Great post, I love your four-pronged approach for long-term, climate-change adaptation. I have three additional strategies to contribute:
1) AB inBev could experiment with alternative main ingredients for beer in addition to providing capital for genetic modification of barley and hops. Your paper notes that inBev recently acquired SAB Miller. They have a beer in Africa produced from Cassava, which is a hardy, drought resistant and common plant in the region. This cassava beer is not only cheap to produce, but it does not have the same fluctuations in raw materials cost or availability due to the type of plant. This strategy could be leveraged and experimented with globally with other local plants.
2) AB inBev should get consumers involved by making them aware of their own impact on the environment while consuming beer, similar to how Nespresso encourages pod recycling. For example, I had no idea that AB inBev had so many sustainability initiatives, and if I had known I maybe would have bought more beer from them. Additionally, by making consumers aware, perhaps the consumers can help with bottle/packaging recycling and other initiatives. This would allow AB inBev to address the upstream supply chain along with the downstream.
3) AB inBev should leverage its market dominance to influence smaller breweries towards more sustainable supply chains. For many of these breweries, vertical integration is not a possibility, but I think the water reduction efforts as well as the distribution and packaging initiatives could have real impact in smaller breweries.
Great write up on a complicated and interesting topic! I recently read an interesting WSJ journal where Apple is quoted saying “It isn’t just that workers are cheaper abroad. The vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products”. Based on this quote, my understanding is that the amount of capital investment Apple would have to make in order for manufacturing to be feasible in the US seems to be insurmountable. Therefore, I would urge Apple to think of adding manufacturing jobs in the US as a long-term strategy rather than a short-term one as the level of CAPEX would not make sense for a short-term project. Also, instead of manufacturing jobs, I would urge them to think about longer term, sustainable jobs in the US such as engineering, customer service, and retail where the skills of the US population would allow workers to operate at the top of their license.
In terms of maintaining their reputation for R&D and innovation, I believe that unless the government can provide Apple with tax breaks for this investment, Apple will need to raise their prices. Currently they are making about a 35-40% margin on iPhone sales, which now cost almost $1000. In order to maintain this margin, Apple would need to raise prices even further. In my opinion, the iPhone is now such a commodity product that I think demand is relatively inelastic and would absorb another price increase. However, I believe an argument can be made then that Apple is pricing so high that it is discriminating against the majority of the US population. Therefore, is Apple’s social mission canceling itself out? If it is providing jobs that provide Americans with more income, but then they cannot use that income to purchase one of the products they want, is that ok? To answer this, Apple needs to define if it is truly making products for all people.
Interesting read! I had no idea of the extent of the sustainability programs from Vail. To answer the question of whether snow should be manufactured for skiing, I do not think it should. While I love skiing and am happy to hear that 80% of Vail’s water for snowmaking is returned to the environment, I read an article that snow creation uses 100 gallons per minute. This seems like a huge environmental price to pay while more than 1.2 billion people in the world do not have enough drinking water. Additionally, it appears to be unsustainable as the world continues to have less and less water.
I also wanted to add that extreme weather could potentially mean more blizzards and more snow (snowpocalypse!), even if in some years its means no snow. This variability in skiing conditions cannot be controlled by manufacturing snow and probably impacts revenues as customers may be less willing to plan expensive ski vacations in advance if they are unsure about weather patterns. I feel like Vail needs to think of a strategy to maximize when they have a lot of snow as well as when they have no snow.
Finally, I read an awesome article about a free service called Sunweb’s Ski Guarantee that will reroute travelers to other ski resorts if 2/3 of ski lifts are closed due to no snow at a resort. I recommend Vail create its own program between its 14 resorts to offer this option to people who purchase ski packages as a way to maintain customer satisfaction while also reducing dependence on artificial snow making.
Interesting article! One other additional cost and complexity could be the cost of the instability in the supply chain/demand as regulators get their bearings in a post-Brexit world. I would imagine that McLaren does not like to hold inventory given its high price point and warehousing costs, and this could pose a problem as shipments get held at customs whereas they could easily get to Europe/other countries before Brexit. This is especially challenging given how many of the cars are sold outside of the UK.
Great essay! In response to your question about whether fast fashion is just for lower price segments, I believe it is not and that the digitization trend of supply chain is permeating all price points. Take for example, Moda Operandi, a website founded in 2014 which allows women to pre-order high end clothing and accessories (average price point of an order ~$2k) off of the runway so that they do not have to wait for department and specialty stores to purchase a collection before they receive their clothing. The company now has net revenues of almost $100mm. According to an article in Forbes, women receive their items a full 4-6 weeks before they would if they ordered the same items through a third party (department, specialty store). The Moda Operandi approach also helps the designers to digitize their supply chains by allowing them to collect data on demand long before they would receive information from their standard department store distribution channels. This, in turn, allows them to be more agile in planning the production of their lines and in turn helps them financially by producing more of the items that sell well and less of the items that do not.
Interesting topic and great write-up. I agree that last mile delivery is becoming increasingly important for retailers globally as consumers become accustomed to the immediate satisfaction of receiving their orders. I also agree with Phillip’s suggestion on automation, but only in certain very developed markets. I envision automated delivery working only in big cities in the United States and Europe where robots are not so far out of cultural norm. I recently read an article in Forbes that 60% of the cost of delivery is labor, which is especially expensive in the markets listed above. However, I am cautious about introducing automated, robotic delivery in a developing market like Mexico. Juanjo, I like your idea of self-pick up for Mexico as it addresses not only the complexity of delivering, but it also addresses the current cultural reaction and thought on online ordering. In my experience with family and friends in Mexico, the distrust of online ordering is just beginning to fade for the majority of the population. Instead of automating delivery via robots, I propose that Amazon actually double-down on traditional delivery and focus on the customer service aspect of delivery. I would not want Amazon to get caught in a race to the bottom to delivery goods for free at the drop of a pin. I recommend they use delivery people with branded Amazon trucks and mopeds (for smaller orders). The dual delivery system of truck and moped would allow smaller, perishable orders to reach customers quickly (and avoid CDMX traffic!). Amazon should load their delivery trucks and mopeds with additional products as an opportunity to up and cross-sell a customer when receiving their order to mimic the online checkout process. I think this could be an interesting revenue-stream that could counteract the cost of delivery, and an opportunity to build brand loyalty.