Unpacking AI Driven Innovation: Applications and Roadblocks for CPG brands

Artificial intelligence (AI) has truly progressed triumphantly around the globe over the last year and has notably seeped into mainstream use unlike anything we have seen before. This progress is undoubtedly owed to ChatGPT, a conversational AI tool powered by machine learning (ML), the fastest-growing user application in history, beating out TikTok, Amazon, Facebook, Google and every other digital consumer engagement channel.

While representing just one area of AI, ChatGPT has opened up the conversation on the wider possibilities of AI applications in our daily lives – a conversation that also impacts consumer packaged goods (CPG) brands. Rapidly developing, these technologies offer CPG the opportunity to optimise their supply chains, differentiate their product offering and uniquely shape customer experiences. Factors such as increasing market volatility, fragmented consumer demand or sustainability pressures, seem to be reason enough why the CPG industry needs to embrace AI. Considering other key trends within the industry such as eCommerce dominance, personalization, data-driven decision-making, and the changing retail landscape, AI may be the only way for CPG brands to remain competitive.

Applications of AI for CPG brands:

  1. Predictive analysis
  2. Innovative product development
  3. Personalised marketing

1. Predictive analysis

Undoubtedly, one pillar of AI application in CPG is its capacity for predictive analytics: By leveraging machine learning algorithms, companies can forecast future market trends, consumer behaviours, and potential shifts in demand more accurately. Demand forecasting in particular is of critical importance to CPG brands. AI-powered analytics rely on historical data, market trends, and external factors such as weather patterns and social media trends to generate demand forecasts that are accurate. Leveraging AI-powered demand forecasting allows CPG companies to make better-informed decisions about production levels, promotional activities, and distribution strategies. This can lead to reduced waste, improved inventory management, and ultimately, increased profitability.

A great example of this application is Hellmann’s UK collaboration with Google Cloud to develop Meal Reveal: Hellmann’s Meal Reveal, developed with Google Cloud’s Vertex AI, scans food items via mobile cameras, suggesting recipes to combat food waste, particularly ‘fridge blindness’, promoting sustainable eating habits and launched during Food Waste Action Week in March 2024.

2. Innovative product development

Likewise, AI can be a great booster for product development, giving brands that competitive edge in their category through new and exciting innovations. AI’s capacity for vast data analytics, for example consumer reviews or social media posts, allows for an understanding of emerging consumer trends, preferences, and behaviours, after which to model innovation. Using AI in product development can offer multiple benefits, including:

  • Faster product development, i.e., accelerating the process from concept to product by automating prototyping and testing, and optimisation.
  • Improved product quality thanks to improved understanding of which design, ingredients or formulations will most likely result in a high-quality product.
  • Reduced R&D costs, as predictive analytics and automations help to keep cost low, and investment targeted at potentially highest-yielding outcomes.

A fun example of AI driven product development is ChatGPT creating ice cream flavours for Baskin Robbins: Baskin Robbins Korea introduced the world’s first AI-developed ice cream flavours at its Seoul Workshop, utilizing ChatGPT for new flavour ideas based on customer data and developer inputs! This offered experimental options like wasabi and crème brûlée alongside creative twists on classics like green tea orange jasmine, with plans to engage customers through a brand storyteller and an ice cream docent program at the outlet doubling as an R&D centre.

3. Personalised marketing

Last but certainly not least, AI can help CPG brands deliver unique experiences, tailored to the consumers. Customers’ purchase history, online browsing behaviour or demographic information can be used to inform personalised product recommendations, targeted advertising or optimise search engine content. With a more tailored approach, CPG companies can improve their customer satisfaction and loyalty, while also boosting sales.

Let’s take a look at Henkel and Adobe delivering personalization at scale via generative AI: Henkel partnered with Adobe to utilize generative AI for enhancing personalization across its global brand portfolio, such as Loctite, Persil, and Schwarzkopf, by leveraging Adobe Firefly and Experience Cloud to create tailored content based on customer characteristics, aiming to reduce campaign costs and time while delivering personalized experiences at scale!

Roadblocks to AI in CPG:

  • Data quality and accessibility

One of the roadblocks to successful AI integration is the quality of and access to the data required. Access to high-quality data that is relevant, up-to-date, and diverse can be a challenge for many companies. It requires robust data management systems and processes to ensure the accuracy and completeness of data used by AI.

  • Talent gap

CPG brands that do not have the right skills for AI in-house, will likely struggle to get it right. There is, however, high demand and competition across all industries for AI talents, meaning it can be difficult to employ the level of skill needed to lead AI transformation.

  • Legal compliance

A major issue with AI integration has to do with the legal and ethical implications of its use, meaning there is a need for transparency and accountability to avoid potential biases or discrimination. It is important to note as well that, while AI has marched triumphantly (and quickly), laws and regulations have not been able to keep up. This means brands need to be able to adapt quickly to what is still an ever-changing field.

Food for Thought 🌟

While AI has certainly managed to sweep both brands and consumers alike, off their feet, it feels necessary to point out the following. Yes, AI holds many opportunities (provided its key challenges are overcome), however, this does not suggest that all efforts need to be artificially boosted in order to work.

For a brand take, Tropicana has removed the letters A and I from its logo to show that there’s nothing ‘artificial’ about its fruit juices. So, perhaps one way of applying AI is to have a little fun with it (and reminding consumers that at its core, your brand is from humans, for humans).

Karen Rickers Karen Rickers