Should brands and retailers stop destroying unsold merchandise?
Boston Beer recently decided to throw away “millions of cases” of Truly, instead of discounting the product, in response to a broad slowdown in the hard seltzer category over the summer.
“We were very aggressive about adding capacity, adding inventory, buying raw materials, like cans and flavors, and, frankly, we overbought,” Boston Beer Chairman Jim Koch told CNBC last week. “And when the growth stopped, we had more of all those things than we were going to be able to use, because there is a shelf life.”
As a result, the owner of Sam Adams absorbed a charge in the third quarter of $102.4 million related to direct costs of the hard seltzer slowdown, including inventory obsolescence and related destruction costs of $54.3 million.
Mr. Koch told CNBC the reason promotions aren’t used to clear excess inventories is quality concerns. “Our mission is to sell high-quality products and to build high-quality brands. So rather than take a chance of it getting out in the market and going stale and consumers having a bad experience, we decided to make the hard decision and eat a lot of product, just to make sure consumers didn’t get stale product and have a bad Truly,” he said.
Brands or retailers destroying unsold merchandise is rarely talked about but more common than generally thought.
Supermarkets throw away about 43 billion pounds of food every year — accounting for 10 percent of all food waste in the U.S — due to administrative mistakes, breakage, spoilage, theft and other losses, according to the Upcycled Food Association.
Luxury firms and fashion houses are often called out for destroying some goods rather than leaving their wares to languish on discount racks and impairing their image.
Coach earlier this month said it would cease the practice of destroying in-store returns of damaged and unsalable goods after a TikTok video posted by an environmentalist showing slashed handbags went viral. The company said that the vast majority of its excess inventory is donated and that the damaged product being destroyed in stores represented around one percent of units globally.
- Third Quarter (13-week) and Year-to-Date (39-week) 2021 Financial Results – Boston Beer – Boston Beer
- The Boston Beer Company, inc (SAM) Q3 2021 Earnings Call Transcript – The Motley Fool
- Boston Beer tossed ‘millions of cases’ of Truly hard seltzer instead of discounting it, chairman says – CNBC
- 4 Ways Grocers are Winning Market Share & Boosting Margins by Reducing Food Waste – Upcycled Food
- It’s no more ‘burn, baby, burn’ for Burberry – RetailWire
- Why fashion brands destroy billions’ worth of their own merchandise every year – Vox
- Coach Says It Has Stopped Destroying Merchandise After Online Criticism – Business Of Fashion
- Amazon is introducing measures to reduce the amount of inventory it destroys after probes found it trashes millions of items a year – Business Insider
- Amazon’s new programmes give returned and unsold inventory new life – Amazon.com
DISCUSSION QUESTIONS: Did Boston Beer make the right decision in destroying “millions of cases” of Truly amid the slowdown in the hard seltzer category? What insights does the move offer around discounting, repurposing and destroying slow-selling merchandise?