Digital Disruption at AB InBev: A beer cocktail of Transparency & Technology
Following up to my previous article on the airline industry, in this article I focus on beer and how AB InBev, the world’s largest market player in the beer segment, is disrupting the industry investing in four technologies: Big Data, Internet of Things (IoT), Augmented Reality (AR), and Artificial Intelligence (AI). I analyze a new customer preference and recommend a potential technological partner that AB InBev could collaborate with to add further disruption.
Beer is the oldest recorded recipe in the world. The early brewing process is documented on papyrus scrolls around 5,000 B.C by the Egyptians. Compared to brewing ingredients used now— water, malted barley, hops, and yeast— the first beers were brewed with things like dates, pomegranates, and other indigenous herbs which were probably quite bitter by today’s standards.
Beer, which was used by Egyptians for religious ceremonies with Pharaohs as brewmasters, has now grown to a segment which contributes US$615,933m in revenues in 2020 with expected annual market growth of 3.6% (CAGR 2020-2023).¹
Anheuser-Busch InBev (AB InBev or ABI) is the largest brewer in the world and one of the world's top five consumer product companies, as measured by EBITDA. After the SABMiller acquisition, the company's portfolio now contains five of the top 10 beer brands by sales and 18 brands with retail sales over $1 billion. AB InBev has been dominating the beer industry with legacy brands— Budweiser, Corona, and Stella— and has disrupted the beer industry through strategic initiatives such as ZX Ventures, Platform Beer, Anheuser Busch InBev Corporate Pension, and through recognizing the untapped potential in Craft Beer industry and the Cannabis industry. Furthermore, realizing prospective competitors like Amazon in the US and Taobao in China, AB InBev has made around half of its investments in the technological space— starting PartyWith in October 2017 to Octi in October 2019— the company has made five major investments mentioned below:
PartyWith is a social platform app focusing on nightlife events. It connects people who want to party. The app allows users to connect and meet new people to grab drinks, find parties nearby, make friends at festivals, and discover local nightlife experiences. It not only serves as a social connector but also serves as a way to find what's happening around in the city.
WeissBeerger is an Israeli based beverage analytics startup acquired by AB InBev. WeissBeerger developed IoT analytics tools that include sensors in the beer taps, refrigerators and other important points in the supply chain to provide bar and restaurant owners as well as brewers and beverage manufacturers with data related to the quality of the products, inventory situation, consumer purchasing habits and more.
Octi is an augmented video company that leverages machine learning and computer vision to make things more interactive. The company’s app allows users to augment themselves, their friends, and the environment around them using the human body as a medium for storytelling, just as GIFs, emojis, and face filters. The app implements skeleton mapping and gesture detection technology using a smartphone camera to recognize the human body without additional sensors and automatically overlays contextual 3D effects. The technology recognizes what’s happening in real-time with a human body, interprets gestures, and understands spatially where a person sits in a room or scene.
SmartHop is an AI-powered dispatcher that analyzes and compares thousands of loads in minutes to help carriers plan and book loads that reduce vacant capacities and increase revenue. SmartHop provides AB InBev with the ability to reduce the company-owned fleet of trucks since manufacturers don’t always have full loads for their own trucks, leading to wasted space, wasted revenues, and wasted carbon-producing mileage. Using SmartHop AB InBev can outsource its loads to independent truckers and small-scale fleet operators looking for freight, reducing the empty miles AB InBev loads run because of not being able to haul for others.
Created by Analytical Flavor Systems, Gastrograph is a quality and process control software that predicts flaws and adjusts manufacturing processes in real-time, allowing producers to hit target flavor profiles in each batch. Gastrograph is the world’s first artificial intelligence and machine learning process control solution for the food and beverage industry. It uses modern techniques like machine learning and artificial intelligence to provide predictions for flavor profile formation and optimization. This allows early detection and correction of batch-to-batch deviations, flaws, taints, and contaminations at any stage of the production process, from raw ingredients to the finished product. Gastrograph software learns to control the manufacturing process, updating times, temperature, and ingredient additions automatically– ensuring the finished product hits the target flavor profile every time.
The Food & Beverage industry is re-shaping itself. According to a survey from 2018 that looked at how transparency factors influenced consumer trust and loyalty in the United States, 86% of the respondents stated that they would have more trust for manufacturers and retailers that provide ingredient definitions beyond labels.²
In another survey on consumer attitudes towards product transparency in the United States in 2018, 83 percent of respondents stated that they would like to know more about products they are purchasing.³
The trend indicated by the surveys mentioned above is clear— consumers are more aware than ever before. Today’s consumer cares about: Where their food comes from?, How ethically it is sourced?, and How sustainably it is grown?. Consumers also care about the destination of the products: What happens to the plastic package their food comes in?, and How is the manufacturer handling the waste generated during and post-production?
To further consumer transparency through the use of technology, I recommend that a potential partner for AB InBev could be OpenSC. Using OpenSC, users can scan a QR code on a product and view its full history. OpenSC performs three important tasks:
Verifying claims about how the product was produced using machine learning—OpenSC enables product certification to be shared with consumers across a range of digital channels. OpenSC builds on standard requirements-for example to be certified by the Marine Stewardship Council, the manufacturer must not fish in Marine Protected Areas, and then use existing or new data sets to automate the verification of that specific claim, in real-time. This gives an advantage to the manufacturer as previously the verification could only be done after the production. AB InBev could use this feature of OpenSC to verify sustainable or ethical production claims in an automated and real-time manner and maximize visibility and interactive engagement as well as trace certified products throughout supply chains to ensure authenticity and trust.
Tracing products in the supply chain using IoT and Blockchain— AB InBev could use OpenSC to capture unique product-level data throughout supply chains using IoT. For example, sensors could be used to track location, temperature, exposure to light, chain of custody and other attributes for a production batch of beer. Since OpenSC claims to store traceability data in a secure and trustworthy way in a decentralized platform, different players along the supply chain can collaborate by contributing data about the product at each stage to form an end-to-end view. This could help in identifying existing and predicting future deadlocks in production for a smoother and non-disruptive process.
Sharing traceability information with consumers across a range of digital channels— OpenSC works with businesses to design ways of sharing information about how their products are produced and their journey from origin to point of purchase through engaging digital experiences across a range of channels. AB InBev can use OpenSC to enable consumers to verify claims about whether the beer product was sustainably and ethically produced and whether the process abides by the industry standards. To make it more interactive, AB InBev can develop an app for consumers to scan QR code on beer bottles using which they can verify digital information such as satellite imagery for the bottle journey, sample video of the bottling process, and manufacturing plants/ technology involved in the production of the beer bottle.
Given the measures AB InBev has already taken in terms of strategic business expansion and technological disruption, it’s no surprise that the brand has emerged as the top player in its segment.
As a thought leader, it excites me to think about what can a market leader like Anheuser-Busch InBev do at this stage to ensure its dominance and which technologies could it leverage to maintain the stronghold?
Similar to the airline industry, which I talked about in my previous article, the beer industry is a perfect example of a legacy industry with a high potential for disruption. I believe that to keep up with the growing sales of craft brewers to 24.2% in a flat beer market worth $114.2 billion U.S.⁴ AB InBev could explore technologies that would promote product transparency. As per the 2018 report, “Transparency Imperative: Product Labeling from the Consumer Perspective” by the Food Industry Association, 75% of shoppers would switch to a brand that provides more in-depth product information beyond what is provided on the label, up 39% from 2016.⁵ The same percentage of shoppers would pay more for foods with “clean label” ingredients. While Millennials, Generation Xers, Hispanic, Asian shoppers and those with a household income of $100,000+ are the consumers driving this shift, AB InBev could leverage the new customer preferences to maintain its market leadership.
References:-
¹ Beer - worldwide. (n.d.). Retrieved March 01, 2020, from https://www-statista-com.ezproxy.babson.edu/outlook/10010000/100/beer/worldwide
² FMI. (December 10, 2018). How transparency influences consumer trust and loyalty in the United States in 2018* [Graph]. In Statista. Retrieved March 21, 2020, from https://www-statista-com.ezproxy.babson.edu/statistics/1021232/transparency-factors-affecting-consumer-trust-loyalty-us/
³ FMI. (December 10, 2018). Consumers who agree to the following statements about product label transparency* [Graph]. In Statista. Retrieved March 21, 2020, from https://www-statista-com.ezproxy.babson.edu/statistics/1021180/consumer-attitudes-towards-transparency-of-a-product-us/
⁴ https://www.usatoday.com/story/money/business/2019/04/02/beer-sales-stay-flat-craft-beer-grows-share-114-b-us-market/3341312002/
⁵ https://www.foodmanufacturing.com/consumer-trends/article/13251254/insurgents-vs-industry-incumbents-how-the-fb-industry-is-reshaping-itself-for-the-woke-consumer/
(Link to the original article here)