Diageo is best known as the manufacturer of global beverage brands such as Guinness, Smirnoff, and Johnnie Walker, but it’s also an award-winning AI firm. Earlier this year the firm picked up the Gartner Power of the Profession Award for Technology Innovation, winning for its its Spirits Intelligence Platform – or SIP – which started life as a tool in the whisky-production side of the business.
Hailed by the Gartner judges as “transformative”, SIP was actually originally the Scotch Intelligence Platform, an AI-powered data platform that reaches ‘from grain to glass’ across a myriad of operational business processes, from providing data on the contents of a cask as they age, reducing the so-called ‘Angel’s Share’, the portion of the whisky that naturally evaporates during the cask period, though to practical ‘liquid logistics’ information, such as yields and allocation.
Key components include:
Maturation optimization by using advanced scenario modeling and AI to track cask interactions over decades. A unique QR asset tag attached to every cask which stays with it for the duration of maturation, with fresh data added to it at every stage to provide insight into what is happening inside each cask before it is finally dis-gorged. Diageo has more than 10 million oak casks of spirit ageing, stored across 300 locations until ready for blending.
Automated cooperages which integrate robotics and Machine Learning to inspect, handle, and evaluate the precise charring levels of oak casks. It can also suggest which warehouse is best suited for the optimum maturing of spirit for a single malt whisky.
Network synchronization to connect real-time inventory insights with worldwide demand forecast. This allows Diageo to optimize capacity and determine long-term CapEx. It also enables the firm to allocate delivery of drinks where they will be most appreciated. You don’t want a rare and expensive malt turning up where it won’t deliver the best returns.
Dynamics
According to Ewan Andrew. Diageo’s President of Global Supply Chain & Procurement and Chief Sustainability Officer,
We’ve been able to take our allocated scotches, which tend to be some of our single malts and some of our deeper-aged, so the higher gross profit dollar parts of our portfolio, and as that’s allocated out at the start of the year, we need to make sure we’re remaining dynamic in that year to the changing market conditions, the impact of our activations in the markets and is it selling through and stopping it being at risk of sitting in a warehouse after it’s been bottled and tying up capital.
He cites the example of pre-bottling as a case-in-point:
The allocation is done dynamically with decision engines and Artificial Intelligence within the platform. It looks at what’s happening in rate of sale in every market in the world, looks at pricing and it automatically recommends decisions through to then change the allocations. It’s an online trading marketplace between the markets where they can move inventory away because they can’t sell it and someone else can take it. That’s given us $100 million of additional sales [this year] and will continue to scale and give benefit.
And SIP will continue to mature like a good malt, he adds:
It is built with the relevant digital twin information, and it will get better and better and better. We’re now confident to see that as we take decisions on how we put liquid into barrel and into our warehousing network in Scotland, it now understands the ‘Angel Share’ and the losses and how that changes in different parts of a warehouse individually from tall to bottom or in different locations and geographies. So it directs our highest value, highest return inventories to the right locations to minimize the losses. That is happening automatically with decisions and Artificial Intelligence and learning.
Craft still blended in
But the industry’s whisky distillers and blenders are still present, for now at least, he notes:
There’s still humans in the loop. We will get more and more confident for them to start to move out of it, but it’s a lot of capital. So we need to make sure we make really great decisions.
For his part, Diageo CEO Dave Lewis is keen to play up the more traditional whisky-making mythology:
We want a purpose that articulates why this business exists and something that allows everybody that works here can see how it is they make a contribution to that. Here is the new purpose for Diageo, crafting iconic drinks, chosen for life’s moments. In a good purpose, every word needs to mean something.
The element of craft, if you’re new to this industry, one of the things you appreciate massively just about everywhere is how much care and craft and skill there is. If I go with you and to Scotland and walk all of the capabilities in that it’s quite mind-blowing where the craft exists inside Diageo. If you look at the history of how some of our brands were created, craft is very strong in our business.
Diageo partnered with consultancy EY to develop SIP as part of its wider 2030 strategic vision, in part supporting its goal of becoming carbon neutral by that date by reducing the manufacturer’s water and carbon footprint. Diageo’s precise annual ICT spend is unknown, but consensus estimates have put it it in the range of $619.4 million.
The firm is also partnering with SAP and IBM to move its tech suite across to single SAP HANA cloud platform. That was a deal that raised a few eyebrows when announced as previously the drinks firm and SAP had taken to the courts over disputed license payments when the former expanded its user base for the MySAP sales offering. The courts backed SAP, ordering Diageo to pay $68 million.