2026 Grocery Deduction Hotspots: Shortages & Unsaleables
- The HRG Team
- 5 days ago
- 4 min read
If you sell into grocery, you already know the truth: the store shelf is only the beginning.
The real profit fight often occurs later—during shortage research, damage claims, unsaleables, and post-audit deductions that surface when no one is in the mood for surprises.
And in 2026, the hotspots are largely predictable: shortages and unsaleables-related deductions will continue to rise on the list of “high-dollar, high-friction” claim types, especially as supply chains remain tight and retailers continue to tune compliance rules.
Why grocery gets hit differently
Grocery is fast, frequent, and perishable.
Academic research citing Food Marketing Institute (FMI) data indicates that perishables (produce, dairy, meat, seafood) can account for more than half of total sales in many grocery stores.
That mix matters because the deduction story becomes less about “did it ship?” and more about:
Did it arrive in sellable condition?
Did it arrive on time and scan correctly?
Did the invoice match the receiving data perfectly?
Small data breaks lead to a large number of deductions.
Hotspot #1: Shortages (Codes like 22)
Shortages are a deduction category that can be valid in concept yet wrong in execution.
A common example is Code 22 — “Goods Billed Not Shipped” — used when invoiced quantities don’t match what the retailer’s system shows as received.
Common root causes include:
Split shipments that don’t reconcile cleanly
Timing mismatches between Electronic Data Interchange (EDI) transmissions and receiving
Substitutions or SKU/pack-size confusion
Receiving or scanning errors that get treated like supplier shortages
The painful part: shortages don’t just cost money. They cost time.
And time is where recovery dies.
Hotspot #2: Damage and “unsaleables” pressure
“Unsaleables” can show up in different ways depending on the retailer:
Returns and damage claims
Defective allowances
Swell allowances
Reclamation, markdowns, and disposal-related charges
Even older FMI/Grocery Manufacturers Association (GMA) benchmarking has framed unsaleables as a multi-billion-dollar drain across the industry, and more recent sector work continues to show that the operational cost of unsold/surplus food can be a meaningful percentage of sales.
What’s new in 2026 is not that unsaleables exist—it’s that tolerance is lower. Retailers have tighter margin expectations, too, and “gray area” claims get pushed downstream faster.
“Code 20” and why code labels can mislead
You mentioned Code 20 specifically. Here’s the honest truth: code definitions vary by retailer and sometimes by program inside the same retailer.
So rather than pretend every supplier sees the same label, the better move is to treat “Code 20-class” items as high-impact damage/condition/claim deductions that require:
Faster triage,
Stronger logistics documentation
A clean division of responsibility (supplier vs. carrier vs. retailer handling).
If you have a code dictionary from your retailer portal, staple it to your dispute workflow.
You don’t want the team debating the code's meaning as the dispute window closes.
The 2026 department trends behind the deductions
Three trends tend to amplify grocery deduction risk:
More complexity at the edge of the store Fresh, prepared foods, and perishable categories create more opportunities for condition claims, dating issues, and handling damage.
More omnichannel fulfillment stress Online grocery remains material; FMI reports that 7.1% of all grocery item sales were online in 2024. More picking and last-mile complexity can mean more exceptions, more “where did it go?” moments, and more claim volume.
Retailers keep tightening playbooks If you’ve felt an uptick in “policy-first” claims, you’re not imagining it. The process is becoming more automated, and exceptions get coded and deducted faster.
HRG’s proactive recovery playbook (what “good” looks like)
Most suppliers think of deductions as reactive: a pile arrives, then you fight it.
A proactive model looks different:
1) Weekly hotspot dashboard (not month-end archaeology)
Top 5 codes by dollars
Top 5 codes by count
Retailer/location concentration (which distribution centers or regions spike)
A rolling 4-week trendline
2) Triage rules that protect bandwidth Not every deduction requires the same level of effort. Set rules like:
Auto-dispute within 48–72 hours for “no merchandise received” type claims where your Proof of Delivery (POD) is clean
Escalate high-dollar shortages immediately
Batch small repeats weekly (but don’t let them rot for 90 days)
3) A standard “shortage packet” that’s actually complete For shortage-type claims, your packet should typically include:
Bill of Lading (BOL) and carrier documentation
POD (signed, time-stamped if available)
Advance Ship Notice (ASN) confirmation and EDI timestamps
Pallet/carton counts
Invoice and purchase order alignment
Any appointment/receiving records you can capture
4) Root-cause follow-ups (or you’ll relive the same month forever) If Code 22 spikes due to split-shipment mismatches, fix it upstream. If damage claims spike due to pallet shifting, redesign packaging and pallet patterns.
This is the part most teams skip because it feels “operational.” But it’s where the money is.
Why ignoring this is expensive (even if you’re “growing”)
If you’re winning on the top line but letting shortages and unsaleables pile up unresolved, you get a mirage margin.
And the longer you wait, the harder recovery gets. Not because your claims aren’t valid, but because your documentation gets harder to retrieve and the dispute windows close.
HRG’s framing is direct: deductions continue to accrue because each invoice is a new trigger, rules change, and post-audit claims can arise long after the fact.
They also state they’ve recovered $1B+ for clients—largely by doing the work suppliers don’t have time to sustain internally.
A practical first step for Q1: pick two hotspots (for most grocery suppliers, shortages + damage/unsaleables) and run them like a program for 60 days.
Measure:
Cycle time to submit disputes,
Sin rate,
Repeat-root-cause frequency.
You’ll learn quickly where your profit is hiding.
