The CPG landscape is changing fast—and those changes are making for some rough terrain at many large CPG companies. Macroeconomic influences like generational shifts, omni-channel media, retail fragmentation, urbanization, rise of niche brands and interest in health and wellness all contribute to this rapidly evolving environment. Multinational players accustomed to commanding billion-dollar revenues and sizeable share now see niche competitors and private labels, both in stores and online, inhibiting their growth. Meanwhile, consumers are looking for purchase decision information from Google search and social media like Twitter and Facebook, as well as influencer networks like Pinterest, thus reducing the influence of traditional media and brand advertising.
The evolution of all these new data sources and the exponential enhancement of computing power has led to new capabilities that can not only handle big data, but also perform trillions of computations with it—at scale and speeds not possible with humans alone. Artificial intelligence (AI) has been applied in almost all major disciplines across industries. Now AI is driving revenue growth in the consumer packaged goods industry through innovation, improved forecasting and better in- store execution.
How will CPG companies win when the major routes to market tilt toward digital? The good news is that as the physical shelf shrinks, lower trade spend will decrease costs. But gone is the once clear path for driving foot traffic and obtaining preferential shelf position. The loss leader model will no longer work. Trade promotion will evolve from the banner level to the individual level. Personalization will be key.
Perhaps even more challenging for CPG companies, brand loyalty will take a back seat to price and convenience in the digital market. Way, way back. “If you were among those kids who had Kellogg’s Corn Flakes on the breakfast table, drank a Coke from time to time, enjoyed your favorite KitKat and . . . have always used Tide, don’t expect the next generation to follow you,” cautions branding guru Martin Lindstrom. “Your familiar global brands will begin dying in 2017.
For CPG companies, transparency will become a lifeline to relevancy and profits. At the digital shelf, consumers will view everything about a product, from its price, to the processes used to manufacture it, to its provenance. Consumers will shop based on need, not brand.
The challenge will be to meet customers wherever they are. With only a sliver of personal-care products being sold online today, there’s plenty of opportunity for brands to make their mark. But they’ll have to move fast: Just three e-tailers – Amazon, Walmart and Target – comprise 82% of those sales.
How will businesses get on consumers’ shopping lists at home? How should strategies change when stores are places for experience rather than product distribution? The answer is to rethink brand value, the relationship between digital and physical shelves, and the supply chain.
Here are five technologies that could give you an edge in brand and CPG manufacturing.
Offer transparency with block chain
Today’s customers don’t just want affordability and variety—they’re also interested in where products come from. There’s a rising demand for environmentally sustainable and ethically produced goods. Block chain or distributed ledger technology can provide transparency across an entire manufacturing supply chain, allowing your consumers to see the country of origin for each material or component. It can also help you detect and report counterfeit goods or materials—which is important for your revenue, brand reputation and maintaining product safety.
Gain visibility with IoT
You’re under increasing pressure to cut costs while getting products to market faster. And one of the best ways of achieving this is by utilizing IoT sensors, which can give you granular visibility of shipping—not just of cargo routes and expected arrival times, but even tracking individual items or materials and where they’re packed in a hold. This information can help you reroute deliveries if there’s a problem, or source replacement materials from a different supplier.
Promote safety with augmented reality
Augmented reality (AR) technology is set to have a big impact on manufacturing. It can be used to provide realistic and engaging safety training on your shop floor. Not only is AR training effective, it’s more fun than learning from a manual and can help you attract millennials and digital natives to the workforce. AR can also improve safety during the production process, by allowing employees to access important real-time data about machinery and equipment as they work. It can alert them if they’re standing too close to moving parts or interacting with a machine incorrectly.
Drive growth with artificial intelligence
More and more manufacturers are cutting out third-party retailers and selling direct to consumers. But to make a success of this model, you need to take full ownership of the customer journey.
As you gather vast amounts of data based on online behavior and purchasing patterns, artificial intelligence (AI) can help you make sense of it all. By identifying patterns in data, AI can help you determine which channels your customers prefer, how they like to purchase and which pricing models work best. These insights can even help you forecast future demands, identify new niche markets and drive product innovation.
Speed up innovation with digital twins
You need to get products to market faster than ever. But you also need to manage the cost of production and innovation. As a virtual replica of a physical system, digital twins let you test new manufacturing environments, machinery and processes. This helps you reduce the risk of failure and adopt a more experimental approach, regularly trialing designs and improving internal efficiencies.
Be ready for change
Of course, whichever new technologies you adopt, there will be other crucial considerations. How will your technologies interact with each other, and will they integrate with your existing systems? In the case of a merger or acquisition, will you combine your systems or keep them separate? And do you have the right underlying infrastructure and network and cyber risk management strategies to keep everything running smoothly?