Inventory that's about to expire loses value, but how much exactly? Many hospitality entrepreneurs throw products away without calculating the cost, or sell them at a discount without knowing if they're still making a profit. In this article, you'll learn step-by-step how to calculate value reduction and make smart decisions.
Why calculating value reduction matters
If you don't know how much value your inventory is losing, you can't make good decisions. Throwing away costs money, but selling with too much discount does too.
💡 Example:
You have 5 kg of salmon that expires tomorrow. Purchase price €18/kg.
- Total purchase value: 5 kg × €18 = €90
- If thrown away: 100% loss = €90
- If 50% discount: €45 revenue remaining = €45 loss
Difference: €45 saved through smart action
The three scenarios for nearly expired inventory
There are three options, each with their own financial impact:
- Throw away: 100% loss of purchase value
- Sell at discount: Partial loss
- Process into another dish: Retain value
Formula for value reduction
You calculate value reduction like this:
Value reduction = (Purchase value - Residual value) / Purchase value × 100%
💡 Example calculation:
3 kg beef, purchase price €24/kg, sold at 40% discount:
- Purchase value: 3 kg × €24 = €72
- Normal selling price: €40/kg (food cost 30%)
- Discount price: €40 × 0.60 = €24/kg
- Residual value: 3 kg × €24 = €72
Value reduction: (€72 - €72) / €72 = 0%
⚠️ Note:
Always calculate with the actual selling price after discount, not the original menu price. And don't forget you still have preparation costs.
Break-even point for discount sales
To avoid extra loss when selling at a discount, you must at least recover your variable costs:
- Purchase price of ingredient
- Preparation time (chef wages)
- Gas/electricity for preparation
- Packaging (for takeaway)
💡 Break-even calculation:
Steak that expires tomorrow:
- Purchase price: €12/piece
- Preparation costs: €3/piece
- Minimum selling price: €15/piece
Anything below €15 = extra loss on top of the original problem
Alternative processing options
Sometimes you can limit value reduction by processing smartly:
- Meat: Process into stew, ragout or ground meat
- Fish: Make fish soup or fish & chips
- Vegetables: Soup, smoothies or side dishes
- Dairy: Sauces, desserts or marinades
Through processing you often retain 70-90% of the original value, versus 0% when throwing away.
Prevention: avoid value reduction
The best strategy is preventing inventory from nearly expiring:
- FIFO system: First In, First Out
- Smaller purchase quantities: Order more frequently
- Daily check: Which products have 2-3 days left
- Menu adjustments: Create specials from products that need to go
⚠️ Note:
Never sell products that have actually expired. This is about products that are approaching their expiration date but are still safe to process.
Impact on annual basis
Value reduction from nearly expired inventory can add up significantly:
💡 Annual impact example:
Restaurant with €8,000 purchase per month:
- 5% of inventory becomes nearly expired
- Average 60% value reduction
- Monthly loss: €8,000 × 0.05 × 0.60 = €240
Annual loss: €240 × 12 = €2,880
Through better planning and smart processing, you can reduce this loss by 50-80%.
How do you calculate value reduction? (step by step)
Inventory the stock
Count all products that expire within 1-2 days. Note the quantity and the original purchase price per unit. Calculate the total purchase value.
Determine the residual value
Calculate what you can still get: if throwing away it's €0, if selling at discount the new selling price, if processing the value in the new dish. Deduct any additional preparation costs.
Calculate the loss percentage
Use the formula: (Purchase value - Residual value) / Purchase value × 100%. This gives you the exact loss percentage so you can make the best choice between the available options.
✨ Pro tip
Check every morning which products expire within 48 hours and immediately make a daily special or special dish from them. This way you sell at normal price instead of at a discount.
Calculate this yourself?
In the KitchenNmbrs app you can do this in just a few clicks. 7 days free, no credit card.
Was this article helpful?
Frequently asked questions
Can I still sell products that expire tomorrow?
Yes, as long as the expiration date hasn't passed, you can sell them. Just pay attention to quality and safety. If in doubt: don't do it.
How much discount can I give at most?
Get back at least your variable costs (purchase + preparation), otherwise you make extra loss. This often means maximum 50-70% discount.
Do I need to register value reduction for accounting?
Yes, food waste and value reduction are deductible business expenses. Keep track of what you throw away and why, you can deduct this from your profit.
How do I prevent inventory from nearly expiring?
Work with FIFO (first in, first out), order smaller quantities more frequently, and check daily what needs to go within 2-3 days. Plan specials around products that need to move.
Is it better to sell at a discount or throw away?
Selling at a discount is almost always better, as long as you get back at least your variable costs. Even at 70% discount you earn more than throwing away (0% revenue).
📚 Sources consulted
- EU Verordening 852/2004 — Levensmiddelenhygiëne (2004) — Official source
- EU Verordening 853/2004 — Hygiënevoorschriften voor levensmiddelen van dierlijke oorsprong (2004) — Official source
- EU Verordening 1169/2011 — Voedselinformatie aan consumenten (2011) — Official source
- NVWA — Hygiënecode voor de horeca (2024) — Official source
- NVWA — Allergenen in voedsel (2024) — Official source
- Codex Alimentarius — International Food Standards (2024) — Official source
- FSA — Safer food, better business (HACCP) (2024) — Official source
- BVL — Lebensmittelhygiene (HACCP) (2024) — Official source
- Warenwetbesluit Bereiding en behandeling van levensmiddelen (2024) — Official source
- WHO — Foodborne diseases estimates (2024) — Official source
Food Standards Agency (FSA) — https://www.food.gov.uk
The HACCP standards shown in this application are for informational purposes only. KitchenNmbrs does not guarantee that displayed values are current or complete. Always consult the FSA or your local authority for the latest regulations.
Written by
Jeffrey Smit
Founder & CEO of KitchenNmbrs
Jeffrey Smit built KitchenNmbrs from 8 years of hands-on experience as kitchen manager at 1NUL8 Group in Rotterdam. His mission: give every restaurant owner control over food cost.
Manage inventory without spreadsheets
Always know what you have in stock and what it's worth. KitchenNmbrs connects inventory to recipes and purchasing for complete oversight. Start your free trial.
Start free trial →