Nexo spoke with Karen Shevchenko, Business Development Director at Carlsberg Croatia, about his experiences investing in connected coolers.
Please tell us about your role at Carlsberg Croatia, and what you are trying to achieve.
My title is Business Development Director. I have key accounts reporting to me, but I mostly focus on business development- which means that my responsibility is to work on commercial efficiency projects. Anything that has the potential to help us to sell more, to generate more profit, or generate more value.
To name just a few projects: we have, for years, run value management; we looked at execution excellence, how we can improve our operations, and use the time in our sales trips more effectively, all with an aim to generate more value.
What are the challenges you face in achieving your objectives? What part do connected coolers play?
For a country like Croatia, coolers play a very important role, because first and foremost it’s a highly seasonal market. The index of the season versus the off-season can be one to five, or one to ten- meaning that, during the season, you sell ten times more than off-season. Of course, coolers play an important role in this regard because being able to provide a cold product during the hot summers here gives you a competitive edge. That is why all beer and beverage producers in Croatia invest a lot in their coolers.
Also, because Croatia is a highly tourist-driven market, with a population of four million, increased by 16-17 million tourists every year, you can imagine how much that affects the sales of any beverage. Our main objective is to understand how we can get maximum value out of the cooler, so it comes down to which outlets to place it in, and in what location in the outlet.
The biggest challenge we had in the past, working with standard coolers, is that we had very little idea how efficient the coolers actually are. We tried to guesstimate, using some assumptions, some empiric knowledge- but it was never a truly data-driven decision process. And this is where a connected cooler gives us an advantage.
The connected cooler allows us to see how the environment around the cooler changes, depending on where it is placed, and what we do with it. This is recorded using two simple metrics, foot traffic and door openings- which are good proxies to tell you whether the cooler is efficient or not, or whether the efficiency is going up or down depending on what you do with the cooler. This creates a wide field for decision taking, for now you can predict results depending on how you use your equipment.
Which stakeholders are involved in your project, and did you need to put any new capabilities in place?
I don’t think the stakeholders changed, pre- and post-Nexo; all of them are interested in the same point: using data to prove different hypotheses, or concepts, or ideas, circulating within three major functions.
Sales, interested in selling more using the coolers, and want to see the data to be able to manage the customers. Finance, interested in return on investments and want to get our assets working as efficiently as possible.
Marketing are interested the most in which brands or SKUs we put into the coolers. They fight for the planograms, to include certain SKUs; for Marketing, having a broader presence is important, whereas for Sales, a major task is to narrow it down and have fewer SKUs, and through that, increase efficiency.
To maintain a constructive discussion between all three functions, you need to operate credible data, to try to maximize your output on all three dimensions: volume (for Sales), value (for Finance), and assortment (for Marketing). With connected coolers, we receive an opportunity to have better understanding of how to manipulate these three dimensions efficiently. Therefore…
Rather than new capabilities, what changed was access to the credible data. We are still trying to answer the same questions; the only significant change that happens is that, where before you had to speculate – unless you had a specific market study – now you have access to specific data, through which you can take decisions.
A lot of companies ask us where they should integrate the data that comes from connected coolers into their business. What is your advice?
I think that Nexo, or data per se, is not a panacea- having more data is not going to solve your problems. It still comes down to capabilities, and the people that work with this data: develop entrepreneurial culture, train your people and they will take care of data, they will find the best way to use what they have at their hands to improve results. If you only invest into better data, it would be a waste of money to get a very powerful tool that you don’t know how to use.
How will you ultimately measure the success of the connected cooler program?
For us, Nexo data is a means to get to the final destination. Efficiency of the equipment is measured through sales per unit, and we use Nexo and other tools to achieve our sales targets.
The trick is, if you focus purely on Nexo, it becomes very difficult to measure its effect, because there are a lot of other factors in the market, affecting your final efficiency: competitors’ activities, weather, out-of-stocks situations, and others. You consider all of these to understand if you’re able to achieve your final target. Therefore, rather than focusing on small parts, we focus on the holistic view: are we getting there using all the tools we have, Nexo included?
I will give an analogy to demonstrate the concept. Take an artist: he needs to learn to mix pigments, prepare the canvas, to put the layers of paint on the canvas, wash his brushes – this is the learning process, this is how you build your people’s capabilities. You need time and experience. But when it comes to creating the masterpiece, you do not control how well the artist mixed the pigments – you look at the final result. But if you trained him well, he will be able to use his instruments to create the best possible results. The same with managing value – sometimes it is an art to create value using the resources you’ve got. And Nexo in this case, as an additional tool, can give you a bit more to work with.
Are there things you know now about deploying this kind of solution which you didn’t know when you started?
Certainly the things you need to take care of before you launch such solutions include: a) a clear understanding of how you will use the solution – having a pilot is highly recommended; b) a plan with clear roles and responsibilities; and c) strict discipline and training – we lost some time at the beginning to train the sales organization how to work with Nexo coolers, scanning them, processing data, and so on.
What would you say to people who are skeptical about investing in connected coolers? We hear people say that the business case isn’t yet justified, it’s not proven- and they’re absolutely right. What would you say?
I’d advise them to try the same approach as we did. Two years ago, when considering an investment in Nexo, we did a pilot in Zagreb, where Nexo provided twenty units that were retrofitted into existing coolers. We were able to see how the technology works.
It was a very controlled pilot. We looked into the data, and experimented for several months; and found that there was enough proof for us that we could scale it up to the entire cooler fleet that we have. We saw that we are able to take decisions that would allow us to increase our efficiency faster than before, and have more transparency on each individual cooler in the market.
Again I think that we, as producers, shouldn’t focus very much on proving whether Nexo is generating uplift or not, because sometimes that’s very difficult to prove: there are a lot of factors you need to take into consideration. Assess the result in its entirety: did you make your equipment work better, or not? Sometimes you need to take the decision based on intuition. In the case of Nexo, our intuition was pretty strong- and it wasn’t very tough to sell this case to the rest of the management of the organization. Everyone was able to immediately grasp that if we can use the data correctly, then we can generate benefits.
I have a strong belief in Nexo. There are so many opportunities- as soon as we are able to find the way to use it.