Optimism Prevails as Artificial Intelligence and Process Engineering Provide Untapped Upside Potential
It has been a month since the Global Restaurant Investment Forum (GRIF) in Dubai came to a successful closing. Celebrating its fifth anniversary, it is the surprisingly upbeat tone of the event and industry that stays behind.
Undoubtedly, the restaurant sector across EMEA is facing numerous challenges. These range from higher business rates and landlords wanting to up rents to significant changes in the consumer behaviour, technological advancements altering the business landscape as well as broader socio-political issues. The latter ranges from Brexit in the UK, which continues to put a strain on prices, costs and the supply chain, to continued localisation efforts in some of the Middle Eastern markets, which sees a large expat community leaving. In both these markets and instances, the consequences of the socio-political movements have also had a marked impact on the availability of qualified talent. Moreover, there is of course more competition in the form of new brands. Many of those new concepts, as well as some of the more established players, have sought private equity money to help speed-up their growth plans. Burdened with an already high pressure to perform and deliver returns on investment, some of these organisations are now beginning to falter in the current difficult trading environment. In short then, it is tough out there and trading conditions are not the best either. So, why the optimism?
Innovate through Artificial Intelligence
First and foremost, it seems that this positive outlook is based on the huge potential that exists for those organisations willing and able to innovate and drive change. By doing so, there are ways to stand out from the crowd, better speak to the needs of today’s customers and improve operational efficiencies – resulting in better returns and financial results.
Driving Change Through Integrated AI: Thinking outside the box requires dedication. It also takes meticulous planning and commitment to constantly trying something new and (re-)evaluating its impactfulness – ultimately, this is what an iteration cycle is all about. Benjamin Calleja, CEO at Livit and speaker at this year’s GRIF, seems to have perfected this together with his team. Livit is an organisation which works predominantly with food and beverage (F&B) as well as retail clients, assisting them to develop, implement and transform their brands – from a design, operational and business perspective. Increasingly, the firm also works with hotel organisations which themselves admit that they are not doing a great job in managing F&B (at the conference, Maarten Markus, Managing Director Northern Europe at NH Hotels said “We do not consider ourselves the best in F&B operations – so we operate with and through external parties!”).
Ben spoke about Artificial Intelligence (AI) and gave an impressive example of how this works in action. For those curious, visit 18I89 Fast Fine Pizza in Stockholm. Here, technology does not become the centre of attention, nor a marketing gadget. It helps to influence behaviour, drive operational efficiency and improve the bottom line. Technology applied ranges from an intelligent music playlist coupled with a dynamic volume control to real time scene lighting, artificial scenting and seamless payment as well as automated table and inventory management systems which are assisted by heat sensors and smart software. The result – better efficiencies, greater effectiveness, increased margins, more engaged customers …. The list goes on.
Drive Profits Through Process Engineering
The palpable optimism at the conference was also driven by a passionate, albeit punctual, call for paying more attention to sustainability. Delegates and speaker alike not only acknowledged and recognised the growing importance of pursuing more ecologically friendly and socially more acceptable ethical business practices, they also saw opportunity to do good whilst growing and developing their business and revenue streams – and more often than not, this requires some serious process engineering.
Does Doing the ‘Right’ Thing Equate to Better Business? GRIF attendees on and off stage talked about a customer base which is increasingly preferring niche products, organic food and sustainably sourced produce. They also spoke about how the F&B and hospitality industries are putting significant strains on global resources – thus highlighting the need for change. Recent research supports this, pointing out that one third of global food production is wasted along the supply chain – and, at least in the EU, restaurants are the second biggest culprits responsible for food waste generation (Principato, L., Pratesi, C.A. & Secondi, L (2018). Towards Zero Waste: An Exploratory Study on Restaurant Managers. International Journal of Hospitality Management, Vol. 74). It thus seems about time that F&B businesses finally got ‘on the band waggon’. They have recognised that by promoting and pursuing social, environmental and economic business practices they are addressing the needs of today’s consumers as well as the potential global threat of depleted resources. But, which processes do restauranteurs need to re-evaluate and look at to succeed?
- Product innovation, and product engineering, was mentioned as one key aspect in bringing the industry to the next level. Aaron Noveshen from The Culinary Edge highlighted here the ‘impossible burger’ – one, which is made of 0% beef and instead uses natural ingredients. It is an engineered burger which mimics the sights, sounds, aromas, textures and flavours of a traditional one, an all-time consumer favourite – but in a more sustainable way. But there was another speaker at the conference, Mohammed Ashour (CEO of Aspire), who probably put sustainability centre-stage and ‘on the map’ during this year’s GRIF. He was awarded the Hult Prize by the Clinton Global Initiative in 2013 and reminded us of the growing appetite, and the shrinking resources, of our planet. Consequently, a new, more resourceful source of protein is needed. He and his team developed Aketta – think ‘beef’ but instead of the source being a cow, it is crickets.
- Managing food waste was mentioned as another key component of driving innovating as well as better, more sustainable business practices. It touches on many different areas, from the supply chain and procurement through to operations. Securing the ‘right’ ingredients in order to be able to deliver the ‘right’ produce and menu is one vital part of the process. At the same time, restaurateurs and chefs are increasingly thinking of limiting unnecessarily elaborate menus and (better) using all elements of an ingredient with a view to reduce food waste. Technology is hereby a key enabler behind such process improvement – entrepreneurs and Ecole Hoteliere de Lausanne graduates Anastasia Hofmann and Naomi MacKenzie spoke at the conference, for example, about their firm KITRO which is one of the readily available solutions in the market that, through process automation, sensor checks and analytics, empowers the F&B industry to optimise work processes to reduce food waste and food cost, upping profits.
In summary, then, we all know that nowadays it is difficult to have quick wins – and most of the time they do not come easy. In the past, it seems that many restaurateurs thought that by seeking private equity money to fund growth they had found the ‘magic formula’. But we have seen that this is not the case, and at times, too quick of an expansion backfires – in particular in challenging market environments. The recent words of Megan Greene, Managing Director and Chief Economist at Manulife Asset Management, reverberate in my mind. She warned at the IHIF in Berlin earlier this year about “dangerously high debt levels”, “low productivity” and “low inflation” – a potentially toxic combination for the hospitality industry. This was echoed by Keith Lindsay, Managing Director at CBRE Hotels, who spoke of the “wall of money” facing the hotel industry and that it is too easy to be tempted by the seemingly readily available financial resources and the amount of attention received by the sector. The F&B industry should be mindful of this and instead focus on improving processes and driving innovation to strengthen and grow the bottom line. Investing into AI, such as Benjamin Calleja has done, and working on improving food profit margins, as supported by the likes of KITRO, will be one big and important step in readying restaurant operations for any potential ups and downs that the industry might be facing – and making the businesses more competitive by having more streamlined operations. And whilst not everyone is willing to take the plunge and, as Mohammed Ashour put it, work on the ‘lobsterisation’ of crickets (making reference to the fact that before lobster became the gourmet food of today, it was actually seen as the food of the poor), most businesses and entrepreneurs will at least acknowledge the fact that, most often, it is those who dare who win.