The consumer packaged goods (CPG) industry is changing rapidly. With new technologies shifting the way consumers shop and companies do business, there is a growing demand for CPG companies to accomplish more with less and drive business value using technology and data. Innovations in technology are driving new expectations and behaviors among today’s consumers.
To win in this market – with its retail growth, e-commerce platforms, competition, and rapidly changing demographics – CPG companies must meet consumer demands, embrace growth, and invest in innovative technologies. This sector is wide open to disruption. Five digital transformation trends will help address challenges and enable future growth.
Data analytics can drive growth in the consumer packaged goods industry by transforming data into valuable insights. By using data in the right way and asking the right questions, companies can gain a clearer view of the different ways that consumers make decisions. As Forbes (September 5, 2019) writes, “We all understand that there is tremendous value sitting within big data. We can debate whether or not it’s the new oil, but clearly, data scientists can tease out incredible behavior patterns from large amounts of data that they collect and use past behaviors to predict future expectations.”
Companies armed with consumer behavior data make better decisions on project offerings, marketing initiatives and distribution options. Spending on data and analytics is forecast to reach $274.3 billion by 2022, according to IDC figures quoted in a February 11 Harvard Business Review article.
Digital innovations are fundamentally changing the way consumers shop for and buy products. To win, a CPG company needs to redefine its channel strategies and employ digital innovations to meet and exceed consumer expectations.
The market is experiencing unprecedented changes in the way people shop and engage with categories, brands and stores. “If you are a consumer packaged goods manufacturer or retailer, the future is promising,” notes an IRi blog. “Then, there’s the revolutionary impact of digital, social and mobile media and communication platforms, which gives shoppers more options…The new shopper journey with multiple touch points provides CPG marketers with an enormous opportunity to engage and influence their key consumers along this new path-to-purchase.”
As a recent Liberty White Paper notes, to enable differentiated experiences, companies must build connected strategies on a strong foundation firmly rooted in user experience design, integrated operating models, process efficiency, digital systems and technology, and robust data sets.
Automation and Cobots
Growth in the use of robots is being seen in areas including the packaging line, primary packaging, secondary packaging and palletizing. Robots can also perform tasks such as metal stamping and testing, quality inspection, and machine tending. From 2017 to 2018 there was a 48% increase in the number of robots sold to food/CPG markets, and a 31% increase in those sold to life sciences/pharma, according to Automation World (September 25, 2019).
Cobots – or collaborative robots – are revolutionizing business. These are cheaper, lighter and more versatile than ordinary robots and physically interact with humans in a shared workspace. They can significantly increase productivity levels, working alongside people, taking on dull, repetitive tasks, reducing human error and freeing up capacity for higher-value tasks.
By 2025 cobots will likely account for almost 35% of all industrial robots and exceed a market value of $9 billion, according to Loup Ventures, a venture capital firm that focuses on frontier tech. “One of the main factors contributing to this growth will be a decrease in their price tags and an advancement of their capabilities in edge computing,”notes CNBC (June 10, 2019).
In the CPG industry, mergers and acquisitions (M&A) continue to drive growth. There were about 50 acquisitions in the food and beverages category alone in 2018, of which eight deals were valued at more than $500 million. Every CPG company wants to grow its business model; in 2018, growth in the U.S. CPG industry accelerated slightly reaching 2.0%, compared to 1.4% in 2017.
M&A activity can help CPG companies grow while decreasing operating costs and driving profitability for shareholders. However, being able to achieve planned synergies can take time, and companies are facing the need to realize deal efficiencies as quickly as possible. This need is driving companies to integrate the newly merged businesses as quickly as possible, often leaving integration “loose ends” to be dealt with at a later date. Data can be one of these loose ends stopping organizations from realizing the rest of their deal objectives. Through Liberty’s experience, of doing 100’s of M&A deals, it is our perspective that proper diligence and planning for the integration including upfront data work will significantly decrease long term negative impacts.
Integrating new devices and technologies to provide a seamless, commercial experience via multiple channels gives clear customer benefits. Unfortunately, this omnichannel approach is accompanied by increased risks, making cybersecurity an ever-evolving and top concern. What’s needed is an integrated security solution that delivers the smooth, secure omnichannel experience customers expect, along with advanced network protection.
Companies should use analytic methodologies rooted in machine learning and artificial intelligence to protect critical assets by gaining real-time insight into whether the activity at the technology level is predictive of an increased cyber threat.
To build cybersecurity, attention must be focused on persistent, predictive, real-time analysis of the entirety of discoverable technologies, as highlighted in another Liberty White Paper. Data should be compiled from dozens of sources, and partnerships forged with specialized groups, including local, state and federal agencies. One approach is to use a hub-and-spoke system, where policy, procedure, oversight and incident response come from the hub, with the partnerships and specialty capabilities focus on keeping threats at arm’s length.
Consumers today are expecting more choices, real-time access to product information and faster delivery times. Gartner concludes that “customers today have higher expectations for digital experiences based on their interactions with other businesses.” Advanced technology, and analytics in particular, is crucial to accelerating response times, improving fulfillment models and promoting faster inventory turnover. An estimated 64 percent of CPG executives now invest in new technology to distribute through direct-to-consumer channels. By updating supply chain technology, concentrating on individual consumers, improving processes, mastering trends and reducing delivery times, CPG firms will put themselves on a path to becoming modern and agile organizations, able to advance seamlessly into the future.
About Liberty Advisor Group
Liberty Advisor Group is a goal-oriented, client-focused and results-driven consulting firm. We are a lean, handpicked team of strategists, technologists and entrepreneurs – battle-tested experts with a steadfast, start-up attitude. Our team, with an average of 15+ years of experience, has delivered over $1 billion in operating income improvement and over 300 M&A deals for our clients. We collaborate, integrate and ideate in real-time with our clients to deliver situation-specific solutions that work. Liberty Advisor Group has the experience to realize our clients’ highest ambitions. This year, Liberty has been named to the 2019 Best Places to Work in Chicago and to FORTUNE’s list of Best Workplaces in Consulting and Professional Services.