McKinsey Quarterly 2023 Number 1

It should become a business priority as well. Our in-depth examination of the farm to-retailer food supply chain reveals that food loss is a result of inefficiencies, and its hidden costs are often equal to or greater than retailers’ net profits—even the best performing ones’. The good news is that reducing food loss is immensely achievable. Our research shows that food manufacturers and retailers, because they are at the center of the food value chain, are uniquely positioned to lead global efforts to reduce food loss. Working with each other and with all participants in the value chain, we believe they could cut food loss by 50 to 70 percent. Two-thirds of the food that would otherwise be lost could be redirected to human consumption; the remaining one-third would go to alternative uses, such as bio-based materials or animal feed. And the business rewards would be significant: companies would reap economic and cash flow benefits while simultaneously improving their Scope 3 emission footprint. Our research shows that retailers could reduce their cost of goods sold (COGS) by 3 to 6 percent and manufacturers by 5 to 10 percent. Grocers and manufacturers could capture $80 billion in new market potential by developing new businesses from food that would otherwise be lost. And they could cut CO 2 emissions and the associated costs by 4 to 9 percent. Because food loss is a sprawling problem that spans multiple players and processes, siloed approaches will have limited impact. To effect major change, all stakeholders will need to work together. The effort and investment will be well worth it, on many levels. Where and how does food get lost? More than two billion tons of food are lost or wasted every year. About half of this happens upstream: during the harvest, postharvest handling and storage, and processing stages (Exhibit 1). Although meat and dairy have a high environmental impact per unit produced (it takes more than 1,000 gallons of water to produce a pound of beef, for example), meat accounts for only about 3 percent of food loss, with dairy another 5 percent. Three other food categories— fruits and vegetables, cereals, and roots and tubers—account for much of the food loss and the associated CO 2 emissions and water use. Those categories should therefore be the focus of loss reduction efforts. Exactly where in the supply chain does food get lost, and what factors contribute to this? In collaboration with the Consumer Goods Forum and its members, and working closely with leading European grocers and distributors, we investigated the farm-to-retailer journey, using tomatoes as our test case.

We chose tomatoes because 50 million to 75 million tons of them are lost upstream every year—more than any other fruit or vegetable. In addition, lessons learned from the

McKinsey Quarterly 2023 Number 1

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