How Dynamic Pricing Tech is Cutting Grocers’ Food Waste

U.S. grocers generated 4.99M tons of surplus food in 2022, and nearly 35 percent of it was landfilled or incinerated, taking a toll on the environment and on retailers’ bottom line. Food lost at the store level is worth, on average, double the profits from food sales, reports ReFED.

But a process called dynamic pricing has potential to turn the tide. It’s a way to slash food waste and its associated costs by discounting items as they draw nearer to their expiration dates.

Software developer Wasteless offers an artificial intelligence-powered application to achieve those very goals. Its dynamic pricing software not only helps incentivize consumers to buy food that would otherwise become waste but does it in a way where retailers can make a profit.

The company’s markdown software leverages deep learning to determine what foods to discount, how much to discount them, and when to do it. The smart tech monitors and analyzes data such as how much stock is onboarded to shelves, when it was put out, and expiration dates. Items are automatically priced according to their freshness.  

“We learned that to sell to retailers you must touch their pockets. So, we are selling money and value. Along with those benefits come massive food waste reduction,” says Wasteless founder and CEO Oded Omer.

Launched in 2017, the company caters to 1,000 stores across 18 grocery chains in the U.S. and Europe. Customers realize at least 20 percent more revenue—sometimes up to 50 percent—leveraging this price optimization app.

The tool has been a game changer for grocers who historically took what Omer calls a reactive approach to food waste rather than a preventive one. They would wait until a day or two before meats, poultry, and other perishables reached their expiration dates, then aggressively discount them.

“We say do not wait until the last moment and knock down prices by 30 to 60 percent. Go with a much smaller discount earlier.  Then we look at the outcome to determine if the lesser markdown was enough to move the stock and sell items. If the item was not picked up the AI technology deepens the markdown,” Omer says.

In terms of dollars, some end users realize tens to hundreds of millions in savings, he says. At the same time, they typically cut their waste by 35 to 80 percent. That adds up, especially for large operations. He points to a 150-store chain that was able to prevent 2.2M pounds of meat from going to waste in one year.

The fresher the items the greater the savings. Meat, poultry, and fish are where customers see the highest impact.

Omer and co-founder Yossi Regev come from IT backgrounds, having developed dynamic pricing, big data, and IoT systems in past ventures. And they knew retail; they’d established three companies that focused on this sector.

They sold the last of the three operations, a retail analytics company, to drink and brew mega giant AB InBev for $18M.  While their focus was not on salvaging food at the time, they were aware of the issues.

“We thought what if we could harness the power of dynamic pricing to reduce food waste? We could have massive impact!”

For a fleeting moment he wondered if he would have to be insane to start all over again from the ground up.

“But my career was inside startups where you wake up with an idea. You want to do something good that will bring meaningful change.

“So, I said we know retail. We know investors and have other connections. Let’s fight food waste.  That’s a good goal.”

In 2017, the year Omer and Regev launched Wasteless, they tested the American market but decided grocers there were not ready for what they had in mind. The entrepreneurs turned to Europe, establishing a subsidiary in the Netherlands where the industry was aware of and wanting to take on food waste. Today they work with what Omer calls four of Europe’s largest chains.

The partners gave the U.S. another shot in 2019 setting up a demonstration project in Manhattan. Retailers’ understanding has been growing around the potential to generate more revenue while reducing their waste, and the tech company has grown alongside this trend.

By now Wasteless has raised $15M, mainly through venture capital from U.S. and European firms. Some funds have come from innovation grants and some from industry-related investors, mostly meat manufacturers.

A few dynamics that present unique challenges to grocers drive the uptick in new technologies for this sector—especially as food companies are pressued to do their part to help slow climate change. What those dynamics boil down to is that grocers live in a constantly changing world.

There are supply chain fluctuations due to factors such as seasonal produce availability, weather conditions, and transportation delays. A sudden disruption in the delivery of fresh produce or other perishables can lead to a backup, then unexpected overstock, with waste happening when products expire before they are sold.

Adding to these complexities, consumer preferences can shift, sometimes quickly, due to trends, diet fads, or local events. Trying to stay on top of these fluctuations can take some guesswork. It can mean more waste when unexpected demand spikes are not properly anticipated.

Stores Consulting Group supports grocers in areas such as process improvement, shrink and profit recovery. The company brings Wasteless’ technology to its clients.

“[The tool has generated] huge returns on investment and the ability for targeted markdowns based on movement and ownership, versus the traditional way of static markdown percentages,” says Rick Marino, managing director, The Stores Consulting Group.

His clients are losing one-third less in markdown costs; they are selling more and landfilling less while offering clients what they look for: good deals, he says.Says Omer: “It’s about empowering supermarket chains to operate more profitably and efficiently, reduce waste and ultimately create a more sustainable future for the industry.”