Chapter 7: Future Scenario, Recommendations and Conclusions
7.1 Future Scenario of the beer industry (Vision 2030+)
We start by trying to understand the current situation and ways the current trends will impact the beer market in the future.
Lower Consumer demand: the beer industry is experiencing declining growth in the developed markets (USA, Western Europe, Japan) due to the following factors:
1. Demand Elasticity- emergence of suitable alternatives (substitute) beverages e.g. Cider, wine.
2. Demographic changes due to aging population e.g. Germany, Japan
3. Higher taxation and government regulations.
4. Global economic slowdown reducing consumer disposal incomes.
However, in emerging and developing markets like Brazil, China & Nigeria, demand remains strong and will continue to grow.
Market Volatility resulting in global economic slowdown will lead to the growth of the lower price segment of the beer market (winning greater market share) at the expense of premium and mainstream segments which traditionally attracted stronger growths and higher profit margins resulting in reduction of overall profitability.
Intensified competitive pressure: This will lead to rapid product innovation especially amongst craft brewers resulting in more category offerings and new beers on the market.
Changing Consumer behavior. New patterns of consumer behavior will emerge driven by health & wellness, customization & personalization resulting in dietary preferences, and focus on shopping experience favoring local product purchase.
Distribution Challenges. Retail stores like supermarkets and large chain discounters/convenience stores will become important distribution channels for beer at the expense of traditional bars and pubs. There will be a surge in demand for small batch deliveries in various pack sizes to reduce warehousing costs and satisfy consumer requirements making order fulfilment rate to prevent stock outs a major KPI for the Breweries.
Large batch distribution to a central wholesale customer may be unsuitable and obsolete.
Changes in Operational and Organizational structure. Due to rapid changes in consumer preferences, it is projected that it will lead to shift from stable product portfolios with longer product lifecycles to agile organizational structures which support swift and steady product launches with shorter product lifecycles. Traditional low-cost manufacturing favoring large batch volumes will be unsuited for niche markets requiring smaller batches.
These changes in the beer market powered by the emergence of trend-conscious consumers rather than traditional beer drinkers will force breweries big or small to adjust to the changing landscape. This means breweries would have to expand their portfolio offering to meet the growing trend of customization. As a result, Breweries are starting to invest massively in digitalization technologies. Unfortunately, despite the massive investments, the breweries are still overwhelmed with countless data silos and disconnected information leading to lack of visibility and collaboration across the brewery enterprise resulting in multitude business inefficiencies.
Digitalization in brewing industry is still basic limited to process automation, control and recipe management. Most of the available data are not collected. The few data collected are mainly from anomaly detection & control but not fully exploited for making predictions which offers the greatest value.
As sensors become less expensive and readily available, with closer integration in equipment, their utilization will gain traction in the brewing industry resulting in Digital Factory (Industry 4.0) with interconnected devices and processes to generate data for smart decision making.
New ways of manufacturing will be aided by digitalization to enhance productivity.
Going forward, there will be a great need for data integration to overcome silos and gain competitive advantage through the improvement of data transparency and efficiency. This is where IIoT utilization will play a leading role. In the future, data from IIoT in decision making will gain importance and prominence in the brewing industry.
Digital transformation will change the brewing industry in several ways:
1) Innovation cycles will be shorter reducing time to market which is critical for survival in the new emerging competitive environment.
2) Breweries will require less production and maintenance staff. Brewers and Process Engineers will be confined in a centralized location in front of the computer screen or on mobile applications like tablets and smart phones to monitor and control the entire process.
3) It will transform the brewery business process through improved predictive maintenance, better asset utilization resulting in higher productivity.
4) New business models will be enabled changing the bases of competition. With the ability to monitor machines and equipment in use at brewery locations, manufacturers of industrial equipment like Endress +Hauser will migrate from selling capital goods to selling products as services. Since the device manufacturer knows the usage rate from sensor data, cost could be charged per usage rate. Remote monitoring of equipment performance, service like periodic software upgrades and maintenance could be provided by device manufacturers under annual contract with the Breweries. This service delivery approach will offer the supplier with a more intimate relationship with the customers hence creating a customer lock-in relationship that will be hard to disrupt by competitors. Performance monitoring of field devices will provide useful data to inform the design of new models which could enable the manufacturer sell additional products and services.
Issues like cloud computing, data security, data privacy, small batch production, simulations using digital twins and documentations will take center stage.
Over the coming years, 3 important trends will dominate all industries including the Brewing industry. These are:
1. Automation: As competition intensifies with the need for speed to react to customer demands increases and the true scale of valuable time wasted waiting for Laboratory results become obvious, breweries big and small will invest in automating their processes and systems. Inline process analytical equipment has been found to be more accurate than human employees. They will increase productivity and reduce defects.
2. Artificial Intelligence (AI): The adoption of AI is becoming wide spread in most manufacturing industries including the beer industry. As their capability to better predict future trends than humans become apparent, human employees will be ditched in favor of AI.
3. Internet of Things (IoT): IoT connects physical items to the internet for real-time monitoring and adjustment. The brewing industry could benefit immensely from IoT. For instance, smart devices monitoring critical process activities like fermentation could send data directly to brewers and process Engineers via advanced industrial wireless technologies powered by 5G networks enabling real-time tracking and monitoring of critical process parameters like temperature, alcohol concentration, yeast growth etc. for real-time intervention to deliver consistent high product quality.
These three factors identified above will dominate the Brewing industry in the coming years.
With increasing economic development leading to higher disposable incomes, sales growth will continue to put pressure on production operations especially in the brewing industry. With greater access to information technology, consumer knowledge on food products will also increase. This will shape dietary preferences leading to an ever-changing consumer taste. IT will continue to revolutionize marketing with a projected growth in online platforms. Increased globalization will merge economics and societies exposing consumers to a wider array of available beverage products hence presenting them with unlimited choices to meet their ever-changing taste. Internal rivalry in the brewing industry will continue to grow resulting in the need to adapt their processes to meet these ever-changing dynamics in trends and tastes. Government regulations on the Brewing industry to conform with regulatory requirements like ISO 9001 (Quality Management Standards), Food Safety requirements (ISO 22000), supply chain transparency and product information will continue to grow. There will also be an increase in pressure on all industries (brewing included) from all stockholders especially governments and shareholders to reduce environmental pollution and to be more sustainable as it is with energy giant Royal Dutch shell that is proposing to tie senior executives pay to carbon reduction (BBC News, 2018). Shareholders will continue to demand reduction in production cost in the face of an increasing input (raw material) costs. Demands to increase productivity, product quality, profitability and plant efficiency to increase capacity while new investments are delayed is projected to increase. The brewing industry is affected by seasonality in demand, this demand seasonality requires the brewing industry to pivot quickly to respond to these changes. The need to obtain accurate operational data that could be converted into useful business information on which improvement decisions could be based will also continue to rise. Problem solving based on ad hoc activities, causing poor communication between the various functions in the brewing industry will gradually phase out as demand for process efficiency increases to address the ever-changing business landscape increases.
These projected trends will result in Brewing industry investing massively in automation and digitalization technologies in a bid to make their processes smarter, more productive to remain competitive. The IIoT platform which connects smart devices throughout the brewing operation enabling automation will result in better asset management through condition monitoring of equipment. Real-time data analyses from inline analytical process equipment enabling smart business decisions by utilizing various problem-solving techniques such as cause-effect and Pareto diagrams, failure mode and effect analysis (FMEA). This will result in cost reduction
and increasing profitability. Digitalization through IIoT, big data analytics are projected to be the next wave of technology that will enable breweries to achieve these goals. Breakthrough technologies making Inline analytical process equipment smarter and more accurate will gain widespread adoption in the Brewing industry with increasing applications. An example is radar technology which utilizes level measurement for inventory monitoring from raw material silo to CIP. The quantity of raw materials like malted barley in storage silos currently estimated with deep sticks or graduated ropes will be remotely and more accurately monitored using radar beams with 79-80GHz (see Fig. 31 below). Radar technology has also found useful application in other inventory monitoring systems such as in bulk chemical tanks containing hazardous chemicals like caustic soda and acids used in vessel CIP to ensure that continuous processes are uninterrupted due to material shortages.
The entire beer production process from milling to packaging will be monitored and accurately controlled to ensure consistency in product quality. Inline analytical process equipment like the mass flow meter capable of doing multivariant analyses (mass flow, volumetric flow, temperature & density) will gain widespread adoption in the brewing industry. Analytical results from these smart inline process analytical devices will be transmitted through different available industrial networks to data acquisition systems and cloud-based servers for data storage and analytics. However, care must be taken to ensure that the data collected from inline analytical devices meet the needs of the brewery and should impact one or two key areas of the business e.g. quality as part of the HACCP or FSMA plan of the brewery, or improve efficiency such as flow rates, process time as stated in Littles law which can then be fed into the digital twin.
Big data analytics, machine learning, Artificial intelligence and analytics is projected to allow for better forecasting, increased productivity, greater insights into plant and process performance and enabling better customer service delivery. It will also improve supply chain performance and profit margins by tracking shelf life and freshness of beverage products, predicting and avoiding spoilage by monitoring of critical quality parameters like temperature, humidity and other environmental conditions of beverages as the go from one point to another until the reach the consumer. In other words, it will improve overall business performance and drive down costs. Date from these integrated technologies will support Brewery KPI dash boards by enabling the visualization of relevant performance metrics and identify critical process problems in real-time by remote monitoring on mobile applications like tablets and smart phones; preventing product quality issues and asset utilization problems arising from unplanned breakdowns and production downtimes due to off-spec products.
Substituting Laboratory measurement with inline process monitors will improve energy consumption in the brewery. An example of this effect is seen in the waste water treatment plant which utilizes aeration (oxidation) of the organic matter in the secondary stage of sewage treatment to enable the organic microbes (bacteria) to convert the harmful organic substances in the waste water into CO2, water and energy hence making the water safe for discharge to the environment. Being that aeration accounts for over half of the waste water treatment plant energy costs (Penn, 2015, pp. 14-15), an accurate control of dissolved oxygen levels is key to minimizing energy cost especially so when the online dissolved oxygen meter is coupled with the automatic blower.
The adoption of Inline analytical process equipment will eliminate manual data collection which will improve OEE, inventory management and scheduling.
The use of digital twin technology can significantly improve brewery product innovation. These digital models can help in cost reduction of manufacturing and commissioning of new products by eliminating the need to create a physical prototype of new products. This technology will increase time to market which will be good for responding to frequent demand changes due to seasonality, changes of consumer taste and competitive moves.
To enable end-to-end quality monitoring involves the integration of the brewery network infrastructure with suppliers, transporters and retailers. However, increased data convergence enabled by interconnected devices across the IIoT platform for end-to-end monitoring of beverage for quality and spoilage, exposes the Brewerys network beyond their existing brewery network firewall protection which opens it up to external attacks and data security threats such as cyber-attacks (malware, ransomware etc.). Standard firewall and security software might no longer be enough to counter the treat since they lack the necessary characteristics to be effective in harsh industrial environments with high temperatures, dusts and sometimes humidity. Hence, this will require superior data security protection; firewalls should have specific industrial protocols such as Dynamic Host Configuration Protocol (DHCP) which ensures the allocation of unique IP addresses to field devices (Bartsch, 2016, p.10) and incorporates availability and safety. Blockchain technology with it advanced data encryption and digital ledger saved on distributed servers might play a significant role in industrial data security.
With the adoption of new technologies like wireless data transmission on 5G, blockchain, breweries will have the opportunity to demonstrate how they ensure product safety in compliance with regulatory requirements such as ISO 9001 that will offer more transparency in the supply chain and production process giving more confidence to consumers. RFID tags and blockchain will also find useful applications in product tracking from goods in to goods out (end-to-end process) which will significantly help in risk management. Blockchain technology has the potential to shorten time to market by removing middlemen enabling breweries to effectively respond to competition.
The adoption of IIoT, bigdata analytics and deep learning (machine learning and artificial intelligence) will improve:
Inventory management by improving demand forecast through predictive and prescriptive analytics.
Improve product quality and prevent reputational damages through remote tracking and tracing of shipments and implementing appropriate measures for product recalls. It will also reduce asset loss such as beer keys going missing in the supply chain.
Improve brewery cash flow through improved equipment availability, accurate demand forecast (through prescriptive analytics leading to lean production management), enhanced sales and marketing services, new digital business models through outsourcing equipment ownership (utilization will be on rental or pay per use basis), equipment outsourcing etc.
Improved quality management through remote monitoring and real-time quality monitoring using mobile applications enhanced by 5G connectivity leading to reduction in defect rates.
Aside from the technologies, data collection and analysis will also require new set of skills and changes to the way of work for the employees in the brewing industry. The large mass of data collected from process samples and processes must be mined, queried, filtered, analyzed and reported to show trends and performance against KPIs to obtain useful actionable insights for specific applications. Analytics will be expected to highlight inefficiencies such as losses and their root causes geared towards productivity improvements. These will require transformations and responsiveness that will involve a holistic approach to the entire brewery organizational structure to support the digitalization process which are:
Planning- incorporated in the brewery corporate strategy. Digitalization should be viewed as a business strategy not just a technology implementation.
Employee engagement changing mindset through education (training) and prompt performance evaluation.
Substituting laboratory analysis with inline analytical process equipment and digitalization will enable real-time access to analytical results and data from multiple sites over the internet or intranet. It is projected that there will be a widespread adoption of mobile applications like smart phones and tablets for quality monitoring. This will allow operational personnel to quickly identify and make better informed decisions.