CPG Lookahead: What’s Driving CPG’s AI Adoption

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2022 has quickly turned into a year to forget for many CPG brands as the world continues to reel from the impacts of COVID-19, various supply chain disruptions and emerging tensions between CPG world powers — namely the U.S. and China. But beyond these well-publicized snags and disruptions, there are also numerous emerging trends that are set to reshape the way the CPG space operates for years to come.

Moreover, this is all happening while CPG brands are in the midst of adopting artificial intelligence and other next-level technologies. But with so many moving parts, CPG brands are still trying to navigate the key considerations they need to keep in mind when deploying AI and sophisticated tech so that they can make sure that they have the proper frameworks in place to drive long-term sustainable technology success. 

With that in mind, here are a few key considerations CPG brands should keep an eye on specifically that are set to have the largest impact on the way technology is used by the industry moving forward.

Sustainability and Social Consumerism

The COVID-19 pandemic, Russia-Ukraine crisis and other global crises have completely shaken up the established CPG formula. As the global state of affairs has evolved over the last three years in particular, CPG brands are facing a huge amount of pressure both in terms of their business reputation and in consumers' minds when it comes to sustainability and “doing the right thing.” 

This pressure ranges from relying on climate-friendly sources to how much sugar is included in products. And as social consumerism continues to grow and evolve, businesses need to find ways to keep their ears to the ground to stay on top of trends and also disruptions that occur in the supply chain in real-time. This obviously presents significant challenges, and will no doubt be a significant factor in shaping the way AI is used moving forward. 

Digital Transformation and Customer Experience

The digital transformation that has swept the CPG industry over the last three years has been both a blessing and curse for brands. On one hand, the CPG digital transformation is set to unlock $490 billion in value by the end of 2023. On the other hand, CPG brands are having to work overtime to continue experimenting with new offerings to meet the expectations of customers that have become accustomed to the new digital-first world that rolled out during the pandemic. 

Moreover, the digital world has become increasingly diverse through innovations in VR, mobile and desktop, for example, so brands need to find a way to connect all of these disparate components into one cohesive network. This requires an incredible amount of agility and flexibility, meaning that businesses are likely going to expand their real-time computing capabilities as well in order to both keep up with shifting consumer preferences and to scale up and down as needed.

Ethics and Auditability

Beyond the growing sustainability and ESG expectations of consumers, CPG companies are also facing increased regulatory scrutiny around sustainability and general business ethics. With today’s globally interconnected CPG marketplace, it is virtually impossible to ensure that businesses are in compliance with the various international and local regulations without some sort of advanced technology. In addition, because of the amount of various suppliers that CPG brands rely on, it is imperative that businesses have a clear view of their third-party partners' operations to ensure that they are also acting in accordance with regulations as well. 

Therefore, CPG businesses are working overtime to build governance, auditing, and reporting tools that can help them steer clear of potential liabilities. And with the CPG operations network continuing to expand and become more diversified in the wake of the COVID-19 pandemic, ramping up technology adopting in this way needs to be a foremost priority for CPG brands.

Making Sense of the New Retail Landscape 

The metaverse, social commerce, peer-to-peer commerce: there just does not seem to be an end to the retail and CPG experience. This is obviously exciting for CPG brands in that it opens up potential new revenue streams but can also be an incredibly overwhelming prospect. Even when it comes to launching campaigns using more traditional tactics — like in-store displays or traditional e-commerce — there is a tremendous amount of legwork that goes into making sure that the campaign is successful. Moreover, CPG and retail brands routinely spend years planning out their expansions into new channels. 

Now, CPG brands are faced with the daunting prospect of spinning up new offerings with incredibly short lead times. This means that CPG are having to lean more heavily on technology than they have before, and need to reinforce their teams with the talent and tools they need to make the most of these emerging opportunities.

It is true that the CPG landscape is as frenetic as it has likely ever been. But that doesn’t mean that CPG brands cannot disentangle themselves and chart a path forward. By keeping these key areas in mind and applying AI and other technology wisely, CPG brands will not just eb able to hold their own in the next-generation of the CPG marketplace, but stake out a leadership position. 

Sagar Shah, Client Partner, and Dipita Chakraborty, Chief Practice Officer, Fractal Analytics

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