Designing a New Supply Chain for the AB InBev and Keurig Joint Venture

Part of a Series

This Insight is a part of the 2017 Next Generation Operations Summit Report.

To see the complete report, click here.

Two Pillars of Research and Development

Keurig has been able to dominate the single-serve coffee market in the US separate company.” in part because of the ease of the coffee-making experience. Keurig users simply insert a coffee pod into the machine and they have a fresh cup of – Scott King coffee in under a minute. For the AB InBev joint venture, King and his team are tasked with creating a similar experience around alcohol. The goal, he says, is to make the customer a “hero.” That’s easier said than done. Unlike coffee grounds, which are easily inserted into pod form, it’s a bit trickier to do with a mojito. As a result, the early work of the operations team has been to split research and development into two core pillars.

The first pillar will look at the hard goods involved in the process—the actual device itself and the consumable product. The second pillar will look at overall quality and service.

In order to accomplish this King and his team are looking at a variety of new technologies to support development. “In our supply chain strategy, we really need to look at infusing digital from product development to end customer distribution. We also need to look at things like Internet of Things (IoT), because IoT is changing the way companies work and consumers leverage data and information,” he explains.

“When we go to these partners we have the ability to say, we are a Keurig and Anheuser-Busch joint venture. That alone brings credibility to the table and allows us to move a lot faster with a lot cheaper cost than if we were to try to do it as a separate company."
Scott King
Vice President of Operations, Joint Venture of AB InBev and Keurig

Creating a Productive Culture

While the people that joined the JV have broad and deep experience in product development, they have also developed those skills in two distinctly different organizations. “Keurig’s culture is very innovative, very slow. They have their core, their coffee, and they focus on that. AB InBev is very fast, M&A focused—a fast moving company,” King says. In order to make these two parts work together, King had to create a third culture that drives the JV, using the best parts from both halves to make a new whole.

“We had to look at, as a leadership team, how do we enable our employees to go towards a vision of delighting the customer, making the user a hero, in all the products and services that we’re working to design,” King says. For King, once he set the vision for the JV it was important to assess which employees were going to be able to see that vision through. Some left, returning to their parent organizations; others came on, filling in gaps. The net result was a group of people more committed to the new vision than past processes.

Scaling Up

With research underway and a team in place, the next challenge for King was figuring out how to develop a supplier network and how best to start implementing new initiatives. “When we think about this joint venture, we have the opportunity to do a slow roll out, a phased roll out or a big bang type thing,” King notes.

There are several ways the JV can develop its network and each path has its own advantages and drawbacks. If King and the team opt for a slow roll out, the JV will be able to respond to shifts in the market by being nimble and reactive. However, growing slowly could pose a problem for the JV’s parent companies, which are used to working at scale. Going big at the beginning might be easier with the help of the parent companies, but who can say how well a small JV can manage at scale right away?

King and the team have opted to chart their own course, but they are reaching out to the parent companies where it makes sense. For example, the JV is already leveraging the size and reputations of the parent companies while building up the JV’s initial network of partners and suppliers. “When we go to these partners, we have the ability to say, we are a Keurig and Anheuser-Busch joint venture. That alone brings credibility to the table and allows us to move a lot faster with a lot cheaper cost than if we were to try to do it as a separate company,” King says.

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Conclusion

Starting any new venture can be rough sledding even if it is an outgrowth of two well-established companies. Institutional cultures can create unforeseen talent and change management issues that have to be dealt with early on if the new organization is to succeed. But it’s not worth abandoning every legacy—retaining the pedigree of trustworthy parent companies can save valuable time and money early on.

“In our supply chain strategy, we really need to look at infusing digital all along the way from product development to end customer distribution. We also need to look at things like IoT, because IoT is changing the way companies work and consumers leverage data and information.”
Scott King
Vice President of Operations, Joint Venture of AB InBev and Keurig

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