Zero-Waste Grocery Stores – The Old-Fashioned Way Forward?

Food Packaging Industry

According to Grand View Research, the global food packaging industry is estimated at USD 277.9 billion in 2017, exhibiting a CAGR of 5.1% year-on-year. Food packaging offers extended and stable shelf-life and higher food safety for consumers. It also accounts for 50% of the global consumer packaging industry, if the beverage sector is to be added, that number would increase to 69%.

European Commission for the Environment estimates that EU countries use on average 198 plastic bags per capita in one year. Of those, about 61% originated at supermarkets and 89% were discarded after the first use. If the  EU abolished the use of plastic bags, it would save close to 900bn euros.

With increasing awareness about environmental protection, the food industry is under increased pressure to reduce its wastage. One way in which the industry is trying to reinvent itself is by eliminating or reducing the packaging the food items come in. Zero-waste food stores are an attestation of this effort. These stores aim to encourage customers to bring reusable packaging to purchase items in bulk.

Redefining food retail: the future of Zero-waste stores

The food retail industry has seen many transformations throughout the years. Initially, fresh locally produced food was sold to consumers through small neighborhood stores. These stores often sold items by the volume required. With globalization and the development of transport and shipment, large supermarkets were established, selling all types of internationally sourced packaged foods. A variety of different businesses later emerged to redefine this shopping experience, most of which focused on price reduction. Those stores used the strategy of selling in bulk or larger quantities in order to reduce the prices involved in packaging. Examples include Costco in the USA and Algramo in Latin America.

In recent days, a new trend has emerged in food retail under the form of bulk or zero-waste stores. Such stores are redefining the industry by shifting the focus from price and diversification of offered products, to environmental sustainability. In fact, these new stores answer 4 Sustainable Development Goals:

• Zero Hunger: By making food available in bulk, people can buy smaller quantities to answer their needs.
• Reduced inequalities: Food no longer includes the cost of packaging and is, therefore, more affordable to the whole population.
• Sustainable cities and communities: Less packaging also means less volume to transport, and less waste in landfills.
• Responsible consumption and production: People can now buy the quantities they need as opposed to preset volumes. This means that greatly reduces excess purchasing of food products that will be unused and disposed of.

This innovative version of food retail is inspired by the older traditions of local grocery shopping whereby small spices and food stores sold locally sourced ingredients by the unit of volume according to the customer’s needs.

The Zero-waste model:

These food retailers have an innovative business model with two aims: profit & zero packaging. Such stores carry products such as grains, pasta, spices, coffee, and dried fruit that are displayed in large bins or dispensers from which customers can serve themselves into their own containers or store provided recyclable/reusable containers. These stores tend to also sell more than simply food such as cleaning liquid and laundry products that customers pump into their bottles; as well as an array of environmentally friendly products, such as bamboo toothbrush, plastic-free dental floss and vegan leather snack pouches liquids. The customers are then charged according to the volume or weight purchased.   

The benefits of this new model are five folds:

1. Forecasting split: The retailer no longer needs to predict both the quantity of a product required and the quantity of each of the different sizes of this product, but rather just the total volume that could be sold within a specific period.
2. Cost reduction: Since the retailers purchase goods in bulk volumes, the reduction in small containers reduces the shipment volume and therefore reduces shipment costs. This models also saves retailers money in terms of disposal and labor costs. Since shops purchase straight from the food producers, there is a possibility to reduce costs as the packaging aspect of the value supply chain is removed.
3. Environmental benefits: The main goal is to prevent packaging waste which has significant advantages over recycling and other forms of waste management. It prevents waste from ending up in nature due to accidental release or waste mismanagement. It thereby prevents harm to our ecosystem; directly (e.g. the entanglement of animals) or indirectly (e.g. plastic particles accumulating in food chains). In addition, fewer greenhouse gases are emitted from the transportation of goods.
4. Finance vs impact loop: The larger these stores grow the higher the environmental benefit in terms of waste and emissions reduction. Currently, these stores are mostly located in cities where customers are aware of environmental pressures. As such there is limited floor space for each store in city centres, implying that growth will be driven by number of stores and not store size.
5. Affordability of products: this concept helps eliminate the poverty task as it makes the product available to people needing to buy in smaller quantities.

Success or failure?

Zero-waste stores have gained in popularity in many countries around the world. While in countries such as the UK, Germany, the Netherlands, and Indonesia it had picked up quite fast, some countries such as the USA have a been a bit slower to adopt this new trend. The business model faces the following challenges:

1. Lower product diversification: Not all products can be sold by volume, and therefore this makes such stores an inconvenient for people who only have time for a one-stop shop where they can buy everything. Since products are bought in large stock, it is also harder for stores to hold a large variety of brands of the same product.
2. Ease of use for customers: It is challenging for customers to always plan to bring their containers with them to the store. Which means that the re-use of containers might be deterring clients from buying from the zero-waste store.
3. Lack of regulatory support: The EU has approved a law banning single use plastics (straws, cutlery) and all supermarkets in most European countries charge customers for plastic bags. In contrast, local laws limiting plastic usage in the US such as banning plastic bags have come under scrutiny of state and federal lawmakers. They argue that these bans are unconstitutional and vote laws against the ban, “banning the bans”.
4. Inventory constraints: no packaging implies that food spoils faster as sealed cereal boxes last longer than open bins of granola so stores have to manage higher overage costs.
5. Last mile delivery: Most food producers with whom stores work, still use plastic containers for shipping. One mitigant is to aim to purchase only local products thus reducing shipping complexity and carbon footprint.

One of the main challenges to bulk shopping is its inconvenience. Shoppers need to plan in advance by carrying their own bags and/or containers. Some entrepreneurs aim to eliminate the hassles of physical zero-waste stores. A new online zero waste platform called Loop has partnered with big companies (Proctor & Gamble, Nestle and Coca-Cola) to offer branded goods in reusable containers. Products like Crest and Häagen-Dazs arrive at your house in a reusable box. Once finished, consumers put the containers out for pick-up. Loop collects them, washes and finally refills them for reuse. The platform is set to launch this spring 2019 in New York and Paris.

Examples of Zero-Waste Food Stores

The first ever zero-waste food store was opened in London in 2007. According to bepakt.com, an online index tracking packaging-free shops around the world, there are currently around 350 zero-waste food stores, globally. Most are located in the EU with significant activity starting to take place in cities such as Paris, Barcelona, London and Berlin. Internationally, Singapore, South Korea, Japan, and the USA are other countries that are starting to adopt this business model. In Germany alone, 29 zero-waste food stores opened-up in 2018.

The US’s first zero-waste grocery store, In.gredients, opened in Austin, Texas, in 2012. It was a small grocery store with about 1400 square feet of retail space with a mission of ‘no waste’.  The store’s original idea was to be as package-free as possible while providing a grocery shop experience. Most of the food was sold in bulk and housed in gravity bins. Items for purchase included grains and nuts, locally sourced produce and liquids such as soda, oil, and vinegar. Customers mostly used their own bags almost for all products except for products such as eggs. The original goal of the firm was to be 70% packaging-free with the goal to increase that share every year.

Unfortunately, about 18 months into its mission, the store had to adapt its business model as they realized it was not sustainable. The business model required customers to plan their visit to the grocery store, which required a significant change in most customers’ habits that most were unwilling to do. Most customers would go across the street to normal grocery shops just because they forgot their containers. Another reason why customers shopped elsewhere was to buy must-have items which were not available at In.gredients, such as a six-pack of beer, potato chips and roast chicken for a Sunday night dinner with the family. Despite best efforts, the store closed its doors in April 2018 given its low sales and lack of profitability.

Another example of how stores are experimenting with the concept of zero-waste is Roots Zero-waste Market in Idaho. Selling food in bulk is problematic as it expires faster than traditional sales channels that use plastic to protect food from early spoilage. As such,  zero-waste packaging stores face faster inventory cycles. Roots combined the concept of a supermarket with that of a cafe to be able to rotate food from grocery to cafe in order to eliminate food waste due to expiration or superficial damage. The amalgamation of two different business models allows to keep products fresh, rotating through to the customer and eliminate food-waste as well as capture higher customer willingness-to-pay.

Fruta Feia is a Portuguese project creating a market for “ugly fruits” that started in 2013 that aims to tackle issues such as standardization and “beauty” of fruits and vegetables. The aim of Fruta Feia has been, and with great success, to develop an alternative network for these forgotten fruits and veggies. Via an entire network of collection points, members and producers, are now able to play an important role in offering a market for these products and for reducing food waste. Firm has collection points in Porto and Lisbon and producers from all over Portugal. Via their online platform you can easily find information about the local producers of the fruits and veggies, and the collection points. A clear and simple, yet effective and innovative project.