Sarah McIntosh's Profile

This was a great read! PepsiCo’s efforts to avoid stockouts seem comprehensive, although potentially very expensive. Since coconut water doesn’t perish quickly, it makes sense to diversify geographic risk by developing risks with copackers in many different locations. However, since the copackers are located near the coconut water manufacturers, I worry about the implications of having to open new factories in different regions, and whether the costs of this don’t outweigh the diversification benefits.

On a different note, I agree with the concerns of others about hedging. In particular, I’d worry about how hedging other crops, particularly commodities, is likely to be impacted by many factors other than local weather. For instance, rice is grown so globally that while a small area might see a short-term spike in prices following a typhoon, it’s unlikely that the rice futures market would re-adjust based on seasonal storms, and even more unlikely that it would predictably adjust based on seasonal storms. Additionally, hedging doesn’t seem to solve the core problem of a troubled operational model and a breach of the customer promise to distribute coconut water.

Finally, I think your point about how they can build up brand equity to help mitigate supply chain risks is interesting, because it raises the question of to what degree coconut water is a commodity versus a branded good. While I would have assumed that coconut water was a relative commodity, where customers might have brand preferences but likely not strong loyalties (similar to normal water), it seems to have become more branded in the past year [1]. This apparent move towards branded coconut water certainly speaks to the necessity of maintaining a steady supply chain.

[1] https://www.thrillist.com/drink/nation/best-coconut-water-brands

Thank you for writing this! It’s really interesting to read about such a massive company adopting really aggressive and optimistic targets in light of climate change, although I share Pranay’s concerns about whether Unilever will enforce these goals up the supply chain.

One thing that seems like a broad concern as companies adapt to climate change is that their incentives are sometimes misaligned with consumers. For instance, you suggest extending the use of One-Rinse technology to shower products. While this certainly makes sense from an ecological perspective, consumers might be resistant to adopting these technologies if they prefer taking long showers. In contrast, it makes sense that drip agriculture might be more aligned with farmers’ incentives, as it lowers costs.

In addition to Pranay’s concerns about early suppliers in the supply chain, I’d be curious to explore how Unilever is viewing the risks of pushing more eco-friendly products on a consumer base that hasn’t fully acknowledged the scope of climate change.

Fascinating to read about Campbell’s pivot towards a seemingly healthier brand. While I’m more optimistic than Alison about Campbell’s ability to create and market healthier food, I agree with her assessment that Campbell’s likely isn’t the right parent company for Habit. My initial concern is that this doesn’t seem to fit in with the customer promise of Campbell’s, which has historically been to provide an array of slow-to-perish processed consumer goods at affordable prices. Habit is relatively expensive, and I would expect (or hope) that they orient customers towards less processed foods, which comprise a minuscule percentage of Campbell’s bottom line. In fact, Habit should be pushing consumers to buy the very foods that Campbell’s doesn’t sell.

Habit is also an expensive investment, and so out-of-line with Campbell’s core customer base. I’d also worry about Habit’s ability to control the privacy of biometric data, especially if it’s using these as input for food recommendations.

While I applaud Campbell’s focus on supply chain transparency and healthier eating, I’d urge them not to lose sight of the lower margins on unprocessed foods and their lack of historical competency in the fresh and unprocessed food markets. Coupled with concerns around price and privacy, Habit seems like a dicey investment for Campbell’s.

Great article and fascinating comments! I concur with Patrick’s assessment that Diageo is probably breathing a sigh of relief when they look at these numbers. The short and medium term financial impact on their total bottom line doesn’t seem particularly severe as a percent of total revenue, and the average consumer would likely be able to tolerate a modest 0.5% increase for a well-regarded brand.

However, the potential disruption to their process flow of shipping is more concerning. While average wait times of 30 to 60 minutes at the North Irish border aren’t egregious, this seems likely to add an element of variability that Diageo could be underestimating. Additionally, the distribution following bottling, where the beer is shipped to countries across the U.K. will increase variability, potentially damaging relationships with wholesalers.

Thank you for writing about this! While I agree with Briana’s comments about Amazon potentially viewing this acquisition as a short-term loss leader and a long-term volume play, I’m not sure that it will be motivated to improve the infrastructure for local products. Amazon dropped Amazon Prime to rural areas in Canada and Alaska, as these were so unprofitable [1]. It seems plausible that they’ll invest in local products in less rural, and so less expensive, agricultural areas. But given their issues building a profitable delivery market in rural areas, I don’t think they’ll be optimistic about their ability to build a profitable supply market in these areas.

This article really highlighted how even Whole Foods, which sparked the locavore movement, has done an inadequate job creating an infrastructure that brings local goods to market. These goods are disproportionately expensive to move to market and sell, and Amazon doesn’t seem likely to invest in this segment. However, if Amazon’s takeover leads to reduced investment in the locavore market, it seems to open up room for a new business that can successfully aggregate local suppliers and deliver efficiently to interested consumers, like a large-scale CSA that allowed you to pick from a number of suppliers.

[1] http://www.cbc.ca/news/canada/north/amazon-ca-drops-free-shipping-for-remote-customers-1.3026859

Thanks for the article, Darrin! As its supply digitizes, L’Oréal seems to be facing a core tension around the large-scale implications of a digital supply chain and the small-scale implications of region-specific consumer demand. While L’Oréal has successfully used robotics and slotting software in global distribution centers, it seems challenging to apply these while also increasing the number of SKUs to account for different consumer demands. To some extent, L’Oréal might be motivated to train customers worldwide to have as similar tastes as much as possible, in order to reap the full benefits of digitization for its supply chain.

L’Oréal seems likely to face similar tensions as they develop their direct-to-consumer sales channels. Because their portfolio of brands runs the gamut from extreme luxury to a shampoo I can buy for ten dollars at CVS, they need to be wary of over-affiliating brands that should be kept segmenting. While they should certainly try to own the online consumer experience rather than sending customers to Amazon.com or Walmart.com, they will need to make sure to keep each brand experience individual and unique.