In today’s meat industry, there have been numerous cases reported on meat fraud and mislabelling of meat products. Besides, the meat supply chain is itself riddled with issues like lack of transparency in operation, insolvency, or financial risks due to excessive debt concentration, and improper capacity management.
Though it isn’t a fix it all, blockchain technology can help resolve these issues. For instance, blockchain implementation in the meat supply chain will make it easy for all the stakeholders to trace the provenance of the meat. Valid providence credentials help increases the brand’s reputation and perception in the consumer’s mind. This increases the consumers’ willingness to pay, thereby increasing revenue.
Blockchain-enabled smart contact payment platforms can help reduce the risk associated with deferred payments and thereby, decrease the debt concentration. Additionally, the data harvesting and data sharing functions of blockchain can help address the demand-capacity mismatches and the lack of transparency that arises in the meat industry.
Additionally, factors such as:
- need for a common voice in the industry
- brand’s objective to tap into the consumers need for provenance
- consumers varied consumption habits
- concern about how sustainable meat production is
- need for a more accurate labeling system
give a reason for Supermarket retailers to collaborate with players in the meat industry to implement blockchain technology across the retail meat supply chain.
The reasons that make BeefLedger a suitable candidate for the major retailers to partner up with to implement blockchain technology in the Australian meat industry include:
- having access to their own abattoir infrastructure and supply chain assets
- collaborating with educational and research institutions
- having established their own initial user community.
Despite the several advantages associated with the implementation of blockchain in the technology meat industry, there are certain risks associated with it:
- as the technology is immature the technology’s benefits i.e., ROI are unclear
- there is a knowledge gap regarding what level of food provenance information do the end consumer’s need
- the feasibility of a one-to-one traceability system is unknown.
Knowing all of this it is the decision of the major supermarkets whether to initiate a transformation of the industry by adopting blockchain. If they decide to adopt the technology, then they need to collaborate effectively with blockchain technology consultancy firm as well as with suppliers. Information sharing is the key here. Consequently, the retailers also need to inform consumers on how to access the newly available provenance information
BeefLedger Ltd is a public unlisted company founded in 2017. Its headquarters is based in Brisbane, Queensland, Australia (BeefLedger, n.d.). They provide a blockchain-driven platform that can trace the source of origin of the food products. They aim to use technology to improve the product quality credentials and increase the confidence that the supply chain participants have in each other.
BeefLedger has built an entirely new digital ecosystem that consists of elements like:
- smart contracts which are designed to streamline payments and replace letters of credit and to avoid forgery
- packaging integrated with technology to avoid substitution of the original product with a fake product
- applications that let consumers and distributors verify and validate where their meat is coming from.
1.2 Company Mission, Vision, and Values
BeefLedger is driven by the belief that every consumer and supply chain participant can benefit from having transactions that are more transparent and streamlined.
To achieve a viable ‘agriculture in the middle’ format using the advancements in technology.
- Innovation: Embracing challenging situations and viewing innovation as a fuel to become more resilient
- Excellence: Incentivise the pursuit of excellence by providing the food producers with access to data
- Peace of Mind: Helping end-consumers to worry less about food safety, ecosystem health, social equity, and animal welfare
1.3 Business Model
BeefLedger’s business model runs on a licensing-based system, wherein the business obtains its revenue from:
- User subscription: To pay an annual subscription fee for using the BeefLedger platform
- Data fee: To pay per ‘proof of work’ i.e., the platform users pay for every block that is created in the blockchain or the distributed ledger. These proofs of work can be in the order of thousand data points which makes it feasible for end-consumers to have high confidence in the credentials and the food provenance. On the other hand, the proofs of work could be in the order of a hundred data points which makes it suitable for low-level credentialing.
- Transaction fee: To pay a transaction processing fee when payments are made across the platform by using the smart contracts.
BeefLedger also offers a quasi-franchisable platform which enables the supply chains in multiple regions to co-brand the local blockchain-enabled ledger (BeefLedger,2018). Unlike the traditional franchise model offered by the firm, the quasi-franchisable model allows the franchisees more lateral decision-making power. This freedom allows franchisees to customize their business and differentiate themselves from the rest. This model is quite like the white label positioning strategy which is designed to reduce the operational costs.
1.4 Business Drivers
Some of the key factors that are responsible for creating and pushing the business performance of BeefLedger include:
By providing valid credentialing and provenance data, BeefLedger enables consumers to have high confidence in the whole-of-life traceability of the product that is present on their plate.
- Brand value
Consumers are willing to pay a premium price for top-notch quality Australian beef. This in effect calls for the need for validated brands that can capture consumer loyalty and appropriate premium price. This is where BeefLedger can add value. By providing the necessary credentialing they help in the creation of a sustainable brand value and thereby, differentiate the product from the rest of its competition. The increased brand value directly contributes to the increase in the supply chain profitability.
The Australian meat industry value chain is highly fragmented. It consists of approximately 77,000 producers, 100 meat processors and two major food retailers (Coles and Woolworths). However, with the vast amount of parties involved throughout the supply chain, there is a lack of integration and information sharing among the various players involved. This leads to additional costs. For instance, the fragmentation and lack of integration in the supply chain lead to asynchrony of payments and an imbalance in profit distribution amongst the stakeholders. Not only does this causes a loss of trust but it can also put certain parts of the supply chain at a disadvantage. Due to the asynchrony of payments in the supply chain, oftentimes to keep the supply chain functioning the players need to use various forms of cash flow financing. This leads to the concentration of large volumes of debts in certain parts of the value chain. This in return raises the cost of capital for the overall supply chain and often concentrates risk in specific and critical parts of the supply chain.
Contrarily, using blockchain-enabled smart contract payments (smart contracts contain contractual conditions and protocols that are to be abided by the participants) helps to smooth the payments and mitigate the asynchrony of payments. By reducing the payment delays this technology helps mitigate the adverse effects of delayed cash flows on certain segments of the supply chain. Furthermore, by increasing the confidence in the security of payments and avoiding delay in differed payments this technology makes it easier for supply chain participants to source funds. Consequently, this reduces the debt makeup in the overall supply chain and makes the whole chain more liquid. This way blockchain can be integral to managing the risk and uncertainties present in the overall meat supply chain.
- Risk Mitigation
Given the pandemic situation, there is an increased need for meat safety and security. To mitigate meat fraud risk, BeefLedger works closely with its packaging innovation partners. Their robust crypto-currency systems incentivize supply chain participants to exhibit desired behavior which in return increases the bio-security transparency.
BeefLedger platform allows the producers/processors to get direct feedback and create engagement from the end-user community. This is carried out with the help of functions like consumer ratings and engagement techniques like passive push initiatives and active referral programs. The feedback obtained from the rating function can be leveraged by the producers/processors to continuously improve the products/services they offer.
The platform aims to create a ‘golden data thread’ i.e., step-to-step connectivity throughout the supply chain by deploying Blockchain and smart contracts that comprise data conditions along the supply chain. This Intellectual Property makes all the ‘moving parts’ of the chain traceable.
1.5 External and Internal market environment
To better understand the macro-environmental factors that affect the implementation of blockchain technology in the meat retailing business a PESTEL analysis has been conducted.
1.5.1 PESTEL Analysis
Various political, economic, social, and technological factors affect the Australian grocery retail giant’s decision to use blockchain technology to trace the provenance of the meat sold in their stores. Let us see how these factors look like.
- Disjointed voice in the industry: In this era, politicians are always experiencing an information overload. Especially, the fragmented nature of the meat industry means that the different interests are at odds with each other on the same subject. Furthermore, the conflicts that occur between the players present at different levels of the value chain proves to be unhelpful for the industry overall. Making decisions on an ad hoc basis with just the short-term goals in mind has been a common thing for most of the Peak Body Councils. Now there lies a danger where the industry’s disjointed voice can result in a less than optimum policy outcome.
- Decline in household income: Due to the COVID 19 outbreak, the household incomes are expected to decline in 2019-2020. As a result, consumers vary the quality and quantity of their purchases based on the disposable income they have. It was observed that consumers tend to purchase less expensive products like red meat and poultry when they have low disposable income. Contrarily, consumers purchase the more expensive quality of meat and seafood when they have a higher disposable income. So, based on the disposable income of individuals the meat, poultry, and fish retailing in Australia might experience fluctuations in demand (Chapman, 2020).
- Vertical integration of the supply chain: Progressively, the meat industry is trying to become more vertically integrated through collaborations, strategic alliances, and ownership models. The proprietary/trade brands formed from these integrated supply chains target specific consumer segments. The value proposition of these trade brands is based on tapping into the consumer's need for a better understanding of the origin of the product and as well as increasing product loyalty. These trade brands have been using provenance as a marketing strategy. Now with the help of blockchain technology, these trade brands can directly target their end consumers using differentiating pricing tactics.
- Change in consumer shopping habits: The recent lockdown has impacted the popularity of cooking shows and new food trends immensely. Not only has this influenced consumer's shopping habits but it has also broadened the average home cook's repertoire of recipes. As a result, there is a shift in demand towards different types and cuts of meat. For instance, food trends have brought new consumer demand towards niche product segments such as beef cheeks, quail, and lamb short ribs (Chapman, 2020). It is expected that over the next five years, this niche product segment might experience a continuous boost in demand. Besides meat processors that deal with premium products are expected to gain more consumers through differentiation from the supermarkets. So, providing consumer’s provenance information of the premium meat and what sort of recipes are most suitable for that meat cut is more likely to influence their purchase decision.
- Social license around farming: The hyper-connectivity provided by the media has provided a place for people to fight for a common cause. Due to this social media is being used as a tool to put pressure on politicians to bring regulatory interventions to the industry. For instance, consumers are aware of the current technology used to increase the shelf-life of meat. Processes like the MAP (modified atmospheric packing) process are used to slow down the meat spoilage. In this process, the meat is exposed to gases like carbon dioxide or monoxide to have a rosy-exterior and look fresh while it is still decomposing from inside. There is growing consumer outrage regarding the use of MAP processes on livestock ("Food dyes, food lies: are you being duped at the supermarket?", 2016). Now more than ever there is an increased consumer sensitivity around knowing the freshness of the food they consume.
- Advancements in the blockchain: Developments in blockchain technology has allowed us to record the sequential events and their timestamps throughout the supply chain. This can be particularly helpful in the Australian meat industry where the ‘moving parts’ of the product transact through different parties with varying levels of trust and at different times.
- Advancements in the labeling technology: Recently it has become easier for consumers to check the product information on the spot (for example using QR codes to check the information) when such sort of information is made available. So, with the help of this labeling technology, the end-consumers can check whether the product that’s labeled ‘halal’ or ‘locally-produced’ is actually what it claims to be. This might be a way to gain customer loyalty.
- Carbon footprint: Added to this there has been increased scrutiny on the meat industry from environmentalists. And some environmental activists are busy spreading the notion that methane emissions from animals are the largest contributor to global warming. Despite being an inaccurate statement, this notion has managed to persuade the consumers to put pressure on the meat industry to reduce their carbon footprint. As a result, there is a growing consumer sensitivity around the amount of distance the meat travels from the supplier paddock to the plate. In this case, information about where the meat product has originated from acts as one of the driving factors that influence the end-consumers decision on whether to purchase the meat product. Here, blockchain could be of value in reinforcing the consumer’s confidence in the sustainable production of meat and it can ensure the consumer's buy-in to the ‘buy local’ selling proposition.
- As mentioned earlier, there is growing pressure on the meat industry from the government, environmental activists, and consumers to increase the transparency and comprehensiveness of the labeling system.
1.5.2 SWOT Analysis
To get a better understanding of BeefLedger’s core competencies and areas of improvement the SWOT analysis is being carried out. Let us look at each of these four aspects in detail:
At its core BeefLedger has three main competencies:
- Access to their own abattoir infrastructure and supply chain assets
Being able to deploy a variety of technology solutions on the meat as it is being manufactured through the slaughtering and processing chain allows BeefLedger to gain a first-mover advantage. BeefLedger has its whole supply chain ‘under one roof’. This allows them to conduct their tests seamlessly and efficiently.
- Key collaborations with higher education and research institutions
Having robust relationships with several research institutions and academic bodies allows us to constantly tap into the unknown. We are collaborating with Universities such as James Cook University, Queensland University of Technology and Commonwealth supported research body Food Agility CRC.
- Having an initial user community in place
The use community comprises graziers, cattle agents, transporters, processors, retail butchers, and consumers. This user community allowed us to have an insight into consumer preferences and needs. Additionally, these initial platform users helped lay the foundation that is necessary for acquiring new consumers and build consumer loyalty.
The firm doesn’t have a fully developed development plan. It is relying on the abilities of the board members to source, manage, and allocate resources adequately. It’s the role of the board members to conduct required due diligence before committing to any specific course of action. If the board fails to live up to the expectations, then it might result in a loss of capital.
BeefLedger has the potential to use its core platform to diversify into other foods. This presents the firm with a significant market growth opportunity. Having an established presence in the beef industry and knowing the ins-and-outs of the digitalized food provenance would mean that BeefLedger could diversify into other sectors at a low entry cost.
One of the most noticeable threat is that the market for red meat industry products is moving adversely. This could be the result of tighter supply and falling meat consumption in the domestic markets. The lower meat consumption could contribute to higher domestic meat prices which might inflate the industry’s revenue but at the same time, it might alter the consumer's consumption patterns. Consumers might be reluctant to pay more for the same quantity as a result they might prefer cheaper substitutes like chicken in place of red meat like beef. To stay in business some of the players will eventually be forced to decrease the prices of their products.
Besides this BeefLedger doesn’t face any immediate threat from the competitors as it is part of an industry with relatively no competition,
1.6 Operational Plan
1.6.1 Value Analysis
Domestic consumers in Australia are unaware of the food traceability within the meat industry. This could be due to the absence of any major contamination risks in the meat market. Keeping that in mind, the recent food contamination in strawberries in Australia has increased the level of consciousness in the consumers regarding the security and safety of the supply chains within the country.
So blockchain combined with smart packaging technology can help and protect the brand’s perception in the domestic markets. By providing provenance information, like the ‘story’ behind how the product reached their plate and asking consumers for feedback allows them to differentiate between the fraud meat and the real one. Additionally, these tactics also effectively engage the consumer with the brand. Considering that the approaches to ensuring provenance are still in the early stage of their development, brands can effectively use this to their advantage to differentiate themselves from their competition.
1.6.2 Process Value Analysis
Blockchain technology can help supermarkets reduce the time required to trace the origin of their meat products from days to seconds. Supermarkets can either achieve batch level traceability or one-to-one traceability depending on how much product level detail is needed. For instance, supermarket retailers can implement blockchain onto their meat suppliers. They can do this by partnering up with BeefLedger. Through blockchain, the supermarket retailers and their suppliers will be able to share data on BeefLedger’s platform. This enables the retailers to map the life cycle of their products throughout the supply chain. Now the end consumer can have access to this finer provenance information by either scanning the QR code or NFC chip present on the food packaging. Based on the type of meat supplier the supermarkets are dealing with they can choose to adopt a traditional or a quasi-franchisable platform. Especially, when dealing with non-proprietary meat supplier brands it is advantageous to use a quasi-franchisable platform. This is mainly because the non-proprietary meat supplier brands often want to cut costs.
Having this level of granularity in tracing the food provenance allows the supermarkets to act quickly and accurately in the case of emergency food recalls or food safety incidents. Furthermore, once this technology is established on the retail level, the retailers can leverage it to optimize the freshness of the meat in the store by ensuring that the meat spends a minimal amount of time between being pulled out from the meat processing plant and appearing in the store shelf.
Implementing blockchain technology at the retail level can help both the meat processors and the supermarket retailers to adjust accordingly to the mismatch between the supply and demand levels. Oftentimes, meat processors make numerous capacity management decisions that deal with the predictable and unpredictable variations in capacity and demand. What blockchain does is that it uses the demand estimate on the retail level to aid the meat processors to convert the unpredictable variations in demand into predictable patterns. Reducing the uncertainty associated with capacity-demand fluctuations allows them to plan their decisions accordingly and minimize the costs. For instance, the meat processors could use the information obtained from consumer purchasing behavior to forecast the market demand. This would help meat processors avoid or minimize the number of occurrences of periods with underproduction or overproduction. Over time the meat processors can use data harvesting to make more informed decisions concerning the:
- optimum meat product mix
- types and cuts of meats that are trending
- consumer preferences regarding differences in production location for meat products
1.6.3 Risk Analysis
The first risk is that there exists a clear knowledge gap regarding consumer preferences on food provenance at domestic levels. The only way this gap can be addressed is that by further investigating how much provenance detail do customers want to base their purchase decision. Knowing this would also help in deciding what type of traceability system i.e., batch traceability system or one-to-one traceability system should be implemented. While a one-to-one traceability system provides finer provenance detail it is relatively complex and expensive to implement than the batch traceability system.
The second risk has more to do with the implementation of a blockchain traceability system in the meat processing plants. If a one-to-one traceability system was to be implemented, then the product a record needs to maintain in the blockchain from the time of the first re to the time of its exit to offer a secure system. This needs a wide-scale industry engagement between AMPC and partners of AMPC. Above all, a pilot project needs to be tested to evaluate what approach the processors prefer the most and it is most important to know how the consumers feel about the granularity of the information provided to them.
The third risk is associated with the uncertainty about returns on investment. This implies that there’s a possibility that the project might take longer than the initial forecast duration to bring in profit. Also, major players such as large-scale meat processors and supermarket giants can contribute more towards the initial investment, and thereby, they have higher power and a stronger voice in negotiating the benefits. It can also be viewed that those who have contributed the most would face a relatively higher risk.
1.6.4 Marketing Plan
As mentioned earlier, a blockchain-enabled supply chain provides an opportunity for retailers to improve the consumer’s confidence regarding the product’s authenticity. This gives the supermarkets avenues to design their campaigns around the fact that the food origin is being underpinned by blockchain technology.
The way the food provenance of a product is highlighted in a retail store is completely different from the way it will be highlighted in the online sales channel. Hence, there is a need for supermarkets to have a dual marketing strategy in the domestic market.
1.6.5 IT Governance Plan
Essentially, three levels need to be carefully managed in this project:
- Digital ledger
Firstly, a host of IoT (Internet of Things) interdictions need to be introduced to capture the data along key dimensions like product, period(time), place, people, and price. This data is of further use in the transformation activities (like feeding, slaughtering, boning, chilling, and packaging) that happen in the meat supply chain.
- Digital paddock
Primarily includes developing a predictive model that tells the farmers the optimal way (the least expensive way) they can achieve the desired weight gain in the animal in the given time. The predictive model uses data dimensions such as genetics, feed quality, and climatic conditions to come up with a max-min optimization solution (this solution aims to find an optimal way where the weight achieved by the animal is maximized and the cost associated with reaching this weight is minimized).
The secondary element includes establishing a data feedback look with the retailer or the end-consumer to identify which batch or which cut of meat is consistently rated high by the consumers. Identifying this can help the producers get an insight into which meat products have gained customer acceptance and thereby they can use this information to implement differential pricing tactics.
- Digital Payments
The first step includes implementing the blockchain-enabled smart contract payment platform to support transactions between the cattle breeder, grazier (someone who rears or fattens cattle), and the abattoir. These transactions are to be supported in both fiat currency and cryptocurrency.
The second step includes providing a user interface that allows the customers to:
- verify the meat provenance at the retail level
- give feedback in the form of product rating
1.6.6 Financial Analysis
Considering that the whole industry would benefit from the blockchain implementation the meat processors alone shouldn’t be the ones to bear the brunt of the initial cost of implementation. Now the questions that arise are:
- who should bear the initial investment?
- how should the benefits be divided?
There are two approaches to sourcing the funds. The first approach focuses on seeking potential players in the industry who are willing to invest, then repaying the investments of these investors, and later on paying them the benefits. Whereas the second approach is more of a collaborative approach towards investment and benefit distribution of funds amongst all the industry players. Both the approaches have something in common i.e., the one who invests a larger amount of money is likely to receive larger benefits and face an increased amount of risk as well.
Based on whether a one-to-one traceability system or a batch traceability system is implemented the operations and the capital budgets are likely to vary. Since there’s no full-scale implementation of a traceability system in the meat industry it is difficult to give an exact estimate of the cost of the activities. But according to the study conducted by the AMPC the ability to break even against the initial investment costs or to show a positive cash flow over the years in this project is positively influenced by factors such as the amount of labor-saving and selling price increase achieved. Here labor-saving refers to the amount of money that is saved on manual labor by streamlining the processes. While the reduction of labor costs is helpful it was also observed that most of the benefits stem from the sell price increase (AMPC,2019).
Due to the fragmented nature of the Australian meat industry, the major players in the supermarket can initiate a transformation of the meat industry by adopting blockchain. In doing so, they should be willing to collaborate, build trust, and share information with their supply chain partners. Furthermore, a blockchain-enabled supply chain will bring in a new level of agility and flexibility to the retailers. Additionally, the retailers will need to be willing to
- invest in blockchain infrastructure by partnering up with a blockchain technology consultancy firm
- train consumers on how to access the newly available provenance information
- collaborate with meat processors to effectively deploy the traceability system.
Chapman, W., 2020. Fresh Meat, Fish and Poultry Retailing in Australia. Retrieved November 30, 2020, from https://my.ibisworld.com/au/en/industry/g4121/industry-performance
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