Category Archives: Business model innovation

Why 2014 will finally be the year of online grocery

Live music at my local Whole Foods

Live music at my local Whole Foods

This article originally ran on on Jan. 16, 2014. 

Some people go to bars or clubs on weekend nights. I go to the grocery store. I love to mosey through the aisles, looking for new snacks, picking up five apples before I decide on the right one. I’m apparently not the only one. On a recent Friday night at the Whole Foods (WFM) in Cambridge, Mass., I encountered a pair of musicians, on flute and classical guitar, playing lovely melodies near the wine and cheese section. Clearly, the natural foods chain believes a lot of people see food shopping as entertainment.

Recently, however, disaster struck: I ran out of oatmeal. I realized it would be much easier to order a six-pack of Quaker Oats on (AMZN) than to make an extra trip to the store. I was even willing to eat (shudder) cold cereal for breakfast two days in a row while I waited for delivery. Thus, my pantry entered the Internet age.

My pantry is not alone; 2014 could be the year of online grocery. Traditional brick-and-mortar chains should be worried. The fact that AmazonFresh expanded to two new cities in 2013, after six years operating only in Seattle, is just one cause for concern. Currently, 3.3 percent of total U.S. grocery spending—a $500 billion industry—is online, according to a report from Brick Meets Click. It could reach 11 percent by 2023, a growth rate of nearly 13 percent per year.

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How SABMiller is innovating in Africa

As a staple crop in the developing world, cassava makes a lot of sense: it produces a lot of calories from a relatively small amount of land, is highly drought-resistant, and can be grown in marginal soil. But there’s a big problem: cassava starts to degrade as soon as it’s pulled out of the ground. It’s also 75% water, which makes it costly to transport, so it doesn’t work well as a cash crop.

I interviewed Andy Wales, head of sustainability at SABMiller, for MIT Sloan Management Review, and he told me how the giant beer company is using cassava’s weakness as an opportunity to create a more sustainable line of beers in African countries.

SABMiller worked with a company that developed mobile processing units, which farmers use to process the cassava on-site. SABMiller than uses the processed cassava to make a local beer which competes with illicit homebrews.

SABMiller's first cassava beer, Impala, launched in Mozambique. It has since followed up with Eagle brand cassava beer in Ghana.

SABMiller’s first cassava beer, Impala, launched in Mozambique. It has since followed up with Eagle brand cassava beer in Ghana.

It’s better for the environment, because the beer doesn’t have to travel as far to get to consumers. It’s better for farmers, who have a new way to profit from their crop. And it’s better for the government, because it’s taxed. “It’s a triple win,” says Wales: “growth for the agricultural sector, growth for our business, and it’s better regulated from a health and quality perspective.”

Leasing jeans: A business model for a green economy?

Let’s face it: fashion is bad for the environment. I’m not just talking about clothing – I’m talking about our general desire to obtain new things as trends change. How many perfectly good couches like this have been discarded, replaced with new ones that required significant amounts of energy and raw materials to produce?

ugly 70s couch

Of course, that’s true any time you buy a new product, whether it’s for style reasons or not.

Many environmentalists see leasing and rental models as part of the solution. What if, instead of buying new flooring, you leased it? The flooring company could then reclaim it when you want a new floor, reusing it or recycling it depending on its state.

A Dutch company called Mud Jeans is attempting to use the same model for denim. The company is letting customers rent jeans for 20 euros up front plus 5 euros a month (a total of $107 to own a pair of jeans for a year). After a year, customers can send the jeans back or keep them (for an additional 20 euros). Mud will then either recycle the jeans or lease them to another customer.

Mud Jeans

There’s one problem, from an environmental standpoint. Levi’s conducted extensive research and found that a pair of jeans is most damaging to the environment not when it’s made but when it’s used, because of all the energy and resources required to wash and dry clothes. Cotton production accounted for only 5% of the climate-change impact of a pair of jeans and 4% of its energy use.

Water use was a different story. Cotton production accounted for 49% of the water use associated with a pair of Levi’s. But washing nearly matched it, at 46%.

Overall, I like Mud’s idea, mainly because it will get consumers thinking about the potential embedded in a leasing economy. Ultimately, however, it would probably be better for the environment to take my father’s approach: buy a pair of pants at LL Bean, and wear it for the next 20 years. I wonder if that will ever be in style.