Diageo responsible drinking trends in the alcohol industry

Diageo responsible drinking trends in the alcohol industry

“Our ambition is to be the best performing, most trusted and respected consumer products companies in the world – ensuring we play a positive role in society is at the heart of this.” (Diageo Annual Report 2016)

With its 9.4% market share on volume (2015) Diageo is absolutely the leading company in the alcohol market, ranking always as first for the past eight years. Its market share is almost double of Pernod Ricard, the second market leader. Diageo strong market supremacy doesn’t surprise since the company operates in more than 180 countries and owns 20% of the world top spirits. For example some famous and well known Diageo brands are Guinness, Smirnoff, Baileys.

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In the medium term the global beverage alcohol market, that generates today around 300 billion Eur of net sales,  is expected to grow. This trend is driven both by a rise in global incomes and a growing legal purchase age population. On one side the beverage alcohol industry benefits from margins that are higher than for the overall consumer goods market, on the other side this market is one of the most highly regulated in the world with regulation varying widely between countries and jurisdictions.

The notch

However, despite of the great market supremacy reached in the past years Diageo seems now to be victim of its own success. The sluggish growth of the company has turned red with a 2016 negative performance of -3% on its global net sales. The brand portfolio has been recently revisited, some brands sold and now it focuses only on the most important areas of the company: Scotch, Beer, vodka, rum and other liqueurs.

It is clear that now Diageo cannot play the same expansion strategy used in the past years. The fast growth achieved thanks to expansion in white spaces market is now not repeatable anymore having reached almost entirely the market saturation.

For Diageo executives a direct competitors fight is now approaching and in order to continue gaining market shares their strategy is diversification through clear areas and a cultural steer towards responsible drinking.   

There are already example of big multinationals who have been able to diversificate effectively in the FMCG market. One is Unilever that is investing in a sustainable living bringing “a brighter future, a better business”. The Unilever sustainable living plan focus on three main points: improving health and well being, reducing environmental impact and enhancing livelihoods. Another one is Coca Cola who have expanded its portfolio towards sugar reduction entering juice and water categories through different acquisitions. For example, a famous one is Innocent brand.  

A challenge

How diversificate in a market where alcohol is considered by the consumer almost like a commodity?  

According to US National Institute of Health, in 2012 alcohol consumption have caused 3.3 million deaths in the world. Alcohol misuse reaches the fifth place as leading risk factor for premature death and disability. However, moderate alcohol consumption may have beneficial effects on health. For instance decreased risk for heart disease and mortality due to heart disease, decreased risk of ischemic stroke and decreased risk of diabetes.

Problems caused by alcohol are of great interest for governments who are continuously putting in place restrictions in the sector, who differs by country and making de facto the most regulated and difficult market to operate. Moreover, consumers – who are the first who pay the sour bill – are becoming more sensitive on this topic.

Responsible drinking

Diageo strategy focus strongly on responsible drinking. This is comparable to the sustainable living plan of Unilever. In the long run, this approach will educate people to a correct use of alcohol and bring a reduction in diseases and deaths caused by alcohol.

Ivan Menezes Chief Executive of Diageo states that sustainable efficiency will bring to the company £500 million savings in the coming three years.

The company is assessing responsible drinking as a performance. In its annual report three KPI out of eleven are based on this: creating a positive role for alcohol in society, building thriving communities and reducing the environmental impact of its products.

Efforts

Diageo is the first company in the industry investing strong commitment on responsible drinking. Moreover, by putting high level of information in the hands of consumers, demonstrates its true desire in helping consumers making informed decisions and at the same time confirms its position as market leader.

In 2016, 335 programs aiming to reduce harmful drinking were sponsored by Diageo. This year DRINKiQ.com was launched in 12 languages. This is a website with best practices about responsible drinking, list of allergens and sustainability symbols. Moreover, compared to 2015, the company has reached 12% improvement of water efficiency through its supply chain and production process.

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Responsible marketing commitment:

“Diageo was in breach for a Smirnoff television advertisement on the grounds that depicted dependency on the presence of alcohol. We were also found in breach for a post on the Guinness Facebook page because it suggested that drinking may have therapeutic benefits. In both cases, the content was immediately withdrawn.” (Diageo Annual Report 2016)

However, the area where Diageo has made the most breakthrough step compared to its industry is with Johnnie Walker, a whisky scotch priced at a similar amount per serve of main competitors. Johnnie Walker Red Label is the first global brand to provide serving alcohol content and nutritional information on-pack. Indeed, a consumer who buys alcohol will never find on any bottle nutritional information. This is quite an anomaly, considering even something as simple as plain bottled water always has ingredients and the chemical makeup of the product on the label.

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Diageo has chosen this exact brand and portfolio range because by value Scotch whisky is the most important area in which the company has 24% of total net sales, owning a total of five brands.

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Competitors reaction

Following very positive market critics and feedbacks, Pernod Ricard follows now Diageo pioneering step. Indeed, it announced in February 2017 that will provide nutritional information on all of its spirits products. Consumers will be able to access this information by scanning a QR code that will be present on the back labels of all its bottles. This method also if different by the traditional adopted by Diageo, will enable consumers to quickly display all main info on their smartphones.

The trend started by Diageo is going to have big effects for the alcohol industry. First of all, this will enhance transparency between producer and consumer. A buyer entering a shop will trust brands who put on black and white calories and direct effects of consuming a glass of alcohol. Secondly, will strongly promote responsible drinking in the society improving as well relationship between key stakeholders such as government and regulators. Thirdly, this will boost sales for companies who will adopt this strategy, differentiating brands between other competitors and at the same time winning market shares in the market.

Sources: Euromonitor, Diageo, US National Institute of Health

NaturALL Bottle Alliance: first 100% bio-based and recyclable bottle

NaturALL Bottle Alliance: first 100% bio-based and recyclable bottle

Danone and Nestlé Waters, the world’s two largest bottled water companies, have joined forces with Origin Materials, a startup based in Sacramento, California, to form the NaturALL Bottle Alliance. Together, the three partners aim to develop and launch at commercial scale a PET plastic bottle made from bio-based material (i.e. 100% sustainable and renewable resources). The project uses biomass feedstocks, such as previously used cardboard and sawdust, so it does not divert resources or land from food production for human or animal consumption. The technology represents a scientific breakthrough for the sector, and the Alliance aims to make it available to the entire food and beverage industry.

Teaming up to accelerate development of 100% bio-based bottles

For decades, both Nestlé Waters and Danone have been committed to sustainable business practices, notably by continuously improving their environmental performances and promoting the development of a circular economy. A large part of these efforts has focused on developing innovative packaging solutions that are recyclable and made with renewable resources, as well as the promotion of recycling. After identifying the unique approach of Origin Materials separately, the two companies decided to team up to accelerate development of this promising technology.

“Our goal is to establish a circular economy for packaging by sourcing sustainable materials and creating a second life for all plastics,” declared Frederic Jouin, head of R&D for plastic materials at Danone. “We believe it’s possible to replace traditional fossil materials with bio-based packaging materials. By teaming up and bringing together our complementary expertise and resources, the Alliance can move faster in developing 100% renewable and recyclable PET plastic at commercial scale.”

Danone and Nestlé Waters are providing expertise and teams, as well as financial support, to help Origin Materials make this technology available to the entire food and beverage industry in record time.

Nestle-and-Danone-teaming-on-bio-based-PET-bottles This next-generation PET will be as light in weight, transparent, recyclable and protective of the product as today’s PET, while being better for the planet. The exclusive use of renewable feedstocks which do not divert resources or land from food production is the Alliance’s main focus area. The R&D will focus initially on cardboard, sawdust and wood chips but other biomass materials, such as rice hulls, straw and agricultural residue could be explored.
“Current technology on the market makes it possible to have 30% bio-PET,” noted John Bissell, Chief Executive Officer of Origin Materials. “Our breakthrough technology aims to reach 100% bio-based bottles at commercial scale. With the help of our Alliance partners, Origin Materials will be able to scale up a technology which has already been proven at the pilot level.”

A packaging revolution for all

The NaturALL Bottle Alliance partners consider that everyone should benefit from this new material, so the technology will be accessible for the entire beverage industry. This unique approach demonstrates the allies’ commitment to open innovation and sustainable business.

“It’s incredible to think that, in the near future, the industry will be able to use a renewably sourced packaging material, which does not compete with food production and contributes to a better planet,” commented Klaus Hartwig, Head of R&D for Nestlé Waters. “It therefore made perfect sense for us to join forces through this Alliance to develop this innovative technology in a large scale and in the shortest time period possible. This is an exciting journey and we are proud to be part of it.”

A packaging revolution in record time

Origin Materials has already produced samples of 80% bio-based PET in its pilot plant in Sacramento. Construction of a “pioneer plant” will begin in 2017, with production of the first samples of 60+% bio-based PET to start in 2018. The initial volume goal for this first step is to bring 5,000 metric tons of bio-based PET to the market. Thanks to their complementary skills and shared vision, the NaturALL Bottle Alliance aims to develop the process for producing at least 75% bio-based PET plastic bottles at commercial scale as early as in 2020, scaling up to 95% in 2022. The partners will continue to conduct research to increase the level of bio-based content, with the objective of reaching 100%.

Source: Medium.com / Nestleusa.com

Best practices to remain sustainable in the Food industry

Best practices to remain sustainable in the Food industry

Best practices to remain sustainable in the Food Industry

Best Practices with Edible Insects Novel Food Law


 

best practices sustainable

Exporting food has an environmental cost so is it really impossible to remain sustainable while consuming it? What are the best practices then ?

My last interview with Risteco’s co-funder Isabelle Lacourt and Thanaphum Muang-Ieam, a Thai edible insects entrepreneur were edifying.

Environmental cost of international export, especially between different continents seem fundamentally not sustainable.

Eating bananas from Australia would generate about 1.4 ton of CO2 since planes pollute 3 times more than cars. Moreover, that would deprive local farmers of jobs. Furthermore, consuming exotic food would promote an irresponsible consumption way.

 So, should we stop eating bananas ?

On the 26th of october a conference involving the European Commission and the National Bureau of Agricultural Commodity and Food Standards (ACFS) evokating edible insects future legislation took place in Bangkok. This novel food law should enter into force by 2018 to make edible insects business legal into the European Union. According to the regulatory expert of the Public Federal Service of Public Health in Brussels, edible insects from Asia and other continents might be legalized if they respect specific conditions.

However, we can expect these Asiatic insects to be sold at a lower price than the european one. As a result, we could expect those bugs to be the main consumers choice in the coming years.

best practices sustainable

Then are edible insects still going to be a sustainable food?

best practices sustainable edible insect

Exporting is not always a bad thing” Isabelle Lacourt, cofounder of Ritseco says . It actually depends on the conditions the products have been made through. For instance, lambs from New Zealand actually revealed that exported food was sometimes healthier than the french ones.

In Thailand firms dealing with edible insects prepare to get into the European Market. They plan to produce this future food by huge amount. Is that wrong?

“Producing at a high scale is necessary in order to be profitable otherwise it is too expensive” Thanaphum Muang-Ieam co-funder of Global Bugs, answers.

 

Therefore the best practices to remain sustainable are:

  1. Increase your production to get into global markets

  2. Reducing your crickets breeding space

  3. Develop a local farmer learning and support model

  4. Anticipate future sustainable development hurdles

best practices sustainable” It is wrong to make huge firms based on a vertical integration process. We need to separate the different supply chain activities to reach a better quality food »Dr. Yupa Hanboonsong said.

« Mass production is never conducive to biodiversity » Isabelle Lacourt added. Indeed, single supplier, concentration & production cost’ permanent reduction work are not sustainable.

Promoting sustainable food is a great opportunity to provide billions of people with high quality food standards. It should not be seen only as a business opportunity. If business is the key point of any sustainable activities, long-term effects of any opportunist approach might lead to a poor food quality.

Discover my three months edible insects’ investigation and best practices here.

Amazon Will Launch Virtual Dash Button in the US

Amazon Will Launch Virtual Dash Button in the US

Announced on January 20, 2017, the  Virtual Dash Button will allow Prime customers to order products directly via their smartphone or from the Amazon site.

Amazon will further simplify access to brands by launching Virtual Dash Button that will allow, via the website or application, to directly order the products with one click only. Concretely, the interface will propose shortcuts (free) that will be added one another. Customers will have 30 minutes to cancel their order. Launched in March 2015, the Virtual Dash buttons are a real success for the American e-commerce giant.

On the most popular products marketed by the platform, they represent more than half of orders made, according to Amazon

VR Buttons yes, but to do what?

First concern: which buttons to choose? If some seem obvious, like the buttons “Pampers”, “Whiskas”, or “Bounty” for example, others are less clear. Who really use the “Doritos” button? Going along with Clorox, Energizer, Gain, Honest Kids, L’Oreal Paris Revitalift, Lysol, Peet’s Coffee, Playtex, Seventh Generation, Slim Jim, Snuggle, Vitamin Water, Zico Pure Coconut Water, not everyone in a household shares the same domestic needs: You may have run out of Doritos, while your kids want the new famous Springles innovation. Users have complete control over the buttons, and can sort (most-needed to least-used), label (“Bran’s favorite”), and delete them whenever they want. As with the physical buttons, customers receive a notification with every order, and can cancel within 30 minutes if they make a mistake.

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Tiny Products assortment behind some Amazon Dash buttons

The “Bounty” button allows me to choose a Paper Towels Roll, sold in packs of eight, but could also allow me to order paper Napkins. There is some choice, but the range remain tiny and not deep enough. We are very far from the diversity of choice of products available in supermarkets! While target is offering 27 bounty products on its website, I do not see why Amazon, which offers 100 times more references than a supermarket, does not offer the whole range of products of a brand, to be able to associate them with its buttons.

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Amazon Dash Button: the beginning of the future

In conclusion: Amazon Dash Button is a connected object that really has chances to be part of our daily, tomorrow. But the lack of references available behind each button disappoints, even though the products are available on Amazon. Despite this, Amazon is serious about its Dash Buttons, and said customers are on board. Last fall, the program expanded in Austria, Germany, and the UK where customer can choose from more than 200 physical Dash Buttons, priced at $4.99 each. With the innovation presented in this article, whenever you register a Dash Button device, Amazon will automatically add a virtual button for the same product.

Mass customization: big data and innovation tech

Mass customization: big data and innovation tech

Goods can no be produced and sold without considering customer needs and recognizing the heterogeneity of those needs” Wedel and Kamakura, 2001

Economies of scale in manufacturing and distribution brought down the price of mass-produced goods so much that most consumers were often willing to forgot their individuality and settle for standardized goods. However, with the advent of social media services, such as Twitter, Facebook and Pinterest have made it easier for people to have a window to show and share moments of life and to brand themselves. In turn consumers started to consider products as another form of expressing their uniqueness.

To fulfil consumers’ needs, companies throughout the world have embraced mass customization to provide unique value in an efficient way.

How we got to Mass Customization

  1. The concept of mass customization began coming back into view when companies discovered market segmentation in the 50s and niche marketing in the 80s.
  2. The rise of mass customization in the 1990s gained space with the notion of segments of one: every consumer is his or her own market segment with specific requirements that must be fulfilled. Consumers got more informed and empowered, and businesses had to meet their demands to stay competitive and relevant. Mass marketing become less effective since customers expected personalized, real-time communications so businesses started to employ individualized marketing efforts to remain connected.
  3. Mass Customization term has become well-known since Joseph Pine published his book “Market of One- Creating Customer Unique Value through Mass Customization” where he defined Mass Customization as “producing, developing, marketing and delivering affordable low cost and high quality of goods and services that give customer nearly what they want.

Benefits

Companies that seize the opportunity of profitable mass customization:

  • build loyalty
  • increase revenue and gain a competitive advantage and engagement vs. competitors
  • use their consumer base as an engine of advocacy to potential buyers

Big data for mass customization

As consumers customize products, they are volunteering extensive data about their preferences that brands can use to inform future product development. Data analytics have the ability to track customer episodes, predict certain customer behaviors and perceptions, and prescribe how a company should engage with those behaviors to deliver more value to customers.

– Crowdsourcing

It is the process of getting ideas from a crowd of people, usually online. It has emerged as one popular method for mass customization

PepsiCo: FritoLay “Do Us a Flavor” campaign, has been built around seeking consumer input: consumers suggested new product flavors, and the winning flavors were developed and launched.

– DARWIN (Decision Algorithm Rating What Ingredient’s Next)

Graze is an online healthy snack supplier that relies on an artificial-intelligence algorithm called DARWIN to customize snack boxes based on the preferences subscribers enter on the site. “It’s possible to get 4.9 million different combinations of snacks in a Graze box,” says Jones.

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– Smart algorithms for dynamic pricing

Some companies are managing on-demand capacity by using smart algorithms and better data-processing capacity to enable dynamic pricing.

Walmart: dynamic pricing is done by monitoring pricing at your competitors, in real-time and it means dynamically changing prices to optimize revenue. Walmart changes its prices roughly 50,000 times a month.

– Recommendation Engines

Recommendation engines it is  what advise product choices based on previous selections and it is now moving into the customization space by helping customers configure products.

Chocri: customizes and ships chocolate bars, helping consumers configure their own bars from four base chocolates and 100 different toppings. Recommen­dations are based on popular choices users of the site have made and are edited by the company.

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Innovation technologies for mass customization

3 D Scanning and Modeling

3D scanners let you gather data from real-world objects that can be analyzed and collected and can be used to construct 3-D digital models.  VTT Technical Research Centre of Finland Ltd aims to develop advanced food manufacturing technologies by combining expertise in food, material science and 3D printing technology. Researchers have the long-term vision of developing high-tech vending machines that provide customised purchases.

Supply chain

Key issues

  • Production process organization: it is necessary to avoid early proliferation of consumers orders
  • Supply chain structure for mass customization: it is crucial to manage physical and information flows with consumers, customers and suppliers in order to improve not only efficiency but also consumers and customer satisfaction.

Research’s key takeaway

SCM World, in cooperation with the non-profit association MESA international, recently completed a survey of 174 supply chain and operations executives to understand the future of manufacturing . According to the research,  manufacturing is now entering a new phase of customization-oriented production that is less concerned with productivity and efficiency and more focused on agility and responsiveness. Fast increasing rates of investment in advanced robotics, additive manufacturing and advanced digital simulation of manufacturing processes all lend themselves to shorter production runs and more unit-level customization.

What is the focus for Brand Development

Mass customization offers the opportunity to perceive and capture latent market niches and subsequently to develop technical capabilities to meet the diverse needs of target customers. For Brand Development it is necessary to:

  • Challenge the Mass-Market Mind-Set : in fact for mass producers, the focus of the marketing group is not about spotting differences but it’s about identifying and exploiting needs that are similar.
  • Embrace Big Data as a new way of doing business.It is essential to incorporate advanced analytics and insights as key elements of all critical decisions.

Beatrice Rossano

[Focus] Drone delivery: The next disruption ?

[Focus] Drone delivery: The next disruption ?

Focus on Drone delivery: The next disruption in grocery

Pizzas could arrive from the sky in New Zealand and perhaps soon in Europe. This is not science fiction but reality. Indeed, Domino’s Pizza Enterprises has announced its partnership with Flirtey, leader in drone deliveries, to launch the first pizza deliveries drone service in the world. The two companies celebrated their alliance by organizing a demo in Auckland, New Zealand on 25 August 2016.

This event marks the end of the approval process by Flirtey and the beginning of this experiment from a Domino’s restaurant in New Zealand.

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Pizza delivery drone becomes a reality in New Zealand

New Zealand was chosen for this experiment because of its regulation, which allows companies to use delivery drones. According to Don Meij, Domino’s Group CEO, the company’s growth in recent years has increased significantly the number of deliveries and Domino is constantly seeking to innovate in pizza home delivery. The use of drones as a means of delivery is designed to complement Domino’s current fleet in the field.

They will include control systems and GPS online. The Pizza chain invested heavily to equip their restaurants with various delivery vehicles, such as electric scooters, electric bikes and even pizza delivery robots (DRU), the latest innovation.

For supplier it doesn’t make sense to have a 2-tonne machine delivering a 2-kilogram order. The DRU DRONE is the next step in Domino’s expansion in artificial intelligence field. It will enable them to acquire new knowledge and adopt new technologies in the business..Drone delivery allows to expand their supply zone by removing barriers such as traffic or accessibility and to provide faster and reliable delivery system.

Drone delivery could be soon possible in Europe

The first test flights will take place this year after summer in New Zealand. Domino’s will offer discounts on shipments by drone in the early stage of the test to perform later more substantial deliveries in terms of size, weight and distance, depending on the initial results and the Customer feedback. The group announced the possibility of extending the experiment to its six markets, namely: Australia, Belgium, France, the Netherlands, Japan and Germany.

sprite drone

Drone Delivery: The next disruption?

Except for security matters, we think Drone delivery allows companies to reach more rural customers and to reach urban customers in a much more efficient time. Moreover delivery cost would be cheaper and eco-friendly. This year, we saw many companies investing in drone delivery, among them, retailers such as:

  • Amazon in UK: The government permitted them to conduct drone delivery tests
  • 7-Eleven in U.S: The convenience store chain managed a trial with drone delivery for the first time in the country
  • Google in Australia: Delivery drone has been tested in order to reach consumers in rural area

Did you know?

Domino’s Pizza is ready for the disruption

domino's pizza digital

Domino’s Pizza makes your local pizzeria a loser, half of the company’s U.S. orders are digital. Its stock hit an all-time high in 2016 because Domino’s Pizza has aggressively courted Millennial stomachs by upping its online game and allowing young people to order via texts, voice recognition, connected voice and also tweets. Traditional pizzerias lost 21% Market share during the past decade.