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Blockchain Paving its Way into the Retail Industry
by EOS Intelligence EOS Intelligence No Comments

Blockchain Paving Its Way into Retail Industry

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Blockchain technology, which initially became popular with cryptocurrency (especially bitcoin), is now making its way into many other industries, including retail. Though still in its infancy, blockchain holds tremendous potential for retailers and has applications across supply chain data management, customer retention through loyalty programs, digital advertising, among many others. While several industry experts have proclaimed blockchain to be the next revolutionary technology in the retail sector, it is yet to be seen if these applications gain commercial acceptability (or remain niche solutions for niche products).

While the financial services industry has been one of the early adopters of blockchain technology, other sectors are also increasingly realizing the potential that blockchain can unlock for their businesses.

One such sector is retail, which is increasingly going digital – shedding its paper-based and centralized way of doing business. With an increasingly demanding customer and growing need for transparency, blockchain technology is expected to play a big role in the retail sector.

In addition to its inherent application as a payment-medium supporter (i.e. increasing acceptance of cryptocurrencies as a payment mode by retailers), blockchain has several other applications in the retail space – encompassing supply chain management, customer loyalty programs, and digital advertising.

Blockchain in supply chain

Blockchain helps improve transparency

Blockchain technology makes it possible to record every touchpoint of the product’s life as it moves through the supply chain – from manufacturer to shipper to supplier to seller – adding blocks of verifiable record to the product’s heritage.

For instance, if a supermarket is selling a box of cookies, blockchain data would record exactly when, where, and by whom the cookies were made, as well as what ingredients were used during manufacturing. By placing the cookies supply chain on the blockchain, the process becomes more transparent through inerasable tracking of how cookies have been handled at each node all the way up to the store shelves. This makes any affected ingredient traceable faster. For instance, if milk or eggs used in the cookies were affected due to poor storage, the affected ingredient (or its batch) could be traced back to the storage location and could be withdrawn from the warehouse without the tedious and error-prone process of checking each supply chain node. This ensures greater food safety and helps hold suppliers accountable throughout the chain. This is also useful in case of tracing of organic products where it is particularly important to trace whether each ingredient used to make a product is organic and matches the claims made by the producer.

There are several players in the industry who are already taking advantage of the benefits brought to their operations by blockchain. One of the largest retail giants, Walmart, has partnered with IBM and has been working together since October 2016 to develop a food safety blockchain technology called, IBMs Food Trust, to facilitate the digitization of the food supply chain process. The technology, which was previously in its testing phase, was launched for commercial use in October 2018. With the help of this technology, the source of the product can be tracked in 2.2 seconds, which previously could take up to seven days (with the use of paper-based ledgers).

In September 2018, Walmart announced a Food Trust Initiative, under which it has requested all its greens suppliers to upload data about their produce on the blockchain and ensure end-to-end traceability by September 2019. It is likely that the company extends the use of this technology to other fresh foods and vegetable suppliers in future.

Post the commercial launch of the IBM Food Trust platform in October 2018, France-based retail giant, Carrefour, also announced that it will be using IBM’s blockchain technology to track animal and vegetable product lines. Furthermore, it expects to expand this technology to other fresh products by 2022.

Blockchain Paving Its Way into the Retail Industry

Blockchain effectively combats food-related fraud

Another issue that blockchain helps combat in the retail space is food-related fraud, i.e. the misrepresentation of product contents by substituting the ingredients with cheaper alternatives. It is estimated that the global food industry suffers losses of about US$40 billion annually due to food fraud. An example of such a fraud was the Tesco horsemeat scandal in 2013, where some of Tesco’s packaged beef meals were found to include 60% horsemeat (undeclared on the label).

To fight such frauds, one of the world’s largest e-commerce players, Alibaba, has partnered with four Australian and New-Zealand-based companies, among whom are Blackmores (an Australian health supplement company) and Fonterra (a multinational dairy co-operative) to create a food tracing system built on blockchain technology. The project entered into its pilot phase in 2018. Through this system, Tmall Global’s (Alibaba’s international online marketplace) customers in China will be able to trace the goods that they order online (from partnering companies) across each node of the supply chain before the goods are finally delivered. The partnership is not only expected to help customers track the supply chain of food ordered online but also to prevent food fraud thanks to greater visibility and traceability of such fraudulent actions potentially attempted by producers.

Blockchain helps bring down the counterfeit luxury goods market

As a digital ledger where multiple stakeholders share and authenticate the same information, blockchain also makes counterfeiting more difficult. Counterfeiting is a big issue in the luxury and premium goods market owing to high prices and limited availability. The scale of counterfeiting in the luxury retail segment is overwhelming and it is sometimes nearly impossible to distinguish legitimate goods from the counterfeit ones. Forbes estimated the counterfeit luxury goods market in 2018 to be worth approximately US$1.2 trillion.

However, the use of blockchain technology can help luxury brands fight against the menace of counterfeiting. By using blockchain, companies can track every link in their supply chain and customers can access information to ensure the origins of the product and its authenticity.

Greats, a US-based premium sneaker brand, has been using blockchain and embedding smart tags in its footwear since 2016. Customers can use their smartphones to scan the tags to verify the authenticity of the sneakers.

The use of blockchain technology can help luxury brands (and other retail companies) fight against the menace of counterfeiting. By using blockchain, companies can track every link in their supply chain and customers can access this information through smartphones to ensure the origins of the product and its authenticity.

In 2018, a Paris-based blockchain company, Arianee, announced that it will be building a registry to combat counterfeiting of luxury brands, where every product will be classified with a unique token that differentiates it from the rest of the products.

Another example of this is De Beers, one of the world’s largest diamond producers, which along with five other diamond players (Diacore, Diarough, KGK Group, Rosy Blue NV, and Venus Jewel) has developed a blockchain platform, called Tracr in 2017. Through this platform, a diamond can be tracked from miner to end customer, i.e. throughout its complete value chain, using ethereum blockchain technology. In 2018, De Beers announced that it has successfully tracked 100 high-value diamonds along the value chain during the pilot run of its blockchain platform. The platform is expected to bring transparency in the diamond trade through physical identification of diamonds. A diamond could be tracked through its unique number from mining to cutting to polishing and to retail, which will ensure its purity.

Owing to its ability to empower companies to track, trace, and authenticate their products from the point of origin to the retail shelf, blockchain is likely to become the standard in supply chain tracking for the retail sector. However, this application is currently in its nascent stage of development and is being experimented on by only few large and niche players before it reaches industry-wide adoption.

Blockchain in customer loyalty programs

Customer loyalty points is another area where blockchain could be considered very useful. Loyalty programs generally work by awarding points to customer account for each purchase, which later can be redeemed for discounts on future purchases. While it follows the principle that retaining existing customers is less expensive than attracting new customers, loyalty programs are not always successful.

Most loyalty programs are centralized, where the customer could only redeem its value with the same retailer (or in some cases a small group of retailers), thereby limiting their use and appeal. Moreover, in many cases, loyalty programs also have stipulations that further restrict the use of the points and reduce the program’s perceived value, which in turn results in lower loyalty of the customer. According to Colloquy Loyalty Census 2017, there were approximately 3,000 loyalty programs in North America, where 6.7 trillion points were issued every year and about 21 trillion points were dormant or not used. This suggests that more often than not, customers find loyalty programs more exhausting than benefitting, defeating the entire purpose of having loyalty programs.

Blockchain technology allows customers the flexibility to use their loyalty points when and how they please. Blockchain-based loyalty programs award customers with tokens or cryptocurrencies instead of points, which could be redeemed by customers during future retail purchases and could even be redeemed for fiat currency (as the value of tokens grow overtime and do not expire).

This can be seen in the case of Rakutan’s loyalty program. In 2018, Rakutan, one of Japan’s largest retailers, announced an alt-coin, called Rakutan Coin, with which customers could redeem reward points for gifts at all Rakutan Group companies and also for other cryptocurrencies. The company has moved US$9 billion worth of existing Super Points (customer loyalty program points) into the blockchain to provide a boost to the Rakutan Coin.

Blockchain-based loyalty programs award customers with tokens or cryptocurrencies instead of points, which could be redeemed by customers during future retail purchases and could even be redeemed for fiat currency.

In another example, in 2017, University of New South Wales in Australia partnered with LoyaltyX, an experimental loyalty agency for a blockchain loyalty research project, wherein students and staff earned US$5 of ether (cryptocurrency ethereum) for every ten transactions made at any of the eleven campus retailers including Boost Juice (Australian fruit juice and smoothie retail outlet) and IGA (Australian chain of supermarkets). It was found that 86% of the participants were more attracted to earn cryptocurrencies where they had the option to redeem them for fiat currency.

Thus, blockchain-powered programs seem to encourage customers to engage in the loyalty programs as they not only curb the problem of set expiration of traditional loyalty points but also give the power to the customer to use the tokens as and when they require with any retailer. This is likely to help retailers renew customer interest in their loyalty programs, which in turn is likely to improve brand loyalty.

In addition to adoption in the retail space, players from other related industries are also experimenting with blockchain-based loyalty programs. In 2018, American Express (an American financial services company) partnered with Boxed (an American online wholesale retailer) to make its membership rewards program more versatile by integrating blockchain. With blockchain, merchants will be able to create custom membership rewards program for American Express card holders. The power to structure the offers will be with the merchants, whereas American Express will have the right to regulate the products or brands being promoted.

Also in the same year, Singapore Airlines partnered with KPMG and Microsoft and created a blockchain-based digital wallet KrisPay, where customers can turn travel miles into units of payment that can be used with partner merchants such as eateries, beauty parlors, gas stations, and some retailers, including LEGO store outlets within Singapore. This shows that some large brands are experimenting with this technology for their loyalty programs.

While integration of blockchain seems to be the ideal solution to invigorate the fading customer loyalty programs, it is still in its embryonic stage. Such applications need mass adaption to be successful and this will require significant time and investments.

Moreover, the adoption and success of blockchain-based loyalty programs to an extent also depend on the overall sentiment towards cryptocurrencies – their value and ease of transactions.

Lastly, scalability is also an extremely critical point for the smooth running of such loyalty programs. With numerous retail transactions happening every second, it is yet to be seen if blockchain can cater to these huge numbers without a slag time.

Blockchain in digital advertising

Another space where blockchain technology is likely to have significant potential is digital advertising, which is used by numerous retailers as a medium to reach their prospective customers. However, the process of buying online advertising is susceptible to fraud, especially with the increasing use of automated real-time bidding through ad-exchanges (programmatic advertising).

Under real-time programmatic advertising, publishers (themselves or through ad vendors) showcase their inventory along with details about the kind of visitors that their site targets. The advertisers then bid for these ad impressions and the highest bidder gets to display their ad on the site.

The entire process and ad marketplace lacks a sufficient level of transparency. Sometimes vendors misrepresent remnant inventory for a publisher as premium inventory, thereby charging higher fees from advertisers. In other cases, fraudulent sellers enter the exchange, claiming to represent publishers and having access to their inventory, in turn selling fake inventory to advertisers.

Blockchain has the potential to make the online ad marketplace more robust and legitimate by providing transparency, which is currently missing. Since blockchain is a peer-to-peer online ledger where all transactions between the participating parties are recorded (and cannot be deleted or changed), the advertisers can see for themselves where the inventory that they are bidding for has originated and who has access/authority to sell it.

Some examples of implementations are already found in the market. In June 2017, MetaX, a blockchain technology company, along with DMA (The Data and Marketing Association) launched adChain, an open protocol built on the public ethereum. adChain is an open access ledger that tracks and reports the origin, sale, resale, and publishing of an online ad.

Explore our other Perspectives on blockchain

In December 2017, MetaX also launched a blockchain-based solution ‘Ads.txt Plus’ to improve transparency in the digital advertising space. Ads.txt Plus is based on a technology by IAB Tech Lab, called Ads.txt, which helps prevent fraud in the industry by allowing publishers to broadcast a list of authorized sellers of their ad inventory. By bringing this technology to ethereum blockchain, MetaX aims to further improve efficiency and transparency for its users.

If blockchain is adopted successfully in the digital advertising space, the advertisers can see exactly where their ad dollars are being spent, which players made commission, and how much of the total amount paid by them for the ad reached the site publisher.

Further, with the help of blockchain, buyers and sellers (advertisers and publishers) can enter into smart contracts for the sale and purchase of digital ads without the need for intermediaries, eliminating them from the ad bidding process.

Alternatively, buyers and sellers can choose to add other verifying parties/service providers to the smart contracts, such as measurement provider, ratings provider, payment provider, and arbitrator. In 2017, Kochava Labs (the R&D subsidiary of Kochava Inc.) launched XCHNG, an open and unified blockchain-based framework for the digital advertising ecosystem. Through the use of smart contacts, XCHNG aims at reducing the number of middlemen in the digital advertising ecosystem by facilitating transactions between the buyer and the seller and measurement providers.

While blockchain-based solutions fit perfectly in the digital advertising space on paper, the practicality and adaptability are yet to be seen.

One of the key issues challenging the adoption of blockchain in the digital ad space is scalability. The process of chaining and verifying on a blockchain takes much longer, especially, when compared with the current speed of real-time bidding transactions. It is yet to be seen if blockchain technology can evolve to offer faster processing speed, which is critical for industry-wide adoption.

While blockchain-based solutions fit perfectly in the digital advertising space on paper, the practicality and adaptability are yet to be seen. One of the key issues challenging the adoption of blockchain in the digital ad space is scalability.

While few blockchain solutions, such as XCHNG (which claims it can handle 180,000 transactions per second per smart contract composed of multiple insertion orders), refute this challenge, the other challenge in this area is that of intent. Since blockchain is expected to make transactions more transparent and also reduce the number of intermediaries, industry players may not fully embrace the technology and despite its inherent benefits, blockchain may take time to gain ground in the digital advertising industry.

EOS Perspective

In an era where businesses are becoming more customer centric, blockchain helps bring the customer and retailer together on the same platform and promises a future with more transparency. It is clear that blockchain technology has the ability to transform the retail sector just as it is likely to transform several other industries (such as healthcare, car rental and leasing, or aviation).

However, despite holding immense potential and promise, most applications in this space are still to move beyond just being proof-of-concepts. Several issues, such as high investment requirements, scalability, and to an extent, willingness to change, remain to be addressed before there is an industry-wide acceptance for these solutions.

That being said, executives are definitely keeping an eye open for the latest developments in this space and several of them are open to testing and investing in blockchain-based solutions, hoping for them to be the key differentiator/value-proposition that attract the customers towards them. While most investments currently are being seen in the supply chain space (since its benefits seem most achievable and tangible), solutions in the space of loyalty programs and digital advertising may take a little more time to gain traction.

It is safe to say that retailers cannot afford to ignore the benefits of blockchain technology anymore. Many retailers lack specific understanding of this concept and its potential across different areas of their operations. This could cost them dearly in terms of customers. Technological innovations are happening at light-speed in today’s day and age and while blockchain technology currently may lack commercial acceptability and scalability, it is expected to seep into the operations of the real sector in a significant way in the coming future.

by EOS Intelligence EOS Intelligence No Comments

High Production Costs Dampen Camel Milk Market Potential

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Over the past few years, dairy-caused allergies and the growing debate regarding the inherent benefits and disadvantages of consumption of cow milk and its products have made consumers look for alternative sources to traditional dairy products. One product that has been growing in popularity owing to this is camel milk. Deemed to be the most expensive milk in the market, camel milk is known to have several medicinal values, especially for the treatment of diabetes, orthopedic problems, and autoimmune diseases. Few studies also claim that it is beneficial for the treatment of autism. While camel milk remains a niche product at the moment, it will be interesting to see if this product can make a dent in the massive dairy-milk industry, especially with the presence of several other healthy plant-based milk alternatives.

Growing demand and expanding production

Camel milk is not a new product as it has been consumed in the Middle East for ages, however, it is only recently that it has sparked global interest. Owing to its significant health benefits (primarily for diabetes), the product has found traction especially in developed countries, such as the USA, parts of Europe, Singapore, and Australia. The global market, which was valued at about US$4.24 billion in 2017 is estimated to register a CAGR of about 7% during 2018-2022.

Investments to expand Australian camel milk production

In response to the growing demand, several companies (especially across Australia) are entering the camel milk space and are increasing their investments in the sector.

Australia’s Wild Camel Corporation has expressed plans to increase its herd size five-fold from 450 camels to 2,500 camels over the next two years.

Similarly, Western Australia-based Good Earth dairy, which in mind-2018 had about 100 camels, plans to expand to 3,300 camels by June 2020, which would help the dairy produce about 10,000 liters of camel milk in a day.

Victoria-based The Camel Milk Co. doubled its milk output in 2017 to reach 250 liters a day from a herd of 250 camels. It has also maintained a scope for further expansion by moving to a farm that can house a herd of 1,000 camels, planning to increase its herd size along with growing demand.

International investments are also pouring into Australia’s camel milk market. In 2017, UAE-based investors funded a US$6 million (AUD8 million) pilot camel milk farm at Rochester, Australia. Several Chinese investors are also reported to be interested in investing in the camel milk business in the country.High Production Costs Dampen Camel Milk Market Potential

India’s camel milk production grows as well

In addition to Australia, India (and a few African countries, such as Kenya and Ethiopia) has also focused on increasing camel milk production.

India-based Aadvik Foods and Products, which procures raw camel milk from Indian camel breeders and herders and processes and markets it, has significantly increased its scale of operations. It started with procuring and processing 80-100 liters milk per month in 2015 and moved on to procuring and processing close to 8,000 liters per month in 2017.

In January 2018, Rajasthan’s State Government (in partnership with Jaipur-based Saras Dairy) announced its plans to set up a mini camel milk plant in Jaipur. The plant will cost US$1 million (INR 70 million) and is expected to be set up by the end of the year. Post the establishment of the Jaipur plan, the government plans to open another mini plant in Bikaner.

Expanding food product lines

In addition to processing and marketing camel milk, several companies across the globe are expanding their product base to include camel milk products such as milk powder, chocolate, cheese, infant formula, ice cream, etc.

In 2016, Desert Farms, a US-based camel milk company, added camel milk soaps and camel milk powder to its product range.

In 2017, India-based Aadvik Foods, also extended its camel milk product line to include camel milk chocolates and milk powder.

In a similar move, Amul, one of India’s largest dairy cooperatives, launched camel milk chocolates in late 2017. Unlike most other players in the market, Amul has first started with chocolates and then wishes to enter the packaged camel milk market in the near future.

In 2018, Australia’s QCamel announced its plan to launch camel-milk chocolates for the Australian as well as international markets.

In February 2018, UAE-based Camelicious launched the world’s first camel milk infant formula for children aged one to three, an alternative for children who are lactose-intolerant.

The camel products for children are praised for their benefits, as camel milk is the closest alternative to mother’s milk in terms of nutritional value. Since camel milk is beneficial for children as it has higher iron and vitamin C content compared with other milk options, products such as chocolates, infant formula, and ice cream, seem to be smart product extensions, especially if such benefits are highlighted through marketing.

Moreover, product extensions help companies reach a greater audience for their camel milk. Since camel milk is saltier than the largely consumed cow milk, products such as chocolates, help garner users that otherwise may reject camel milk due to taste preferences.

High retail prices hamper demand growth

While camel milk as a product is gaining popularity and acceptance globally, it is not without its share of challenges. Camel milk is the most expensive type of milk in the market.

In the USA, Desert Farms sells one gallon of camel milk for US$144 (US$38 per liter), while it sells a kg of camel milk powder for about US$370. In comparison, a gallon of cow milk sells for about US$3.50 in the USA.

In Singapore, a liter of camel milk sells for about US$19 per liter (US$72 per gallon). In comparison, cow milk sells for close to US$8 per gallon in Singapore.

Similarly, camel milk in India costs about US$7 per liter and camel milk powder costs close to US$87 per kg, whereas cow milk retails for about US$0.6 per liter.

While the benefits of camel milk are plentiful, they do not always justify the high price in the eyes of the consumer. The high cost can be attributed to the high production cost and low yield compared with dairy cattle produce.

In Australia, the cost of producing one liter of camel milk is around US$13 (AUD17), while in India a liter of camel milk cost US$5-6 (INR 350-400) to produce – in comparison to this, producing one liter of cow milk costs farmers about US$0.27-0.32 (AUD0.37-0.44) per liter in Australia and US$0.2-0.27 (INR 14-22) per liter in India.

Camels also produce less milk in comparison with cows. While cows produce around 16 liters a day, a camel usually produces only 6 liters a day.

While the benefits of camel milk are plentiful, they do not always justify the high price in the eyes of the consumer.

In addition to the barrier of high price and costs, camel milk also faces significant competition from plant-based milk alternatives, such as soy, almond, and coconut milk. These milk options are also considered to be a healthy alternative to cow milk and have the added benefit of being vegan. Moreover, while these milk options are more expensive in comparison with cow milk, their prices are still considered more reasonable when compared with camel milk price.

EOS Perspective

Camel milk has a lot of inherent benefits, which are expected to ensure steady sales growth over the next decade. While there are no doubts regarding the growing popularity of camel milk, it is too far-fetched to say that this market can dent the dairy mega-industry. Camel milk market is standing at the beginning of its promising growth curve, however, it must work towards pushing the production costs down to become more mainstream rather than niche, which will not be achieved by simply marketing the medicinal properties of the product.

Camel milk market is standing at the beginning of its promising growth curve, however, it must work towards pushing the production costs down to become more mainstream.

Several dairy farms across the globe have realized this aspect and are working towards achieving economies of scale and getting costs down through increasing operations size and venturing into extended product lines. While it is certain that the industry will continue to grow, it is yet to be seen whether it can create a shelf space for itself across large retail stores or whether it remains a primarily niche premium online sales product mostly for affluent consumers.

by EOS Intelligence EOS Intelligence No Comments

Is Technology the Solution to the Next Food Crisis?

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The UN estimates rapid population growth with additional 2-3 billion people globally by 2050. To feed this swelling population, food production needs to scale up by 70%, otherwise we are likely to be at risk of a global food crisis. With resources becoming scarce and climate change diminishing crop production by 2% per decade, food production methods need radical transformation and technology could be the possible solution to it. Using technology in farms and fields holds extraordinary promise of helping the agriculture sector become more efficient, productive, and sustainable.

Population increase, resource limitations, and climate change are putting pressure on farmers to produce more with less. To boost production it is essential to efficiently manage farm inputs such as seeds, fertilizers, and pesticides, optimize sowing and harvesting cycles, monitor field data (soil condition, plant stress, etc.) for improved crop yield, among others. However, managing these inputs is cumbersome and laborious without consistent and precise monitoring. Unfortunately, many farmers still rely on guess work and traditional processes instead of actual data to make all farming decisions. Technology could prove useful by helping farmers to closely monitor all farm activities and take informed data-driven decisions to improve production levels.

Technology can offer relief to pressures in agriculture

Emerging technologies such as weather tracking, robotics, and Internet of Things (IoT) can consistently monitor every aspect of agriculture such as soil fertility, health of farm animals, temperature and humidity conditions, optimal time to sow and harvest, schedule chemical application on fields, analyze irrigation requirements, among several other functions.

Weather forecast-based predictive modelling

Weather is a crucial determinant to ascertain the best time to sow, fertilize, spray, irrigate, and harvest crops. About 90% of crops losses are due to weather events and 25% of those losses could be avoided by using weather forecast-based predictive modelling on farms. Integrating weather forecast models with farming practices could enable better decision-making and improve crop yield. Companies such as John Deere, Ignitia, etc., already offer comprehensive weather-based farming solutions.

Robotics

Robotics is another emerging technology gaining traction in the agriculture sector. With robots capable of executing all functions from sowing to harvesting, they could easily replace human labor in the foreseeable future, particularly, at a time when some countries are facing labor shortage. For instance, in 2017, the UK suffered from 20% shortfall in migrant labors, which was mostly blamed on the Brexit vote that has made the UK unattractive for overseas workers to seek employment. The labor shortage is likely to get worse in 2018, making harvesting at labor-intensive vegetable and fruit fields difficult. Hence, some farms across the UK are considering to employ farm robots for vegetable and fruit picking.

Robots are also far more efficient than human labor, which is the key requirement to boost food production – each Harvest CROO Robotics’ robot (made by a US-based company that develops robots for the agriculture sector) is capable of harvesting eight acres in a day, which is equivalent to the work of 30 human pickers.

Internet of Things

Further, IoT has gained significance across several industries and has now entered the farms. IoT is turning farms into a mesh of smart sensors connected in a network, with the help of which every granular detail of crop, soil, livestock, or farm can be analyzed, thus, enabling farmers to devise smart cropping techniques and farming methods. IoT can streamline farming processes, reduce water consumption, and improve production and bottom lines.

EOS Perspective

Eventually, the growing population will put pressure on food supply. In such a scenario, digital farming is the best possible solution to escape the looming food crisis. Technology promises improved communication systems, precise monitoring devices, recommendations that could improve all processes between sowing and harvesting, and efficient livestock monitoring, among others, that could boost agricultural yields, reduce food wastage, decrease the inputs or resources needed per unit of output, and ensure sustainable farming practices.

However, most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption, with most farms unable to bear the high upfront costs. Another common challenge is the lack of robust communication and internet network in rural areas as well as the absence of awareness and skills among farmers to apply technologies in farms.

Most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption.

Consequently, the development of digital farming will require commitment and intervention by governments across the world, to offer incentives and cover the substantial start-up costs. Fortunately, few organizations have already started undertaking initiatives to tackle challenges. For instance, Mimosa Technology (a Vietnam-based IoT solution provider for agriculture sector) leases IoT-based hardware devices to farmers’ cooperatives in Vietnam to lessen the cost burden for smallholder farmers.

Initiatives are also being taken to ensure network connectivity and improve digital literacy in remote/rural areas – for example, governments of Thailand, India, or the UK, to name a few, are planning to boost digital connectivity in rural areas.

Eventually, technological innovations can be expected to make farming practices precise and to improve output. The use of digital farming solutions is an answer to the probable food crisis but for it to succeed, a mass adoption of technology across farms is a necessity. With growing awareness of benefits of automation in fields and efforts made by various organizations and governments to overcome challenges, digital farming would sooner than later transform the agriculture sector.

Brief description of companies and projects:

  • CropX: A USA-based agriculture-analytics company
  • CLAAS: A Germany-based agricultural machinery manufacturer
  • SmaXtec: An Austria-based provider of solutions to monitor livestock
  • Farmers Edge: A Canada-based company offering digital solutions for agriculture
  • The Weather Company: A USA-based weather forecasting and information technology company, a part of IBM
  • John Deere: A USA-based manufacturer of machinery for agriculture, construction, and forestry
  • Ignitia: A Sweden-based weather forecasting company
  • Robot Thorvald (to be launched): A robot developed by Saga Robotics, a Norway-based manufacturer of robots
  • Deepfield robotics: Robots developed by Bosch, a Germany-based engineering and electronics company
  • Hands Free Hectare: A project developed by Harper Adams University and Precision Decisions
  • Robot Agbot: A robot designed and built by QUT (an Australian university) with support from the Queensland Government
by EOS Intelligence EOS Intelligence No Comments

Infographic: Dark Chocolate – India’s New Indulgence Is Here to Stay

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India’s indulgence in dark chocolate is gradually rising. While the Indian chocolate industry has grown manifold over the decade, especially in milk and white chocolate segments, it is the dark chocolate segment that has gained momentum in the recent years. The growth in demand for dark chocolate can be attributed to the growing health consciousness, increased per capita income of the urban population, and exposure to foreign flavors, especially amongst urban Indians. Most of the demand (and market) is currently limited to urban cities as dark chocolate is typically priced higher than other chocolate types. Nevertheless, though still getting accustomed to the bitter taste of dark chocolate, Indian market offers great growth prospects for players associated with this sector provided they plan efficiently and act keeping in mind the specifics of the Indian market scenario.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Social Media-fueled Restaurants: How Instagram Has Impacted the Restaurant Industry

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Instagram has infiltrated the restaurant business, pushing it to be more photogenic, colorful, and trendy. With several Instagrammers and restaurants posting pictures of beautifully crafted meals every day, food has become an integral part of social networking. Restaurants have picked up on this trend and are focusing on becoming more ‘Insta-friendly’ or ‘Instagrammable’ by modifying their décor, lighting, and food presentation. From rainbow colored unicorn food and drinks to galaxy donuts, all are crafted keeping Instagram in mind. Physical spaces are being designed to bait Instagrammers, with expectation to inspire them to take maximum photographs and share them on social media.

With social media playing a crucial role in decision-making for diners, whether it is choice of food or restaurant, Instagram has become an indispensable tool for digital marketing for restaurants helping them to drive business and increase awareness.

Social media restaurants

Social media restaurants

  • Location of restaurants (refer to the infographic):
    • Bellota – A Spanish cuisine bistro in San Francisco, USA
    • Media Noche – A casual dining restaurant in San Francisco, USA
    • Peal’s Finest Tea – A tea café in Los Angeles, USA
    • Seamore’s – A casual seafood restaurant chain across New York, USA
    • Comodo – A casual dining restaurant in New York, USA
    • Pez Playa – A beach-front bar and casual dining restaurant in Mallorca, Spain
    • Dirty Bones – A casual dining restaurant chain across London, UK
    • Sonic – A drive-in fast-food restaurant chain across the USA
    • Zizzi – Italian casual dining restaurant chain in the UK and Ireland
    • Chili’s – American casual dining international restaurant chain
    • Starbucks – American/international coffeehouse chain
by EOS Intelligence EOS Intelligence No Comments

Infographic: Dwindling Honey Bee Colonies: Impact and Remedial Measures

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Pollination is critical for crop production and honey bees are an integral part of it, performing 80% of pollination globally. Unfortunately, for the past ten years or so, the world has been witnessing massive disappearance of bees, primarily in the USA and Europe, where the annual hive losses are now 30% or higher. Disruption in bee population is largely driven by the use of harmful agricultural chemicals, climate change, and habitat loss.

Depletion of bee population will not only disrupt ecosystems, but will also cause major global food production problems. In countries such as the USA, pollination is responsible for production of at least 90 types of commercial crops, which contribute 15-30% of an average American’s diet.

Disruption in bee populations has already driven up the prices of some food items that are heavily dependent on bees for pollination on a large scale. Besides the agricultural sector, the economic brunt of vanishing bees will also be witnessed by industries using beeswax and honey as raw materials, for instance by the consumer products sector.

Nevertheless, efforts are being made by governments, particularly in the USA and Europe, to develop strategies to preserve the pollinators. Other countries are acknowledging the problem too, for instance scientists in Japan have developed robot bees to pick up some of the pollination slack but the effectiveness of such replacement technologies is yet to seen.

 

Dwindling Honey Bee Colonies - EOS Intelligence

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Dual Quality of Food Products Questions EU’s Single Market Strategy

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Several countries in Central and Eastern Europe (CEE) allege that some multinational brands and supermarkets’ private-label food products sold in Western Europe are of superior quality than those available under the same brand name and packaging in their home markets. Food producers contend that they often change composition or characteristics of food products in different countries to adapt to local taste preferences. However, this practice has led to resentment among the CEE consumers who feel that food producers deliberately offer inferior quality products in CEE to save on costs. Taking into consideration the results of comparative tests (conducted by few CEE member states) indicating dual quality of food products to be a fact, European Commission has come out in support of countries complaining about double standards of food products. As European Commission is working out an approach to tackle the issue of dual quality of food products, the packaged food industry must prepare for possible impact.

Slovakia, Hungary, Czech Republic, Croatia, Bulgaria, Poland, Slovenia, Estonia, and Romania are among the countries that have voiced their concerns over dual quality of food products. These countries claim that some of the packaged food products sold in their home markets differ in composition and ingredients when compared to same brands’ food products sold in western markets, for instance, some products contain lower quality of the primary ingredient (e.g. less fish in fish fingers) or contain ingredients considered as less healthy (e.g. sweeteners instead of sugar in beverages). Some countries also complain about the difference in sensory characteristics such as taste, texture, or color.

Investigations by national institutions of few CEE countries revealed that, despite being marketed under identical packaging, many packaged food products differ in composition and characteristics across European Union (EU) member states. In many cases, food products available in CEE markets were less healthy as compared to same brand products available in western markets such as Austria, France, or Germany. In 2015, the Prague University of Chemistry and Technology tested 23 products marketed under the same brand name in Czech Republic and Germany and uncovered differences in eight products. Slovak Agriculture Ministry and the State Veterinary and Food Administration (ŠVPS) conducted a similar study in 2016 and found discrepancies in nearly 50% of the products tested. In 2017, NEBIH, Hungary’s food safety authority, compared 96 products in Hungary, Austria, and Italy. The study included multinational brands, supermarkets brands, as well as some products with similar composition but not the same brand. While 25 of these products were found to be identical, 8 products were different in composition and 30 products exhibited difference in sensory characteristics, whereas 33 products indicated differences in both.

Multinational companies contend that this is a common business practice to change the composition of the branded products as per the local preferences and demand, difference in purchasing power, local sourcing requirements, variation in production lines, etc. EU legislation requires companies to properly label ingredients, but it does not mandate sale of the same recipe under the same brand name across the EU markets. However, it is difficult for consumers to identify the difference in quality of products based solely on information presented on the label. Consumers generally expect that products of the same brands with identical packaging and appearance are the same and thus the purchase decision is often based on brand image and reputation.

The frustration and dissatisfaction is building up among consumers in these markets as they feel as if they are being unfairly treated as second-class consumers. The dual food quality issue has now come under the political radar as the concerned countries have joined forces compelling the European Commission to take necessary actions to eliminate double standards in the quality of food products sold across EU.

EU-Dual Quality of Food Products

After years of perseverant diplomatic efforts, in 2017, European Commission finally acknowledged the issue of dual quality in food products and pledged necessary action against such practices as they may lead to single market fragmentation. In September 2017, the European Commission offered a grant of EUR 1 million (~US$1.2 million) to the Joint Research Centre (European Commission’s science and knowledge service) to develop a common methodology which can be used across the EU market for comparison of products. Additional EUR 1 million (~US$1.2 million) will be offered to member states for conducting further tests and to take actions to ensure compliance.

Alongside, European Commission also released guidelines highlighting application of the existing EU food and consumer protection legislation to determine whether a brand is acting in breach of these laws when selling products of dual quality in different countries. Unfair Commercial Practices Directive (UCPD) prohibit “a misleading commercial practice if in any way it deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to the main characteristics of the product”. National authorities are directed to determine on case-by-case basis whether consumers would still buy a product of a particular brand if they were aware that its main characteristics differ from those of the product sold under the same brand name and packaging in most EU member states – if they would not, then the company can be considered acting in violation of UCPD (though such a determination will undoubtedly be challenging with regards to maintaining objectivity and common fixed criteria). European Commission, along with the help of industry stakeholders, is also preparing a new code of conduct that will include standards to improve transparency and thereby avoiding the dual quality issue.

EOS Perspective

Dual quality of food products has been proven to be a fact and is perceived as an unfair distortion of EU single market. European Commission advocates to strengthen enforcement of existing consumer protection laws, however, some of the EU member states’ representatives are demanding legislative amendments as they believe that the current laws are inadequate to tackle the issue of dual food quality. CEE countries demand that the multinational brands must standardize their food products across the EU market to put an end to the discriminatory practice. However, this would require revision of EU food legislation, a proposal relished by neither the European Commission nor the industry.

In May 2017, Hungary submitted a draft legislation to European Commission to introduce a labelling obligation to include distinctive warning on dual quality food products. However, food law experts contest that such an obligation will restrict the food producers to distribute their products freely in Hungary, unless they bear an additional cost for labelling. This conflicts with article 34 of EU’s treaty that guarantees free circulation of goods within EU. However, if a similar proposal is considered for EU, it would force the food producers to include a warning on the labels, and this could be perceived as a mark of a potentially negative marketing.

It is about time that multinational brands offering dual quality products acknowledge the intensity of the allegations. Companies must prepare an acceptable justification for the difference in quality of their products, more specifically, if their products in certain markets are of inferior quality. Companies may consider reformulating their products in CEE markets to standardize their product offering across the EU bloc. For instance, in September 2017, HiPPs, a German baby food producer, announced that it would reformulate one of its Croatia-sold products to match with the German recipe.

Rebranding is another option that the companies could explore. Products with significant difference in composition could be launched under a new brand name exclusively for that local market. Companies for whom rebranding and reformulating is not deemed feasible, should consider relabeling and repackaging their products to clearly differentiate the products across markets. For instance, Tulip is considering changing the packaging of canned luncheon meat in the Czech Republic to differentiate it from the similar product available in Germany. An unquestionable fact here is that whichever approach companies take to address the dual quality issue, it will result in additional costs, which might affect the products’ prices and make them less accessible, especially for consumers from low-income sections of the CEE population.

For the multinational brands offering identical products across EU, the dual quality issue can be seen as an opportunity. Such companies could consider multilingual labelling informing consumers that same product is sold across markets, and this approach would also help standardize the packaging and labelling across the region. Further, these companies could also benefit from a positive PR and marketing campaigns to reinforce the fact that they consider all their customers equal across EU single market.

Packaged food producers who have presence only in Western Europe are presented with a unique opportunity to expand in CEE markets. As the general perception in CEE is that packaged food products made in western EU countries are often of superior quality, the western-recipe version of a given product may be well received by the CEE consumer.

Local e-tailers as well as retailers in border cities can also be at gain. For instance, Czech e-tailers such as Rohlik.cz and Košík.cz have added special sections on their websites offering German products; likewise, supermarkets in German towns such as Altenberg and Heidenau have put up sign in two languages, due to increasing footfall from Czech cities across the border.

As the debate on dual quality of food products is gaining heat, multinational brands such as HiPPs and Tulip are already considering changing product composition or packaging to reflect the differentiation of their products across member states. Though food producers are not required to offer standard products across the EU countries, they will need to justify the difference in their products, and failure to do so may lead to legal action. The recent guidelines announced by European Commission are more of a soft warning to food producers. If the issue remains unresolved, then European Commission may consider more extreme measures. European Commission warned that if the situation does not improve, it will make the name of brands that are involved in the practice of dual quality publicly available. This might severely impact the brand image of these multinational brands in consumer’s view. Revision of packaging and labelling law is also one of the recommended alternatives that might be explored as a last resort.

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Artificial Intelligence Finds its Way into Your Favorite Fast Food Chain

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The idea of robots replacing humans has always seemed like talks of the future, however, it is not as distant as it seems, especially when it comes to the fast food industry. The fast food market, which is characterized by cut-throat competition and high share of low-skilled jobs, has recently been swept by a technology wave. Leading players, such as Domino’s, Starbucks, or KFC, are investing heavily in artificial intelligence (AI) to increase efficiencies and differentiate themselves in this overly crowded industry – some are integrating it with their back-end operations while others with the consumer interface. However, with investments in technology increasingly becoming an industry trend, the question remains if AI will provide the competitive edge to these players or are consumers yet not quite ready to lose the human touch.

Artificial intelligence has been the buzz word for some time and the fast food industry is also catching on the wave. With some market leaders claiming to be as much a technology company (owing to huge technology budgets) as a food business, these players are incorporating AI in several verticals to improve operational efficiencies and elevate consumer experience.

The wave of AI adoption is particularly prominent in the US market, where labor costs are increasing significantly, hence AI is being seen as a tool to reduce costs in the long run. Just recently, in the beginning of 2017, minimum wages have been increased in 19 states and will reach US$13.50/hour in Washington state and even US$15/hour in California by 2022 (the minimum wages in 2017 stood at US$11 and US$10.50 for Washington state and California, respectively).

Apart from the need to control costs, the interest in AI is driven by the fact that it provides food business with great advantage – the use of AI helps companies gather valuable data about customer choices, flavor trends, etc., and use this information effectively.

Leading players, such as Domino’s, Starbucks, KFC, and CaliBurger, have already started using AI is different verticals of their businesses to not only reduce costs but also to remain one step ahead of the changing consumer expectations.

Domino’s

Domino’s can be easily slated as one of the most aggressive fast food players when it comes to adoption of technology. The company has embraced AI in several aspects of its operations aiming to smoothen both the ordering and the delivery sides of the business.

In early 2017, Domino’s launched an AI-based technology called the DRU (Domino’s Robotics Unit) Assist, which enables consumers to order a pizza on the app using their voice. The in-app AI assist, which was built in partnership with natural language company, Nuance, converses with customers in a human-like manner and discusses orders, menus, ingredients, store locations, and operating hours.

Along similar lines, the company has also launched its Facebook messenger bot, wherein customers can converse with the bot on the messenger app to learn about menu options, discount offers, and also order food. In addition, Domino’s is in the process of launching its ‘Domino’s Anywhere’ feature, through which customers can drop an exact location pin using GPS (as in case of Uber) when ordering pizza thereby facilitating delivery at various locations, such as parks, and other public places without providing an exact address.

Simultaneously, the company is also using AI to automate the delivery process. In November 2016, in New Zealand, Domino’s partnered with Flirtey, a drone company, to undertake the first commercial delivery of food by a flying drone. While this technology is largely futuristic for mass adaptation, the company is focusing on land-based autonomous delivery vehicles to deliver pizza to customers’ doorsteps. This technology went to trial in June 2016 in Australia and in 2017 in Germany, while the company plans to roll it out in the Netherlands for customers within the one-mile radius by the end of 2017. The technology, which is provided by Starship Technologies (a European start-up), has GPS tracking, computer vision and object detection capabilities, and can travel within a three mile radius, carrying up to 10kg weight for a cost as low as US$1.32 (£1).

McDonald’s

McDonald’s is one of the recent players to blend fast food with technology. The company stated that its investments in technology are to be one of its key strategies in 2017, calling it the ‘Experience of the Future’ strategy. As per its plans, McDonald’s aims to replace cashiers with self-ordering kiosks in 2,500 of its restaurants by the end of 2017 and in another 3,000 restaurants by the end of 2018. The cost of each kiosk is estimated at about US$50,000-60,000.

In addition to this, the company plans to roll out mobile ordering across 14,000 US locations by the end of 2017. Mobile ordering will not only ease the ordering process but also help the company gain access to valuable customer data, which in turn can be used to recommend additional dishes and personalized deals. McDonald’s has already launched mobile ordering in Japan and received a positive response with customers using the app ordering about 35% more than usual.

Since 2015, the company has also been rolling out digital menu displays across its stores in the USA as well as globally. They use AI to highlight weather-appropriate options. This feature has resulted in increased sales by 3-3.5% in Canada.

Starbucks

Starbucks has also developed an artificial intelligence program to improve customer ordering experience. The program, which is known as the Digital Flywheel program, links itself with the accounts of Starbuck Reward members and makes order suggestions based on order history, weather conditions, time of day, weekend/workday, and other such factors. In addition, it brings additional convenience to the ordering process for the Reward program members, who can order directly from push notifications or text message and collect their ready order from a nearby Starbucks.

Moreover, embracing the voice computing trend, the company has launched an AI-based ordering system on its app that allows customers to order and pay for their orders using voice. The company has also launched a ‘Starbucks Reorder Skill’ for users of the Amazon Alexa app, wherein users who have linked their Starbucks account to their Amazon Alexa account can re-order their usual drink (at one of the last 10 visited Starbucks stores) by simply saying “Alexa, order my Starbucks”. However, this service is currently limited to the order of the users’ usual designated drink instead of ordering anything off the menu.

Starbucks has made significant investments in technology on a continuous basis, having invested close to US$275-300 million in its partners and digital initiatives globally in 2016, an increase from an investment of US$145 million in 2015.

KFC

While most quick service restaurants players are using technology to elevate their app-based ordering experience, KFC in China is taking a different route to join the AI bandwagon. In April 2016, KFC (in collaboration with Baidu, China’s leading search engine) launched a robot-run restaurant in Shanghai called Original+. The restaurant is run by a robot named Dumi, which takes customer orders and is smart enough to handle order changes and substitutes. While the robot can understand the three main dialects of Mandarin spoken in China, it cannot distinguish other dialects and accents. The payment at the outlet is made through smartphones via mobile payment systems.

The collaboration opened another AI-enhanced café in Beijing in December 2016, wherein customers take pictures of themselves with a machine, which then recognizes the users face, sex, age, and mood, along with analyzing the time of the day to recommend suitable meal options and completes the ordering process. Moreover, upon revisit, the machine recognizes the user and shows order history as well as dining preferences to quicken the order process. However, unlike the Shanghai restaurant, this restaurant also offers the traditional ordering process. While these may seem futuristic, the company has expressed its plans to open more smart restaurants in the country.

CaliBurger

Apart from market leaders, smaller players, such as CaliBurger, are also investing heavily in technology in both the front and back end of their operations. The California-based burger chain has brought AI into their kitchens through the use of AI-enabled robot, called Flippy, which is capable of cooking/flipping burgers and placing them on the bun. The robot, which was launched in March 2017 in the chain’s Pasadena, California outlet is created by Miso Robotics, a pioneer in the robotics for restaurant business. The concept is currently in test run and if successful, it is expected to be rolled out in early 2018 with expansion plans to more than 50 outlets worldwide by 2019.

EOS Perspective

It remains no secret that most leading and few niche smaller players are turning to AI to elevate their service levels in this competitive industry. Companies which have traditionally not taken the digital route up till now are also joining the technology bandwagon. Pizza Hut, which has always been one step behind Domino’s with regards to technology deployment, has invested US$12 million in technology in Q2 2017 towards improving its digital and delivery services. The chain plans to invest US$180 million in a technology overhaul by the end of 2018.

It can be expected that at this stage of technology development most of the automation will be successfully implemented in the customer-facing side of the business, and will comprise technologies such as bots and voice recognition that can be integrated into apps and other ordering mediums. This not only helps consumers by easing the ordering process but also helps companies gather valuable data about customer preferences and ordering trends, which in turn can be used for providing complementing recommendations and thereby increasing sales. While AI-enhanced ordering and payment may be the path of the future, it will be far-fetched to say that it will eliminate the need for humans in this side of the industry altogether. With increased sales due to AI-based ordering, the need for humans will remain, however, their role may evolve from ordering to management.

The adoption of AI or automation at the food preparation and delivery end, on the other hand, still seems a little futuristic. While several players, such as Domino’s and CaliBurger, have started investing and launching this technology, the wide application of it seems distant. This is especially true in the food preparation tasks, due to an increasing trend towards customization of orders and the growing use of complex ingredients to cater to niche audiences that require dairy-free, vegan, gluten-free, or other such options. Till the time robots that can handle such complexities are developed, these jobs will largely be conducted by humans with maybe automating the easier aspects of the process (such as flipping the burgers). Moreover, with the fast changing consumers’ needs it will be hard for robotics companies to preempt the trends and develop robots that can match the required skill sets both now and in the future.

That being said, the use of AI by the restaurant industry is definitely on the rise and while we may not know the extent to which it will take over the current operations, we can definitely be sure that this is increasingly becoming the point of focus as well as innovation in this highly competitive space.

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