On 7 May, the Netcomm Suisse Observatory organised its third Executive Workshop for 2019. The theme of the workshop was on “Digital Innovation in the Food Industry”. The food industry is one of the most important contributors to the economy, with a total global production value of $9tr which is equivalent to 10% of the world GDP. Compared to other industries, the food sector was a late starter in e-Commerce and Digitalisation with an e-Commerce penetration in Switzerland of only around 2.5% of its total sales. However, thanks to the big size of the industry, this share still means an online grocery market of the size of around CHF 1bn. In recent years, new distribution models are helping to increase consumer confidence to shop their groceries online.
The half-day meeting was attended by a group of 12 senior managers and executives from well-known brands, retailers and startups in Switzerland’s food sector, such as Eat.ch by Just Eat, Manor, Migros, Valora, Unilever, Nespresso, Yamo, El Gusto and Drink Shop. The agenda featured case studies from Just Eat, Yamo, and xFarm. The workshop was hosted by the Netcomm Suisse member Zurich Insurance was supported by BFK Digital.
The executive workshop started with the Eat.ch case study. Eat.ch is the main online platform for food delivery services in Switzerland, matching restaurants and consumers. The home delivery market is seeing a major shift towards online and digital channels in recent years. Estimates show that 2019 will be globally the first year where the value from online orders will exceed the value of offline orders. In Switzerland, the market size is around CHF 1bn with about ⅓ of orders done online. Recently, the company is reaching into building up its logistic fleet to enable restaurants that do not own the infrastructure to reach consumers at home. This development was due to the one-sided offering in Switzerland’s food delivery market which is traditionally focused on Kebab, Pasta and Pizza. Since consumers are demanding a greater variety which includes Japanese, Thai and Mexican for instance, Eat.ch is supporting those restaurants with its fleet. The vehicles are equipped with a tracking system as customers today need to know how long the delivery takes. Overall, the company is focusing on putting the customers at the centre of its activities. For today’s consumers in any industry, the importance of the user experience is growing exponentially. For Eat.ch, this means to keep pace with world-class engineers from Silicon Valley as new service models such as Uber Eat are pushing forward. Another aspect of this is the possibility of click&collect as consumers want to save delivery costs. For understanding what serves the customer best, A/B testing is playing an important role. In surveys, consumers are stating many things that might be important for them, such as ingredients used, but in practice not all of them are useful. Therefore, ideas need to be tested and the company is not afraid to fail a test in order to learn new things.
Order your next meal here.
After speaking about new delivery models, we are turning around to innovation in food production. Our second case study was presented by the Ticinese startup xFarm, the winner of the Loomish E-nnovation Award in November 2018. xFarm is applying technology to improve efficiency of agricultural production. xFarm’s solution is a simple tool that supports the management of the farm in many aspects, including support for the administration, data of the machinery, and data about the conditions of the plants on the field. The tool offers a full integration of different solutions that are already existing. Further, the solution is available on a mobile app as the smartphone is becoming a highly important tool on the side in agriculture. xFarm processes meteorological data and sensors on the ground are delivering insights about the conditions on the field. However, the sensors are not telling what the issue exactly is but supporting the farmer to show the exact location. This is enabled by geographic tracking and indication on Google Maps. The gathered data enables also the forecast of diseases. The development of the solution was driven by the increasing complexity of agriculture with higher requirements of administrative work and increasing consumer expectation with regard to production transparency. The solution is applied in a total of 2200 farms with most of them in Italy. One example of an application is in cooperation with a winery in Italy. The application of the Chinese blockchain solution allows tracking of data from the vineyard up to the winery. This way, the story of the wine is captured in a QR code and can be told to the consumer. Another project is in cooperation with the Italian coffee brand Lavazza where xFarm’s technology is supporting the production of coffee farmers in Columbia and helping them to produce more efficiently. As part of the project, the Columbian farmers are also getting access to training.
Learn more about xFarm here.
The last case study of the workshop was presented by Yamo, a startup based in Zug that since 2016 have been disrupting the way baby porridge is produced. The story of the startup began with a food challenge of the two co-founders Tobias and Luca who were eating only vegan food for a full month. In this period, the two became aware of all the additives in many products. Especially for baby food, this was quite a shock. Their friend José, the third co-founder and food scientist, told them that this industry hasn’t seen any innovation for the last 60 years, which brought the ambition to change it. This was also supported by insights from interviews with parents who said that they would rather produce the porridge themselves instead of buying it. This, on the other hand, is very time-intensive which has shown them that there is a potential market gap. Luckily, the team found a way to produce porridge in a cold compression procedure with no application of heat and pressure of 6000pi. This way, the bacteria is killed but the valuable vitamins are unaffected. For bringing the product on the market, Yamo was giving priority to online sales as this enables them to be in touch with the parents and to gain insights about their preferences. Another priority is retail partners, namely Coop and DM. These two understood the need of Yamo, especially the need for refrigerators which is not common for baby porridge. Coop needed to adjust its assortment to create the necessary space and DM introduced refrigerators for the very first time. Sales through retail stores are important to create trust as parents can physically experience the product. In general, trust is playing an important role as parents, especially mothers (around 85% of purchases) are making the decisions. Therefore, collaboration with nutrition experts in product development is key. To further increase trust, Yamo has its online community where parents are sharing pictures and recommendations of the product which is further building up the startup’s reputation. Yamo is paying high attention to quality control as baby nutrition is a very important and emotional field. Therefore, each production badge is tested as the company cannot allow for any failure with regard to its product. Today, the startup employs 25 people of which the software development team is the biggest one, followed by the marketing team. In marketing, the team is focussing on performance and branding.
Learn more about Yamo here.
During the workshop, we have seen that consumer habits are changing. People state to be more aware of their nutrition and many of them (around 34% in Switzerland) are on some kind of special diet. People become also aware of environmental impacts of certain habits, such as meat consumption. These trends offer new possibilities for new products like meatless meat or vegan products.
In a more urban environment, people tend to order more through delivery services such as Eat.ch. We have seen that the understanding of customer preferences is key, also in this sector. Therefore, Eat.ch is giving priority to really testing their offers to learn quickly what works and what not. The market is also driven by tech giants from Silicon Valley making Amazon Prime and Uber Eat the true benchmark, also for Swiss players.
Consumer trends are also bringing the need for higher efficiency and higher transparency to the agricultural sector. xFarm is supporting farmers with its fully integrated solution. As for consumers, mobile devices are playing a highly important role in today’s agriculture.
Baby food is one of the most emotional products as parents, especially mothers are highly concerned about the well-being of their loved ones. Therefore, Yamo is very focused on high product quality. The reputation is built up by letting parents share positive emotions associated with the product on online channels as well as retail sales. Clearly, being able to speak the language of mothers combined with outstanding quality and freshness is leading the way to success.
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