Everybody hates food waste. It creates unnecessary costs for producers, retailers, and consumers, and it has deeply detrimental impacts on climate change. In the face of global food insecurity, it also represents a moral flaw. So if everybody agrees, why is it so difficult to find a solution?

Perhaps marketing and retailing theory can come to the rescue. Recent research and pilot programs in stores call for leveraging a well-known pricing tactic to reduce food waste substantially, namely, by adopting dynamic pricing for perishable foods. As vegetables, dairy, fruit, and meats get closer to their expiration dates, lowering their prices should encourage more purchases, which would reduce the number and amount of items thrown out by retailers. A similar pricing strategy might occur further up the supply chain too, such that farmers and other producers might lower their wholesale prices to move late-season produce into stores, rather than letting it rot in the field.

According to some studies, dynamic pricing offers substantial promise. One experiment indicated that it reduced food waste in a grocery chain by 21 percent. In a comparative analysis, the researcher also tested the effectiveness of organic waste bans, which require retailers to deal with the expired products in their stores by either composting or donating them. Those efforts, according to the study, reduced food waste by only 4 percent.

In addition, organic waste bans create costs for retailers, which must find methods and channels to move the expired items. But dynamic pricing promises increased revenues throughout the supply chain. They might earn lower margins on nearly expired food, by charging, say, 25 percent less for eggs that are within a week of their expiration date, but it is still better than earning nothing, while also having to pay to have the eggs disposed of. It also implies better immediate outcomes for the retailer than donating the food for free. According to the previously cited study, dynamic pricing increases retailers’ gross margins by about 3 percent, whereas the bans decrease them by 1 percent.

Such studies and experiments only focus on wholesalers and retailers though, so dynamic pricing alone is not enough. Once consumers get the products home, they still might wind up tossing expired food, such that it still goes to waste. To address this stage, dynamic pricing advocates also suggest establishing revised rules for the definition of expiration, sell-by, and best-by dates printed on food packaging.

Currently, those rules are vague and undefined (with the exception of expiration dates for baby food). Manufacturers tend to be conservative and print early dates, even if the food is likely to remain consumable and fine for a longer time, to protect against potential lawsuits and to encourage people to eat their products at their optimal freshness levels. For the dynamic pricing plan to work, consumers need to realize that they can still safely consume food after its best-by date, so that they feel safe purchasing it at the store, then consuming it at home.

Still, disposal by grocery stores accounts for approximately 10 percent of all food waste, so reducing the volume of items thrown into dumpsters in the back of stores could have a significant effect. The next step is determining effective implementation plans; to price dynamically and accurately, the wholesalers and retailers need to be able to identify a precise date of production and/or expiration for all the foods they sell. Such information is not widely available currently, suggesting the need for more transparent food supply chains. That’s another idea that seems likely to get everybody to agree, even if deciding how to make it happen continues to challenge us.

Discussion Questions

1. Develop a plan for dynamic pricing of food, imagining that you are a food manufacturer (e.g., farmer). Develop another plan, imagining that you are a retailer. What are the most important features that each member of the food supply chain would want to include?
2. Should laws regulate the meaning of expiration, sell-by, and best-by dates printed on food? What represent reasonable requirements for these products?

Sources: Christine Clark, “Dynamic Pricing Superior to Organic Waste Bins in Preventing Climate Change,” UC San Diego Today, July 23, 2023; Robert Evan Sanders, “Dynamic Pricing and Organic Waste Bans: A Study of Grocery Retailers’ Incentives to Reduce Food Waste,” available at http://dx.doi.org/10.2139/ssrn.2994426; Jodi Helmer, “Can Dynamic Pricing Reduce Food Waste in Supermarkets?” FoodPrint, January 31, 2022