By Larry Mogelonsky, Principal of Hotel Mogel Consulting Limited – 9.5.2020
Amidst all the headlines about COVID-19, you may have missed the coverage of what is potentially a gamechanger in the foodservice and retail industries. First announced over a year ago, Starbucks is now readying to deploy a blockchain network for end-to-end coffee bean traceability and greater product transparency, and this will soon influence what motivates customers to buy at your restaurant, sundry or store.
I love Starbucks. Not only are its products consistently great but, as a former advertising exec, the company’s branding and marketing are perennially some of the best in the world. While undoubtedly you can find better coffee at independent cafés throughout the Mediterranean and Middle East, as a global franchisor Starbucks has revolutionized the way the world views and values coffee.
A while back, I wrote an article entitled, “Fast Food Restaurants are Where Food Trends Go to Die,” describing how, by the time you see a food trend being advertised by a major chain, it’s a mature concept and can no longer generate buzz for your own business. The underlying lesson here was to differentiate your product by not directly copying what dining patrons could find everywhere else. Starbucks, however, may be the exception to this principle in that it is the gold standard for premium coffee service and often the trendsetter for the industry rather than a laggard.
In essence, if you can’t do better than Starbucks then why even bother? Now after its latest partnership with Microsoft to build a verifiable coffee production blockchain, Starbucks is raising the bar again – where it goes, the competition will be forced to follow or inevitably lose market share.
As a start, blockchain is far more than just swanky cryptocurrencies like Bitcoin or Ethereum, and it would certainly help for you to cultivate a basic understanding of how the technology works. You won’t need to become versed in distributed systems architecture, but you should know how a decentralized hyperledger with algorithmically linked – or hashed – and timestamped transactions can be used to authenticate a product’s origins. Plenty of resources exist online for you to peruse.
Now let’s look at how the application of blockchain will evolve our current practices. Over a decade ago, hotels and restaurants started to embrace the concept of “authentically local” as a means of product differentiation and commanding higher prices. For eateries specifically, the locavore movement and reducing food miles became a way to simultaneously improve ingredient quality, support the region, take a stance against environmental degradation and justify upcharging customers to cover the increased costs. But how do you truly know if something is local besides taking a restaurant at its word?
Just as Burger King or Subway putting sriracha on the menu signaled the omnipresence and inert familiarity with this once-buzzy, Southeast Asian hot sauce, “local” has also lost much of its luster simply because everyone else is doing it. When you say that all your ingredients are locally sourced, it still adds value to the experience, but this messaging can no longer be assumed to be a primary motivator for customers to choose you over the competition. And at the luxury end, local in all things is now a firm expectation rather than a value-add.
Traceability, as powered by blockchain, is a strong contender to be the local for the new decade because it deepens the trust that guests will have with your products and it allows you, the purveyor, to source from niche producers around the world while also limiting the unethical interloping of middlemen. When it comes to marketing coffee, ‘single origin’ has been a powerful trend for helping brand luxury products over the past five to ten years as people can choose between beans produced on an individual farm or small geographic territory in, say, Nicaragua versus from a Colombian finca, enriching the customer experience in the process. Blockchain adds an extra layer of security and authenticity to this model in that the beans are now exactly where they say they are from.
While setting up your own blockchain is likely an insurmountable task for any enterprise not approximating the size of Starbucks, perhaps in the near future there will be a consortium blockchain that you can subscribe to. Piggybacking on these networks may also entail many other operations besides supply chain management, notably facilitating secure contactless payments without the worry of chargeback disputes. In the meanwhile, what’s important is that you grasp how this latest news will come to heighten guests’ demand for digital product transparency.
Soon it will no longer be a matter of just listing all your niche providers but being able to prove their legitimacy. This is not just for coffee, either. Think of every ingredient or item on display whose price could be enhanced through more granular traceability.
Do you believe that showing the exact cow pasture where a steak came from will allow you to charge more for that piece of meat? How about chocolate where cocoa is mostly produced in West Africa and yet those countries have largely failed to develop a homegrown direct-to-consumer industry because of too much exploitation by nefarious wholesalers? What if, instead of trumpeting your Belgian or Swiss chocolates, you vended products from an Ivory Coast startup that used blockchain to verify that its beans were wholly fair-trade or responsibly farmed.
While blockchain is a lofty goal these days for just about any hospitality organization, there are other “old school” ways you can deploy in the meantime to attain better product transparency, and you should consider them to help drive revenues for the decade ahead.
The world’s most published writer in hospitality, Larry Mogelonsky is the principal of Hotel Mogel Consulting Limited, a Toronto-based consulting practice. His experience encompasses hotel properties around the world, both branded and independent, and ranging from luxury and boutique to select-service. Larry is also on several boards for companies focused on hotel technology. His work includes four books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018) and “More Hotel Mogel” (2020). You can reach Larry at larry@hotelmogel.com to discuss hotel business challenges or to book speaking engagements.
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