Digital Transformation Trends: Insights and Strategies for CPG Companies

The digital transformation in the consumer goods industry has helped companies to increase revenue, improve operations, gain a competitive edge, and enhance customer experience, among others. So every CPG brand must venture into new technologies and trends in order to avoid being outpaced by their competitors.

Throughout the following article we will dive into digital transformation trends and the impact they have on consumer goods.

5 Digital Transformation Trends in the CPG Industry in 2024

1. Shift towards e-commerce and direct-to-consumer (D2C) models

CPG sector requires the integration of digital technology into its business model and processes to change operational workflow and redefine customer experience.

During the pandemic, more brands began implementing e-commerce platforms. After this, many consumers increased their online shopping, which led to e-commerce platforms becoming crucial in every industry.  The CPG industry must have a strong online presence in order to meet their consumers’ demands. This includes not only offering a friendly user experience and interface on their websites, but also having a presence on several e-commerce platforms and optimizing products for search engines.

Also, as digitization keeps growing, digital devices and social media have impacted on the way consumers interact with brands and products. By including direct-to-customer models in their trade,  CPG brands may offer lower prices to consumers, control their brand image, gather valuable customer data and build stronger relationships with them. This model has grown among consumer goods brands in the past years, mostly in industries such as apparel, cosmetics, consumer electronics and food and beverage.

2. Adoption of advanced analytics and artificial intelligence (AI)

Artificial intelligence nowadays covers much more than we know. To sum up, we can divide it between AI and Generative AI, and what’s the difference between these two? While AI is capable of performing tasks that would usually require human intelligence such as problem solving, prediction and optimization; Generative AI is focused on creating new content similar to existing based on what it was trained on.

The adoption of analytics and artificial intelligence is a key driver to digital transformation in the CPG industry. The use of AI on analytics can help companies better understand consumer behavior and preferences, and allow them to customize their offerings regarding products and marketing strategies

Forecast accuracy is a key area where AI driven models can significantly help CPG companies. Getting the right product, to the right place, at the right time in the correct quantities makes a big difference in the bottom line. Not enough product and your items are out of stock, too much and you see returns and spoils.

Trade spend efficiency is another key area where AI can assist. By optimizing the trade budget, running promotions that deliver more volume for the spend, CPG companies reap the benefits at both the top line and bottom line.

AI is also driving efficiencies across the supply chain and manufacturing processes, taking out inefficiencies and helping companies improve margins..

For more insights into how AI and machine learning impact forecasting and trade promotion activities, visit CPGvision blog and learn more.

3. Internet of Things (IoT) and connected devices in CPG

The Internet of Things consists of a network of interrelated devices that connect and exchange data with other devices and systems over the internet. It has the potential to revolutionize various industries and aspects of daily life by enabling greater automation, efficiency, and insights through the use of connected devices and data analytics.

How can the CPG industry benefit by investing in IoT? By being able to predict machine breakdown time, track number of units on each retailer, send discounts directly to consumers, analyze interactions with products and product popularity among consumers, among others. To wrap up,  getting to know their customers better, monitor goods transportation, and improve security will give CPG brands a competitive advantage.

4. Automation and robotics in manufacturing

With the help of robotics and automation, companies can optimize processes and operations to boost efficiency. Some ways in which CPG companies may benefit from these technologies are:

• Identify patterns and deviations that allow manufacturers optimize their processes, improve efficiency and reduce waste.
• Prevent equipment inactivity by detecting potential issues before they happen.
• Enhance the quality control process by detecting flaws.
• Automate manufacturing processes such as packaging and labeling.
• Reduce labor costs and errors.

5. Personalization and data-driven marketing strategies

As we mentioned above, people are spending more and more time online, so CPG companies marketing efforts must shift to digital channels such as social media, email marketing and even influencer partnerships, to broaden the audience and improve engagement.

Nowadays consumers are active participants in the marketing process, through online channels they may share opinions, reviews and experiences and even influence other people’s perception of the brand. With that being said, shifting to personalized and data-driven strategies is the key.

In order to succeed with a personalized marketing strategy, consumers should feel that the brand meets their needs and preferences. To achieve it, segmented and targeted strategies are essential, and if combined with a strategy driven by data, home run! Data provides insights on market trends and customer behavior and preferences, companies can analyze this as a starting point on their strategies.

The Impact of Digital Transformation on CPG Companies

1. Improved customer engagement and experience

Nowadays, mobile phones have become the number one chosen device to search, review, analyze and buy products. With that being said, every brand should offer a unified experience in every device and channel in order to boost customer experience. This approach allows keeping your brand voice consistent throughout all channels and strengthens brand presence.

Customer experience has become a pillar to CPG brands engagement and sales increase. If a company focuses on enhancing customer experience, they can improve not only customer satisfaction, engagement and loyalty, but they will also see improvements in brand identity, sales and revenue.

2. Enhanced operational efficiency and supply chain optimization

In order to satisfy consumer demand on time, manufacturers who rely on digital technologies get better results. Through AI algorithms companies can optimize demand forecasting and inventory management, leading them to accurate results, inventory optimization and stockouts reduction.

Also, with the use of IoT and AI, manufacturers can track their inventory in real-time, having visibility into supply chain operations and facilitating decision-making.

Another way in which CPG brands can increase efficiency embracing digital transformation is by automating warehouse operations. The use of AI and robotics to fulfill orders, restock and move items, reduces times and costs.

3. Real-time data insights for informed decision-making

By making informed decisions, companies can improve efficiency and gain a competitive edge.

Real-time data can help companies:

• Accurately forecast volume down to very granular levels of product and outlet.
• Predict promotions performance, the cause behind it and how to act upon it.
• Predict failures, giving time to pivot and come up with a different strategy.
• Find new opportunities and areas to expand.
• Keep consumers and retailers informed by providing accurate data about product details.
• Improve customer service.

4. Agility and adaptability in response to market changes

To remain competitive in the fast-paced environment of CPG, companies should rely on agility and adaptability to innovate, grow and sustain long-term success.

Counting with real-time insights and predictive analytics, will help companies stay ahead of the curve regarding market trends and consumer behaviors, predict and control supply chain operations and lead to informed decision-making.

5. New revenue streams and business models

By incorporating digital platforms such as e-commerce or marketplaces to their channels, CPG companies can reach a global audience and facilitate sales processes.

In addition to the new business models, CPG brands should lean on data analytics to identify trends, markets and demands; and on AI and ML to personalize customer experiences and predict future behaviors. By leveraging all digital technologies, companies can innovate and create new value propositions, staying competitive and open to growth and profitability.

Ready to Embrace the Digital Shift?

Digital transformation is not just a trend but a necessity for CPG companies. By adopting new technologies and staying up-to-date with digital trends, companies can increase revenue, improve operational efficiency, enhance customer experience, and gain a significant competitive edge.

As the industry continues to evolve, leveraging these technologies will be crucial for CPG brands to remain agile, adaptable, and successful. CPGvision by PSignite can help you achieve profitable revenue growth by providing the ultimate combination of powerful feature function, advanced scalability and ease of use. Want to learn more? Check their website by clicking on this link.