AI in Consumer Packaged Goods —Report 2024

In an economic environment characterized by flatlining baseline growth and an aggressive competitive landscape, consumer goods retailers in Europe are exploring all avenues as they seek to develop their businesses — and must increasingly look to new technology to stay ahead. Unsurprisingly, their attention is turning to artificial intelligence.

The rise of AI, as well as cloud computing and IoT, has created a competitive divide between early adopters and laggards. This shift will continue to impact the industry, forcing companies to reevaluate their short-term visions. And those who do not future-proof their commerce set-up for the AI revolution will be left behind. In this exciting context, we have collated extensive market research available on consumer attitudes towards artificial intelligence in the British and German CPG markets.

Besides a generally positive attitude to AI, which consumers expect to improve both products and their own customer journey, our survey also reveals the growing importance of sustainability in consumers’ purchasing decisions — including a willingness to increase their budgets to finance improvements in this area. It also confirms that, in a highly competitive environment, quality customer service is crucial to continued success. Changing consumer preferences and expectations, driven by these factors, require companies to innovate and adapt their product offerings and marketing strategies, as companies that fail to meet evolving customer expectations risk losing market share to more agile competitors. For this reason, CPG retailers require an acute awareness of these important shifts in consumer preferences to best serve today’s customer experience.

To help them do this, this report provides an overview of consumer attitudes, highlighting the key findings from within the data and offering relevant analysis. After a brief summary of respondents’ habits, we will look in depth at responses to AI, sustainability, and customer service in CPG, providing insights into differences between the UK and German markets — and drawing conclusions on how retailers might respond to our findings. As the world changes faster than ever before, with the rapid adoption of AI at the helm, being prepared requires a new approach. This report is designed to help enterprises respond to market trends and customer requirements as quickly as is necessary to capture share in the CPG sector.

With annual sales volumes of £510 billion and €650 billion, respectively, in 2023, the retail markets in Britain and Germany are Europe’s largest—and among the most important worldwide. In two representative nationwide surveys, based on age and gender quotations, Appinio asked 2,000 end consumers split evenly between Germany and the UK a range of detailed questions about their consumer habits and their opinions and preferences regarding AI, sustainability, and customer service in retail. The result is the largest and most detailed set of data currently available about these issues in CPG in Britain and Germany. This dataset was collated by Appinio in cooperation with Spryker.

Survey participants were between 16 and 65 years of age (average age: 40.3); 1000 lived in Germany, and 1000 lived in the UK at the time of their responses. In total, 994 men and 1006 women took part in the two surveys. Respondents in both countries answered 22 questions about their habits, opinions, and preferences in late May 2024.

At the beginning of the survey, participants were asked how often they bought which categories of CPG. The highest-frequency segment was food and beverages, with almost a third of survey participants buying them daily and nearly two-thirds on a weekly basis; only one in ten consumers bought products from this segment less frequently. Following this, the personal care, household, and health & wellness segments were the next most frequent, with 30%-40% of consumers shopping for these items on a daily or weekly basis and 40%-50% buying them monthly; beauty and personal care, the fifth most-frequently bought segment, was a daily or weekly basket item for around a quarter of respondents and a monthly one for many more.

After this, the survey questions suggested a range of segments in which the average frequency is, by nature, far lower. At least a third of respondents rarely or never buy pet-care products, for instance, and half say the same of home décor and furnishings and office and school supplies; a full 44% of respondents never buy baby and childcare products — as is to be expected in aging markets in which ever fewer households have children.

AI technologies are transforming e-commerce, making shopping experiences more personalized and interactive. While integrating AI comes with its own set of challenges—such as initial costs, the need for high-quality data, and adapting organizational culture—it also opens up exciting opportunities. From Coca-Cola using AI to predict consumer preferences and develop more effective marketing strategies to L’Oréal’s AI-driven skin-type analysis and recommendation engine, FMCG giants are at the forefront of this technological revolution; and, increasingly, retailers are following them.

This is good because our report reveals that consumers are overwhelmingly positive about AI in retail. Three-quarters of respondents expect that AI will lead to improvements in product quality, for instance, and one-quarter is aware of having bought an AI-enhanced product. What is more, an almost unanimous 96% of those who have already purchased a product with an AI element were satisfied with it, with 40% reporting very high levels of satisfaction.

AI is also impacting consumer habits. Our survey shows that a clear majority expect AI to help them make better buying decisions, with two in five respondents already using generative AI tools like ChatGPT to research products.

Overall, our study shows that consumers showed high awareness of AI, openness to using it, and a clear expectation that it will bring them value. This is good news for enterprises that are already thinking about how AI can improve their CPG products and retail operations to give them a competitive edge in challenging market conditions — and a reminder to all in the sector that the ability to respond rapidly to technological trends must be a key element of all strategic considerations.

It’s important to note that these consumer attitudes also align with market trends. Market experts expect AI to profoundly impact digital commerce by enhancing consumer interactions. One study from McKinsey & Company found that AI-driven marketing campaigns can significantly improve business performance, demonstrating a potential revenue increase of up to 30%.

Amazon Web Services (AWS), known for leading the charge in AI enablement across industries, has also verified AI’s impact on the transformation of CPG. At a recent AWS Summit, they showcased how retail providers use AI for product personalization for production, research, and development, highlighting that the future of the industry will include extensive customization.

Let’s examine the data more closely to see what this means for the future of CPG.

In view of its increasing importance to consumers and businesses, another focus of our survey was sustainability. Our data shows that environmental concerns are growing in importance for consumers, exerting ever more influence on their purchasing decisions and shaping their buying behavior. Our respondents also displayed a high level of understanding about how technology such as AI can reduce environmental impacts. Importantly, our survey respondents revealed themselves to be realistic, aware that increased sustainability may lead to higher prices and not unwilling per se to pay them. This puts the onus on CPG providers and retailers to test, launch, and scale new sustainable digital business models that meet these customer needs.

Overall, a majority takes sustainability into account when buying CPG, is aware that AI is already being used to reduce products’ environmental impact, and is willing to pay a premium to support this. Taken together, these findings show that consumers increasingly consider sustainability a quality issue — and that companies using AI technology to make their production and distribution more efficient will be able to use their achievements as a differentiating factor.

Let’s examine the data more closely to see how this impacts the customer experience.

One of the most widespread uses for AI is in supporting manufacturer and retail customer service, and for consumers, quick and effective customer service is one of the key factors in how they view CPG brands. Many suppliers have recognized both the importance of good service and the potential for technology in this area, so for several years now, intelligent chatbots and predictive call-management systems have been seeing high levels of adoption. Our responses show that consumers are aware of this shift and view it in a generally open-minded light, but that a not insubstantial minority is still not getting sufficient satisfaction from automated customer service solutions.

Overall, the data shows that effective customer service is extremely important to consumers, making operational efficiency an absolute priority for companies looking to secure customer satisfaction and lasting loyalty. Consumers expect AI to play a role here, too, but a significant proportion of them are not yet satisfied with solutions deployed on the market.

Despite these differences, what our findings show is that, across both markets, consumers are far from wholly satisfied with the automated service they are receiving. Even in the UK, where respondents seemed generally more prone to praise (and pay premiums), almost one in three survey participants reported having had a somewhat, slightly, or very negative experience with an AI solution. Especially in a market where customer service is so important, this should be the cause for companies in the CPG category to prioritize improvements to their automated tools, optimizing buying journeys and aftersales processes to create a seamless, high-quality brand experience.

And whether in Germany or Britain, high quality in automated customer service will be of all the more importance given consumers’ potential unwillingness to accept price rises for AI-enhancements outside the area of sustainability (see previous section). It is a safe assumption that consumers in both markets will increasingly come to expect the highest service standards and latest automated solutions as part and parcel of CPG products—and not legitimate grounds to be asked to pay a premium.

One overall finding of our survey is that, beyond simple effectiveness, a key element in applying AI-enhanced solutions will be an uncompromising attitude to data privacy backed up by clear communication because, as our final question revealed, consumers remain skeptical about this aspect of AI technology. Across both survey samples, participants were generally confident that AI will have a positive impact on sustainability, but were also concerned about how their data is being used—and decidedly uncertain about whether they trust AI technology in this area.

Interestingly enough, German consumers were, in spite of their higher overall sensitivities to privacy, slightly less concerned about how AI is using their data than their UK counterparts; potentially, this is due to overall lower exposure to the technology thus far, but is certainly a reminder to all companies deploying new technology to think carefully about how they respond to these concerns. Without privacy, transparency, and responsibility vis-à-vis data usage, AI solutions will not reach their full potential to increase customer satisfaction and brand loyalty with a broad cross-section of consumers.

As the data has shown, our report offers a compelling narrative about consumer attitudes to AI, sustainability, customer service, and the future of the customer experience. In a space often dominated by buzzwords and assumptions, we can show in detail that consumers in two key European markets actually have a well-developed understanding of new technology in CPG—and are ready to join companies in the move toward more efficient and sustainable buying processes. In return, they expect improvements in quality and service along with a responsible attitude to their data.

In the race to leverage the power of Generative AI, CG businesses are being bombarded with AI promises, but many find themselves struggling to turn hype and dreams into tangible results. Spryker helps CG brands unlock the true potential of AI, empowering customers to apply innovations like conversational commerce for hyper-personalization to their digital journey.

Thanks in part to its strong partnership with AWS, Spryker promotes a legacy of innovation in digital transformation, shaping the future of AI applications across the consumer goods industry. From unlocking new business models that enhance the competitive edge to capturing more profitable growth and scale, this partnership is helping customers fuel their long-term success.

Learn how you can redefine the customer experience by enabling mass personalization of conversational commerce here.  

Data powered by Appinio, your go-to market research provider helping companies gain deep insights into consumer preferences and behaviors, enabling brands to better understand and engage their target audience.