Retailing Strategies of Imperfect Produce and the Battle Against Food Waste

Problem definition: Imperfect produce—edible but cosmetically flawed fruits and vegetables—is often excluded from store shelves, contributing significantly to food waste. Commercializing imperfect produce presents a promising opportunity to reduce waste. This study examines how grocery retailers can best choose from three common retailing strategies: discarding imperfect produce, bunching it with cosmetically perfect produce, or differentiating by selling perfect and imperfect produce separately at different prices. Methodology/results: We develop analytical models that capture consumers’ purchase behaviors under each retailing strategy. These models account for varying consumer preferences and quality perceptions to determine optimal retailer choices and their implications for food waste reduction. Our analysis identifies the specific market conditions under which each retailing strategy becomes optimal. We then examine two widely discussed policy interventions aimed at reducing food waste: educating consumers to improve their perception of imperfect produce and relaxing the tolerance limits for the amount of imperfect produce allowed into retail stores. We find that educating consumers about the value of imperfect produce may inadvertently reduce sales of perfect produce through cannibalization, potentially leading to increased amounts of unsold perfect produce and lower profits. This economic pressure can cause retailers to switch from the differentiating strategy to the discarding strategy, paradoxically increasing food waste. Additionally, relaxing tolerance limits may merely shift food waste from farms to retail stores when retailers employ discarding or differentiating strategies. Our study incorporates three extensions—upcycling imperfect produce into by-products, adopting mixed strategies that combine approaches, and implementing full-shelf ordering policies—which confirm the robustness of our main findings. Managerial implications: This research provides retailers with actionable insights for selecting optimal strategies to manage imperfect produce based on specific consumer preference profiles and market conditions. For policymakers, we offer recommendations that highlight the potential unintended consequences of well-intentioned interventions, suggesting more nuanced approaches to effectively reduce food waste. Funding: H. Yu is grateful for the summer research funding from the Robert H. Brethen Operations Management Institute and the Whitman School of Management, Syracuse University. Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0167 .