Although COVID-19 has affected every industry, there are some it has changed more than others. Retail and Consumer Packaged Goods (CPG) are two such industries that have undergone irreversible transformation. Fortunately, most changes driven by the pandemic will prove to be positive in the long term. For the moment, however, CPG organizations are trying to decode the changes and examine how technological interventions can be applied for a stable and sustainable response to new consumer behavior. The experience of our global CPG clients shows that the answer lies in creating a digital, agile and real-time data-driven organization.
CPG organizations have accelerated their digital transformation in the last 12 months
To begin with, new consumer segments have emerged, there is a growing demand for new products, the buying behaviors have changed and the fulfillment channels have shifted from physical to digital. There has been a significant growth in e-commerce for CPG over the last 12 months as online grocery services ballooned from 13% to 30% in the US. Forecasts indicate that by 2022 e-commerce in the grocery category alone will be 3X higher than pre-COVID-19 levels[i]. Most significantly, CPG companies have accelerated their digital transformation and are moving to the direct-to-consumer (D2C) model. Consumer are using in-app ordering, home delivery, order-online-and-pickup-in-store (or pickup curbside) and have begun to depend on chatbots and voice assistants. Consumers want CPG companies to provide these tools.
Pandemic shaped the consumer behavior and CPG organizations are focusing on D2C
The pandemic has had a financial impact on consumers resulting in a change in buying behavior. These consumers want cheaper products and some are wisely switching to individual-use products; others, driven by health-related concerns and anxieties around shortages want to stock up; still others have opted for local products, and there is a noticeable uptick in organic products.
For the CPG industry, these changes in consumer behavior are difficult to spot. This is because the primary owner of the consumer relationship has always been the retail partner, blocking a direct view of the customer. CPG businesses are therefore unable to change products, processes and supply chains in response, as quickly as they should. D2C commerce hold the potential to change status quo. It will enable CPG organizations to leverage data and analytics to build consumer intimacy, strengthen loyalty, shape new products, manage inventory, optimize supply chains, reduce operational costs and meet the demands of consumers who want supply chain visibility.
Invest in improving collaboration between CPG and Retail for D2C success – Kevin Gokey, VP & Global Chief Information Officer at Church & Dwight
To understand how CPG companies are positioned for the future and the transformation projects they will focus on, we conducted a joint webinar with Kevin Gokey, VP & Global Chief Information Officer at Church & Dwight and Praveen Gururaja, Director, Retail and CPG, Microsoft, as guest speakers.
Both Gokey and Gururaja agreed that the pandemic provided a new growth opportunity in the form of D2C. However, Gokey cautioned that, “The operational excellence that got us to where we are today won’t take us into the future.”
One part of the solution, said Gokey, is to make significant investments in improving collaboration between CPG and Retail. He believes that omni-channel growth will make it necessary for CPG to develop joint business plans with retail marketplace platforms like Amazon and retail chains like Walmart.
Automate, digitize and connect current processes using cloud to accelerate digital transformation – Praveen Gururaja, Director, Retail & CPG, Microsoft
The second part of the solution is to use technology to build D2C, understand consumer behavior, spot trends, manage inventory, change products and lower operational costs. Praveen Gururaja pointed out the need to automate, digitize and connect current processes. This can be achieved – quickly and effectively – using cloud services to optimize brand performance through consumer connectedness and omni-channel commerce. Cloud creates an intelligent and collaborative enterprise by connecting suppliers, headquarters, warehouses and field sellers, to improve sales execution and customer satisfaction; it delivers sustainability and operational excellence by creating the connected factory of the future that runs on digitized supply chains and logistics; and it accelerates innovation aimed at transforming traditional products while moving towards a service model for new and sustained revenue streams.
Microsoft’s Azure stack fits in perfectly to fulfil these needs. It provides the scalable infrastructure that CPG organizations need and it allows them to leverage the underpinning tools to exploit their data. These tools include:
- Data lake to ingest and leverage consumer, supplier and partner data
- Analytical engines to improve functions such as trade promotions and deliver advanced capabilities such as in-store dynamic pricing across electronic shelf labels
- Automation for routine processes such as those used to scrape the web to identify counterfeit products and to achieve goals such as a reduction in low-end manual labor
- Artificial Intelligence (AI) to identify revenue growth and upsell opportunities
- Security to ensure data privacy and compliance with GDPR, California Consumer Privacy Act, etc.
- Video analytics to understand in-store consumer demographics, path-to-purchase, manage assortments and replenishments and several other difficult-to-monitor factors
While the technology exists – and has become affordable – the real challenge, said Gokey, lies in persuading the organization to use the new technology. Getting employees to be data literate and skilling analysts in data sciences is difficult. This is an area that requires immediate attention if CPG organizations want to extract the promised ROI from digital, cloud, data and analytics.
ITC Infotech has a strong pedigree in the CPG industry and has been serving several Global Fortune 500 companies with digital solutions. During the pandemic, CPG companies have told us that they see acute changes in customer expectations along three vectors: (a) customers want their needs to be met where they are, whether or not on digital or physical mediums; (b) they want brands to meet their evolving needs, so solutions need to adapt quickly; and (c) they want to be protected from the uncertainty of their surroundings which translates into prioritizing consistency, predictability and reliability.
To meet these expectations, enterprises need real-time connectedness like never before. To make this real, enterprises must move away from what has largely been a siloed, project-oriented approach towards a platform-oriented approach that unlocks agility. They must understand how consumer needs are changing daily, discover new consumer segments and adopt new strategies.
We build platforms of intelligence for deploying intelligence at scale across the CPG value chain powered by Microsoft technologies and services.
Our decades of experience and expertise in CPG, along with our domain accelerators, has been leveraged by several global enterprises to build their capabilities and services and realize business value at speed and scale. Our platform of intelligence framework helps CPG companies realize tangible benefits.
Finally, it is the partnerships that CPG organizations create that will spell success.
We live in a complex world, dependent on intricate eco-systems. The only way to make this work is to bind everyone in the partnership to the desired business outcomes. Partners must commit to owning the outcomes. ii
ITC Infotech is partnering with Microsoft to implement Platforms of Intelligence for CPG companies. We work with Microsoft experts to define the current state, future roadmap and use cases. Our bespoke Azure AI/ML-powered intelligent platform empowers CPG leaders to build stronger consumer connect, mutually rewarding retailer relationships, and a streamlined supply chain built on the foundations of Azure Machine Learning, Azure Synapse, Azure Data Lake, Azure Cognitive Services and more. The fact that we have our genesis in a CPG company differentiates us from other service providers and allows us to deliver better supply chain visibility, increased ROI, optimized costs, and improved sales for your CPG organization.
To know more tune into our recorded Joint Fireside chat “2021 – A Year to Accelerate Digital Transformation in the CPG Industry” where Kevin Gokey – CIO & VP of Church & Dwight, Praveen Gururaja – Director, Retail & CPG of Microsoft and Debjyoti Paul – President DX, ITC Infotech, share their views on what’s in store for CPG in 2021 and beyond. click here: https://youtu.be/S2gtxbz9uNc?t=40
Debjyoti Paul, President, Digital Experience,ITC Infotech