Food and Beverage Players Turning to Internet of Things for Competitive and Operational Advantages

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4Q 2017 | IN-4840

Crisis breeds innovation. Companies like Texas Instruments, Xerox, and Motorola were founded during the Great Depression, which may not seem like one of the best times to launch a new company. While it is more difficult in bad economic times for enterprises to raise money and attract new customers, this increased focus on value means that only the best ideas and products succeed. Some industries, such as the food and beverage industry, are in a constant state of crisis due to slim margins and increased competition which have forced enterprises to differentiate themselves by developing operational advantages and creating new customer experiences. Companies like Heineken, Buffalo Wild Wings, and Chick-Fil-A have started using Internet of things (IoT) solutions to gain competitive advantages in their respective markets. While overshadowed by larger verticals such as the industrial, manufacturing, and logistics markets, the food and beverage industry is continuing to grow as enterprises realize the value these solutions provide.

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Niche Market

NEWS


Crisis breeds innovation. Companies like Texas Instruments, Xerox, and Motorola were founded during the Great Depression, which may not seem like one of the best times to launch a new company. While it is more difficult in bad economic times for enterprises to raise money and attract new customers, this increased focus on value means that only the best ideas and products succeed. Some industries, such as the food and beverage industry, are in a constant state of crisis due to slim margins and increased competition which have forced enterprises to differentiate themselves by developing operational advantages and creating new customer experiences. Companies like Heineken, Buffalo Wild Wings, and Chick-Fil-A have started using Internet of things (IoT) solutions to gain competitive advantages in their respective markets. While overshadowed by larger verticals such as the industrial, manufacturing, and logistics markets, the food and beverage industry is continuing to grow as enterprises realize the value these solutions provide.

Behind the Scenes

IMPACT


Within this industry, IoT applications must provide clear return on investment (ROI) and have strong business use cases. Because of industry challenges, enterprises are responding in part by developing applications to create new consumer experiences and to reduce operating costs by more effectively leveraging technology. For fast food restaurants like Chick-fil-A, this drive for differentiation manifests itself in the form of deploying digital signage and integrating that with mobile app-based rewards programs to deliver highly personalized user experiences while also using sensors to monitor the temperature of coolers and freezers to avoid contaminated inventory.

Another restaurant chain, Buffalo Wild Wings, is using IoT to reduce beer shrinkage, where bartenders either comp drinks to patrons or pocket payments from alcohol sales. Buffalo Wild Wings estimates that the average bar loses 24 pints from every keg due to this practice, which represents a nearly 20% loss in sales. By monitoring the keg activity using flow sensors, enterprises service busses, and application programming interfaces, the restaurant reduces lost beer sales due to theft. Additionally, Buffalo Wild Wings uses the data from the flow sensors to analyze consumption patterns to reduce outages and streamline operations.

Creating Customer Experiences

COMMENTARY


Food and beverage companies can utilize IoT applications to create unique consumer experiences. Heineken is embracing IoT by leveraging big data and artificial intelligence (AI) to improve both their marketing strategy and operations. The brewery is attempting to augment its customer experience through its Ignite bottle, a beer bottle with a reusable attachment composed of 50 sensors and electronic components that light up to the beat of surrounding music and in different patterns according to whether or not the bottle is being drunk from. Heineken is hoping to create a differentiated consumer experience within a particular venue. Larger arenas do not allow bottles due to safety concerns, so the Ignite bottle is targeted at a very niche market. Lastly, Heineken is also using PrimeSense, which was bought by Apple in 2013, to monitor consumer behavior at retail stores to understand how and where consumers purchase their beer. This data can then be used to create more interactive display units to drive sales.   

There is a significant need within the food and beverage industry for these types of solutions, but oftentimes suppliers and providers are more focused on industrial applications. In its ongoing SI/VAR and Partner Program IoT Ecosystem analysis which ranks companies in terms of their IoT service capabilities, ABI Research found a 20% increase in the number of companies offering food and beverage IoT solutions between 2015 and 2017.While that is sizable, for comparison, there was a 31% increase in the number of companies offering vertical-specific IoT solutions over the same period, with a 40% increase in the number of companies offering manufacturing, industrial, and enterprise IoT solutions. There may be some hesitancy from companies looking to target a niche vertical that has relatively slim margins, but food and beverage companies, particularly those in fast food, are looking to protect those slim margins by reducing operating costs. IoT suppliers looking to expand their offerings should embrace opportunities within these smaller niche markets to leverage their existing solution sets to deploy vertical specific connected solutions.

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