My best customer is the trashcan

The twisted incentives that push suppliers to see waste as a good thing

One of the main barriers to reducing waste is that the supply chain doesn’t always collect the right data or share it. More often than not, suppliers and other upstream actors never hear about key quality issues that are blisteringly obvious and important to consumers, which they could impact positively if they were incentivized to do so. 

Down in Costa Rica, working to reduce waste by extending pineapple shelf life, we ran an experiment where we kept the fruit from two farms separate to see if there were meaningful quality differences between them.

To our surprise, we saw that fruit from one farm showed significantly less of the biggest waste-causing defect pineapples exhibited after being shipped in cold storage to Europe; “shell browning.” If you buy a lot of pineapples, you’ve seen it. The pineapple looks fine in cold storage, but after a few days at room temperature, the shell of the pineapple turns brown and begins to smell rotten, long before it’s inedible.

I was excited: we’d uncovered that one farm was producing much higher quality fruit. Maybe we could isolate the differences between farms and improve quality across the board! I told our customers – a large pineapple and banana importer into southern Europe, and the independent supplier who owned both farms – what we’d seen. I got blank stares. Then they explained to me that they couldn’t capture this value. In fact, it could hurt their businesses. If waste dropped, demand from the supermarkets would drop, and their sales could drop. 

Their best customer was the trashcan.

Come again?! When I dug deeper, I found that these upstream players weren’t incentivized to care about what happened to the fruit after it passed the retailers’ quality inspection and they got paid. In addition, the retailer’s quality spec didn’t mention shell browning, and neither did UN standards for import, which listed dozens of defects that were checked for regularly. So, the marketer and supplier didn’t care. 

There is logic to not measuring this defect at import. It’s tricky to measure something that doesn’t appear until long after the fruit has changed hands, and has been sitting on supermarket shelves for several days. Even if you were to hold fruit in the warehouse at room temperature to measure shell browning over a week, by the time it appeared, the rest of the fruit from that container would already be long paid for and sitting on store shelves or kitchen counters.  

So, despite moving a large percentage of the fruit that would end up browning on shelves and at home, the marketer had no reason to measure shell browning. They had copious data on fruit quality from thousands of containers, over decades, but zero data on this defect. On the supplier side, the quality team had rarely seen shell browning, as it only appeared after long periods of cold storage, and the pineapples they bought and ate locally in Costa Rica didn’t spend that long in refrigeration.

The farmers ran a sophisticated operation and spent their lives trying to grow the best pineapples, but were unaware of this key factor that affected the final consumers’ purchase decision every day.

Hiding in plain sight

In a way it makes sense that upstream actors didn’t care about the defect. It didn’t directly touch their businesses. But why didn’t the retailer demand fruit that exhibited less shell browning? After all, it was a main cause of waste and consumer dissatisfaction for them. As I learned when moon-lighting as a produce clerk a few months later, even though they controlled the stores, the retailer wasn’t set up to measure this type of defect either. They likely didn’t know it was happening at a large scale. 

When someone bought a pineapple or we threw one away, the system registered the SKU (e.g. one pineapple sold), but not the key “metadata” about the fruit, such as the supplier or the cause for the waste (I’ll go deeper into solving the waste portion of this in a separate post). 

This dynamic led to a surreal experience I had one morning stocking shelves. Standing in a European produce section, I removed a pineapple from the shelf because of shell browning, and saw by the label that it was from the farm we were working with in Central America.  I could see the whole journey of this pineapple, but as I entered it into the system and placed it into the donation bin, I realized that nobody else would.  This pineapple’s story would be lost, along with stories of the millions of other pieces of produce that would be wasted that day in supermarkets across the world. As a result, the key people who had the power to reduce the incidence of these defects, and the waste they caused, wouldn’t have the information they needed to do so.

Diagnosing the disconnect

Let’s trace this back across the chain. The pineapple buyer, who negotiated with the marketer and supplier, would just see a pineapple waste percentage and a sales number across hundreds of stores. As a result, he couldn’t select suppliers based on the quality of their fruit beyond what it looked like at import, or set quality specs based on anything that happened after the fruit made it onto shelves. The marketer and supplier, who made the production and storage decisions that could reduce shell browning, wouldn’t be pushed to improve it.

In a hypothetical world, if suppliers made the effort to take great care of the fruit, for example by investing in new production technology or by paying more for faster shipping, they wouldn’t be rewarded with more volume or higher prices from the retailer. If anything, as pineapple waste went down, they might see their sales drop as volume needed from individual supermarkets lowered.

The status quo is a strange one, where your average (or in my case, below average) produce clerk might see shell browning every day, but the decision-makers in the supply chain rarely see it. In this low feedback world, the supplier and marketer can grow their business by selling fruit that doesn’t last. By one way of thinking, the trashcan is their best customer.

What can be done? If only the fruit could talk

We can imagine a parallel universe where retailers collect better data on what consumers want and what causes waste, set quality specs with suppliers that reflect those needs, and reward early supply chain actors through higher prices for fruit that lasts longer and tastes better. By coordinating efforts across the chain, our idealized stakeholders would outcompete our current ones. They would be able to offer higher quality produce, which better matched consumer needs, all while feeding more people and wasting less.

How do we get there? A lot of our work as technology providers is around capturing the data that will let the fruit (or other food) talk, and then sharing it up and down the chain. As we work to scale our solutions to the global problems of food waste, hunger, and nutrition, & climate change, we must meet the various supply chain stakeholders where they are.  We should go in eyes wide open, knowing that there are many long-standing structures in place that work well enough today for business to continue as usual, and that while our solutions might not solve an acute problem for any individual stakeholder, if we can implement them widely, all stakeholders will benefit. 

Next week, I’ll build on this example and explore an opportunity in this space that I find tantalizing, both from a sustainability and a business perspective: that upstream actors like fertilizer, seed, and wax companies could drastically increase their market caps by finding a way to prove the value they are already creating at the retailer level, but for which they don’t get credit for today.