affect forecasted promotional volumes. At this stage any additional packaging is purchased ready for the promotion. Promotional forecasted volumes are based upon historic data thus alterations can affect these volume sales. Last minute alterations from retailers to mechanics and positioning can lead to waste.

14Kantar Data


18

Alterations to promotional plans in the final week can negatively affect volume sale and potentially create waste. UK retailers are keen on price/brand matching and suppliers can often be asked to develop a promotion within a very short time span away from the pre agreed promotional plan. Final confirmation of the promotion, the mechanic, product shelf positioning, and volume are considered. However, retailers can still change these factors right up until the promotion is on the shelf. At this stage retailers cannot discuss if a competitor and own brand will be on promotion at the same time. Retailers have more influence over the mechanics used on their own label cheese, while brand owners tend to have a greater push over branded products. Consumers who buy brands tend to purchase based upon what is on offer. Whereas those consumers who purchase own label cheese tend to stick to own label cheese whether there is a promotion on or not. Therefore own brand cheese promotions are less affected by what other promotions are available. If there is a difference between the volumes that a supplier and the retailer forecast for a promotion and actual sales volume, this can be a pinch point for creating waste. For example, if the retailer promises a promotion will be displayed on gondola one (a promotion end at the customer eye level on the power/central aisle and considered to be the best position for cheese promotions) and this is then put on gondola four, it can have a big effect on the actual sales compared against those forecasted. If competitors’ cheeses are also on promotion this will affect sales and is a factor that is not necessarily planned for. 3.2.3 Logistics Wastage during this stage is minimal. Branded cheese tends to constantly be on a rolling promotion (once a brand concludes a promotion in retailer X, they are put on promotion in retailer Y). Large quantities of cheese are kept in chilled storage locations ready to be transported to retailers when needed. 3.2.4 In Store Product brand promotions can cause displacement of sales from other products in the range. A promotion in one retailer can affect the brand's sales in another. While one supplier’s brand range is on promotion it can cause a knock on fall in sales in its other ranges being sold in the same retailer. When a promotion is running in a retailer it can also create falls in sales volume in other retailers where there is no promotion. These factors are given limited consideration in the initial planning stage. A high volume stock keeping unit (SKU) produces less waste. There would need to be a severe disruption to the promotion such as a last minute cancellation and refusal from an alternative retailer to take on a promotion in order for a major brand promotion to produce waste which could not be absorbed or sold on. If a lower volume SKU was to be promoted because it is a lower volume SKU waste may occur. However, the waste volume would be less due to the SKU being of lower volume. There is a bigger risk with high volume SKUs but then there are more options to absorb any wastage issues, such as further processing, changes to the promotional mechanic and/or alternative markets. Examples of retail cheese promotions are shown below.


19

Source: IGD Retail Analysis 3.2.5 After Promotion The shelf life of cheese is quite long (months) compared to other dairy products such as milk (one week), and yoghurts (three weeks) and as such product wastage is very rare. A promotion can be extended or a mechanic altered if there is a surplus of cheese after a promotion. Cheese can also be returned to a normal shelf position to be sold either still on promotion or brought back to its normal packaging (this is, at the retailer's discretion). If cheese is returned to the supplier it can be unpacked (causing an additional labour and logistics cost and packaging waste) and then grated and used in either retail or foodservice packs. Excess cheese can also in some circumstances be sold on to retailers that will accept short dated products. 3.2.6 Evaluation Formal evaluations are not currently undertaken. Suppliers are required to monitor sales volume whether their cheese brand is on promotion or not. The retailer will also monitor sales. 3.2.7 Waste Arisings A cheese promotion planning process map is shown below in Figure 5. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in cheese are:

Last minute changes from the original promotion plan;

No single agreed forecast;

Store planning and positioning; and

Potential impact of cannibalisation.


20

Figure 4 - Cheese Whole Supply Chain Product Map

Production levels are monitored at the creamery

* Cheese is produced and cut between 12-24 months

before being sold depending on the maturity level

required at selling. Cheese cutting is done with

modern machines to ensure each piece is cut in the

most efficient manner. At this stage any off cuts are

sent to be grated and used in retail and foodservice

packs.

***************

* The creamery ensures there is enough cheese stock at

the right age of maturity for each promotion that year.

This stock is assesssed when planning future

promotions to ensure there will be enough product to

sell on promotion. Rolling promotions ensure that

there are few peaks and troughs in terms of production

levels. If a surplus of cheese exists then the supplier

will try to create a promotion with a retailer to get rid

of the additional stock. If there is a lack of cheese then

future promotions will be moved around and adjusted

to ensure the right level of maturity.

1% WASTE - used for other sources

Promotional

Planning

12 months outPromotional plan developed which

cons iders the amount and ages of

exis ting s tock

Plans are agreed with retailers in

terms of product range, promotional

mechanic, positioning in store,

promotional volume, and timing of

promotion

*******************

* Retailers cannot inform suppliers

as to whether competitor products

will be on sale at the same time,

despite this having the potential to

negatively effect promotional volume

forecasts.

***********

* Agreement is reached upon the

position in store of the promotion as

well as the mechanic to be used.

However these details can stil l be

altered by the retailer up until the day

the promotion occurs.

Promotional

planning

Promotional

Planning /

purchasing

Confirmation of final promotional details

locked down between supplier and

retailer.

**********************

* Final confirmation of the promotion, the

mechanic, product shelf positioning, and

volume are considered. However, retailers

can stil l change these factors right up

until the promoting is on the shelf.

************************

* At this stage retailers can atil l not

mention whether a competitor brand will

be on promotion at the same time.

PROMOTIONAL

DECISION MAKING

PROCESS

SUPPLY CHAIN

12 - 24 months outCheese production and maturi ty

levels cons idered for future sa le

90 days outReconfi rm promotional activi ty and

purchase packing

POTENTIAL ISSUES/

CAUSES OF WASTE

ESTIMATED WASTE

ARISINGSPromotion plans are confirmed with the

retailer

* At this stage any additional packaging is

purchased ready for the promotion.

************************

* Promotional forecasted volumes are

based upon historic data. Promotional

mechanics can be affected greatly by the

positioning of the promotion in the store

as well as the promotionla mechanic used.

A half price mechanic can increase cheese

volume sales by ten fold from an average

week if on offer in a BIG 4 retailer.

1-3 weeks outRe-confi rm activi ty

Production


21

1-5 Days

Retailer and Supplier steps

after promotion

Logistics

1% WASTE - general waste lost in

transportationPromotions generally run over a 3-4 week

period.

* If a competitor product is on promotion at

the same time this can cause a reduction in

volume sales compared to the forecasted

figure.

************

* Data is collected during the first week of a

promotion to monitor whether more cheese

needs to be sent to the retailer or if there is

the potential for a surplus of stock.

************

* While one suppliers brand range is on

promotion it can cause a knock on fall in

sales in its other ranges being sold in the

same retailer, this is considered in the initial

promotional planning forecast. When a

promotion is running in retailer x it can also

create falls in sales volume in other retailers

where there is no promotion - this again is

considered in the initial promotional forecast.

1% WASTE - packaging

* The shelf l ife of cheese is quite long compared

to other dairy products and as such product

wastage is very rare.

* A promotion can be extended or a mechanic

altered if their is a surplus of cheese after a

promotion. Cheese can also be returned to a

normal shelf positioning to sell, this can either be

stil l on promotion or brought back to its normal

RRP (this is at the retailer's discretion).

************************

*If cheese is returned to the supplier it can be

unpacked (causing an additional labour and

logistics cost and packaging waste) and then

grated and used in either retail or foodservice

packs. Excess cheese can also in some

circumstances be sold on to short date retailers.

* If a promotion has undersold then a retailer can

request to stop their 'normal' cheese delivery

from the supplier which can cause a build up of

stock and the potential for waste

Store

Promotion in Store

* Suppliers are required to monitor

sales volume whether their cheese

brand is on promotion or not. The

retailer will also monitor sales.

**********

* Formal evaluations are not currently

undertaken.

After Promotion Evaluation

* Branded cheese tends to constantly

be on a rolling promotion (once a

brand finish a promotion in retailer x

they are put on promotion in retailer

y). As a result large quantities of

cheese is kept in chilled storage

locations ready to be transported to

retailers when needed.

**************

* Waste during this stage is minimal

* With UK retailers keen on

price/brand matching suppliers can

often be asked to develop a promotion

within a very short time span away

from the pre agreed promotional plan.


22

3.3 Grapes Promotion mechanics in the grape sector are very much driven by the retailer and vary from retailer to retailer. Grapes account for 18%15 of all products on promotion in 2011. Packing size and format differ greatly as does the supply chain. Some retailers import the majority of their grapes as packed at source and others pack more in the UK. The weather can have a huge impact on both the availability of grapes and also sales volumes. Some retailers plan their promotions well in advance while others are not quick to react to the market surpluses caused by weather in particular. 3.3.1 Agriculture This stage represents the growing, picking and packing of the product. New vines will be planted approximately three years before the bearing of fruit. The ordering country (UK) will determine if the product is pre-packed before leaving the country of supply. Pre-packing at the source of supply is becoming more common within the fresh produce sector. This will however depend on how progressive the industry is in terms of competence and product quality in export markets. Supply for a promotional activity may not be from one sole supplier, for example and may count on supplies from multiple countries (whether this is in Northern Hemisphere or Southern Hemisphere). The production price and volume is established at the time of ordering (one year before). The market conditions at the time of importing will have an impact on the grower price. On occasions the buyer may benefit from the price established but again, on occasions they may not. If the promotion is toned down and the volume is not achieved in the UK market, this will impact producers. Impacts for producers can arise from product not achieving specification set out by the buyer. Some retailers will try and mitigate this by sending lower grade products to ‘basic’ ranges. 3.3.2 Promotional Planning At 13-14 weeks out, before agreeing a promotion, data are reviewed from the stock control/ordering system which will provide data on pre-promotion, during production and after the promotion. Other sources of data would also be accessed including Kantar World Panel data. The promotional mechanic will vary by retail outlet. The larger chains will opt for standard offers, whereas convenience stores will operate a number of promotions including BOGOF, Half Price, Y for X, and/or redemption coupons. Planning and ordering of the stock will have an impact on the volumes stored. If the promotion volumes were over forecast this could impact on the quality of the stock. This does not result in the actual volume of product wastage as the product is re-directed to alternative markets such as wholesale and/or export markets. In the convenience sector promotions drive footfall through the stores and therefore on occasions the promotions may not match the market place. Promotions on other fresh produce products can negatively impact the sales of grapes.

15Kantar Data


23

3.3.3 Purchasing/Ordering Forecasting will depend on the sophistication of the system. The more sophisticated the system, the more accurate the forecasting. This will be based on previous sales, impact from the weather, previous promotions and the success/failure experienced of these promotions. Larger retail chains tend to react in 'quick time' within 12 hours however smaller convenience retail outlets react within 48 hours. This will have an impact on product availability. The structure of the retail estate will also have an impact on the ordering. In the convenience sector, orders can be overestimated. If this occurs over ordered product is redirected to alternative markets such as wholesale and/or international exports. As a supplier of fresh produce, consideration must be given to the export destination, for example supplies from Spain will take approximately three days to ship to the UK market. This must be considered in the planning. Retailers can over estimate what they plan to sell. Volumes can peak but during other times the volumes may not be sold. This results in alternative customers having to be found. 3.3.4 Logistics Damage caused to product throughout the transit would equate to less than 1%. This is throughout the supply chain, not just at this point of the supply chain. As a supplier, there is acceptance that there will be some loss of product due to the transportation, however the exact volume is unknown. Financial loss is experienced through the disposal of crates. The crates cannot be disposed of to landfill and cannot be deep cleaned (for re-use). 3.3.5 Production/Sorting The volume of waste product would depend on the country of supply. If supply is from a first world supplier (EU for example), the grapes will be sorted, cut and packed at source and transported to the UK market. Second world suppliers export product in loose form for sorting and packing in the UK. This may result in some quantities of waste. For punnets, a re-packing exercise may occur but the risk increases due to customers’ specific requirements. Retailers have various procurement methods, for example Retailer X will import 95% of their fruit in loose format and will re-pack in the UK, however Retailer Y and Retailer Z import 50% in retail ready formats and the remaining volume will be packed in the UK. 3.3.6 In Store The placement of the product in store and how it is promoted to the public can have an effect on the volume of stock procured and sold. For product not successfully sold on promotion a price reduction exercise will occur. Examples of promotions on grapes are shown below.


24

Source: IGD Retail Analysis Depending on the retail outlet this could go through three price reductions and is based on the date code. The majority of reduced stock would be sold at the first reduction point. If the promotion is not going well, the on shelf configuration can be adopted to reduce the stock on shelf. Alternatively the promotion can also be extended to shift volume of product. Sales of fresh produce are also weather driven with warm weather increasing sales volume. If promotions are being driven on other fresh produce (e.g. strawberries) the victim line will typically be grapes. The wastage of product at this point is in terms of value (leakage at store through price reductions). 3.3.7 Evaluation Formal evaluations are undertaken which take into account the sales data during and after a promotion. Sales data will be provided from the customer and will be supported by external data with sources utilised from Kantar for example. Other areas of evaluation include price mechanisms, selection of promotion mechanic, country of origin and cannibalisation of other products. 3.3.8 Waste Arisings A grapes promotion planning process map is shown below in Figure 6. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in grapes are:

Grade-outs at the harvesting and packaging stages particularly the latter if the UK;

Failure to respond to market surpluses;

Promotions designed to generate footfall without regard to seasonality or price sensitivity;

Damage in transportation and handling; and

Victim of other fresh produce promotions.


25

Figure 5 - Grapes Whole Supply Chain Product Map

POTENTIAL ISSUES/

CAUSES OF WASTE

Reflects products before entering the UK chill chain

ESTIMATED

WASTE

ARISINGS

1% WASTE

* Damage caused to product

throughout the transit would

equate to less than 1%. This

is throughout the supply chain,

not just at this point of the

supply chain.

* As a supplier, there is

acceptance that there will be

some loss of product due to

the transportation. This

volume was not disclosed.

* Financial loss is

experienced through the

disposal of crates. The crates

can not be disposed of to

landfill and can not be deep

cleaned (for re-use).

* From arrival of the product

into the UK port, the product

will have approximately 6 days

shelf life.

Sales volumes are agreed

between the UK supplier and

the grower.

* Supply for a promotional

activity may not be from one sole

supplier

* The production price and

volume is established at the time

of ordering (1 year before). The

market conditions at the time of

importing will have an impact on

the grower price - on occasions

the buyer may benefit from the

price established but again, on

occasions they may not.

* If the promotion is toned down

and the volume is not achieved in

the UK market. This will impact

the producers.

Promotional planning is

undertaken with the supplier and

retailer. Once agreed that is

then communicated with the

growers.

* Before agreeing a promotion, data

is reviewed from the stock

control/ordering system

* Planning and ordering of the stock

will have an impact on the volumes

stored. If the promo volumes were

over forecast this could impact on

the quality of the stock. This does

not result in the actual volume of

product wastage as the product is re-

directed to alternative markets -

wholesale and/or international

markets.

Promotions on other fresh produce

products can negatively impact the

sales of grapes.

* Forecasting will depend on the

sophistication of the system. The

more sophisticated the system,

the more accurate the

forecasting. This will be based

on previous sales, impact from

the weather, previous promotions

and the success/failure

experienced of these promotions.

* The structure of the retail estate

will have an impact on the

ordering. If orders are

overestimated, poduct is

redirected to alternative markets

either wholesale and/or

international exports.

Promotional

Planning

8 weeks out

Re-confirm activity

3 weeks outDecide if the promo is still current.

Review the mechanic, the

placement in store. It is common

practice that at this stage changes

can still occur. Once reconfirmed

this will be built into the in-store

plan.

1% WASTE

1 week out

Changes can still be made

to the promotion

PROMOTIONAL

DECISION MAKING

PROCESS

SUPPLY CHAIN

1 year out

Agreement regarding the

promo mechanic, marketing

method, likely volume and

period and procurement

Haulage from the

port to the

supplier/pack

house

AgricultureLogistics - Sea, Air

or Road Freight

13 - 14 weeks out

Reconfirm promotional

activity and decide which

marketing activity will be

used

Purchasing /

Ordering


26

* Evaluation of the

promotion, based on actual

sales volumes will be will take

place at this stage

Reflects products out of the store (at home)

* Switching between the

countries of supply e.g.

From Chilean to Egyptian

can create problems due to

bulk storage

* Poor quality grapes are

sent to wholesalers/export

markets

* The volume of waste

product would depend on the

country of supply. If supply

is from a first world supplier

(EU for example), the grapes

will be sorted, cut and

packed at source and

transported to the UK market.

* Second world suppliers

would export product in loose

form for sorting and packing

in the UK. This may result in

some quantities of waste

* For punnets a re-packing

exercise may occur but the

risk increases due to

customers specific

requirements.

* Temperature of grapes to

remain at 2°C however the

transportation of mixed

products can result in

product that is transported at

0 - 1°C.

* Waste at this stage will be

generated for the retailer and

by the consumer. Measuring

the volume of waste

produced once the product

has been purchased is

beyond the scope of this

project. However, research

by WRAP estimates that fruit

generates 1.1 million tonnes

of household waste per

annum. "Sector Guidance

Note: Preventing Waste in

the Fruit and Vegetable

Supply Chain".

* The placement of the product in

store and how it is promoted to the

public can have an affect on the

volume of stock procured and sold.

* For product not sold on promotion

a price reduction exercise will

occur.

* Sales of fresh produce are

weather driven - warm weather

increases the sales volume.

* If promotions are being driven on

other fresh produce (e.g.

Strawberries) the victim line will

tend to be grapes.

* The wastage of product at this

point is in terms of value

* The promotion will be evaluated

from this stage and onwards (up to

3 weeks post promotion).

1 week post promotion

Sales data reviewed

2 weeks - post promotion

Improvements made in the

system to manage issues.

This could include changes

to the on shelf configuration,

Production /

Sorting / Cutting /

Packing

Logistics from the

supplier to the

retail RDC

1 - 5 days

Consumption of the product

at home

Household

Wholesale / International Markets

1% WASTE

Promotion in Store

RDC Store

Arrival at the

supplier / pack

house


27

3.4 Potatoes The focus of our research was on regional and speciality potato varieties. Promotion mechanics in this product group are driven by the retailer and vary significantly from retailer to retailer. The forecast planning will depend on the relationship between the supplier and the retail buyer/analyst and how proactive each are in this particular area. The sector appears to operate ‘save X’ (20p off for example), and this is generally classified as a ‘normal promotion’ and operates throughout the year. At specific times of the year ‘special’ promotions may operate to drive sales volume of ‘regional/speciality’ product lines. Throughout the year, pack size and format will differ when the product is on or off promotion. Development in packaging technology is important, as this can positively impact on the quality of the product. The weather can have a huge impact on the availability of potatoes. Should poor weather affect the quality of potatoes, this could impact on promotional volumes (causing some promotions to be withdrawn if not meeting the forecasted volumes) or result in the plan to be changed, again resulting in sales volumes to be affected (particularly for regional/speciality lines, when timing of the promotion is important for example new potatoes in the summer). 3.4.1 Agriculture This stage represents the seeding, growing, picking and packing of the product. For speciality/regional potato lines, the pack-house/retail supplier will inform the seed supplier six months (minimum) regarding the expected sales volumes. Three months before the promotion, the farmer will plant the seeds at the required volume. This timing cannot be exceeded, if it is, this can cause delays to the promotional plan. Supply for a promotional activity will not be from one grower, but from multiple growers. After the three months of growing, the product is then picked, graded and packed. Waste impacts for growers can arise from poor weather resulting in poor quality produce. Poor weather can affect yields and the quality of potatoes. Delays to promotional activity can occur should poor weather affect the production volumes. 3.4.2 Promotional Planning, Forecast and Ordering Forecasting will depend on the sophistication of the system. This will be based on previous sales/promotions, impact from the weather, previous promotions and the success/failure experienced by these promotions. 6 - 12 months out of a promotion, a promotional plan is developed. This identifies planned and agreed promotions, and delivered promotions. Planning is typically based on the previous year’s promotional calendar and available insight from retailer data collection and market data (for example Kantar Worldpanel). Whilst the promotional plan is established in advance, the plan is expected to change. 95% of the time, the promotion will be delivered during the expected time-scales, however changes may occur to the mechanic, and position in store. Volumes will not be discussed until closer to the promotion time and whilst volumes can be estimated (based on the previous year’s promotion), promotional volumes are likely to change up to two days before the promotion. Changes at this short notice are difficult to


28

manage within the pack-house and ideally ‘locking down’ orders at the beginning of a promotion will prevent additional pressure within the supply chain. Whilst the sharing of the promotional cycle plan will vary by retailer, this can typically be disseminated three weeks before the promotion. At this stage suppliers are made aware of the competitor activity during the promotion. This is not discussed before this stage, yet retailer buyers and planners must be consider the impact on sales and waste from the promotion of two similar products on promotion at the same time. 3.4.3 Production – Field and Pack-house The forecast established three to six months prior to the sowing of the potato seeds is vitally important to ensure the volumes picked meet the demands of the expected promotion. The picking day of the potatoes will vary depending on the variety sown. The picking day was two days before being in the store. Therefore efficiencies with picking, sorting, packing and logistics are essential at this stage. Issues that could affect production include poor weather, and breakdowns with machinery (sorting and grading machine for example). Should weather affect the quality of the product, flexibility within the promotional plan should be considered. This should include the flexibility to move a promotion into an alternative promotional cycle (should this be a ‘special’ promotion for example, rather than a ‘normal’ promotion with a price reduction such as 20p off). 3.4.4 In Store The placement of the product in store and how it is promoted to the public can have an effect on the volume of stock procured and sold. The placement of potatoes in store is extremely important as the positioning under lights can affect the colour of the potatoes, often turning potatoes green in colour. This is called "greening" and indicates the formation of chlorophyll. Packaging design can assist in the protection of the product from light. Packaging (whether this is a poly bag, paper bag or other format), should include a large area that protects the product from direct light. Vent holes should also be incorporated into the packaging to keep the crops fresh and dry during transport. The store closing down procedures at the end of the evening should ensure that potatoes are always covered. The incorrect ranging of products can result in waste of products at a store level particularly in respect of regional varieties. This is a difficult area and decisions regarding the listing and more specifically, de-listing of products, could impact on customer loyalty. However the incorrect listing of products for stores can impact on the wastage level. Communication should be clear between stores, regional and central teams regarding the impact on waste and the options regarding ranging. The offer in terms of packaging, size and placement has an effect on the success of the promotion. A balance is to be sought in terms of meeting the needs of availability whilst not impacting on the people resources within the stores. During promotions, case size can be changed. Case fills will vary depending on the product and space allocated for the promotion. For large promotions a merchandising unit can be utilised. On occasions before a promotion, in an effort to sell old stock through, promotional product could be held in the store stock room waiting for stock in the shop front to be run down. Should this occur, this will affect the quality of the produce and will negatively impact the available shelf life.


29

Placement of the promoted product must be where the planner originally intended it. Should there be changes at store level, this could impact the sales and waste volumes. Whilst store personnel understand their consumers and the local area, should changes be required, this should be communicated with regional and central teams to ensure changes to the forecast have been actioned. Examples of promoted potatoes are shown below.

Source: IGD Retail Analysis 3.4.5 Evaluation Specific KPIs are not established on an individual promotion basis, yet general KPIs are established at the beginning of the business year. KPIs focus on availability, yet a KPI for waste is not established. Sales volumes are tracked and evaluated through the provision of data from customers. Shoppers that have been attracted to the promotion is also measured and evaluated. Should there be an issue with a promotion, the evaluation would identify if in future, the mechanic will need to be changed or the time of the year of the promotion should be altered. 3.4.6 Waste A potatoes promotion planning process map is shown below in Figure 6. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in potatoes are:

Quality at harvesting which can be impacted by weather and management practices;

Machine breakdown which can damage product and impact supplies;

Ranging decisions in store; and

Store close down procedures not being followed.

http://retailanalysis.igd.com/PhotoCon/Asda Hitchin8924257122542013/fullsize/UK, Asda, Hitchin, February 2013 255.JPG


30

Figure 6 - Potatoes Whole Supply Chain Product Map

Promotional

Decision

Making

6 - 12 Months OutDevelop promo plan

with mechanic,

l ikely volume and

period

6 Months Out- Seed team

3 Months OutPotato seeds

planted

3 Weeks OutPromotional Plan

Shared

1 Week OutForecast sent

confirming volumes.

2 Days OutPotatoes Picked

Store Post 1 - 6 daysConsumption of

potatoes

Post 2 daysRe forecast

Post 2 - 3 weeksRunning down

promo

Supply ChainSupplier /

Packhouse

Agriculture - Seed

SupplierAgriculture - Farmer Retailer to Supplier Retailer to Supplier

Agriculture - Farmer

/ PackhouseLogistics / Store Household Retailer to Supplier Retailer

Potential Issues/

Causes of Waste

- To be proactive to

plan production in

advance.

- Must agree order

volumes at this

stage.

- Plant to order.

- Weather can affect

yields and quality

of potatoes.

Poor weather, has

the potential

to effect promo

calendar.

- See potential

competitor activity

at this stage.

- Potential of high

volume at the start

of promo.

- Orders can

fluctuate 2 days

before promo.

- Locking down

orders will alleviate

this.

- Inaccurate

forecasts causing

stress in the

packhouse.


yields and quality

of potatoes.

- Increase case fi l l

size, with large

volume promotions

util ising an MU, to

aid availability.

- Case fi l l will be

dependent on the

season/time of year.

- Range planner

to fit right number

of stores.

- Avoid placing

potatoes under

direct l ighting.

- Weather can have

an impact on the

sale of potatoes.

- Receipt of data

regarding sales

volumes by SKU,

availability, waste

levels etc.

- Must run down

stock effectively.

- Stock can be held

in the back, whilst

running down stock,

affecting optimum

shelf l ife

of products.


31

3.5 Soft Citrus In volume terms, soft citrus is the most promoted product out of the fresh produce sector16, with suppliers commenting that this has now become a commodity product. Promotion mechanics in this product group are driven by the retailer and vary significantly from retailer to retailer. Typically the mechanics utilised for this product are Mix and Match, 2 for X, Multi-buy or BOGOF. Supply to the UK is either from Northern Hemisphere (for example, Spain) or Southern Hemisphere (for example, South Africa, Chile) and suppliers from each country have their own issues and constraints regarding the supply to the UK market (whether on or off promotion). Weather has a considerable influence on product availability as well as the purchasing habits of consumers. The supply (country of origin), seasonality, weather, availability can impact on the promotion. These areas should be considered during the development of the forecast. 3.5.1 Agriculture This stage represents the growing, picking and packing of the product. Where possible product will be packed at source and transported to the UK. Suppliers report that there are very little, if any problems, regarding the supply of soft citrus from their suppliers (Northern Hemisphere), such that volumes can be doubled – with c.68% of Northern Hemisphere produce being promoted. Soft citrus products are typically out of season between June and September and therefore supply issues from source countries can be variable in terms of availability and quality. Promotions should be managed to avoid problem periods of production. Dependant on the supplying country, all packing will, where possible, take place in the supplying country. Typically Northern Hemisphere product will be packed at source, whereas Southern Hemisphere supply will vary by country. A production buffer is typical to ensure that all retail orders can be fully met. 3.5.2 Promotional Planning, Forecast and Ordering The planning of promotions will commence six months out of a promotion. The promotional plan will be agreed, with the selected mechanic (chosen by the retailer), the marketing period and procurement of the product discussed and agreed. The retailer will typically lead in terms of product choice and mechanic for a chosen promotion. Depending on the promotional strategy of the retailer, the mechanic selection can be rigid rather than being tailored to different times of the year. At this stage, volumes are projected, based on supplier data and experience. Available data will include historical mechanics, impact on weather, impact from mechanic, sales volumes and competitor activity. The volumes will be projected to avoid too little or too much availability which will impact on the waste volumes. Both retailers and suppliers could work more closely to manage and plan promotional plans. Retailers’ have access to real time data (historical and current) in terms of sales and waste

16Kantar Worldpanel data 2011. Soft citrus sold just under 1.5 million packs on promotion in 2011. Over four times the volume of the second promoted product, bananas


32

volume and value. Suppliers have expertise in terms of fruit quality, supply, and seasonality. Often these are not brought together. For gondola end promotions, the promotional volumes are agreed three weeks out of a promotion. This schedule is unrealistic for Southern Hemisphere suppliers as the product will be shipped during this reporting period. 3.5.3 Logistics Promotional volumes are agreed three weeks in advance of the promotion, however ordered volumes from Southern Hemisphere suppliers can take between three and six weeks to arrive in the UK. Amendments to volumes at this stage from the retailer will be too late to alter. To combat this, buffer stock is held to anticipate potential increases in ordered volume. Typically three days is the optimum delivery time of fruit from Northern Hemisphere suppliers (e.g. Spain). Should late changes be made to the forecast, transportation time can be reduced by doubling the number of drivers, but at a financial loss to the supplier. Locking orders in advance of this time period would assist in reducing pressure and wastage throughout the supply chain. Accurate forecasting and improved communication between supplier and retailer will also assist to accurately forecast the promotional volumes. Whilst there is increased scrutiny at customs, typically clearance time has improved. However, clearance and issues like poor weather when the ship is docking are out of the supplier’s control. During these occasions, volume will be purchased from other suppliers to meet the order. Yet when the ship is docked and cleared customs this can result in a glut of volume in the market place. To be adequately managed, changes to the forecast, at the latest should be made five days before the promotion for Northern Hemisphere suppliers and five weeks before for Southern Hemisphere suppliers. 3.5.4 Re-forecast Dependant on the retailer, promotional volumes will be re-forecast at least twice a week. Whilst the forecast is based on historical sales and previous promotions, the forecast can be manually overridden and changes to the forecast can be made. This is likely to occur after a period of strong sales. Retailers’ can have a ‘knee jerk’ reaction to this and can increase an order by at least 50% (volume). Alterations can cause stress within the supply chain (particularly at the pack-house) to try to achieve these orders. Whilst there will be a one off hit with increases to the volume, the volume will not change over the promotional period as volumes will reduce on consecutive days. Strong relationships between the retailer and supplier are required, as well as clear communication. The forecasting system should be left and manual changes should be kept to a minimum. 3.5.5 In Store Seasonal crossovers have the potential to cause waste challenges within this product category. It is difficult for both supplier and retailer to manage new product and older products in terms of product quality. This can impact on the waste volumes. At a store level, the stock must be managed effectively – managing rotation, optimising availability and reducing the number of the date codes. Examples of promotions on citrus are shown below.


33


The last week of a promotion is the main concern to suppliers. It is imperative that promotional stock is run down effectively – using appropriate mechanisms such as stock rotation. Flashing of a product (price label) will result in improved sales, with sales improving by a reported 12 – 15%. Whilst the direct marketing of the promoted product benefits the sales, products are not flashed after the promotional period. This however, can have an impact on sales volumes, resulting in increases to waste levels (with reduced sales). The forecast needs to truly be representative ensuring that projected sales volumes are budgeted correctly. Retailers may implement initiatives to reduce the volume of waste and to increase availability, yet communication with suppliers regarding these initiatives can often be improved. Initiatives include the forecasting procedure, stock rotation, markdowns of product and stock availability. Placement of the promoted product, must be where the planner originally intended. Should there be changes at a store level, this could impact the sales and waste volumes. Whilst store personnel understand their consumers and the local area, should changes be required, this should be communicated with regional and central teams to ensure changes to the forecast has been actioned. 3.5.6 Evaluation The value and volume of sales are evaluated at the end of a promotion (the rate of sales by volume are evaluated (units/stores ranged in)). Should the evaluation find that the promotion failed, future promotions would re-consider the choice of mechanic and the time of the year that the promotion will run. KPIs are not established at the start of a promotion, but at the start of the business year. Annual waste targets do not appear to be challenging to suppliers. 3.5.7 Waste A soft citrus promotion planning process map is shown below in Figure 7. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in soft citrusare:

Over-production to meet retail orders;

Order and production mis-alignment (demand amplification);

Clearance delays at Customs;

Ambient storage (rather than chilled); and

Seasonal cross-overs between hemispheres and suppliers.

http://retailanalysis.igd.com/PhotoCon/Asda Mitcham40654201218122013/fullsize/14.JPG


34

Figure 7 - Soft Citrus Whole Supply Chain Product Map

Promotional

Decision

Making

6 Months OutAgree 6 monthly

plan, mechanic,

marketing period &

procurement

3 Weeks OutReview promo

volumes.

3 Weeks OutSouthern Hem

logistics

1 Week OutRe-confirm volumes

3 Days OutNorthern Hem

logistics


potatoes

Post 2 daysReceipt of sales data

Post 2 - 3 weeksRunning down

promo

Supply Chain Agriculture - Grower Retail to Supplier Retailer to Supplier Logistics Retailer to Supplier Logistics Logistics / Store Household Retailer to Supplier Retailer

Potential Issues/

Causes of Waste

- Supply from

Northern

Hemisphere and

Southern

Hemisphere wi l l

a ffect time to arriva l

in the UK.

- Volume not

disclosed at this

stage.

- Lack of

communication

regarding volumes,

and the review of

existing data of

previous promos.

- At this stage

volumes are

discussed but will

be based on

projected volumes.

- Issue for Southern

Hemisphere

suppliers, as

amendments to

volumes at this

stage will be too late

(as on the sea for 3

weeks).

- On occasions

delays at customs

can create pressure

on the supply chain

to release product to

packing.

- Retailer can re-

forecast a week

before sales.

Fluctuations (either

increases or

decreases) - can

result in additional

volumes being

sourced or a glut of

volume in the supply

chain.

- Changes to be

made 5 weeks before

promo for SH and 5

days before NH.

- On occasions

delays at customs

can create pressure

on the supply chain

to release product to

packing.

- Unplanned

changes to the

forecast can result

in additional costs

of labour and

transportation.

- Lack of chilled

storage can affect

the shelf l ife of

products.

- Receipt of data

regarding sales

volumes by SKU,

availability, waste

levels etc.

- Must run down

stock effectively.

- Some products

sold without

flashing, therefore

potentially effecting

sales/waste

volumes.


35

3.6 Strawberries Whilst not the largest promoted product (in volume terms), berry and currant promotions tend to be seasonal and typically increase between April and October. Berries and currants are the fourth largest fruit product on promotion behind oranges, bananas and easy peelers. Typically the promotion mechanic most utilised is TPR or Y for £X. There is also evidence to suggest that strawberries are a high waste line in value terms. 3.6.1 Promotion Planning Typically promotion planning for the forthcoming year will be planned 12 months out of the promotion. This does however vary by supplier, with some suppliers commenting that “historically planning promotion has been up to four weeks in advance of the promotion; at the most it is seven weeks in advance”. The planning commences with the intention to promote from the retailer to the supplier, followed by discussions on volumes (with country of origin influencing this decision). The decision making protocol of selecting the promotion will vary by retailer. The retailer clearly takes the lead in initiating the promotion, choosing the mechanic, time allocation and providing an indication of forecast volumes. There will be some input from suppliers, but the final decision will retain with the retailer. Generally the plan is based on the previous year’s activity. There is a requirement to analyse data and disseminate this within the supply chain, so decisions based on sound volumes can be made. Whilst also considering the previous year’s promotional activity, the production volume needs to be considered. The promotion should correlate with the production peak. Waste can be generated at this point through over supply in the summer months (July to September). Should there be over production, other sales avenues are explored such as wholesale markets. The impact from the weather on production volumes and consumer purchases can greatly affect this product. Should there be a good spell of weather, production volumes increases along with an increase in consumer demand. Rigid promotional campaigns can result in waste volumes throughout the supply chain. There should be some fluidity to promotions to avoid high wastage should volumes increase (linking with consumer demand). Typically, waste performance indicators, specifically for a promotion are not considered as KPIs. Suppliers are measured on availability into depot. Waste is considered across the category rather than being attributable to one supplier. A waste target will be established at the beginning of the year detailed in the contract of supply, yet this does not appear to be too onerous. 3.6.2 Agriculture UK supplies of strawberries typically also source from the EU (Spain or Holland) or North Africa (Morocco or Egypt). Strawberries grown outside of the UK can be picked on day one, with arrival into the UK on day four, to be in the store on day seven. Typically the shelf life on strawberries is up to six days. Poor weather can impact the quality of strawberries, resulting in the potential to reduce or withdraw the promotion.


36

As discussed earlier, good weather can impact on the increase in sales volumes and a rigid promotional planning strategy can result in high wastage of strawberries throughout the supply chain. Receipt of poor quality strawberries from growers/exporters can affect the promotion, with worst case the promotion being withdrawn, resulting in a glut of product in the market. 3.6.3 Volume and Purchase Orders Four days out of a promotion, the volume plan is typically received from the retailer. Whilst this is adequate for UK grown produce, this is insufficient for imported produce. Data supplied by the retailer, provides insight on forecasts and the trading week. This appraises volume and availability. Orders are typically received in the morning however the first order is typically a poor indication of volumes. The order is then split (with suppliers) and orders are then confirmed late morning/early afternoon. This can constrain delivery times due to the shortening of time scales. Poor volume estimates also put pressure on the supply chain as UK produce is generally picked to order. To secure the produce, the orders are needed as early as possible. 3.6.4 Store Refrigeration of strawberries will vary by retailer. During trade interviews, suppliers report that often strawberries are not refrigerated within stores. This can negatively impact on the shelf life of the product by up to two days. This will of course also depend on other variables such as weather, in-store temperature and the rate of sales. Packaging also has a significant impact on the waste levels. Protecting the product through heat sealing is one measure. Within some supply chains, there has been a drive for a smaller footprint in terms of packaging dimensions. This can result in strawberries being stacked in a deeper punnet, rather than a single layer punnet. This can result in bruising and mould generation of product. Waste levels can also be impacted through the overlap of supply from two seasons – between the UK and EU and North Africa. Promotions should be avoided which could affect/create victim lines between a gondola end and what is available on the aisle. Access to data, insight and knowledge regarding the category will help in this area. There is an increase in waste levels at a store level due to consumer’s loyalty to British strawberries and this impacts on Dutch strawberries for example. Strawberries have now become a product that is desired all year round, yet consumers have a lack of understanding regarding the supply of strawberries. Quality, season and weather will drive what is available. Consumers could be better informed if there were more knowledgeable and experienced fresh produce managers/employees in store and through improved communication and marketing. Managing and rotating the stock at a store is key to ensure that promotions operate well ensuring availability is accurately forecast and communicated to central buyers and thereafter suppliers. Placement of the promoted product must be where the planner originally intended. Should there be changes at a store level, this could impact the sales and waste volumes. Whilst


37

store personnel understand their consumers and the local area, should changes be required, this should be communicated with regional and central teams to ensure changes to the forecast has been actioned. An example of promoted strawberries is shown below.


3.6.5 Evaluation There appears to be a mixed approach from suppliers regarding conducting evaluations following a promotion. One respondent reports that they undertake their own analysis of data supplied by the customer (focussing on volume and availability). KPIs are not established before a promotion. Again, there are varying views regarding waste performance indicators, with one respondent reporting that waste levels are presented on a monthly basis. Should an issue arise post promotion, the mechanic and time of the year of the forthcoming promotions would be re-considered. 3.6.6 Waste arising A strawberries promotion planning process map is shown below in Figure 8. This shows the different stages of the supply chain and the areas that have potential to cause waste. In summary, the key influences that could generate waste in strawberries are:

Weather during growing and harvesting and at the time of consumption;

Over production to meet retail orders or because of prolonged good weather;

Damage through poor handling and/or inadequate packaging; and

Storage at ambient temperatures rather than chilled.


38

Figure 8 - Strawberries Whole Supply Chain Product Map

Promotional

Decision

Making

12 Months -

4 Weeks OutPlan promotions.

Not fixed and will

flex.

4 Days OutVolume plan

received.

3 - 4 Days OutEuropean produce

picked and

transported.

2 Days OutBritish produce

picked and

transported.

2 Days OutSales orders

received.


strawberries

Post 2 daysReceipt of sales data

Supply Chain Retailer to Supplier Agriculture Retailer to Supplier Grower & Logistics Grower & Logistics Retailer to Supplier Logistics / Store Household Retailer to Supplier

Potential Issues/

Causes of Waste

- Must cons ider

sa les and

production curves

(volume of product)

in the forecast.

- Typically either

British or European.

Eygpt will be a

source country out

of the UK season.

- Weather impacts

can have a

considerable effect.

- Waste can be

generated through

over supply in the

market place.

- Insufficient time

for imported

produce.

- Poor volume

estimates can put

pressure on the

supply chain.

- Use technology to

store produce (e.g.

Controlled

Atmosphere (CA)) to

control and avoid

mould.


the quality of the

produce.

- Receipt of poor

quality strawberries

from exporter, can

affect promo, with

worse case scenario

resulting in the

withdrawal of the

promo.

- Delays of imported

produce.

- Use technology to

store produce (e.g.

CA) to control and

avoid mould.


the quality of the

produce.

- Often volume

(either too high or

low) discrepancies

with orders.

- 12 hrs in advance

of the produce

arriving in store

depot can be a

significant window

for issues to arise

and affect the

volume.

- Have less time to

sell produce in

ambient condition

to retain optimum

shelf l ife of product.

- Packing of product

can have a positive

impact on shelf l ife

of product (heat seal

for example).

- Insufficient

ordering systems

lacking ability to

track sales volumes

to sufficiently after

order volumes.


39

4.0 Key Findings The insight from the product analyses reported above has been used with other trade material to produce guidance notes for retailers and manufacturers on preventing waste during promotion campaigns. These are reported separately. In this section we address some of the wider issues raised by this research. 4.1 Promotions and waste Promotion campaigns intensified after the economic recession started in 2007. These campaigns included the introduction of value lines which take different forms, depending on the retailer. There is evidence17 to suggest that these approaches have been effective in helping to achieve a greater utilisation of product and to an extent, it can be argued, represent a specific form of promotion. It is also possible that these approaches have helped reduced waste and loss. As a result of the recession and continued austerity, price is still at the forefront of shoppers minds’. IGD report18 (2014) that four in ten (41%) shoppers say price is an ‘extremely important’ factor when they are deciding what stores to shop at – though this is a decrease from 45% two years ago. Promotion campaigns have been utilised by UK retailers to help them leverage sales and increase footfall into their stores. All the leading retailers promote even where the main strategy is every-day low prices. Promotions have also been used to increase consumer loyalty as some consumers have switched to the discounters (such as Aldi and Lidl) who have seen their overall market shares increase. In contrast, and despite the high levels of promotional activity, three of the leading multiple retailers (Tesco, Morrisons and Co-operative Food) are currently reporting a reduction in their respective market shares. Today, in response, almost all of the major players in the market now have some form of price-matching or price-guarantee initiative. As to the fundamental question of whether promotions result in increased waste we have no direct evidence to claim that this is the case overall. In this sense our findings mirror the results from WRAPs work on household waste where it was also not possible to demonstrate that sales of food on promotion increase the amount of household food wasted. However, for the fresh produce category we were able to analyse a limited data set that did show for certain products that waste (by value) was higher during promotions and that for this limited data set, overall food waste from promotions was higher. These data also showed that waste for some products was lower during promotions compared to when they were off promotion. It is not possible to infer that these results stand for all promotions across fresh produce or that they can be extrapolated to other categories. Indeed, for this limited data set waste from promotions also fell significantly between 2011/12 and 2012/13. There were instances where greater flexibility and responsiveness in the supply chain could have helped prevent waste. These circumstances arose because of weather events that resulted in higher than expected production levels outside usual seasonal fluctuations. We found that waste is not used as a significant reason to mount a promotion campaign or a metric that is used in the promotion planning and evaluation process. Nevertheless, we accept that promotions can be a beneficial force in preventing waste. However, because promotions are driven by market share and footfall reasons and mounted as part of a retailers’ competitive strategy, waste is not at the forefront in promotion planning or evaluation with the result that some promotions can result in increased levels of waste. This

17See A review of factors effecting fruit and vegetable demand: http://randd.defra.gov.uk/Default.aspx?Menu=Menu&Module=More&Location=None&Completed=0&ProjectID=17802 18http://shoppervista.igd.com/Hub.aspx?id=26&tid=5&dcid=180


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can arise through poor choice of product for a promotion, for example promoting products at times when consumption does not respond to a price reduction, for example summer promotions on products associated with winter seasons. Our evidence shows that promotion planners do not use waste as a key metric at all stages of a promotion campaign. We believe this position needs to be re-balanced which is what the guidelines (published separately) seek to address. 4.2 Impact of different promotion mechanics and waste We set out to identify whether one promotion mechanic was more likely to result in waste compared to another. The evidence is more certain, though we were unable to subject it to statistical validity testing. Our work suggests (but does not confirm) that ‘BOGOF’ types of promotion could lead to more waste than other mechanics like ‘X for Y’. We have to qualify this finding because it is clear that other factors such as the choice of product for a promotion, the location and positioning of the promotion ‘in-store’ and the level of PR activity of the promotion also influence resulting levels of waste. However, these factors will also influence waste arising from other mechanics, such that we believe BOGOF type promotions should be reviewed from a waste prevention point of view, and potentially replaced. In January 2012, the Office of Fair Trading (OFT) launched two investigations, both into retail food pricing and promotional practices in the UK retail food and drink sector. Following the investigation OFT has developed a set of principles. The principles are designed to ensure promotions are not misleading. Following the dissemination of the principles, eight retailers have publicly signed up to the principles and in some cases have developed these further. This may result in the reduction or removal of using particular mechanics, such as BOGOF and Half Price. While the choice of promotion mechanic may alter the potential for creating waste in households, other factors such as stock rotation, location in store and avoidance of specific promotion packs can all have an impact on waste in the supply chain. Standard promotions (using existing packaging) can result in very little waste and issues with procurement (packaging and raw ingredients) are minimal. Issues however can occur with retail specific promotion packs that require special packaging to be designed and ordered for specific promotions. If a promotion is cancelled then the packaging cannot be reused or sold to alternative markets as the product was designed for specific retail outlets. This has the potential to cause a significant amount of waste to suppliers. 4.3 The importance of promotional planning Promotional planning is key to successful management and impacts on both retailers and manufacturers. It can have considerable effect on potential waste arising. We found that when promotions are evaluated the cost of waste resulting from the promotion was often not included and that waste was not always a KPI used in the planning, execution and evaluation of a promotion. The true cost of a promotion should include the costs of marketing, the loss of sales on victim lines, disposal costs of any residual stock and the cost of waste – which is both the disposal cost and the cost of the ingredients, energy, water and labour that has been used in production. This is a fundamental point where we believe change should be made particularly in assessing the impact of a promotion on waste and using these results in future planning. As part of the promotion process, improvements in forecasting are of critical importance. There are now better methods developed as part of the Collaborative Planning Forecasting Replenishment (CPFR) methodology19 and better data, for example on weather from the Met Office and others that can be used to predict sales. Given that our weather is becoming

19See: https://www.bisg.org/docs/VICS-CPFR.pdf


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more variable there appears to be an urgent requirement to obtain real time weather data and access to expert knowledge that can be used as part of promotion planning and execution. More effective sharing of data can help avoid promotions being run on products that (a) do not respond well to price changes (products vary in what economists call their elasticity of demand) or (b) which result in sales of substitute products falling (sometimes called ‘cannibalisation’). For the former, this is due to some products having low price-elasticity, so demand from consumers does not necessarily increase significantly, even if the price falls, whereas demand and purchases may significantly increase when price is reduced on more ‘elastic’ products. For the latter, one example is that the promotion of strawberries could impact the sales of grapes potentially resulting in waste (if mark down polices fail to increase the sales of grapes). Further, the use of ‘real time’ sales monitoring data during promotions can help to avoid a build-up of residual stocks towards the end of the promotion. As well as better data, effective communication between the manufacturer and the retailer throughout the whole process is vital so that the promotion runs smoothly and accurate production and sales volumes can be planned to eliminate problems and waste in the supply chain. Unexpected and last minute alterations should be avoided to keep waste to a minimum. However, in some cases flexibility can be an asset, for example if a crop is ahead of schedule or yields are higher than forecast because of weather vagaries. Communication between the supplier and retailer should start at least 12 months out of a promotion. Discussions tend to focus on the promotion of one individual product, rather than consider the range of products in the category that are potential substitutes. Open communication regarding the mechanic and promotion of other products are very rarely discussed by retailers with other suppliers. This, can therefore, negatively impact on planned promotions, where forecasts have not included the potential impact from several brands/products that are on promotion at the same time. At 12 months out of a promotion, promotional sales volumes will be provided as a forecast only, and will be confirmed approximately three weeks out of the promotion. However, this can change days out of a promotion, causing pressure on the supply chain, particularly for imported produce. Locking down orders for the beginning of the promotion will help alleviate this additional pressure. It is important to ensure that the promoted products can be transported in the correct temperature range. For mixed deliveries, multi compartment vehicles can be used thereby allowing products to be sub-divided into a number of compartments with individual temperatures suitable for different products. Distribution plans should be jointly reviewed between suppliers and retailers ensuring that stock is managed to run promotions that meet the shopper’s expectations. This should include packing on the day of distribution to maximise product life and quality in-store as well as ensuring there is no need for additional deliveries creating unnecessary fuel usage. Working with the retailer to provide advice on packaging (e.g. freezing guidelines on packaging) that can minimise wastage in the home will also help to keep waste to a minimum.

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