AI revolutionizes FMCG industry innovation - Part 1

Over the past decade, the Consumer Packaged Goods (CPG) industry, historically known for delivering consistent value at reasonable margins, has faced significant challenges such as rising production costs, expanding supply chains, and complex logistics. To maintain their competitive edge, industry leaders are focusing on enhancing productivity across the value chain and embracing disruptive digital and AI innovations. Initially slow to adopt digital technologies, CPG companies have realized that digital transformation is crucial for future success, as evidenced by a study from Bain & Company linking technology leadership with improved business performance.

The study revealed that leading Fast-Moving Consumer Goods (FMCG) companies that invested in technology over the past five years have experienced higher share prices, revenue, and profit growth. These companies are leveraging AI-led design modeling and innovation, with 25% experimenting with these technologies, and 50% deploying or piloting next-generation, data-driven sales execution. AI is being used for pricing optimization and predictive revenue growth management, allowing these companies to outspend their lower-performing counterparts on consumer, customer, and innovation efforts.

Market projections indicate that the global generative AI market in FMCG is expected to grow from $7.9 billion in 2023 to nearly $57.7 billion by 2033, according to a report by Market.US. By the end of 2024, 68% of global FMCG companies were expected to incorporate image recognition and generative AI solutions into their operations. AI-powered forecasting can significantly reduce errors within supply chain networks, leading to a 65% reduction in lost sales due to out-of-stock scenarios and a 5% to 10% decrease in warehousing costs, as reported by McKinsey Digital.

As CPG companies deepen their digital journeys, understanding AI's true potential becomes imperative. Some global conglomerates have adopted breakthrough innovations and developed strategic road maps for AI integration to stay ahead of the competition. Collaborations with technology partners and continued investments in innovation are driving these companies toward long-term success. The future success of the CPG industry will heavily rely on the ability to harness the power of digital transformation and AI innovations. Companies that effectively integrate these technologies into their operations are likely to see sustained growth and improved business performance. However, embracing a culture of innovation, fostering cross-functional collaboration, and continuously investing in digital technologies will be essential for CPG companies to remain competitive and adapt to changing market conditions.

In this and my upcoming blog posts, I'll share success stories from giants like Procter & Gamble, Unilever, Coca-Cola, and Nestlé etc., who are using AI to revolutionize product development, supply chain management, marketing strategies, and sustainability efforts. These stories highlight how AI-driven insights and automation enhance operational efficiencies, personalize consumer experiences, optimize inventory management, and pioneer sustainable practices. By strategically integrating AI, these companies achieve significant improvements in product innovation, market responsiveness, and environmental responsibility. This comprehensive approach showcases the FMCG sector's commitment to using advanced technology to meet evolving consumer and planetary demands. These companies are not only improving their operations but also setting a benchmark for industries worldwide by demonstrating AI's potential to drive growth, efficiency, and sustainability.

Let's see how Procter & Gamble, Unilever, Nestle & Kraft & Heinz have utilized AI / GenAI in their business...

Procter & Gamble Takes the Lead with ChatPG

Procter & Gamble (P&G) has significantly invested in AI to integrate various business activities, from product innovation to distribution, manufacturing, and back-office operations. In 2023, P&G developed an internal generative AI tool called ChatPG using the OpenAI API, aiming to enhance both employee and customer experiences while maintaining data confidentiality through stringent security protocols. Former CIO Vittorio Cretella highlighted P&G's goal of becoming an "AI-first" business, focusing on aligning AI performance with business outcomes and building organizational AI fluency through internal training programs and partnerships with Harvard Business School. This vision also includes standardizing AI development through its "AI Factory."

P&G's commitment to AI extends across its entire operation. The company has developed a proprietary machine learning platform implemented across 80% of its global business. This platform supports various AI applications, including an AI-powered supply chain that optimizes inventory management and reduces waste. A successful example of this is Pampers' My Perfect Fit, an AI-based diaper recommendation tool with a 90% size accuracy rate. By integrating AI across its operations, P&G aims to improve efficiency, innovation, and customer satisfaction. Through these efforts, P&G demonstrates its dedication to leveraging AI to drive business transformation and maintain a competitive edge in the market, setting a benchmark for the industry.

Unilever Leverages AI for Flavors, Fragrances, and Beyond

Unilever utilizes AI to assess product shelf life, taste, texture, and consumer preferences, facilitating the launch of innovative products such as Knorr Zero Salt Cube and Hellmann’s vegan mayonnaise. AI has also driven the development of Axe A.I. Body Spray and BeautyHub PRO, an AI-powered selfie tool offering personalized skincare and haircare advice, leading to a 43% increase in purchase likelihood. The company's AI Horizon3 Lab focuses on forecasting, modeling complex data relationships, and generating insights on trends and predictions using generative AI. According to Andy Hill, Unilever's Chief Data Officer, AI plays a crucial role in driving focused innovations globally, with the lab identifying 15 focus areas, including forecasting, data modeling with graph technology, and generating insights on trends and patterns.

Unilever’s innovation strategy leverages AI-driven tools to enhance product quality and customer satisfaction. These tools have improved the accuracy of demand forecasting, reducing inventory costs and ensuring that popular products are always in stock. Through these efforts, Unilever demonstrates its commitment to using AI to drive business transformation and maintain a competitive edge in the market. By prioritizing AI integration, Unilever sets a benchmark for the industry and showcases the immense potential of AI to drive growth, efficiency, and sustainability.

Nestlé Capitalizes on NesGPT to Enhance Decision-Making

Nestle introduced NesGPT, its internal version of ChatGPT, to enhance productivity and decision-making across various functions, including sales, product innovation, marketing, and legal. NesGPT supports the rapid generation and testing of product ideas, enabling teams to iterate quickly and efficiently. Over 100 team members have been trained to use the tool as part of the company's innovation process, as highlighted by Veeral Shah, Nestle's Chief Digital and E-Commerce Officer. This training ensures that employees can effectively leverage AI to streamline workflows and improve outcomes across different areas of the business. In addition to NesGPT, Nestle leverages AI for supply chain optimization through predictive analytics. This technology helps the company anticipate potential disruptions and respond proactively, ensuring smoother operations and better service delivery. By accurately forecasting demand and identifying potential bottlenecks, Nestle can optimize inventory levels, reduce waste, and enhance overall efficiency. These efforts contribute to improved customer satisfaction, as the company can more reliably meet consumer demands and maintain product availability.

Through the integration of AI, Nestle demonstrates its commitment to innovation and maintaining a competitive edge in the market. By embedding advanced technologies into various aspects of its operations, Nestle aims to drive business transformation and adapt to the evolving needs of consumers. The company's holistic approach to AI underscores its dedication to leveraging cutting-edge solutions to improve productivity, enhance decision-making, and deliver better products and services to customers worldwide.

Kraft Heinz Employs AI to Shape the Future of Food

Kraft Heinz leveraged generative AI to innovate across its supply chain and product development. The company developed KraftGPT, an internal AI application that provides employees with quick insights into multiple business aspects. By aiming for a "self-driven" supply chain, Kraft Heinz predicts production line failures and analyzes customer data for better forecasting. Supported by a dedicated team of data scientists, these initiatives align with Kraft Heinz's AGILE@SCALE strategy. Additionally, Kraft Heinz's AI efforts focus on developing new products based on consumer trends and preferences, accelerating the innovation cycle and allowing the company to swiftly introduce new offerings that meet evolving consumer demands.

Through these efforts, Kraft Heinz demonstrates its commitment to using AI to drive efficiency and growth across its operations. The integration of AI into various business functions showcases the company's dedication to innovation and continuous improvement, setting a benchmark for the industry. By leveraging AI to understand and respond to consumer needs, Kraft Heinz can stay ahead of market trends and maintain a competitive edge.

As highlighted in the stories above, the global generative AI market within the FMCG sector is on the rise. Companies that successfully utilize AI will establish standards for industries around the world. By promoting a culture of innovation and teamwork, these organizations can respond to shifting consumer preferences while enhancing efficiency and fostering growth throughout their operations. The future of the FMCG industry depends on the effective use of advanced technologies to address the evolving requirements of consumers and the planet, ultimately resulting in improved products and services for customers worldwide.

Keep reading...

In next blog - AI revolutionizes FMCG industry innovation - conclude, I will share what L'Oréal, Coca Cola, PepsiCo, Danone, Mondelez and Johnson & Johnson are doing.

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