IoT is the New Black…Coffee: How IoT Technologies Enable Transformation and Monetization of the Coffee Ecosystem

Coffee is one of the most common daily rituals around the world and a powerful economic force due to its being the second most valuable tradable commodity. The continuously growing demand for the product and increasing shareholder pressure on major coffee corporations has provided the impetus for a transition toward a more exceptional technological approach to coffee processing. The particularly interesting economic impact on the coffee ecosystem comes from low-cost sensor technology, which is embedded in the system in order to monitor temperature, quality, pH, humidity, etc.

The next wave of technology was the adoption of blockchain in order to optimize supply chain management, which is a significant concern for the coffee industry. Companies such as Starbucks, Costa, Nescafe, and Nespresso are instantly picking up the benefits of the Internet of Things (IoT) digital transformation and accelerating its integration into their production, products, and services. In 2019 Starbucks announced its partnership with Microsoft, intending to combine Azure blockchain cloud capabilities with other Artificial Intelligence (AI) and IoT solutions to boost bean-to-cup initiative. Costa Coffee has joined forces with SAP and General Electric (GE) to install predictive maintenance software into its products and more than 2,000 portable coffee kiosks located across different countries. Meanwhile, Nespresso is integrating IoT technologies into its Business-to-Consumer (B2C) proposition though the Prodigio machine, which is enabled to connect to a customer’s smartphone via Bluetooth technology to share notifications regarding maintenance, re-fills, and other additional benefits available through the app.

The following acquisitions, partnerships, and adoption of the IoT technology in the coffee industry exemplifies how IoT is truly the new black in terms of optimizing, personalizing, and monetizing traditional business models because it enables companies to satisfy customer needs and wants and also boost their revenue from the simple acceleration and monitoring of the bean-to-cup process.

IoT is rapidly changing the coffee ecosystem through its ability to introduce new products and services in a manufacturer’s portfolio and re-seller services. The coffee makers and machine producers are coming out with mobile applications, which allow consumers to schedule, brew, and monitor the status of their coffee beans through a simple notification on their phones. Currently, there are more than 225 coffee-related apps available on Google Play for download and around 160 apps through Apple App Store.

Furthermore, the modern smart coffee machine is also equipped with high-end sensors, which enable companies to receive real-time data about both the internal state of the machine and individual consumption rate, which can be further analyzed and aggregated to bring new offerings to the market. The information sent from individual machines will be sent directly to the cloud, which subsequently enables firms to optimize, reduce cost, and make their supply chain and delivery services more agile. For example, Siemens Coffee Center, which supports fully automated build-in coffee machines with an opt-in option to be connected to Siemens’ cloud-native IoT Platform MindSphere, is a relatively new market proposition. Thus, the customer receives a tremendous processional service of machine maintenance with a personalized approach, while Siemens can further monetize data and exploration of edge and IoT platform capabilities from a simple cup of coffee. 

Finally, manufactures and coffee conglomerates have the potential to diversify the revenue stream by providing obtained Analytics-a-as-Service (AaaS) to upstream and downstream parts of its value chain with a possibility of purchase. Such trends can equally apply to Business-to-Business (B2B) and B2C machine manufacturers, as it allows organization and monetization from an internal ecosystem’s supply chain and also reduces costs across production. Hence, from the market’s perspective, the coffee ecosystem is not just about selling a commodity anymore; it is about understanding your customers, improving your competitive advantage, providing data-driven services, and capitalizing on them. 

Market transformation and greater usage of IoT technology are arguably having a disruptive impact on the coffee industry. That is why ABI Research came up with three simple ways traditional business models can embrace IoT; because digital transformation doesn’t have to be destructive:

1. Improving Performance through Predictive Maintenance: Traditionally, the monetization model for coffee machine manufactures depends on the hardware (coffee machine). Now, there is a trend of greater adoption of software (mobile apps) and IoT sensors, which creates monetary value for enterprises and large factories are equipped with smart sensors to monitor the performance of critical devices. Since the democratization and commoditization of sensor technologies and the advancement of data analytics, Small and Medium-sized Enterprises (SMEs) can start the IoT digital transformation. With an acceleration of popularity and the application of cloud computing, one of the most prominent tools vendors provide to businesses is Data-as-a-Service (DaaS), in which technology vendors are offering predictive analytics applications within cloud/edge/on-premises. Hence, the enterprises are much more enabled to analyze continuously incoming IoT data to reduce downtime, improve customer service, and ensure machinery health by reducing the risk of it breaking.

1. Sustainable Value Chain: The use of blockchain alongside IoT sensors opens up the possibility of having an overall connected coffee ecosystem, from customers to coffee farmers. The technology elevates the transparency of the fair trade and potentially allows companies to monetize sustainable initiatives and create further competitive advantage.

1. Market Opportunities for Ethical Differentiation: With IoT sensors collecting data on everything customers do, the IoT is still in a crossroads of regulatory vacuum, with emerging privacy concerns. Not all smart home companies build their business models around harvesting and selling customers’ data, but some do. Nevertheless, the lack of security in this specific market can also be an opportunity for differentiation and further growth of brand equity.

The previously mentioned examples are an option for enterprises of all sizes to monetize IoT technology and data generation and take advantage of current sustainability/privacy regulations. The manufacturing IoT monetization strategy is much more extensive in terms of investment; however, local barista shop or small exporting companies are also able to utilize IoT tech. 

While, traditionally, the coffee industry value chain has ended at the sold cup of coffee, nowadays IoT allows the value chain to be extended toward future recurring consumption-based services, which is where the real money resides in IoT. In conclusion, IoT technology is becoming more prevalent in consumers’ daily lives and, before the technology matures, the manufactures and different entities in the coffee ecosystem should catch the momentum to innovate, perfect, and diversify their streams of revenue.