If you've heard anything about blockchain, it's probably been due to its position as the underlying technology for virtual currencies like bitcoin. You've also likely felt your eyes glaze over as you tried to wrap your head around how it works. Well, Anheuser-Busch InBev (NYSE:BUD) has brought blockchain technology to bear on something that's easy to understand: beer!
Technically, the megabrewer isn't using the digital and decentralized ledger of data to make beer. Rather, it's using it to get a bottle of suds into your hands more efficiently and cheaply. What Anheuser-Busch has done is prove that blockchain technology can smooth out an often-cumbersome and Byzantine shipping process, and save the brewing industry hundreds of millions of dollars in the process.
Blockchain for blockheads
Briefly, blockchain is -- in the words of my colleague, Adam Levy -- "a distributed public ledger that uses cryptography to ensure the record is practically immutable." It's seen as a revolutionary currency alternative as it can't be held hostage by cybercriminals.
Also, because there is no middleman, fees for transactions are generally smaller, and transactions can be processed faster. But blockchain is much more than just the foundation of a fanciful payments system.
Companies and industries far removed from cryptocurrencies are using blockchain technology. IBM (NYSE:IBM) has been leading the way in blockchain-for-business in supply chains, food safety, and more; Amazon.com is offering blockchain solutions for Amazon Web Services, and Apple is exploring blockchain for secure timestamp technology. And now Anheuser-Busch is applying it to shipping and logistics.
Navigating the export labyrinth
Together with a consortium of businesses including global consulting firm Accenture (NYSE:ACN), shipping line APL, transport and logistics firm Kuehne + Nagel, and an unnamed European customs organization -- all representing different players in the export and shipping process -- Anheuser-Busch collaborated on 12 real international beer shipments, each of which was going to a different location and had different regulatory hurdles to surmount.
They noted that an international shipment of goods typically requires more than 20 different documents to enable them to move from exporter to importer, which ends up denigrating the quality of the data and limiting real-time visibility into the process for everyone involved.
However, the consortium said the blockchain solution was a huge success as it eliminated the need for printing shipping documents and did away with 80% of the data-entry requirements. By speeding up and simplifying the flow of documents across the shipping process, they estimated it can save the freight and logistics industry hundreds of millions of dollars annually.
The brewer's vice president of international logistics said:
Blockchain technology will be transformational to our business and the world. It reduces mistakes, digitizes information and improves the supply chain process so we can focus on our core business of brewing the best beers for consumers.
Lowering the cost of an expensive proposition
According to the Commerce Dept., because of the U.S.'s regulations, importing goods into the country typically costs a company on average 10 hours of time for documentary and border compliance, and $275 to obtain all of the required documents and complying with all the necessary procedures. Exporting goods requires an average of 4 hours and $235.
In other countries without as much of a business-friendly regulatory structure, such costs can run substantially higher, and the time required can run to days or weeks, even.
Exports from Eastern Europe and Central Asia can take 55 hours and cost over $300 to comply. In the Middle East and North Africa, it can run as long as 142 hours and cost upwards of $700 or more. Of course, in certain economically developed, high-income countries, exports can be as cheap as $186, but still take 15 hours to comply.
International freight movement seems a logical use for blockchain technology as it creates an immutable record of international shipments. Delays could be traced back to their source with surety, and pricing could be built into future contracts and procurement processes. Shipping giant Maersk is already moving in that direction, launching a joint venture with IBM to apply blockchain technology to track each transaction involving the millions of shipping containers it ships around the world each year.
And now Anheuser-Busch InBev is in the early stages of applying it to the near-500 million hectoliters of beer it produces annually. Blockchain might not make its beer taste any better, but it can be a source of substantial savings on its expense ledger.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Anheuser-Busch InBev NV, and Apple. The Motley Fool is short shares of IBM and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Accenture and Luxoft Holding. The Motley Fool has a disclosure policy.