{"id":27636,"date":"2018-11-10T16:50:04","date_gmt":"2018-11-10T21:50:04","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-ai-and-it-are-helping-kraft-heinz-to-squeeze-not-only-tomatoes-but-also-costs\/"},"modified":"2018-11-10T16:50:04","modified_gmt":"2018-11-10T21:50:04","slug":"how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/","title":{"rendered":"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability"},"content":{"rendered":"

Consumer trends will challenge traditional Packaged Goods companies<\/strong><\/p>\n

Consumer trends are changing the Consumer Packaged Goods (CPG) industry and posing a greater threat to traditional food manufacturers. The growth of private labels1<\/sup> and the rise of successful start-ups2 <\/sup>are pressuring leading food companies\u2019 profitability and forcing faster innovation.<\/p>\n

Private labels are gaining traction in the US. In 2017, private labels sales grew by 3.2% while branded products declined by 0.5%3<\/sup>. The US dollar share of private labels should reach 25% over the next decade3<\/sup>. Private labels benefit consumers and retailers. While consumers pay less (on Kroger, a private label 24 oz ketchup is sold by $1 while a 20 oz Heinz ketchup is sold by $2.794<\/sup>), retailers profit more (25% higher gross margins compared to manufacturer brands3<\/sup>).<\/p>\n

While private labels pressure traditional brands\u2019 prices, food start-ups are transforming the industry by offering disruptive products and reacting faster to changing consumer tastes. Chobani, for example, became the best-selling yogurt in the US only after 4 years in the market2<\/sup>. Now that VC companies and tech companies are investing in CPG2<\/sup>, the start-ups threat will undoubtedly continue.<\/p>\n

Both trends are forcing traditional food companies to reduce prices while keeping a fast innovation pace. Cutting costs in raw materials and product development is not the solution anymore. The path to succeed in the future is about improving operational efficiency and innovating faster. Under this scenario, machine learning arises as key instrument to help big companies to thrive.<\/p>\n

Kraft Heinz is responding to market pressure using machine learning<\/strong><\/p>\n

Kraft Heinz, the 5th<\/sup> largest food company in the world5<\/sup>, claims to be a very dynamic company which is committed to long-term growth6<\/sup>. Two recent decisions associated with AI confirm Kraft Heinz\u2019s motivation to reignite growth and profitability (in 2017, net sales decreased by 0.96%7<\/sup>). The company is relying on AI to improve processes in the short-term and to improve product development in the long-term.<\/p>\n

Regarding process improvement, Kraft Heinz adopted AI to increase efficiency in manufacturing. The company has been implementing tools powered by AI to identify waste and inefficiencies in manufacturing and supply chains8<\/sup>. The technology enables the company to handle multiple variables to achieve optimization by quickly evaluating production and operation drivers that can indicate where inefficiencies lay. The company is also using a combination of AI and Robotic Process Automation to support administrative tasks such as contract creation, invoice matching and trade pay processes10<\/sup>. Kraft Heinz is heavily investing to transform automation levels from rule-based (\u201cautomations that do\u201d) to adaptive, non-rule-based (\u201cautomations that learn\u201d)10<\/sup>.<\/p>\n

Regarding product development, Kraft Heinz has recently acquired Wellio, an AI food tech company based in San Francisco11<\/sup>. Wellio is an intelligence platform where consumers can plan and shop healthy meals. The platform is \u201chuman powered and AI assisted\u201d, because it can learn the customers` tastes, meal restrictions, and eating habits to craft recommendations of recipes and shopping lists12<\/sup>. With this acquisition, Kraft Heinz will have access to a vast array of data and to insights of consumer preferences, which can be used for product development in the future.<\/p>\n

Machine learning potential has not been fully explored yet<\/strong><\/p>\n

The pressure for cutting cost while continuously innovating does not seem to be a temporary trend. Therefore, Kraft Heinz and other traditional CPG companies should not only invest in punctual AI solutions, but also embed the technology in their businesses and scale it to become part of the daily operations.<\/p>\n

To improve bottom-line, Kraft Heinz can explore more facets of machine learning properties. One important machine-reengineered process is \u201cpredictive maintenance\u201d. Machine learning can help humans identifying patterns in production data and help engineers anticipate and prevent problems. Some companies have achieved 50% of reduction in downtime and 25% increase in performance in one month after implementing new robotic manufacturing lines13<\/sup>.<\/p>\n

To improve top-line, Kraft Heinz needs to ensure that the company is capturing consumer trends not only from the Wellio customer base, but also from a broader audience. \u201cMarketing Monitoring\u201d, another functionality of machine learning, can aid the company to be faster and more accurate in reading relevant information from social media and identifying consumer trends13<\/sup>.<\/p>\n

It is important to highlight that future investments in AI will come at high costs. Kraft Heinz prides itself for its Zero-Based Budget, which can hinder large investments in new technologies if the related benefits are hard to be proven. The company may take calculated risks if the benefits of AI are expected to come in the long-term.<\/p>\n

Open question: Can Amazon become the leading food company?<\/strong><\/p>\n

Taking into consideration that Amazon has its own food private label, an incredible amount of consumer data, and a solid supply chain infrastructure, how big is the risk that Amazon becomes the leading food company in the world?<\/p>\n

\u00a0(791 words) <\/em><\/p>\n

Sources<\/strong><\/p>\n

1 <\/sup>Nielsen. \u201cPrivate label brands are hungry for more of the global food pie\u201d, 06 March 2018, https:\/\/www.nielsen.com\/id\/en\/insights\/news\/2018\/private-label-brands-are-hungry-for-more-of-the-global-food-pie.html<\/a>, accessed November 2018<\/p>\n

2<\/sup> CB Insights. \u201cDisrupting The CPG Industry: How Brands Can Adapt To The Future Of Packaged Goods\u201d, 23 October 2018, https:\/\/app-cbinsights-com.prd2.ezproxy-prod.hbs.edu\/research\/disrupting-cpg-strategies-future-trends\/<\/a>, accessed November 2018<\/p>\n

3<\/sup> CB Insights. \u201cPrivate Labels Rising: How Retailer\u2019s Own Products Are Taking Off And Transforming The CPG Industry\u201d, 17 September 2018, https:\/\/app-cbinsights-com.prd2.ezproxy-prod.hbs.edu\/research\/disrupting-cpg-strategies-future-trends\/<\/a>, accessed November 2018<\/p>\n

4<\/sup> Kroger, \u201cOn-line Store\/ search for ketchup\u201d https:\/\/www.kroger.com\/search?query=ketchup<\/a>, accessed November 2018.<\/p>\n

5<\/sup> Kraft Heinz, \u201cA Global Power House\u201d http:\/\/www.kraftheinzcompany.com\/company.html<\/a>, accessed November 2018.<\/p>\n

6<\/sup> Kraft Heinz, \u201cCareers and Culture\u201d http:\/\/www.kraftheinzcompany.com\/careers-our-culture.html<\/a>, accessed November 2018.<\/p>\n

7 <\/sup>\u00a0<\/sub>Kraft Heinz, 2017 Annual Report. p. 54<\/p>\n

8<\/sup> Angus Lotten. \u201cKraft Heinz CIO Spends on AI, Robots to Cut Costs\u201d, The Wall Street Journal, 3 October 2017, https:\/\/blogs.wsj.com\/cio\/2017\/10\/03\/kraft-heinz-cio-spends-on-ai-robots-to-cut-costs\/<\/a>, accessed November 2018<\/p>\n

9<\/sup> Alex Hickey. \u201cKraft Heinz CIO Spends on AI, Robots to Cut Costs\u201d, The Wall Street Journal, 3 October 2017, https:\/\/blogs.wsj.com\/cio\/2017\/10\/03\/kraft-heinz-cio-spends-on-ai-robots-to-cut-costs\/<\/a>, accessed November 2018<\/p>\n

10<\/sup> Francesco Tinto, CIO Kraft Heinz. \u201cDriving Digital Innovation through Robotics\u201d, CIO Review,\u00a0 https:\/\/robotics.cioreview.com\/cioviewpoint\/driving-digital-innovation-through-robotics-nid-26423-cid-75.html<\/a>, accessed November 2018<\/p>\n

11<\/sup> Mary Ellen Shoup. \u201cKraft Heinz launches new innovation hub, acquires food tech firm\u201d, The Wall Street Journal, 6 November 2018, https:\/\/www.foodnavigator-usa.com\/Article\/2018\/11\/06\/Kraft-Heinz-VC-fund-takes-shapes-with-acquisition-of-AI-firm-wellio#<\/a>, accessed November 2018<\/p>\n

12<\/sup> Wellio, \u201cTechnology\u201d http:\/\/www.getwellio.com\/technology\/<\/a>, accessed November 2018.<\/p>\n

13 <\/sup>J. Wilson, S. Sachdev, and A. Alter. How companies are using machine learning to get faster and more efficient. 性视界 Business Review Digital Articles (May 3, 2016).<\/p>\n","protected":false},"excerpt":{"rendered":"

The growth of private labels in the US and the rise of uncountable food start-ups are threating the status quo of the food industry. Traditional companies are under pressure to cut costs and to innovate faster. Kraft Heinz is relying on Artificial Intelligence to solve this puzzle by using the technology to improve processes and product development. <\/p>\n","protected":false},"author":11688,"featured_media":27637,"comment_status":"open","ping_status":"closed","template":"","categories":[690,490,4073,1815,431,346,344],"class_list":["post-27636","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-consumer-products","category-cost-cutting","category-cpg-supply-chain","category-food-and-beverages","category-kraft-heinz","category-machine-learning","category-product-development","hck-taxonomy-organization-kraft-heinz","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2018\/","yoast_head":"\nHow Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - 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\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"The growth of private labels in the US and the rise of uncountable food start-ups are threating the status quo of the food industry. Traditional companies are under pressure to cut costs and to innovate faster. Kraft Heinz is relying on Artificial Intelligence to solve this puzzle by using the technology to improve processes and product development.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/\" \/>\n<meta property=\"og:site_name\" content=\"Technology and Operations Management\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/heinzketchupprintad-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"520\" \/>\n\t<meta property=\"og:image:height\" content=\"236\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/\",\"name\":\"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - Technology and Operations Management\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/heinzketchupprintad-1.jpg\",\"datePublished\":\"2018-11-10T21:50:04+00:00\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/#primaryimage\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/heinzketchupprintad-1.jpg\",\"contentUrl\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/wp-content\\\/uploads\\\/sites\\\/4\\\/2018\\\/11\\\/heinzketchupprintad-1.jpg\",\"width\":520,\"height\":236},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Submissions\",\"item\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/submission\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/#website\",\"url\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/\",\"name\":\"Technology and Operations Management\",\"description\":\"MBA Student Perspectives\",\"potentialAction\":[{\"@type\":\"性视界Action\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/d3.harvard.edu\\\/platform-rctom\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - Technology and Operations Management","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/","og_locale":"en_US","og_type":"article","og_title":"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - Technology and Operations Management","og_description":"The growth of private labels in the US and the rise of uncountable food start-ups are threating the status quo of the food industry. Traditional companies are under pressure to cut costs and to innovate faster. Kraft Heinz is relying on Artificial Intelligence to solve this puzzle by using the technology to improve processes and product development.","og_url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/","og_site_name":"Technology and Operations Management","og_image":[{"width":520,"height":236,"url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/heinzketchupprintad-1.jpg","type":"image\/jpeg"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"5 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/","url":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/","name":"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability - Technology and Operations Management","isPartOf":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website"},"primaryImageOfPage":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/#primaryimage"},"image":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/#primaryimage"},"thumbnailUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/heinzketchupprintad-1.jpg","datePublished":"2018-11-10T21:50:04+00:00","breadcrumb":{"@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/#primaryimage","url":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/heinzketchupprintad-1.jpg","contentUrl":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2018\/11\/heinzketchupprintad-1.jpg","width":520,"height":236},{"@type":"BreadcrumbList","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-artificial-intelligence-is-helping-kraft-heinz-to-squeeze-tomatoes-but-not-its-profitability\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/d3.harvard.edu\/platform-rctom\/"},{"@type":"ListItem","position":2,"name":"Submissions","item":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/"},{"@type":"ListItem","position":3,"name":"How Artificial Intelligence is helping Kraft Heinz to squeeze tomatoes, but not its profitability"}]},{"@type":"WebSite","@id":"https:\/\/d3.harvard.edu\/platform-rctom\/#website","url":"https:\/\/d3.harvard.edu\/platform-rctom\/","name":"Technology and Operations Management","description":"MBA Student Perspectives","potentialAction":[{"@type":"性视界Action","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/d3.harvard.edu\/platform-rctom\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"}]}},"_links":{"self":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/27636","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission"}],"about":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/types\/hck-submission"}],"author":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/users\/11688"}],"replies":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/comments?post=27636"}],"version-history":[{"count":0,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/hck-submission\/27636\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media\/27637"}],"wp:attachment":[{"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/media?parent=27636"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/d3.harvard.edu\/platform-rctom\/wp-json\/wp\/v2\/categories?post=27636"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}