Final exam: Ordinary call

Program:

Master in International Business (MIB)

Subject: Global Strategic Management

Professor:

Dr. Marc Sanso

Student's full name:

Marc Sanso's part

Rules:

The exam must be taken individually

All types of material (hardcopies, laptops) are allowed during the exam

Brevity and specificity are important

The use of appropriate theoretical models will be instrumental to your

final grade

The Ripe Case

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Raja Ramachandran and Phil Harris met when they were both working on Wall Street in 2005. A decade later they decided to launch Ripe, which uses blockchain in agriculture and the food supply chain.

www.ripe.io

Ripe's first step was a pilot project in a field near Boston. And they started using blockchain technology to monitor tomatoes. The level of ripeness, color and sugar content was monitored step by step, with the goal of reducing losses and generating valuable information for the distribution chain. Thanks to the blockchain-based information, the restaurants that purchased the tomatoes gained access to much of the tomatoes' growing and distribution history.

Ripe.io partnered with Sweetgreen, a farm-to-table food franchise, to demonstrate that blockchain can be used to monitor crops, providing more information to growers and buyers.

The technology can also be used to detect fraud. IBM is a major player in this business and has partnered with food giants such as Dole, Nestle, Unilever and Walmart. IBM points out that the technology makes it possible to prove where a producer comes from in a matter of seconds. Traditional methods take up to a week. (Based on information from Bloomberg).

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Phil Harris will give two talks at the Redagricola Conference in Santiago and lead an open table conversation on June 13. Check out the conference program here.

Blockchain and its impact on the food supply chain.

From giants like IBM or Walmart to small startups, many companies are using blockchain to improve food safety and transparency.

Blockchain has been associated since its inception with the world of financial services. However, it is increasingly seeing its potential impact in other industries, the food supply chain being one of them.

In August of this year, ten of the world's largest food companies partnered with IBM to integrate blockchain into their supply chains. The goal, to improve supply chain visibility and traceability. This group-Walmart, Nestle, Unilever, McCormick, Tyson, Kroger, McLane, Driscoll's, Dole and Golden State Foods-represent more than half a trillion dollars in aggregate global sales.

What problem is blockchain trying to solve?

The global supply chain is complex. It involves farmers, warehousing systems, transportation companies, distributors and retailers. So many parties involved means the use of multiple and varied record keeping systems, from excel sheets to emails or even paper forms.

This system is not only inefficient, but inaccurate. When you buy a product, lettuce, for example, the brand name on the label probably has no idea what farm that vegetable came from. This means that the brand would not know very well how to react in case there is a problem.

And in the case of food, sometimes things can get very ugly. If not, let's remember the case of food poisoning in Germany in 2011 - 56 deaths due to E.Coli - unjustly blamed by the head of Health in Hamburg on Spanish cucumbers. In 24 hours export contracts for most Spanish vegetables were paralyzed, with losses in the millions.

According to the Center for Disease Control and Prevention (CDC), every year in the USA there are 48 million cases of illnesses caused by food contamination, 128,000 hospitalizations and 3,000 deaths. In Europe, according to SEEN data, there are 40,000 cases of food poisoning and 3,300 hospitalizations. In Spain, the number of people affected by salmonellosis alone has doubled in the last four years, from 4,200 cases in 2012 to 9,800 in 2016.

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When contamination appears in a system whose records are unclear, it can take days or even weeks for companies to trace the source of infection and recall the affected products.

For example, the aforementioned cucumbers, or in the U.S. in 2006 three people died and nearly 200 fell ill after eating spinach contaminated with E.Coli. As the FDA was not able to identify which bags had the problem, it directly issued a recommendation not to consume the product. The losses to the food industry were $74 million.

Why blockchain?

Blockchain acts as a decentralized public registry. This system provides a unified, single source of data and creates a clearer and more consistent record of transactions throughout the chain.

By using blockchain, food companies can easily trace the origin of any outbreak. This increases consumer safety and limits losses, as only affected products are recalled.

Tracing and tracking systems can be different. For example, it is possible to incorporate tags attached to shipments, so that each shipment has a unique identification number. These IDs can provide information on product origin, processing, storage temperature, expiration dates and other data. At each stage of the supply chain, operators simply have to record that ID, and blockchain will securely store every transaction or step the product goes through.

With blockchain you can get all the information about a product in 3 seconds.

In this way, it is even possible to check the data of a product and its history in real time. A major advantage over traditional methods that require requests for information from various sources, sending documentation, etc.

Walmart, one of the most important retailers in the US, has been a pioneer in the use of blockchain. In 2016 it launched a pilot project together with IBM, to control pork shipments in China, a potentially dangerous terrain in the field of food safety. Yum Brands, for example, ended up selling its business in this country in 2015 after one of its brands, KFC, was affected by several food scandals.

Walmart, has considered this pilot a real success. At its 2017 investor meeting, the chain's VP of Food Safety, Frank Yiannas, explained how, thanks to blockchain, it could obtain all the information on a product in less than three seconds, when traditionally it would have taken about a week. Following this result, the company is extending the pilot to other products.

Blockchain Startups targeting the food chain.

In addition to large technology providers such as IBM, numerous startups are also betting on offering services to the food industry based on blockchain. For example: Provenance, whose product traceability software is present in more than 200 food companies. Provenance works with retailers to enable them to provide their customers with product information. It also works with seafood companies to highlight the proper treatment of their workers. Just this December 12, it announced an agreement with Unilever, Sainsbury's and other companies to map the social sustainability and financial efficiency of their supply chains.

Arc-Net has partnered with PwC in the Netherlands to combat food fraud (intentional substitution, added products, alterations, misrepresentations, in food, ingredients or labeling). A problem that according to PwC costs $40 billion each year.

Mercatrace, in Spain, is launching a platform to offer traceability of products from their origin, handling, transport to the consumer's hands. In 2017 it raised a round of 86,000 through the Bolsa Social.

Other startups focus on helping small farmers improve the traceability of their products.

Bart.Digitalagr, a Brazilian startup that provides secure financial documentation for small producers. Agriledger, from the UK, dedicated to generating secure commercial contracts. BestBext360, from the US, focused on fair trade coffee.

The dual challenge of blockchain

These startups face a dual challenge. First, they must convince large global companies to adapt new technologies and alter their entrenched supply chain processes.

Second, they must face increasing competition from technology giants, (such as IBM), who are likely already suppliers to these large companies in other areas.

Blockchain is a relatively new technology, and companies may still see it as a risk to jump into mass adoption. But if blockchain platforms continue to evolve they may actually be a suitable formula for food and logistics companies to be able to save time and money by simplifying and improving the quality of their supply chain records. Other benefits are that they will be able to attract customers concerned about transparency, and tighten relationships between food producers and marketers around the world.

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Assignment Questions

1. Do you think that Ripe's model can represent a competitive disruption in the agri-food sector? Back up your answer in detail with an appropriate theoretical framework.