{"id":22178,"date":"2017-11-14T07:42:17","date_gmt":"2017-11-14T12:42:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/pass-the-cassava-beer-diageos-response-to-water-scarcity\/"},"modified":"2017-11-14T07:42:17","modified_gmt":"2017-11-14T12:42:17","slug":"pass-the-cassava-beer-diageos-response-to-water-scarcity","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/pass-the-cassava-beer-diageos-response-to-water-scarcity\/","title":{"rendered":"Pass The (Cassava) Beer: Diageo\u2019s Response to Water Scarcity"},"content":{"rendered":"

Diageo and Water Stress <\/strong><\/p>\n

Diageo is one of the largest liquor producers in the world and a major producer of beer, with Guinness being its most well known brand in the category. Climate change threatens multiple levels of Diageo\u2019s supply chain, with water scarcity and water efficiency being of key concern [1]. \u00a0Diageo operates more than 130 manufacturing facilities in 30 countries, and 43 of Diageo\u2019s manufacturing sites in 11 countries are in water stressed regions<\/strong> [2]. Water stress means that \u00a0in a given region demand for water is greater than supply or poor quality restricts its use. [3] Additionally, harsh climate patterns and droughts have led to a global decrease in crop yields. [4] \u00a0For example, wheat yields are expected to decrease up to 17% by the 2050s. [5] This should be of concern to Diageo for two primary reasons: they need access to freshwater to brew beverages (90-95% of beer is water) and water is vital for growing raw materials such as barley and wheat.<\/p>\n

\"\"<\/a>
[via Diageo Water Blueprint]<\/figcaption><\/figure>Diageo\u2019s Water Sustainability Plan \u00a0<\/strong><\/p>\n

Diageo takes water scarcity and improving efficiency extremely seriously. Released in 2015, Diageo publicly laid out their strategic approach to water stewardship with goals set for 2020. The main goals include a 50% improvement in water efficiency<\/strong> in direct operations and a plan to return 100% of wastewater<\/strong> from their operations to the environment safely. [6] \u00a0An additional practice Diageo has undertaken is accounting for the social and environmental costs of water when setting internal prices on water. [7]<\/p>\n

Given the increasingly dire threats of water scarcity to its full portfolio, Diageo is focusing on creating more sustainable products for the long term. Beginning in 2012, Diageo started exploring with beer brewed using Cassava [8] and in 2016 Diageo\u2019s Uganda Breweries Limited started production of cassava-based Ngule, which has captured 7% of the beer market in Africa\u2019s Great Lakes region within 5 months. [9] Additionally, in 2015, Diageo purchased United National Breweries beer business in South Africa, which produces Sorghum beer. [10] Cassava is exceptionally drought tolerant [11] and Sorghum is also tolerant to dry conditions and requires minimal land to grow. [12] Diageo\u2019s investment in Cassava and Sorghum-based beers highlights a long term commitment to invest in less expensive and water-reliant raw materials<\/strong>, particularly in emerging markets.<\/p>\n

These investments extend further into the community, as Diageo is hoping to encourage more farmers to enter the Cassava growing market. [13] As part of their water stewardship plan, Diageo also intends to help farmers improve and measure their water usage. [14] Because Cassava is already such a significant crop in the region\u2014Cassava production and harvesting represents about 40% of Ghana\u2019s agricultural GDP\u2014this allows for prices of Ngule and other Cassava beers to be significantly lower to consumers and Diageo<\/strong>. [15] The popularity of these lower priced beers is evidenced by the segments growth: in 2016, the emerging beer segment in Kenya grew by 112%<\/strong> while the mainstream beer market declined by 6%. [16]<\/p>\n

Remaining accountable and innovative <\/strong><\/p>\n

While a focus on emerging market supply chains is vital, Diageo must also intensely focus on improving water efficiency, waste, and pollution in its existing plants. Between 2007-2015, Diageo reached goals it had set out regarding efficiency and waste, however, it only managed to reduce the pollution of its wastewater by 3.1% against a stated goal of 60%. [17] Given that Diageo has aligned with the UN and publicly declared itself an industry leader in water sustainability, it will become even more vital in the short term that they meet their sustainability goals by 2020 in order to remain a reputable leader. \u00a0[18]<\/p>\n

They should consider investing further in R&D to discover additional drought-tolerant grains for brewing liquor and beer. While more developed markets are unlikely to drink Cassava beer in the short term, it is likely there will be demand for more sustainable liquor and beer in the long term due to price increases. Building a reliance on sustainable liquors and beer in more developed markets can also help offset future financial impact due to raw material price increases from drought-sensitive crops or water shortage issues.<\/p>\n

Finally, given the proliferation of early-stage agribusiness startups, Diageo could seek out partners, such as Indigo Agriculture, to create increased-yield crop seeds and help foster partnerships with Diageo\u2019s existing farmers.<\/p>\n

Lingering questions <\/strong><\/p>\n

Some lingering questions include: are developed markets willing to adapt their tastes to new liquors brewed from more sustainable crops as prices increase? Additionally, will Diageo prove they are truly all-in on water stewardship by investing heavily in water waste technologies at their most expensive plants?<\/p>\n

Thus far Diageo has made significant progress in its commitment to water sustainability, but achieving its 2020 goals and setting even more ambitious goals for the future will be the next test.<\/p>\n

[796 words]<\/p>\n

[1] Jane Wardell, \u201cAlcoholic Drink Makers Lead Way on Climate Change Adaption,\u201d Reuters, October 16, 2014, https:\/\/www.reuters.com\/article\/us-climatechange-summit-alcohol\/alcoholic-drinks-makers-lead-way-on-climate-change-adaptation-idUSKCN0I52RP20141016<\/a>, accessed November 2017.<\/p>\n

[2] Diageo, Diageo\u2019s Water Blueprint, p. 5, \u00a0https:\/\/www.diageo.com\/pr1346\/aws\/media\/3791\/diageo_water_blueprint_april_2015.pdf<\/a>, accessed Noevmber 2017.<\/p>\n

[3] European Environment Agency, https:\/\/www.eea.europa.eu\/themes\/water\/wise-help-centre\/glossary-definitions\/water-stress<\/a>, accessed November 2017.<\/p>\n

[4] Toshichika Iizumi and Navin Ramankutty, \u201cHow do weather and climate influence cropping area and intensity?\u201d Global Food Security <\/em>4, March 2015, http:\/\/www.sciencedirect.com\/science\/article\/pii\/S2211912414000583<\/a>, accessed November 2017.<\/p>\n

[5] Jerry Knox et al<\/em>, \u201cClimate Change impacts on crop productivity in Africa and South Asia,\u201d June 20, 2012, http:\/\/iopscience.iop.org\/article\/10.1088\/1748-9326\/7\/3\/034032\/pdf<\/a>, accessed November 2017.<\/p>\n

[6] Diageo, Diageo\u2019s Water Blueprint, p. 5, \u00a0https:\/\/www.diageo.com\/pr1346\/aws\/media\/3791\/diageo_water_blueprint_april_2015.pdf<\/a>, accessed Noevmber 2017.<\/p>\n

[7] Attracta Mooney, \u201cBig companies invest billions to secure water supplies,\u201d Financial Times, \u00a0November 6, 2017 https:\/\/www-ft-com.ezp-prod1.hul.harvard.edu\/content\/19e8c8cc-c091-11e7-b8a3-38a6e068f464<\/a>, accessed November 2017.<\/p>\n

[8] Dominic Walsh, \u201cRuut and branch: Diageo likes the taste of cassava,\u201d The Times of London, December 28, 2012 https:\/\/www.thetimes.co.uk\/article\/ruut-and-branch-diageo-likes-the-taste-of-cassava-tn3dh5ql2nn<\/a>, accessed November 2017.<\/p>\n

[9] Elias Biryabarema and Duncan Miriri, \u201cGlobal brewers push local beers to quench African palates,\u201d Reuters, July 16, 2016 http:\/\/www.reuters.com\/article\/us-africa-beer\/global-brewers-push-local-beers-to-quench-african-palates-idUSKCN0ZV1PA<\/a>, accessed November 2017.<\/p>\n

[10] Reuters Staff, \u201cDiageo snaps up rest of United National Breweries beer business,\u201d Reuters, April 2, 2015 http:\/\/www.reuters.com\/article\/diageo-ma\/diageo-snaps-up-rest-of-united-national-breweries-beer-business-idUSL6N0WZ0KD20150402<\/a>, accessed November 2017.<\/p>\n

[11] Mabrouk A. El-Sharkawy, \u201cDrought-Tolerant Cassava for Africa, Asia, and Latin America,\u201d BioScience<\/em>, July 1993, http:\/\/www.jstor.org\/stable\/1311903?seq=1#page_scan_tab_contents<\/a>, accessed November 2017.<\/p>\n

[12] \u201cStudying Drought Tolerance in Sorghum,\u201d Joint Genome Institute, September 28, 2015 https:\/\/jgi.doe.gov\/studying-drought-tolerance-sorghum\/<\/a>, accessed November 2017.<\/p>\n

[13] Ben Cooper, \u201cSustainability in Beer \u2013 Part II: Local Sourcing,\u201d Just-Drinks Global News, February 18, 2013 https:\/\/search-proquest-com.ezp-prod1.hul.harvard.edu\/docview\/1289050874\/B5A9975650B84F2APQ\/3?accountid=11311<\/a>, accessed November 2017.<\/p>\n

[14] Diageo, Diageo\u2019s Water Blueprint, p. 5, \u00a0https:\/\/www.diageo.com\/pr1346\/aws\/media\/3791\/diageo_water_blueprint_april_2015.pdf<\/a>, accessed Noevmber 2017.<\/p>\n

[15] Dominic Walsh, \u201cRuut and branch: Diageo likes the taste of cassava,\u201d The Times of London, December 28, 2012 https:\/\/www.thetimes.co.uk\/article\/ruut-and-branch-diageo-likes-the-taste-of-cassava-tn3dh5ql2nn<\/a>, accessed November 2017.<\/p>\n

[16] Bella Genga, \u201cCheap Beer Boosts Full-Year Profit at Diageo\u2019s Kenyan Unit,\u201d Bloomberg, July 28, 2016, https:\/\/www.bloomberg.com\/news\/articles\/2016-07-28\/cheap-beer-boosts-full-year-profit-at-diageo-s-kenyan-unit<\/a>, accessed November 2017.<\/p>\n

[17] Kristiana Sherry, \u201cDiageo fails to meet all but one 2015 sustainability target,\u201d The Spirits Business, August 18, <\/sup>2015, https:\/\/www.thespiritsbusiness.com\/2015\/08\/diageo-fails-to-meet-all-but-one-2015-sustainability-target\/<\/a>, accessed November 2017.<\/p>\n

[18] Diageo, 2020 Sustainability and Responsibility Targets, https:\/\/www.diageo.com\/en\/in-society\/our-role-in-society\/2020-sustainability-and-responsibility-targets\/<\/a>, accessed November 2017.<\/p>\n","protected":false},"excerpt":{"rendered":"

How Diageo is relying on drought-resistant crops to improve their water efficiency and increase sales in emerging markets <\/p>\n","protected":false},"author":10162,"featured_media":22179,"comment_status":"open","ping_status":"closed","template":"","categories":[64,3455,1075,3456,3457],"class_list":["post-22178","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-beer","category-diageo","category-liquor","category-water-efficiency","category-water-stress","hck-taxonomy-organization-diageo","hck-taxonomy-industry-food-and-beverage","hck-taxonomy-country-ghana"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nPass The (Cassava) Beer: Diageo\u2019s Response to Water Scarcity - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/pass-the-cassava-beer-diageos-response-to-water-scarcity\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pass The (Cassava) Beer: Diageo\u2019s Response to Water Scarcity - 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