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Author: Anil Gandharve |11/16/17

How Artificial Intelligence is reshaping Consumer Packaged Goods companies: Part 1

Artificial intelligence (AI) is not only here to stay but already in use across different industries. AI is manifest in the Auto industry in the form of self-driving cars, and in consumer products companies in the form of voice-activated assistants like Siri, Cortana, and Alexa. Whether we like it or not, AI is rapidly being integrated into our daily lives in many obvious and not so obvious ways.

For Consumer-Packaged Goods (CPG) companies, Artificial Intelligence offers huge benefits across three key areas of the value chain namely retail, operations and supply chain. However, while CPG leaders are excited about the value that AI can deliver, many are still struggling to find tangible Return-on-Investment (ROI) from AI. Without a clear path to ROI, it’s difficult for CPG companies to validate the necessary funding for AI projects and see the path to success.

In some cases, a disconnect between business and IT decision makers complicates AI adoption. In others, there is a lack of company-wide understanding on how to use AI, or agreement on the customer experience that needs to be delivered. Another area of AI that is of concern to CPG organizations is the use of BOTs¾automated software that replaces human-to-human interactions.

For example, an airline company didn’t want to use a BOT to access its passenger information because it didn’t “trust” the BOT to interact with customers the same way that human agents do. The company feared that the use of BOTs could compromise the brand promise to their customers. Many CPG companies feel the same way about BOTS.

However, despite these and other concerns, CPG companies are looking to AI to improve efficiencies and drive increased productivity. Let’s now examine how AI supports the retail part of the value chain.

Integrating Data into Retail decision-making with AI

While some CPG companies are still working to automate their stores, many other companies are already using AI and machine learning to support a variety of key retail and marketing activities focused on consumer experience. For example, companies are using AI in analytics initiatives focused on loyalty, segmentation, Next Best Offers (NBOs) and customer lifetime value.

For retail marketers, Artificial Intelligence is a tool that helps them understand buyer behavior across different segments and consumer lifecycles. AI is being included in spend projections to reevaluate budget priorities. AI also helps companies integrate basic retail information with buyer behavior and marketing spend data to make better, more informed decisions.

For example, by asking customers to share data through loyalty and rewards programs, retailers can use AI to segment prospects, and make purchase recommendations, both online and in the store. AI and machine learning also help marketers improve their communications with customers because these systems continually learn from user behavior.

Armed with a better understanding of user behavior, retailers are leveraging AI technology to drive customer engagement with technologies like conversational commerce, image-based search, and integration with mobile apps. In the food and beverage segment, stores are becoming experience centers where customers are engaged through mobile apps to deliver customer loyalty programs, product and labeling information, and assisted selling. For example, Pepsi and Coke apps allow customers to create bar codes for their drinks and scan them at their vending machines for added convenience.

Refining AI technologies for future success

Looking ahead, CPG companies will continue to adopt and refine AI technologies, extending their value to predictive and prescriptive models. I expect AI to assist CPG companies with everything from choosing the best location for new retail outlets to innovating to meet the needs of tomorrow’s customers. Customers will also benefit from AI supporting the retail environment, from improved product quality and availability to personalized help, choosing the best products for their families based on their specific preferences.

In my next blog, I will discuss how AI is playing a key role in the transformation of CPG supply chain and operations. Stay tuned…

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