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IBM's Blockchain Service Adopted by Albertsons Companies

Zacks Equity Research

International Business Machines Corporation’s IBM blockchain-driven solutions continue to win adoption from retailers. Recently, IBM Food Trust Network was selected by Albertsons Companies — a U.S.-based food and drug retailer.

IBM's Food Trust service offers enhanced food traceability to assess credibility of sourcing and consumption safety. It utilizes open source technology based on Hyperledger Fabric, which enable retailers to track food supply chain in its entirety.

Additionally, the company’s Food Trust offering, which can be availed as a subscription service, provides users the luxury of setting their own data rules that ensures a secure platform.

We believe that incremental adoption of IBM’s blockchain service, on the back of robust data privacy and traceability features, is expected to favor top line growth.

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Key Takeaways

With an aim to roll out the solution to track the credibility of romaine lettuce sourcing, Albertsons Companies will eventually deploy the solution to the Own Brands portfolio and other food categories.

In 2018, outbreak of E. coli in the United States reportedly affected a significant number of people. This was linked to contaminated romaine lettuce, which is noteworthy in this regard.

Evolving customer demands involves knowing the end-to-end details of the journey of the authentic food item from the source to dining table. Blockchain technology provides efficient methodology to trace products, recognize plausible sources of contamination to avoid and address such instances in real time.

Notably, Walmart WMT has asked its “leafy greens suppliers” to conform to IBM’s Food Trust network’s blockchain-based tracking system by September 2019.

In fact, almost 80 brands including The Kroger Co. KR, Nestle, Unilever and others have deployed IBM Food Trust blockchain services. Per IBM, “more than five million food products digitized on the solution are on retail shelves.”

The expanding clientele strengthens IBM’s Food Trust network with higher volume of cross sectional data which can be utilized to obtain more meaningful insights. This, in turn, makes the system more transparent and efficient as well as ensures a safer food supply ecosystem.

What Investors Should Know?

Per IDC data, spending on blockchain solutions is expected to surge 88.7% year over year to $2.9 billion in 2019. Also, spending is expected to witness a CAGR of 76% between 2018 and 2022 time frame and hit $12.4 billion.

Moreover, blockchain technology market is projected to reach $23.3 billion by 2023 from estimated $1.2 billion in 2018 at a CAGR of 80.2%, per data from MarketsandMarkets.

We believe that IBM’s initiatives to aid clientele deliver services in real time through the blockchain-technology will enhance long-term growth prospects.

However, significant growth opportunity is attracting tech giants into the blockchain market. Intense competition from Microsoft MSFT, Accenture, SAP, Facebook and others, in the blockchain services space is a headwind.

Moreover, ballooning debt levels amid restructuring business activities are major concerns.

Currently, IBM carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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