Feeding Innovation: Food And Beverage Industry Steps Into The Future

Anna Ponza

Arguably, no other segment claims as large a social, geopolitical, or environmental impact as the food industry. Food is also tightly intertwined with people’s cultural identity. There are a plethora of needs, desires, and expectations that must be met to transform food production, processing, distribution, and selling in order to shape a more ethical, sustainable and profitable model.

Substantial technology advances have upended the entire value chain and expanded the ways stakeholders entice customers and earn their trust. Many incumbents still hold strong share, however, niche players continue gaining momentum, pivoting on enhanced awareness and formerly unexplored value propositions.

Those challenges require a deeply transformative approach that will redefine competition rules and generate crucial opportunities.

The broad picture

The overall sector’s equation is far from being solved: agriculture and food is the largest employer in the world, yet wealth and development inequalities create chasms in both productivity and access to staples and refined products. Moreover, while it’s responsible for at least one-quarter of overall greenhouse gas emissions, food production will suffer more and more from climate change and scarcity of resources.

Nearly half of the planet’s population has bad dietary habits, whether related to undernourishment or unhealthy consumption.

On the distribution and sales side, increasingly sophisticated behavioral patterns make manufacturers and retailers question how they can stay competitive and delighting their customers.

To mitigate the burdens of such a complex environment, two main areas need to be tackled: on one hand, consciousness, education, and cooperation are key to increase the accountability of individuals and communities alike. On the other hand, process optimization, digitization of products and equipment, and partnerships across stakeholders can increase the odds of winning the battle.

The call to action: priorities

  • Reframe value chain assets and distinctive features, thus strengthening or even changing the customer value proposition
  • Streamline operations and infuse them with additional capabilities, like automation and traceability
  • Build an end-to-end data platform to achieve full, consistent, real-time visibility across processes, departments, and teams
  • Embrace the “phygital” selling approach by blending the best of both digital and physical worlds while delivering new services and unbeatable customer experience
  • Change collaboration rules with partners to reach a wider, more diverse customer base and maximize profits
Technology enablers and capabilities

Figure 1: Technology enablers and capabilities

The business benefits: processes to explore

  • Precision agriculture and vertical farming: Precision agriculture is an integrated whole-farm management system that aims to optimize site-specific production in an efficient and profitable manner while minimizing environmental impacts. Vertical farming refers to both rooftop greenhouses and food growth in layered stacks inside dedicated buildings. It represents an attempt to address high urban demand, resource scarcity, and short food mileage; eliminate the effect of unpredictable weather conditions; and improve profitability, particularly for high-end vegetables.
  • Smart food cells: Optimization of fulfillment and distribution patterns, particularly within the largest cities, implies creating smaller, consistent, and intelligent food cells. The concept includes proximity warehouses for collecting goods and dispatching them quickly, enabled by highly automated operations, replenishment micro-hubs for local retailers and restaurants, and non-traditional delivery vehicles (e.g., autonomous electric cars or robots).
  • Personalized meals: Personalized nutrition is gaining ground: food preferences and needs are widely diversified for medical and well-being reasons. Collecting purchase history data and applying machine learning algorithms helps to predict consumption choices and enable accurate production forecasts. Increased automation and sensors make life easier for food manufacturers and let them tackle the burdens of the lot size of one. The combination of nutrigenomics, physical activity tracking. and consumer preferences opens new market segments, strengthening relationships with end users and providing them with advice on what to order, cook, and eat.
  • Traceability: Compliance with regulations, fraud and counterfeit reduction, visibility in food provenance and processing, and measurement of environmental impact are among the most compelling reasons for companies to commit to traceability across the entire value chain. Cloud-based networks, IoT, and blockchain get the lion’s share of attention; recording every step of a product’s lifecycle permits detection of potential bacteria-related hazards or unexpected troubles with refrigeration, thus allowing food sellers to anticipate changes in shelf life.
  • Efficient supply chain: Not only does the volatility of raw material supply and unexpected contingencies demand flexible provisioning and adequate inventory-level management, multi-faceted customer expectations challenge cost controls and manufacturing  productivity, while varying temperature and humidity conditions require safeguarding the cold chain process for quality and security. Furthermore, transportation route optimization leads to more prompt delivery and resource optimization.
  • Services: Pairing the food supply with innovative services lures consumers and caters to their changing value drivers. Subscription models; recommendations on what, where, and when to eat provided by real or digital personal assistants; direct communication channels with physicians and health experts to fine-tune daily meals; or concierge services to deliver orders at the best convenience, whether it’s at the door, gym, office or by engaging chefs for home-cooking … these are just a handful of possibilities to leverage.
  • Reinvention of retail stores: For retailers to stay relevant, their stores have to adapt to consumers’ constantly changing purchasing preferences. While fancy layouts, assortment variety and quality, and frictionless payments are no-brainer features, new opportunities keep the segment lively. Stores in unconventional locations, ready-to-eat aisles and hot bars, cooking classes, and “grocerants” (combination restaurants and grocery stores) push the customer experience forward. Grocerants also allow consumers to combine shopping with dining in the same place, and provide brands with instant feedback on new or pilot products.

Sample future business processes across the value chain

Figure 2: Sample future business processes across the value chain

Where to start

As individuals and companies, we all live in the experience economy era, one that hounds us with countless offers of products, services, and opportunities. However, customers’ loyalty is rooted just as much in satisfactory experience: only those organizations that never let consumers down and devote relentless energy to keeping their promise can succeed. Fusing experience data with operational data is therefore paramount.

Experience Data and Operational Data together build the Intelligent Enterprise

Companies need to take the pulse of their current capabilities and map the ones they are missing to achieve their goals. An engineered, design-thinking approach aimed at defining possible transformative opportunities and piloting them quickly through internally consistent proofs of concept is a good starting point.

Tackling digital evolution as a whole can be daunting, whereas small, agile innovation offers a safer environment and builds confidence. Moreover, a clear assessment of differentiating business processes vs. “commoditized” ones can help organizations focus on priorities and determine follow-up actions (e.g., new implementation/redesign vs. benchmarking and optimization). The next stage is transforming the vision into a viable and sustainable roadmap; this requires accurate planning, optimized time-to-value, and delivery on promises.

Learn how to leverage experience and operational data to deliver best-in-class customer experiences! Join our webinar on November 26th. 

Anna Ponza

About Anna Ponza

Anna Ponza is a Business Transformation Principal, and having been with SAP for two years now, helps customers who want to thrive in the digital era and improve their own processes, business models, technology foundations. Value propositions, innovation roadmaps, management of complex projects and thought leadership are the most recurrent services that Anna delivers. Before joining SAP, she spent 17 years of her professional career with several large organizations, covering different innovation-oriented roles, spanning from Research and Development Engineer to IT Senior Manager.