by EOS Intelligence EOS Intelligence No Comments

Beauty Tech Giving Beauty Industry a Facelift

In recent years, artificial intelligence and virtual reality have been adding an additional dimension to the beauty industry, quite literally. With consumers increasingly embracing and demanding personalized offerings and precise results, leading brands, such as L’Oréal and Shiseido are investing heavily in the space. Just as in many other industries, AI is revolutionizing beauty products and how they are conceptualized, created, and sold. However, it is a long road from being perceived as gimmicky promotions to improving customer engagement to becoming commercial go-to solutions.

Artificial intelligence (AI) has been greatly integrated in our lives through different sectors and now the beauty industry is no exception. The use of AI, augmented reality (AR), virtual reality (VR) as well as complex beauty devices has revolutionized the way consumers perceive, apply, and select beauty products. Moreover, in the age of online retail, it enables companies to maintain a similar personalized level of service that would otherwise require a physical interaction with a beauty consultant. Technology is creating new experiences for the consumer, both in terms of beauty products’ features as well as purchasing process.

Beauty industry is also one of the most competitive sectors, with consumers always being on the lookout for new products and having low brand loyalty. Beauty tech seems to address this issue as well, as it elevates consumer engagement through enhanced personalized offerings, which in turn is a trend that has been driving the beauty industry for several years now.

The three main aspects of beauty tech encompass personalization through AI, virtual makeup using AR and VR, and smart skincare tools/beauty gadgets.

Personalization through AI

Across the retail sector, the key to consumer’s heart and pockets for a long time has been personalization of products and sales experience. Beauty industry is no exception. Consumers have been looking for the perfect skincare product that work best for them or the lipstick shade that goes perfectly with their skin tone. Moreover, consumers want this all from the comfort of their home. This is where AI comes in.

Through retail kiosks and mobile apps, AI enables companies to offer personalized shade offerings that are especially curated for the individual user. A number of companies is investing and capitalizing on this technology to differentiate themselves in the eyes of the consumer. One of the leading market players in the beauty industry, L’Oréal, has been one of the first companies to invest in AI- and VR-based beauty tech and acquired Toronto-based, ModiFace, in 2018. There are several different ways companies, such as L’Oréal, have incorporated AI into their product offerings.

Beauty Tech Giving Beauty Industry a Facelift by EOS Intelligence

Beauty Tech Giving Beauty Industry a Facelift by EOS Intelligence

Lancôme (a subsidiary of L’Oréal) has placed an AI-powered machine, called Le Teint Particulier, at Harrods and Selfridges in the UK, which creates custom-made foundation for the customer. The machine first identifies ones facial color using a handheld scanner, post which it uses a proprietary algorithm to select a foundation shade from 20,000 combinations. Following this, the machine creates the personalized shade for the user, which can then be bottled and purchased.

In addition to physical store solutions, AI-powered apps and websites also offer consumers personalized recommendations. In 2019, L’Oréal applied ModiFace’s AI technology to introduce a new digital skin diagnostic tool, called SkinConsult, for its brand, Vichy. The AI-powered tool uses more than 6,000 clinical images in order to deliver accurate skin assessment for all skin types. It analyzes selfies uploaded by users to identify fine lines, dark spots, wrinkles, and other issues, and then provides tailored product and routine recommendations to the user to address the skin concerns.

My Beauty Matches, a UK-based company, offers AI-based personalized and impartial beauty product recommendations and price comparisons. The website asks consumers diagnostic-style questions about their skin and hair type, concerns, and preferences, and uses AI to analyze the data and recommend products from 400,000 products (from about 3,500 brands) listed on its website. Alongside, the company runs Beauty Matches Engine (BME), which is a solution for beauty retailers using consumer data and AI algorithms to identify consumer purchasing and browsing patterns as well as their preferred products by age and skin or hair concerns. This helps retailers predict and stock, which product the consumer is likely to purchase, improving sales, increasing upsells, and providing a personalized solution to customers.

On similar lines, another app, Reflexion, uses AI to measure the shininess of skin through pictures and offers personalized product recommendations. The app claims to provide much deeper analysis than regular image analysis apps and provides additional features such as testing if products such as foundation are evenly applied. The app works by measuring a face surface’s Bidirectional Scatter Distribution Function (BSDF), which is a measure of light reflected on the user’s face.

Nudemeter is another such product, which uses AI to personalize makeup choices and foundation shades for a full spectrum of skin tones, including darker skins. The app uses color analysis and digital image processing along with its AI algorithms that ensure accurate color measurement irrespective of background lighting, pixels, etc. The app is currently being used by Spktrm Beauty, a US-based niche beauty company targeting shoppers with dark skin.

Virtual makeup through AR and VR

In today’s world where consumers prefer to shop from the comfort of their homes, AR and VR are enabling beauty companies to provide experience similar to that of physical retail to their consumers. AR and VR technologies-based apps let users experiment virtually with a range of cosmetics by allowing them to try several different shades, all within minutes and through their smartphone. This elevates the users shopping experience and improves sales conversion.

Sephora’s Virtual Makeup Artist enables customers to try on thousands of shades of lipsticks and eyeshadows through their smartphones or at kiosks at Sephora stores. While many such apps and filters have been in use for some time now, they are increasingly becoming more sophisticated, providing accurate color match to the skin and ensuring the virtual makeup does not move when the user shakes their face, changes to a side angle, etc. In addition, such apps also provide digital makeup tutorials to engage customers.

On similar lines, L’Oréal uses ModiFace’s AR and AI technology to provide virtual makeup try-on on Amazon and Facebook. The technology enables customers using these two platforms to try on different shades of lipsticks and other make-up products through a live video or a selfie from an array of L’Oréal brands such as Maybelline, L’Oréal Paris, NYX Professional Makeup, Lancôme, Giorgio Armani, Yves Saint Laurent, Urban Decay, and Shu Uemura.

Moreover, AR-based try-on apps helped brands connect with their customers during the previous year when most customers were stuck home and could not physically try on make-up. LVMH-owned Benefit Cosmetics has been investing in AR tech, and launched Benefit’s Brow Try-On Experience program (along with Taiwanese beauty-tech company, Perfect Corporation), which helps online shoppers identify the right eyebrow shape and style for them and then choose products accordingly. The company uses facial point detector technology for the program. The app witnessed a 43% surge in its daily users during April and May of 2020 (as compared with January and March 2020), when people were confined to their homes owing to the COVID outbreak. This helped connect with consumers in a fresh manner and increased brand loyalty. Moreover, Benefit claims that brows products have been their strongest category post-COVID outbreak.

One of China’s leading e-commerce players, Alibaba, also partnered with Perfect Corporation to integrate the latter’s ‘YouCam Makeup’ (an AR-based virtual makeup try-on technology) into Alibaba’s Taobao and Tmall online shopping experience.

Smart devices

In addition to AI and AR based apps and solutions, smart devices is another category in the beauty tech space that is gaining momentum. A certain section of premium consumers are increasingly open to invest heavily into smart beauty gadgets that not only improve skin and hair quality but also help them quantitatively measure the results from using a certain product. While these products are currently expensive and for a niche audience, they have been gaining popularity, especially across the USA and China.

One such smart skincare device is L’Oréal’s Perso, which is based on ModiFace’s AI-powered skin diagnostics and analysis technology. Perso uses AI, location data, and consumer preferences to formulate personalized moisturizer for the consumer. The product is further expected to extend into foundations and lip shades. Perso is expected to be launched in 2021.

On similar lines, in July 2019, Japan-based Shiseido, launched its smart skincare device called Optune, which measures a user’s location-based weather and air pollution data, sleep data, stress levels, and menstrual cycles to create a custom moisturizer. Optune is available on a subscription basis and costs about US$92 per month.

In 2020, P&G also launched a premium skincare system, called Opte Precision. The skincare device uses blue LED light to scan one’s skin and applies a patented precision algorithm to detect problem areas and analyze complexion. Post this, the device releases an optimizing serum that is applied to spots to instantly cover age spots, pigmentation, etc., and to fade their appearance over time. The device has 120 nozzles and works on a technology similar to that of a thermal inkjet printer. The device targets a premium niche audience and costs US$599 with refill cartridge costing US$100.

In 2018, Johnson & Johnson’s drugstore skincare brand, Neutrogena, also launched a smart skincare device – a skin scanner, called Skin360 and SkinScanner, which uses technology from FitSkin (a US-based technology company). The scanner comes in the form of a magnifying camera that gets attached to a smartphone. The camera, which has a 30-time magnifying power helps scan the size and appearance of one’s pores, size and depth of fine lines and wrinkles, the skin’s moisture level, and also provides a score to the skin’s hydration level. The data is processed in a mobile app, which in turn provides a complete skin analysis and offers expert advice and product recommendations. While most smart skin devices are relatively expensive, this one retails at around US$50.

EOS Perspective

While AI and AR have been embraced by a lot of industries in the past, beauty tech is still in its infancy. That being said, there is a lot of potential in the space, especially with the consumer becoming increasingly comfortable with technology. While till recently, most technology-based products in the beauty sector were gimmicky and more for fun and consumer engagement, brands have started taking this space seriously, and started launching products that offer real sales growth opportunity.

Moreover, while AI and AR-based technologies have been accepted fairly easily by the consumers and industry players alike, smart devices is still a very niche category, with most products focused on a niche affluent clientele, who are willing to spend more than US$100 on products that may help improve their skin. There is a lot of potential for this segment to innovate, collaborate, and launch products at a more affordable price point in order to reach the masses.

Over the next couple of years, we can expect new niche players, exploring the benefits of beauty tech to enter the market in addition to greater number of partnerships between traditional beauty giants and technology companies. As personalization continues to be the mantra for consumers, beauty companies cannot look to ignore the space in the coming future.

by EOS Intelligence EOS Intelligence No Comments

Beyond the Low-cost Price Tags – the Real Price of Fast Fashion


Gone are the days when consumer bought a pair of jeans and wore it for years. Fast fashion culture has conditioned consumers to expect a constant stream of new clothing that feeds their desire to buy more in order to keep up with the changing trends. Owing to fast fashion, affordable clothes are being manufactured at a warp speed, worn, and quickly discarded, making clothes disposable commodities rather than keepsakes. About 100 billion clothing items are manufactured globally each year and consumption has increased by 400% in the last two decades. Fast fashion has undeniably democratized high fashion by providing affordable apparel for everyday shoppers but it comes at an enormous cost, not reflected in its bargain-basement price tags.

Fast fashion is the fashion now

Selling large quantities of inexpensive clothing has made fast fashion a dominant business model in the garment industry. Another reason for its popularity is the taste of luxury clothing that it offers to shoppers without paying the full price. Fast fashion brands, such as Zara and H&M, are able to produce low-cost mimics of high-end fashion brands. The moment a model walks down the ramp wearing clothes of luxury brands such as Louis Vuitton, fast fashion brands mass produce replicas of a similar design and sell them at astonishingly low prices.

While established luxury clothing brands take months to design and distribute a clothing item, Zara is able to design, produce, market, and distribute a new piece of clothing to its stores located across 93 countries in mere two weeks. This enormous efficiency in producing mass clothing at an economical format provides an edge to fast fashion companies that traditional clothing brands will always struggle to replicate.

Fast fashion has transformed dynamics of the whole fashion industry, changing the traditional four-season fashion calendar to 52 micro-seasons. Fast fashion companies such as Missguided launch about 1,000 new products monthly, while Fashion Nova rolls out 600 to 900 new styles every week.

The blindingly fast pace at which clothes are being manufactured and discarded has its consequences. The manufacturing process is environmentally damaging and speedy supply chains depend on underpaid and overworked factory workers.

Environmental cost of fast fashion

The environmental menace linked to manufacturing and consuming fast fashion is hidden across the lifecycle of each piece of clothing. The production process is tremendously polluting to begin with, as factories indiscriminately dump toxic chemical-laden wastewater into rivers and tonnes of greenhouse gases are emitted while manufacturing – about 1.2 billion tonnes of CO2 is emitted annually by the global textile industry, which is more than aviation and shipping industries combined.

Even the choice of fabric for manufacturing fast fashion garments is posing environmental risks. Proportion of synthetic materials, such as polyester in our clothing has increased two-fold since 2000, rising to 60% in 2019. These fibers are oil-based and a single polyester shirt has 5.5 kg of carbon footprint, as compared to 2.1 kg from a cotton shirt. Moreover, polyester generates vast amounts of greenhouse gases, sheds microfibers that cause plastic pollution in oceans, and when disposed, it does not naturally decompose, compounding the waste problem.

A major ramification of fast fashion is that clothes move from consumer’s wardrobes to garbage as fast as they are manufactured. It is likely that within 7-8 uses, a jeans or shirt would be discarded for clothing that is newer and trending. The shorter lifespan of garments is not only generating enormous amount of waste but is also putting strain on production resources such as water that is extensively used in the manufacturing process.

Globally, about US$ 400 billion worth clothing is discarded prematurely and 21 billion tons of textile is sent to landfills annually. The ecological cost associated with these garments is tremendous – 3,000 liters of water is required to manufacture one cotton shirt and a pair of jeans needs about 8,000 liters of water, almost the amount of water an average person drinks over two years is utilized in production of garments that will be quickly discarded.

Social cost of fast fashion

With rise of globalization, supply chains have become international, which has led to increased outsourcing of textile production to countries that offer low-cost labor. Fast fashion’s low price tags largely depend on even lower production costs. Hence, countries such as USA produce only 3% of its garments, while the rest is outsourced to developing countries, such as Bangladesh, India, Vietnam, etc.

Low-cost production means factory owners need to cut down costs, which is usually done at the expense of safety and results in providing appalling working conditions for factory workers. Fast fashion production uses 8,000 synthetic chemicals, several of those chemicals are carcinogenic affecting health of factory workers. Moreover, workers are constantly exposed to fumes of toxic chemicals, which pose serious threat to their lives.

Fast fashion frenzy has led retailers to indulge in unfair labor practices in an attempt to keep production costs low and simultaneously increase production. About 85% of textile factory workers are women, who work overtime and are highly underpaid. Lack of regulation has given way to exploitation of labor in countries such as Bangladesh, where retailers pay as little as US$ 2-3 per day to garment workers, a larger portion of them are engaged by fast fashion brands. Even in developed economies such as the USA, companies such as Fashion Nova have been found to pay employees far below the minimum wage – the brand was reported to pay US$ 2.77 an hour to its workers in Los Angeles.

Additionally, cases of child labor have been registered in countries including Bangladesh, Brazil, China, India, Indonesia, Philippines, Turkey, and Vietnam.

A move towards sustainable production

In the past decade, changing consumer attitudes associated with sustainability and corporate transparency have propelled fast fashion retailers to rethink impact of their production processes.

Notable steps have been taken by some of the largest fast fashion brands such as Zara and H&M. Zara aims to use 100% organic, sustainable or recycled material in its clothing line by 2025. Also, it has plans for its facilities not to produce any landfill waste by 2025. Currently, Zara has a sustainable clothing collection, Join Life, which uses sustainable raw materials such as organic cotton, tencel (cellulose fiber), or recycled polyester.

H&M also has a similar vision of using 100% sustainably sourced or recycled materials in its garments. It also aims to reduce water consumption and CO2 emissions in production processes. The company already has a clothing line, Conscious, which uses sustainable materials for manufacturing garments.

Both companies also claim to be striving to provide better working conditions for workers and pay fair wages.

Beyond the Low-cost Price Tags – the Real Price of Fast Fashion by EOS Intelligence

EOS Perspective

Thanks to fast fashion, for many consumers, what used to be a thoughtful and occasional purchase, has turned into a series of impulse buys at shorter intervals. The rate at which garments are being produced is not environmentally sustainable and putting profits ahead of workers’ welfare has led to abuse and exploitation of laborers globally.

Fortunately, the number of eco-conscious consumers is on the rise, a fact that has pushed fast fashion retailers to reevaluate strategies and focus on sustainable production. However, a question still remains how much of those sustainability pledges and greener production goals actually hold true.

Can fast fashion really be sustainable?

The fundamental problem lies in the business model of fast fashion that is based on selling more products. The industry’s profitability hinges on luring consumers to fresh stream of new clothes and designs that are launched almost weekly. A business model that is based on over-production is far from being sustainable.

Fast fashion companies are often criticized for greenwashing and distracting consumers from their harmful practices. For instance, H&M’s recycle program encourages shoppers to donate their old clothes, which H&M claims to recycle to create new textile. However, only 0.1% of all collected clothing is believed to be actually recycled, while the rest is most likely dumped in landfills. H&M’s clever marketing tactics make shoppers believe that it is a green company, but in reality, H&M offers discount vouchers to shoppers in exchange of their donated clothes, which pushes consumers to buy even more clothes.

Claims made by fast fashion companies on using 100% sustainable fabric have been questioned by various experts and critics, as all fabrics utilize enormous amount of natural resources and energy in the production process. Fast fashion companies might be shifting to fabrics with lower environmental profile but it cannot be completely sustainable, as claimed.

Moreover, H&M and Zara’s sustainable clothing lines, Conscious and Join Life, have been called out for misleading consumers with vague sustainability claims. It is unclear to consumers why these companies are labelling their clothing lines as sustainable. The companies have never defined terms such as ‘sustainably sourced’ or ‘sustainable materials’, used to describe their clothing lines. Hence, it is ambiguous how they source the materials, what is meant by sustainable materials, and what portion of garments they actually constitute.

While making an effort to use environmentally-friendly materials is definitely a step towards better production practices, it is not enough to compensate for the overall damage that fast fashion companies impose on the environment, hence, consumers also need to do their part.

Time to slow the fast fashion

Fast fashion thrives because companies create demand for clothing. To curb this demand, consumers need to make changes in shopping behavior to reduce their own environmental footprint.

A conscious choice needs to be made to purchase less clothes and to use the existing ones for longer time period. Solely wearing a garment for nine months longer can reduce carbon footprint of that garment by 30%.

Buying used clothes is another way to reduce environmental impact. Wearing used garments is a sustainable way to recycle clothes which would otherwise be discarded in landfills. If every shopper purchased one used item in a year, it could save CO2 emission equivalent to pulling out half a million cars from roads for a year.

Nonetheless, if consumers make mindful choices and fast fashion brands commit to doing business differently, we would be able to produce and consume less.

by EOS Intelligence EOS Intelligence No Comments

Influencer Marketing Redefining the Fashion and Beauty Industry


Social media users are increasingly reliant on and influenced by what they see online, particularly, when it comes to marketing done by fashion and beauty brands. Social media provides immense marketing opportunities to the fashion and beauty industry by allowing them to closely interact with customers and influence their buying decisions like never before. To tap such opportunities, about 78% of global fashion brands incorporated social influencers in their marketing strategy in 2017, according to a survey conducted by Launchmetrics. Influencers are slowly becoming an integral part of marketing campaigns for fashion and beauty brands – for high-end brands such as Becca Cosmetics and Yves Saint Laurent, as well as affordable brands such as Maybelline, for whom influencers have been pivotal in driving sales.

Why beauty and fashion brands are adopting influencer marketing?

In the past, to launch new collections or promote products, fashion/beauty brands invested heavily in celebrities and television models gracing magazine covers, billboard and television advertisements, among others. These efforts were effective but as technology progresses, fresh marketing tactics are born. While most of the traditional forms of advertising are still being used, brands have started to realize how laborious it is to employ traditional methods in promoting products, hence, majority of brands are going digital and starting to work with influencers.

How influential is influencer marketing?

Undoubtedly, influencer marketing is one of the fastest growing digital marketing tools, providing unparalleled access to real-time word-of-mouth targeting. For marketers, today’s social media influencers are yesterday’s celebrities and socialites, only with a more persuasive voice and greater power to reach audiences.

Beauty and fashion industry has understood the power of influencer marketing quite well. Cosmetics brands such as Smashbox have completely abandoned the use of traditional print media for advertising while luxury cosmetics companies such as Estee Lauder have significantly reduced spending on traditional media to focus on digital.

Fashion and cosmetics brands are using various types of influencer campaigns to promote products, foster brand awareness, and boost sales. For example, Maybelline (an American cosmetics company) in China used the influence of beauty bloggers and 50 celebrity influencers to do a 20-minute livestream video for a newly launched lipstick in 2016, which led to sales of 10,000 lipsticks in two hours.

On the other hand, Olay (an American skincare company) introduced a skincare campaign, Olay 28-day Challenge, which urged influencers to document their four-week experience of using company’s products while updating their followers simultaneously across various social media platforms. Influencers also gave away free samples and offered discounts to followers to encourage them to buy the products to join the skincare challenge. In 2018, the campaign was able to increase engagement rate by 20% and there was a significant increase in Google searches for the brand name.

There is no end to innovative social media campaigns that brands are launching. For example, in 2018, H&M (A Swedish clothing retail company) engaged in conversation with consumers on Instagram to come up with new designs for its brand Nyden, which is targeted at millennials. H&M worked with nine influencers, who used Instagram stories’ polling feature to understand followers’ preferences for certain designs, such as using zippers versus buttons, among others. Over a period of two weeks, the polls attracted more than 425,000 viewers and generated 35,000 votes.

For brands such as Fashion Nova (an American fast fashion retail company), with 14 million Instagram followers and ranked as the most Googled fashion brand of 2018, marketing through Instagram has been pivotal in its rapid ascent in the fashion industry. Fashion Nova is known for betting big on Instagram and use of celebrity influencers – as of December 2018, the company had worked with 3,000 influencers on Instagram. Using celebrity influencers, it claims to have generated sales up to US$ 50,000 per post and selling out a whole collection of clothing line within 82 minutes. With about 20 to 30 posts per day on Instagram, Fashion Nova knows how to keep its audience engaged and generate brand awareness.

What challenges are obstructing growth?

Influencer fatigue

Influencer marketing is not as impeccable as it sounds to be. With more and more businesses adopting influencer marketing, threat of influencer fatigue increases, which could result in disengaged audiences and reduced impact. According to a study conducted by Bazaarvoice in 2018, about 47% respondents claimed to be fatigued with repetitive influencer posts on Instagram.

Promotional content is already beginning to clutter consumer’s news feeds. With beauty and fashion influencers recommending every other product that enters the market, audiences will eventually lose trust in them, feel disengaged and overwhelmed. Consumers, after some time, are bound to get tired of having their buying behavior manipulated. Just like people started using ad-blockers when websites became loaded with advertisements, there’s a probability that they may also turn away from beauty/fashion influencers.

Absence of standard metrics/parameters to determine success of campaigns

There is uncertainty regarding what constitutes a successful influencer marketing campaign and how to calculate ROI on marketing spend. Beauty and fashion companies are unable to accurately calculate profitability of influencer campaigns. According to a study published by Celebrity Intelligence in 2018, 46% of respondents (from the beauty industry) faced challenge in evaluating ROI of an influencer collaboration.

Driving purchases is not always the key objective of influencer marketing, rather it focuses on softer goals like growing brand awareness or boosting engagement, which makes ROI far more complex to determine.

Influencer marketing does not guarantee results in terms of sales, brand reach, or number of clicks. No standard metrics have been set for the industry to measure success, instead brands end up speculating whether the campaign was successful or not. Some beauty and fashion companies monitor the comments or number of likes on the posts, while others determine views on videos or track campaign hashtags, all of which are not very effective methodologies.

Fraudulent practices

Much like other industries, beauty and fashion market has also fallen prey to influencer frauds. According a report published Points North Group in 2018, cosmetics/skincare companies suffered losses due to fraudulent engagement – 46% of Raw Sugar Living’s influencer marketing budget was squandered on fake followers, Clarins lost 45% of its budget on influencer frauds, while L’occitane blew 24% of its budget, among various others. Such deceitful practices have taken a toll on marketers, who invest in influencers to drive brand awareness and sales, but their campaigns fail to reach the actual target audience.

Another inauthentic social media activity plaguing the beauty and fashion industry is staging fake promotional posts by aspiring influencers. Companies want to see promotional abilities and references of past campaigns of influencers before hiring them to do paid sponsored posts. Hence, aspiring influencers, particularly from the beauty and fashion industry, have started to publish posts with brand hashtags and captioning it in a manner such that it seems to be a promotional or sponsored content. While this leads to free publicity for brands but most of them complain that this also results in inferior quality sponsored content posted without approval, which could harm brand’s reputation.

Influencer Marketing Redefining the Fashion and Beauty Industry by EOS Intelligence

EOS Perspective

If there is any market that qualifies to be an early adopter of influencer marketing, it is the beauty and fashion industry. It is an extremely dynamic industry and to stand out from competitors, brands need to constantly evolve, be creative, and promote products extensively – all of which is easily achieved through influencer marketing.

Equipped with social media savviness, influencers have the power to eloquently persuade consumers to make purchases. There is no limit to the creativity that they bring to the table – fashion/beauty influencers design compelling marketing campaigns for the brands by reviewing products, conducting polls and contests, offering huge giveaways, sharing their experiences of using products through videos or photographs, attending events organized by brands and promoting such events, among various other tactics.

Is influencer marketing here to stay?

There is no doubt that influencer marketing is becoming the mainstay of beauty and fashion industry, far from a passing fad. The personal nature of influencer campaigns is one of the reasons why it is proving to be effective for the beauty and fashion industry. According to a survey conducted by Celebrity Intelligence in 2018, 98% of beauty companies believed that influencer marketing is effective for the industry while 68% thought beauty segment has a natural affinity with influencers. Even though difficult to calculate, surveys have determined that influencer campaigns could also provide high ROIs – for every US$1 spent on influencer marketing, brands received average ROI of US$10.7 in 2017. Fashion and beauty brands have gauged the power of social media and know that with the right influencer endorsing to the right community/audience, it can translate into clicks, conversions, and actual sales.

Find out more about drivers and challenges in influencer marketing adoption here

For fashion and beauty brands, influencer marketing has become a multi-million-dollar investment, with considerable portions of their budgets dedicated to influencers. For example, Estee Lauder (a US-based cosmetics company), in 2019, revealed that 75% of its marketing budget will be spent on digital marketing, particularly on influencers, while Shiseido (Japanese multinational personal care company) increased its influencer marketing budget by 50% in 2019. On the other hand, in February 2019, Benefit Cosmetics (a US-based cosmetics company) formed an in-house dedicated influencer agency in the UK to streamline influencer marketing operations and manage influencer relationships. In the future, it plans to expand the in-house influencer agency to other locations as well.

Undoubtedly, influencer marketing has dramatically changed the fashion and beauty industry, by allowing real people to narrate a brand story, demonstrate product, and provide honest and credible product reviews. In order to make it a sustainable marketing strategy, measures are being taken to overcome some of the existing challenges. In pursuit to engage with authentic influencers, beauty brands are adopting more sophisticated, data-led approach to selection process. According to Celebrity Intelligence survey, in 2018, about 67% of beauty brands identified social media analytics (including audience insights and engagement metrics) useful to choose authentic and suitable content creators.

Another ongoing challenge is to accurately determine success of campaigns, which some companies (including lifestyle and cosmetics brands such as Daniel Wellington, L’Oréal, and Olay) are tackling by providing influencers with a unique URL or a discount code, which followers can use and brands can easily track conversions. If the campaign does not entail discounts, various metrics can be used to evaluate ROI such as traffic driven, social reach, social media impressions, engagement rate, cost per impression, and cost per engagement, among others.

Nonetheless, opportunities that influencer marketing provides for the beauty and fashion industry outweigh all downsides. While brands have achieved success with sponsored posts and brand hashtags on social media, there is still a lot more for them to explore and innovate through influencer marketing.

by EOS Intelligence EOS Intelligence No Comments

Influencer Marketing: A Powerful Marketing Tool on the Rise

Influencer marketing, until fairly recently a new marketing tool, is now on the frontier of becoming a mainstream marketing channel. The real, relatable, and reaction-stimulating content created by influencers, distinguishes this form of marketing from traditional marketing channels. Influencer marketing offers effective means for brands to communicate and engage with customers on social media, a fact that is driving its popularity. Laden with potential to drive sales and grow brand awareness, the influencer marketing market is likely to reach US$22.3 billion by 2024. However, certain challenges do exist in the market, and if not addressed, they can potentially hinder market growth.

Influencer marketing started shaping up around 2005 with mere video blogs on YouTube, but quickly grew in prominence as marketers took notice of its potential. Growing at a CAGR of 28% between 2019 and 2024, the industry is becoming a marketing mainstay for brands across various markets. This is driven by the fact that influencers generate a sense of proximity with their audiences, which helps in molding their shopping behavior under discrete suggestions and recommendations.

What is driving adoption of influencer marketing?

Consumers, especially millennials, are embracing a different approach to making purchasing decisions. Consumers are relying on Instagram models, Twitter personalities, and YouTube influencers to seek recommendations or to understand which brand or product is trending in the market. This has resulted in brands endorsing products through various social media channels using influencers.

Moreover, it is a proven fact that word-of-mouth marketing leads to twice as high sales as paid advertising, and influencer marketing is nothing but a form of word-of-mouth marketing. Studies also suggest that shoppers purchasing product through word-of-mouth have a 37% higher retention rate, another reason why brands want to reach their consumers through influencer marketing.

Additionally, the way that we consume media has changed. Social media boom is slowly driving consumers away from traditional forms of advertising and marketing. More than ever, social channels are becoming means to start a conversation with consumers and build direct relationships with them. With traditional advertising being sidelined by consumers (about 65% of people skip ads posted during or before online videos), influencer marketing has become an integral channel to connect with them.

How have influencers assisted companies to increase sales and grow brand awareness?

Engaging with influencers is proving to be an effective way of getting a sale, hence, brands are investing considerable budgets in influencer marketing. Brands are partnering with influencers to launch various types of innovative campaigns, with primary focus on increasing brand awareness (84%), reaching new audience (71%), and generating sales (64%), according to a survey conducted by Mediakix in 2019.

For example, YouFoodz, an Australian food chain, used Instagram to promote the launch of its 2017 winter menu. It collaborated with 81 influencers, who posted 162 Instagram stories and 176 pieces of content, which reached 1.5 million Instagram users. The campaign was a huge success, generating 70,000 direct engagements and over 500,000 impressions (number of times particular content is displayed, regardless of if it was clicked or not).

Relying on influencer marketing, Bigelow Tea (an America tea manufacturer) was able to showcase healthy aspects of drinking tea and promote its product to a large audience. Influencers incorporated Bigelow tea into their content in various ways. Culinary influencers developed different recipes to use tea in innovative ways, while craft bloggers turned packaging into DIY arts, for example, creating flower pots from the tea packaging. The campaign led to more than 44 million impressions and increased sales by 18.5%.

Further, M&M (a product of US-based confectionary and food company, Mar Incorporated) launched an innovative campaign in 2016 to let audience decide its new peanut flavor (a choice between Honey Nut, Chili Nut, and Coffee Nut) by running a mini-election. It partnered with a television personality and a team of influencers to encourage people to try the flavors and cast their votes. Finally, coffee nut flavor was selected, and the campaign generated 269 million impressions, 216 influencer posts, 14.4 million social engagements, and more than 1 million votes.

Is influencer marketing cost effective?

Influencer marketing has proven to be quite budget friendly, allowing large brands and small start-ups to launch compelling marketing campaigns. Traditional forms of advertising campaigns, through television commercials, magazines and newspaper ads, etc., require substantial investment.

On the other hand, influencer marketing is cost effective and simpler to execute. Companies with limited budget can engage with micro (comprising 1,000-5,000 followers) or nano (comprising less than 1,000 followers) influencers and still achieve remarkable results without spending a fortune.

In fact, according to a study conducted by Takumi, micro and nano influencers can generate high engagement rates – influencer with up to 1,000 followers could generate about 9.7% engagement rate, while influencers with 1,000-4,000 followers could provide 4.5% engagement rate. Micro and nano influencers tend to build strong trust and authenticity, and are relatable to their audience, which enhances their ability to engage an audience. According to a study conducted by Experticity, 82% of consumers have higher probability of listening to suggestions provided by micro influencers than those provided by influencers with large number of followers.

Moreover, surveys have determined that influencer marketing could yield a decent average ROI of US$ 5.20 for every dollar spent, which makes it an appealing option for marketers.

What challenges are hindering growth?

Lack of stringent regulations leading to poor compliance with guidelines

Current regulations and guidelines pertaining to influencer endorsements are not stringent or comprehensive, leading to malpractices. In the USA, the FTC (Federal Trade Commission) requires influencers to provide disclosure in case of sponsored content, however, no fines are applied for violations. As a result, most influencers do not adhere to the endorsement regulations, either due to lack of knowledge or in fear of losing followers. In 2018, out of 800 Instagram accounts from UK, USA, and Canada, only 25% fully complied with local regulations pertaining to sponsored content, according to a study released by Inkifi.

Such misleading conduct on influencer’s part could raise questions on their authenticity and lead to mistrust among their followers, who demand transparency. Moreover, large corporations such as Unilever (a consumer goods company) have strictly refused to work with influencers who indulge in fraudulent activities. Influencers are at risk of losing trust of their followers as well as of companies if they continue to indulge in misleading activities.

Fraudulent engagement

Typically, brands use the number of followers on an influencer’s account to estimate campaign results in terms of ROI, engagement rate, brand awareness, earned media value, among others. To seem more appropriate or popular, some influencers purchase their followers using bots – software designed to automatically like, comment, and share posts, increase views on videos, and inflate number of followers on accounts. Influencers have also started to fake their engagements by joining a community of real users to trade likes and comments. Despite these followers being real people, they are not likely to be interested in influencer’s content. Consequently, brands fail to meet the desired campaign result or reach the target audience.

In 2019, fraudulent activities were estimated to cost brands US$1.3 billion, about 23% of allocated budget for influencer marketing. Fraudulent practices are inhibiting market growth, as brands are increasingly becoming cautious of investing in influencer marketing – as of January 2019, about 53% of brands stated that fraudulent impressions were obstacles to increasing digital advertisement budgets.

Influencer Marketing A Powerful Marketing Tool on the Rise by EOS Intelligence

EOS Perspective

Influencers are no longer an extra asset to marketing campaigns instead they have become a critical element of storytelling and building direct relationship between brands and customers. Influencers have positioned themselves as authentic gurus rather than simple advertisers, with 92% of consumers making purchasing decision based on influencers’ posts in 2018. Their relentless savviness to promote brands is what keeps audiences engaged and brands coming back for more.

Nonetheless, challenges do persist but the industry is continuously evolving and coming up with solutions. Measures are being taken against inauthentic engagements. Platforms such as Instagram have started to strictly regulate fraudulent activity and began to threaten offenders with fraud penalties, account suspension, and brand reputation damage. Companies have also become mindful and vigilant while engaging with influencers and started to thoroughly vet them to check for fake followers or use of bot to increase followers. On the legal side, a New York Attorney General has stated that selling fake followers on social media will be considered as an illegal activity in the state.

Further, in November 2019, FTC launched guidelines for sponsored content under ‘Disclosures 101 for Social Media Influencers’ that encompasses when and how influencers should disclose their engagement with brands, regardless of whether or not it includes payment. FTC has not made any major changes in the guidelines but the new guide is more user-friendly with abridged language, and photos and videos illustrating the correct way to endorse products on social media.

Find out how influencer marketing is reshaping fashion and beauty industry here

According to the guidelines, when partnering with brands, disclosure is mandatory when there’s a financial, employment, personal, or family relationship with a brand. Disclosure language should be simple and clear, and the disclosure should be hard to miss (for example, disclosures on Instagram are required to be placed at the beginning of the post’s description and before the ‘more’ button). FTC’s aim is to foster transparency in sponsored content by placing more liability on brands and influencers to explicitly reveal their relationship while recommending products.

Influencer marketing has well-established itself in the advertising industry and is moving towards becoming a mainstream marketing channel, and such measures taken by regulatory authorities, social media platforms such as Instagram, as well as the brands will further strengthen its position as a marketing channel. In future, not only will influencer marketing continue to grow in popularity, but is also likely to become a more purposeful and effective way to communicate and engage with audiences. Allured by endless opportunities, brands will continue to collaborate with influencers and the industry is poised to grow.

by EOS Intelligence EOS Intelligence No Comments

Global Economy Bound to Suffer from Coronavirus Fever




Coronavirus threatening businesses in China and beyond


Automotive industry



Coronavirus outbreak poses a risk to the global automotive supply chain.





Technology industry









Shipping industry







Other businesses






Global Economy Bound to Suffer from Coronavirus Fever by EOS Intelligence


Housebound consumers dealing with coronavirus




EOS Perspective








by EOS Intelligence EOS Intelligence No Comments

Is Sustainability Just Another Buzzword in Food Packaging Industry?

Sustainable food packaging has recently received an increased attention within the food & beverage sector. Most players try to make sure not to miss any chance of communicating their concern over plastic waste to the general public, showcasing their initiatives taken to curb the waste. Are such initiatives taken out of actual concern or are they just a move to position the brands right in the ‘environmentally-concerned’ market?

It is assumed that packaging is considered sustainable, if it meets three criteria of sustainability. First, it should be economically viable for the consumers as well as the manufacturers. Second, it should be socially acceptable in terms of ease of use, transporting, sorting, and storing. Most importantly, third, the packaging must be eco-friendly through the use of materials that are responsibly-sourced and reusable/recyclable, to reduce the environmental impact of the packaging.

Change fueled by multiple triggers                 

Food and beverage (F&B) and related packaging industry players have been under a growing pressure to be more transparent and to introduce changes to the way food products are packaged. Considering that a significant share of non-sustainable, non-biodegradable waste, especially plastic, comes from food industry, improving the packaging and transitioning to more eco-friendly solutions is becoming imperative, rather than optional, for increasing number of F&B companies.

At the same time, the pressure to reduce waste and protect the environment from non-biodegradable substances is creating new opportunities for the packaging materials producers and for F&B companies with regards to more relevant brand positioning in this highly competitive industry.

While a lot has been changing in the packaging sphere under the heat from environmentalists and legal requirements introduced by regulators, the role of an aware consumer exerting pressure through product scrutiny and shopping choices should not be underestimated in this process.

According to a report published in April 2019 by Globalwebindex, a market research company, there has been a rise in the number of consumers globally who are willing to pay more for eco-friendly/sustainable products (including their packaging), from 49% in 2011 to 57% in 2018. Consumer awareness is growing fast thanks to governments’ initiatives, educational media, and activists’ social media efforts, all of which have triggered an increased sense of responsibility amongst many consumers, who start to understand the importance of switching to eco-friendly and sustainable packaging.

Increasingly, consumer awareness is going beyond just passive understanding and translates into actions which have a real power to change F&B sector’s approach to food packaging. Consumers vote with their spending dollars and exert pressure by switching their loyalty to other brands, both of which approaches appear to be quite effective. According to the same survey by Globalwebindex, 61% of consumers are likely to switch from their currently-used brands to more environmentally-friendly ones if the latter score better on the environmental friendliness front. This shows that F&B companies really do need to re-think their product and packaging choices and start putting money and effort in sustainable solutions, if not from real concern over the environment, then for retaining consumer trust and maintaining brand values.

Big F&B brands appear to show initiative

The increased scrutiny over F&B companies’ packaging choices has already started bringing some results. Several major players are looking to invest in transforming their packaging materials to sustainable ones. Despite the challenges in bringing innovations into packaging materials and designs, and altering their supply chain, several F&B players are claiming to strive for their sustainability goals. Some claims may surely be genuine but some could possibly be a strategy to get the ‘sustainable company’ tag to stand out from the competition in the F&B industry.

Understandably, players are very vocal about their initiatives targeted at improving their eco-friendly standing to appeal to the environmentally-concerned consumers. F&B brands such as Coca-Cola, PepsiCo, Unilever, Nestle, to name a few, have already announced time-bound plans to revolutionize their packaging models.

For example, in January 2018, the beverage giant Coca-Cola announced a goal to collect and recycle the equivalent of every bottle it sells globally by 2030. The company with its bottling partners started an initiative with a plan called “World Without Waste” that is focused on entire packaging cycle from designing and manufacturing of bottles to their recycling. For the execution of this plan, the company plans to educate the public on what, how, and where to recycle, teaming up with local communities, NGOs, industry peers, and consumers. Furthermore, under the plan of “World Without Waste”, the company aspires to create packaging from at least 50% recycled materials by 2030 and continue pursuing the goal to make all consumer packaging 100% recyclable by 2025.

Is Sustainability Just Another Buzzword in Food Packaging Industry? by EOS Intelligence

In addition to this, in October 2019, Coca-Cola European Partners (CCEP), the largest independent Coca-Cola bottler, announced it would switch the carriers on its multipacks from shrink wrap to paperboard to reduce packaging waste. The company claims that with this switch it will remove about 4,000 metric tons of single-use plastic per year from its current supply chain. The paperboard packaging is planned to be certified from either the Forest Stewardship Council (FSC) or the Program for the Endorsement of Forest Certification (PEFC). Similarly, in January 2019, Coca-Cola packaging partner, Coca-Cola Amatil Australia, announced to cease the distribution of single-use plastic straws and stirrers, and distribute biodegradable Forest Stewardship Council accredited recyclable paper straws.

According to a report by Packaging Gateway, Coca-Cola claims to have made 88% of the consumer packaging recyclable, while its packaging used 30% of recycled material by the end of 2018. Also, about 58% of the equivalent of bottles and cans introduced by the company into the developed markets were refilled, collected, or recycled during 2018. Overall, the company’s recover and recycle rate was said to be 56% in 2018 as compared to 59% during 2017 or 61% in 2014. This proves that with growing sales, Coca-Cola’s efforts might not make as much impact as the company would want the public to think.

Nevertheless, the company is undertaking further initiatives to improve its environmental score. It committed to invest US$15 million in Circulate Capital, an investment management firm dedicated to incubating and financing companies and infrastructure that work upon curbing the plastic waste thrown into the oceans. Further plans of the company include increasing the use of recycled plastic in Australia by 2020.

In another example, PepsiCo also talks about becoming an environment-friendly company, announcing to use 25% of recycled content in its plastic packaging by 2025. In order to meet its target, in September 2018, the company announced its participation in the World Economic Forum’s Global Plastic Action Partnership (GPAP). The partnership focuses on stakeholders located in coastal economies, such as those in Southeast Asia, and its purpose is to help businesses, communities, and local governments redesign waste management to create circular models that include collecting waste and recycling or composting it to reduce waste streams to the oceans or landfills.

PepsiCo also announced other targets for improved sustainability to be achieved by 2025. These include to re-design all of its packaging to be recyclable, compostable, or biodegradable, to reduce virgin plastic content by 35% across its beverage portfolio, and to amp up investment to increase recycling rates in key markets.

Apart from individual targets, another initiative was also launched in October 2019 jointly by a few beverage players. As reported by a publishing firm, William Reed, three beverage companies, Coca-Cola, PepsiCo, and Keurig Dr Pepper, announced their partnership with World Wildlife Fund, The Recycling Partnership, and Closed Loop Partners under the “Every Bottle Back” initiative. This initiative, starting in late 2020, will include investment of US$100 million and will focus on sorting, processing, and collecting discarded plastic bottles in four US regions. The initiative also targets to educate consumers that PET bottles are 100% recyclable, easily remade into new plastic, bottles, shirts, shoes, coats, park benches, and playground equipment, by introducing pack label messaging.

Smaller players are emerging with packaging innovations

The pressure to embrace sustainable packaging is even greater for smaller and mid-size F&B companies, if they want to stay relevant to the customers, grasp their attention, and grow own market share. Smaller players in the industry seem to understand this and have proven to be more agile in introducing new products that focus on organic ingredients with sustainable packaging, while challenging big brands’ prices.

For example, in March 2016, Alter Eco Foods, a San Francisco-based chocolate-centric, healthy indulgence, and sustainability-oriented food brand, launched the first stand-up pouch made from renewable plant-based materials, designed for storing quinoa grain. This innovative pouch named “Gone 4 Good”, is not meant to be recycled but to be thrown in a composting bin where it will disintegrate within three to six months. Made from eucalyptus and breech trees for the exterior and compostable resin called “Matter-Bi” for the interior, the pouch has several green certifications. Apart from this, in early 2019, the company also transitioned its chocolate truffles packaging from non-recyclable plastic pouch to a recyclable paper box and claims to be looking for solutions to replace its current plastic Coconut Cluster pouch, since it is yet not recyclable or compostable. The company is determined to make all its products packed in 100% recyclable or compostable packaging by December 2020.

Another player, B.O.S.S. Food, a Texas-based nutrition bar company, started selling its premium nutrition bars in compostable wrappers made by TIPA (an Israel-based compostable packaging company) in 2017, focusing on ensuring the products’ packaging is environmentally safe. TIPA’s packaging is a bio-based blend with all the properties of normal plastic but is certified for both home and industrial composting through OK Compost mark by the TUV institute. The packaging also complies with food contact regulations in Europe and the USA.

Similarly, a UK-based beverage company named Earlybirds launched a 100% plant-based packaging for its breakfast drinks – bottles and lids made from sustainable sugarcane, over the span of two months of September and October 2019. The launch made the packaging 100% compostable as per EU biodegradability standards. The company’s advertisements claim that, under the right conditions, the bottle will breakdown in twelve weeks and it can be thrown in food waste bin and then composted at an industrial composter, reducing it back to soil. The company is the first in the UK to launch sustainable packaging for beverages.

These are just a few of several smaller F&B companies, which are focusing on bringing new packaging solutions to improve their rating as environment-friendly companies in the eyes of consumers. The initiatives are worth the effort, even though players face quite a few challenges in embracing sustainable packaging over traditional packaging.

Such challenges include higher costs, choosing the right material for packaging that must comply with the standards of environmental safety, as well sustaining the quality of the food product. It is estimated that the companies are required to spend nearly 25% more on the sustainable packaging than on the traditional packaging. This higher cost is attributed to major shifts in supply chain, including (but not limited to) procuring the raw material for packaging to collecting the used packaging for recycling. Another major factor contributing to higher costs of sustainable packaging is the R&D expenses that must be borne by the companies. The solutions still require a lot of research, as there are still very few commonly-used technologies and packaging products, thus a lot of players need to invent them. The companies need to invest considerable sums in developing an environment-friendly packaging material that is viable for their food product to sustain throughout the supply chain as well as shelf life, and (equally importantly) has the aesthetic appeal to grab the consumer’s attention.

But despite being smaller in size and having to deal with challenges, companies such as Alter Eco, B.O.S.S. Food, or Earlybirds have been investing extensively in R&D, a fact that resulted in several of them coming out with better and innovative packaging solutions. In fact, at times, smaller scale of operations works to these players’ advantage, as they do not have the constraint of having to convert the existing large-scale traditional packaging lines to ones suited to deliver new format or feature of packaging. Therefore, many efforts undertaken by smaller players seem to be converted into tangible solutions and launched more quickly and easily, also giving the companies a great marketing advantage over large F&B brands.

EOS Perspective

With the rise in awareness about plastic waste and environment safety among consumers, along with regulations formulated by governments across many countries to curb plastic waste, it has become paramount for F&B companies to enter the path of sustainability. At the same time, sustainability is becoming an important element of many companies’ marketing strategy to get ahead of the competition (or, increasingly, not to stay behind other players). The latter reason alone makes it no longer a matter of choice for F&B companies whether to keep assuring the public about efforts undertaken towards improving own sustainability rating across the supply chain.

Certainly, it is doubtful whether all these F&B companies are capable of actually achieving the claimed sustainability. On the one hand, there is a doubt if the scale of their efforts is relevant enough to bring about an actual change and not remain just a PR tool. On the other hand, the doubts seem to be really justified considering the challenges associated with achieving true sustainability goals.

The challenges range across many aspects. These include the complexity of the required changes in the supply chain, which involve both radical and incremental change, from manufacturers to users, owing to alterations in packaging materials and designs.

Another major challenge is the higher cost associated with changing the packaging materials from plastics to renewable or compostable materials. This starts with the development of the right product’s packaging material to ensure stable and long shelf life, and safe transportation with minimal waste, all of which is particularly challenging when dealing with food products. The costs and complexity of the task is further increased by the responsibility of creating an infrastructure for recycling of the packaging materials and taking the onus of collecting and recycling the packaging of own products, if not directly then through well-planned network of third-party entities.

Considering the complexity of these challenges and the high cost of going up the sustainability ladder, many F&B companies are likely to not be able (or to not want to) work towards full sustainability across their supply chain. In the midst of the growing pressure to meet the sustainability criterion, it is possible that some of the players might quietly opt for less sustainable solutions or stick to only those changes that are most visible to the consumer’s eye.

by EOS Intelligence EOS Intelligence No Comments

Beverage Industry in Troubled Waters, Attempting Conservation Efforts


Water is a finite resource, which is becoming constrained with the growing population and climate change. It is a vital component in production of beverages, both alcoholic and non-alcoholic. From growing raw materials (such as wheat or barley) for beverages, through product development, till the production process, water is indispensable at each step. The beverage industry has come to realize that water scarcity could tremendously impact businesses, forcing them to reassess water management strategies and tap into efficient conservation measures.

Water covers around 70% of the earth’s surface and only 3% is available as freshwater, which can be used for various commercial and non-commercial activities. Unfortunately, this quantity of water is inadequate for growing population and thriving businesses using this resource without considering its limited availability. According to WWF, an international NGO for preservation of wilderness and nature, two-thirds of the world’s population may face water shortage by 2025, with demand for water exceeding supply by 40% by 2030.

Beverage production is highly water-intensive, with water being used at each step across the value chain. According to Water Footprint Network, it takes at least 70 liters of water to produce 0.5 liter of soda, 74 liters of water for a glass of 0.25 liter of beer, and 132 liters of water for a cup of 0.125 liter of coffee. Water footprint for beverage companies is evidently high, and this can be mitigated by implementing water management technologies across the value chain, from farming to beverage production.

Water scarcity posing challenges for beverage producers

Water stress is a pressing problem for all beverage industry players, causing various operational challenges that are impacting business operations.

Opposition to water extraction from natural resources

California suffered a searing seven year drought that ended in 2017. Distress from water scarcity impacted communities, as well as companies operating in the region. For instance, Nestlé, a Swiss multinational food and beverage company, faced opposition from local communities and criticism from conservationists for extracting large quantities of water from Californian springs even during the drought-stricken years.

These events impacted Nestlé’s operations and eventually, succumbing to the pressure, Nestlé invested US$7 million in conservation projects across five of its bottling plants in California in 2017. The projects focused primarily on reducing the amount of water used in filtration process while simultaneously maintaining hygiene of the processing plant. Only after consistent water conservation efforts, Nestlé was granted a three-year permit by US Forest Service in 2018 to extract water within the limit of 8.5 million gallons annually from Californian springs.

Similarly to Nestlé, Coca-Cola faced opposition from local communities in India resulting in closures of two of its bottling plants located in the states of Kerala (in 2004) and Uttar Pradesh (in 2014), due to extensive water extraction from local resources. In order to sustain operations, Coca-Cola announced plans to invest about US$5 billion between 2012 and 2020 to help replenish groundwater in India, allowing the company to also use water for beverage production.

Water shortage impacting business operations

According to global survey of 600 companies by Carbon Disclosure Project (CDP), water scarcity and stricter environmental regulations cost businesses around US$14 billion in 2016. Many companies agreed that water-related issues have affected their businesses directly or indirectly.

For instance, severe droughts in Southeast Brazil in 2014 and 2015 disrupted water supply in the area, limiting production capacity and disturbing operations of Danone, a French multinational food and beverage corporation. As a result the company suffered sales loss of ~US$6 million in 2015.

Not only Danone was affected. As Brazil is one of the world’s leading coffee producers, limited availability of water for irrigation due to the drought, crop production in the region took a hit. Eventually, the situation threatened supply, which led to higher raw material prices for coffee manufacturers. One of the producers that felt the repercussions was J.M. Smucker, an American producer of food and beverages, reported a net loss of US$90.3 million in 2015 due to higher coffee bean prices in Brazil.

Tapping into innovations to reduce water consumption

Water risk for beverage companies highly depends on external factors, such as water quality and availability either through natural resources or municipal bodies. Industry players have very little control over the external factors but can regulate water usage in their internal manufacturing operations to reduce consumption.

Recycling water using zero water technology

Beverage companies are collaborating with technology providers to incorporate innovative water recycling methods.

For instance, in 2014, Nestlé collaborated with Veolia Group (a French company providing water, waste, and energy management solutions) and GEA Group (a German food processing technology firm), to introduce Cero Agua (zero water) technology across dairy production plant in Lagos de Moreno, Mexico. Using the technology, the factory does not have to rely on external water sources. Instead, it recycles and reuses the waste fluid extracted from milk – Nestlé extracts 1ml of water from every 1.6ml of milk. The treated water is used in non-food production applications such as cooling, irrigating the gardens, and cleaning, thus, eliminating the need to depend on external water sources. The company has invested around US$15 million to introduce zero water technology in the plant.

With the help of this technology Nestlé claims to have saved 168 million liters of water in the first year of implementation, reducing water consumption by more than 50%. Zero water technology has been rolled out across its other diary factories located in water-stressed areas of South Africa, India, China, to list a few.

Moreover, between 2004 and 2014, Nestlé claims it was able to reduce water consumption globally by one third and by 50% across its Mexican plants.

Onsite wastewater treatment

Brewing companies are not far from adopting technologies to reduce water footprint. Waste water treatment is one of the effective ways to reuse water and several brewing companies have jumped on the bandwagon to conserve water using this approach.

Since 2014, Lagunitas Brewing Company, a subsidiary of Heineken, has been using EcoVolt membrane bioreactor, a wastewater treatment technology that removes up to 90% pollutants from water so that it can be reused onsite for cleaning purposes. Using this solution, the company has reduced its water footprint by approximately 40%.

In 2016, Bear Republic Brewing Company, a brewery based in California, invested US$4 million in a waste water treatment system that uses electrically active microbes to purify wastewater, which helps the brewery to recycle about 25% of water that it uses to clean factory equipment.

Furthermore, in 2015, a Boston-based craft brewer, Harpoon Brewery, collaborated with Desalitech, a US-based water treatment company, to produce beer made from treated Charles River water. Desalitech uses its ReFlex Reverse Osmosis systems to purify the river water and has been able to recover 93% of the treated river water to brew beer.

Innovative farming techniques

Farming is highly water-intensive and sustainable beverage production can only be achieved if water consumption is cut down during farming. Hence, companies are employing various water management solutions to check water utilization during farming.

In 2014, Anheuser-Busch, an American brewing company installed six AgriMets, a network of agricultural weather stations, in Idaho to provide farmers with real-time weather and crop water use data. Using AgriMet data, growers can monitor rainfall and soil conditions, which helps them to cut down on the amount of water required in irrigation and decide when to irrigate. This ensures efficient use of water across the fields.

Further, for improving water management, the company is employing various seeding and harvesting techniques – for instance, it plants and harvests winter barley earlier in the year, resulting in 30% higher crop yield and 40% lower water usage.

PepsiCo and Coco-Cola have been promoting drip irrigation (a type of irrigation system where water is allowed to drip slowly to the roots minimizing evaporation) in water-scarce Indian states of Maharashtra, Gujarat, Karnataka, Haryana, among others. Coca-Cola started with drip irrigation project in 2008 with 27 farmers covering 13.5 hectares of agricultural land in India, which expanded to over 513 drip irrigation systems installed, stretching across 256.5 hectares of agricultural land by 2011. Drip irrigation leads to significant water conservation, with an average saving of 1200 kiloliter/ hectare of water for a cropping cycle of 110 days/hectare (an agricultural cycle comprising activities related to the growth and harvest of crops). Additionally, savings on account of electricity, fertilizers, and pesticides are estimated at about US$ 29/hectare/year.

Beverage Industry in Troubled Waters - EOS Intelligence

EOS Perspective

For decades, water has been regarded as free commodity in processing and manufacturing environments, but this notion is beginning to change with growing awareness about water scarcity. Limited availability of water puts pressure on industrial activities and often pushes operational costs of beverage companies up. Availability of water is likely to get worse in the future, which could jeopardize operations of food and beverage companies unless the crisis is treated as a priority.

The solution to water scarcity lies in the hands of businesses as much as the governments of various countries. Water management requires stringent policies by the governments to better regulate the use of groundwater or natural resources for irrigation. The governments also need to implement efficient wastewater management and recycling technologies to conserve water. Countries such as Singapore have undertaken water recycling and management measures, but unfortunately such examples are relatively scarce in other parts of the world, with most conservation efforts being implemented only by large food and beverage companies. It is time that the governments as well as all industry players (including small-to-mid sized companies) wake up to the challenges that lie ahead owing to water stress.

Solutions to water scarcity do not always need to be expensive. Small-to-mid sized companies could start with small and inexpensive measures such as installing flow meters or leak detection systems, measuring water usage at each step and setting short and long term goals to reduce consumption across those processes.

Other measures could be to reduce water consumption across most water intensive processes, such as cleaning, which typically accounts for 60% of a beverage plant’s total water consumption. Water could be replaced with dry ice to manually wash equipment or it can be physically cleaned using vacuum systems or high-pressure hoses that can be used to move debris.

Nonetheless, sustainable water management efforts by large beverage companies have resulted in lowering of operational costs, improvement in quality of final products, and in building better brand perception among customers. These strategic advantages could motivate all industry players to reduce water footprint and play their part as responsible water users.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Dark Chocolate – India’s New Indulgence Is Here to Stay


India’s indulgence in dark chocolate is gradually rising. While the Indian chocolate industry has grown manifold over the decade, especially in milk and white chocolate segments, it is the dark chocolate segment that has gained momentum in the recent years. The growth in demand for dark chocolate can be attributed to the growing health consciousness, increased per capita income of the urban population, and exposure to foreign flavors, especially amongst urban Indians. Most of the demand (and market) is currently limited to urban cities as dark chocolate is typically priced higher than other chocolate types. Nevertheless, though still getting accustomed to the bitter taste of dark chocolate, Indian market offers great growth prospects for players associated with this sector provided they plan efficiently and act keeping in mind the specifics of the Indian market scenario.