1. Establishing a successful D2C strategy & winning the digital shelf
The Covid-19 pandemic pushed e-commerce penetration higher overall, but some categories are growing much faster than others for CPG. End consumers want low prices, especially with the cost of living increasing and inflation worries, lowering the overall demand for non-essential goods. This means that pricing elasticity and ‘winning the digital shelf’ are more important than ever. What does that mean exactly?
Winning the digital shelf is all about ensuring that your products are visible in the online retail space. With so much competition, brands must ensure that their products effectively engage and capture consumers’ interest. This involves everything from high-quality imagery, to accurate product descriptions, and positive customer reviews, among other aspects. For CPG manufacturers, this is two-fold.
They must ‘win the shelf’ with their retailers and distributors, but also with the end-consumer, especially as more and more manufacturers look to establish a viable direct-to-consumer (D2C) channel. Manufacturers must evaluate the profitability and scalability of selling directly to consumers and determine if it complements their existing routes-to-market or if they should pursue a D2C-exclusive strategy.
However, despite its importance, many CPG manufacturers are still struggling with establishing or leveraging an existing D2C channel, and because of that, they have little or poor direct engagement with the end consumers. One reason for this is the lack of capabilities and infrastructure to cater to smaller customers.
Traditional CPG manufacturers are accustomed to dealing with larger retailers and distributors, and their systems may not be well-suited for direct engagement with individual consumers or small businesses. This requires a shift in operational processes and the adoption of new technologies to handle the unique demands of D2C sales.
3. Complex organizations
What is often one of the biggest challenges facing CPG manufacturers is the sheer complexity of the organizations. That means that when it comes to making changes or implementing new strategies, an agile company culture is vital – and quite often not the case. Coordinating and efficiently launching digital transformation projects in an organization with complex hierarchies is simply challenging.
Many manufacturers are facing the need to shift from a reactive to a proactive mindset. Events like the covid-19 pandemic proved that successful organizations are those who can adapt quickly – and not only to long-term planned projects of improvement, but to the small and frequent market changes and challenges.
Therefore, the solution to this challenge is implementing a ‘build-test-learn’ approach and embracing an agile, data-driven culture. CPG manufacturers must not become complacent but continue to innovate, ensuring they have new and improved shelves to avoid being pushed out of the market.
Checking customer interest in new products becomes a crucial speed factor. Leveraging the workforce as trusted early adopters to build up e-commerce capabilities and enabling customer advocates to be true influencers can also drive success. Additionally, it is important to assess the current technology stack's ability to experiment with emerging technologies. This will help determine how to scale technology and human resources to serve multiple brands and geographies.
The opportunity lies in embracing innovation to have new and improved shelves, adopting the test-and-learn approach, and leveraging emerging technologies to stay ahead in the competitive CPG landscape.
Industry Examples
Unilever
Unilever is a multinational consumer goods company known for its diverse range of well-known brands. With a focus on sustainable living, Unilever strives to make a positive impact by delivering products that enhance people's lives worldwide while minimizing their environmental footprint. As part of this, Unilever has already been leveraging AI technology through its comprehensive omnichannel strategy for several years.
Using artificial intelligence, Unilever enhances raw material sourcing and employs robots on a single manufacturing line for diverse product handling. They also optimize processes with a digital twin system, integrating AI into marketing via trials with facial recognition technology and employing computer vision for emotion analysis. The most famous example is their TasteFace campaign with the brand Marmite, where they used facial recognition to analyze consumer’s reactions to tasting the controversial ‘love it or hate it’ product.
Unilever's latest AI initiatives include collaborating with Arm, PragmatIC, and the University of Manchester to develop AI-based sensor chips. These prototypes aim to detect food freshness by measuring gas associated with stale odors in fruits, vegetables, and packaged food, emphasizing quality and freshness assurance.
Coca-Cola
Coca-Cola is a renowned global beverage company known for its iconic and diverse portfolio of refreshing drinks. With a rich heritage and commitment to sustainability, Coca-Cola aims to provide consumers with enjoyable moments while making positive contributions to communities and the environment. Coca-Cola is also a market leader for AI adoption in the CPG space.
Using artificial intelligence largely for product innovation and market research, Coca-Cola employs several AI tactics using vending machines where consumers can mix their own flavors (which lead to the new Cherry Sprite flavor), as well as ‘intelligent’ vending machines in Japan, and gamification of vending machines where consumers can collect points. They’ve also introduced pre-ordering at vending machines in some markets.
On top of this, Coca-Cola leverages computer vision to track pictures of their drinks on social media, and then create targeted ads based on this data. With more than 500 brands in 200 countries, Coca-Cola has access to a giant store of consumer data, which plays a key role in its AI strategy.
Industry Examples
Nestlé
Nestlé, a multinational food and beverage company, is actively prioritizing sustainability by focusing on waste reduction and tackling plastic pollution. With a commitment to achieving a waste-free future, Nestle has implemented various actions to address the plastic waste challenge. They are working toward making 100% of their packaging recyclable or reusable by 2025 and are actively exploring innovative packaging solutions to reduce their environmental footprint.
Nestle is promoting a circular economy by collaborating with stakeholders to improve waste management and recycling infrastructure. They support recycling initiatives and invest in research and development to enhance the recyclability of their packaging materials. Additionally, Nestle is actively engaging consumers by providing clear instructions on how to properly dispose of their packaging, encouraging recycling habits among their customers.
The company is also reducing the use of single-use plastics across its operations with lightweight packaging designs, exploring alternative materials, and promoting refillable and reusable options. They participate in clean-up initiatives to remove plastic waste from the environment and have launched pilot projects to test new waste collection and recycling approaches.
Procter & Gamble
Procter & Gamble (P&G), a multinational consumer goods company, strongly emphasizes sustainability with dedicated efforts toward environmental responsibility. They have set ambitious goals to reduce their environmental footprint and have implemented various initiatives to achieve them by conserving resources, minimizing waste, and promoting sustainable practices throughout their operations.
One key area of P&G's sustainability efforts is its commitment to responsible sourcing and sustainable packaging. They strive to source materials responsibly, ensuring they come from sustainable and traceable sources. P&G also aims to make all of its packaging recyclable or reusable by 2030, promoting the circular economy and minimizing waste sent to landfills. The company uses eco-design, exploring innovative packaging solutions that reduce material usage while maintaining product quality.
P&G is working to reduce greenhouse gas emissions and conserve energy across its manufacturing and distribution processes. They have set targets to achieve a 30% absolute reduction in Scope 1 and 2 greenhouse gas emissions by 2030. P&G invests in renewable energy projects, collaborates with suppliers to improve energy efficiency, and employs advanced technologies to optimize their operations and minimize energy consumption.
The business is also dedicated to water conservation and has implemented various water-saving initiatives. They have set targets to reduce water usage in manufacturing facilities and have made significant progress in water stewardship. P&G also supports community water programs to promote clean water and sanitation access in regions facing water scarcity.
Industry Example
Veri
Veri is a metabolic app that helps consumers to monitor their glucose and to understand how eating certain foods impacts their glucose response. The app makes personalized suggestions for each user based on their unique data. The Finland-based company sees itself as a food intelligence company, as its sensor and the accompanying app can help people understand their optimal diet to improve the state of their metabolic health.
The food data is captured in-app through visuals and text. You enter what you ate, and then it correlates the effect on your glucose levels and provides a score of 1 to 10. It can also integrate sleep and exercise data for a more holistic view of health.
Industry Examples
Lenovo
Lenovo is a leading technology company offering a wide range of devices, solutions, and services to meet the diverse needs of individuals and businesses worldwide. Lenovo runs a loyalty program for it’s business partner sellers called LEAP (Lenovo Expert Achievers Program), designed to provide exclusive benefits and rewards to its members, creating a personalized and enhanced experience for its B2B customers.
LEAP offers ‘learn and earn' opportunities and includes other incentives where sellers of Lenovo products can collect points through additional training or selling. These points can then be turned into cash or gift cards as an extra incentive. The idea is to ensure that all Lenovo sellers have the information and education they need for successful sales of the products, resulting in a win-win for Lenovo and its business partner sellers.
Nespresso
Nespresso's B2B offering provides comprehensive business coffee solutions tailored specifically for the needs of commercial establishments. A range of high-quality coffee machines and an extensive selection of premium coffee capsules have been designed to meet the demands of various industries, including offices, hotels, restaurants, and cafes, suitable for both customers and employees.
Nespresso provides a wide range of coffee capsules, featuring an assortment of flavors and intensities to cater to different tastes. Businesses can sign up for a subscription program with auto-delivery of capsules with fast and free delivery, and the option to pause or cancel the subscription anytime. Through this, Nespresso has the opportunity to personalize up-selling offers and increase the overall lifetime value of its customers.
1. Put customer experiences at the forefront
Whereas historically, CPGs have grown purely by building their channel and forming relationships with distributors and retailers, they are now more focused on delivering superior brand experiences across the entire value chain. According to Deloitte, this illustrates digitization's shifts in the industry and how embracing changing consumer demands is a top priority for most CPGs – 93%.
This customer experience led-shift encompasses changes and opportunities ranging from investing in AI-enabled personalization and predictive analytics to investments in direct-to-consumer (D2C) channels and new product and service creation.
AI-powered chatbots and virtual assistants have been around for a while, helping to provide quick and accurate responses to customers, or even sending reminders or updates about orders. The speed of response is a vital component of customer experience, as Forrester reported – consumers are 2.4 times more likely to stick with a brand when their problems are solved quickly.
The next generation of AI in CPG analyzes customer data to predict behavior and preferences, offering personalized product recommendations, targeted marketing campaigns, and customized pricing and promotions. All of this contributes to a hyper-personalized experience for the customer, resulting in a better user experience and contributing towards brand loyalty.
3. Data-driven supply chains
One of the most significant opportunities for CPGs is leveraging data in their supply chains. This all starts with transparency and sharing information – Deloitte reported that 90% of CPG companies are investing in increasing the level of transparency provided to consumers and other stakeholders, compared to 46% of all other companies. This is driven, in large part, by growing demand from consumers to have more information about the products they buy, including product origin and how items are produced. Providing this level of transparency helps CPGs build trust with customers and differentiate themselves from competitors.
Another way to increase transparency is for CPGs to collect more detailed data from their supply chains. This includes everything from tracking products from raw materials to finished goods, to collecting data on product safety, quality, and sustainability. Not only does this help businesses identify opportunities for supply chain optimization, but it can also help CPGs meet regulatory requirements and comply with industry standards.
Data sharing shouldn't stop with consumers and regulators, however. By sharing information with partners on operations and logistics, such as inventory levels, demand forecasts, and shipping schedules, CPGs can optimize product delivery and ultimately lower costs. In addition, data sharing with partners in this way can help to reduce overall waste and improve sustainability by optimizing shipping routes.
Ultimately, driving data-led supply chains ensures that CPGs demonstrate a commitment to sustainability and social responsibility, which is increasingly essential for today's consumer. For Gen Z, brand name was rated as 49% important, while sustainability was 75% when purchasing, illustrating how Environmental, Social, and Governance (ESG) policies must factor into CPGs' future planning.
1. eB2B
eB2B refers to the digitization of business-to-business transactions, where manufacturers and suppliers use electronic channels to exchange goods and services. eB2B is projected to reach $90-100 billion GMV by 2030, so it's a vast area of opportunity for CPGs.
This trend is driven by the fact that B2B buyers are looking for the same transparent, convenient, and speedy experience as in B2C transactions. 87% of CPG B2B buyers believe that B2B commerce solutions that mimic the B2C experience are the answer to meeting their needs, according to Accenture.
Currently, many CPG companies rely on EDI (Electronic Data Interchange) to order and purchase for their major customers, such as Walmart and Carrefour. Despite being an outdated and inflexible technology, it remains in use due to the intricate processes involved in ensuring its proper functionality with these prominent clients. A more streamlined and modern system, such as Spryker, would offer a superior alternative to the complex eB2B interfaces typically found in B2B webstores.
Waiting for a salesperson, calling a hotline, or sending a fax is not only far from ideal by today's standards but also wastes company resources. To meet these expectations, businesses can leverage digital commerce technology with functionalities such as quote requests, personalized catalogs and pricing, agent assistance, dynamic order process engine, unlimited order sizes, and more.
An eB2B solution addresses several challenges faced by CPGs, such as unscalable sales operations, manual errors, a subpar customer buying process, and a need for more convenience. By digitizing the sales organization, businesses can use their resources best while providing a seamless customer experience.
With the ability to gather data insights, businesses can better understand customer behavior and preferences, enabling them to optimize their sales strategies. Moreover, providing a better buying experience can increase customer satisfaction, leading to higher customer loyalty and revenue.
3. Multi-brand platform
Selling multiple brands across different markets can be daunting as each market has its unique set of challenges, and each brand has its distinct identity and target customer. To succeed in a multi-brand or multinational scenario, CPGs can launch a common platform that allows for core competencies across the entire group, while being flexible enough to accommodate local or brand-specific customizations.
The platform should enable regional differences and provide the ability to differentiate between brands. GTM capability to localize is crucial in such scenarios, so CPGs should aim to have a modular architecture that is highly flexible, allowing the different brands to coexist while maintaining their identities.
Launching a single platform for all brands allows for a fast time-to-market while providing the necessary flexibility to accommodate regional differences. The extended aisle of products can be managed by sister brands under the same platform, without taking on added inventory risk. Onboarding brands is easy and fast, and new products can be tested on a small segment within the single platform.
This solution also creates a complimentary revenue stream from existing resources, allowing brands to better align and communicate customer insights. Because of this, it also improves customer convenience and experience by offering a more comprehensive range of products – increasing customer trust in the parent company, and leading to a higher overall customer lifetime value.
