Artificial Intelligence & Machine Learning

FMCG Industry Drives Innovation With AI Adoption

Gen AI Spurs Product Development, Supply Chain Optimization and Customer Engagement
FMCG Industry Drives Innovation With AI Adoption
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The consumer packaged goods, CPG, industry has long been considered a safe investment haven, delivering consistent value at reasonable margins. But, rising production costs, expanding supply chains and complex logistics have plagued the industry over the past decade. To sustain their position and compete effectively, industry leaders are now focused on enhancing productivity across the value chain and embracing disruptive digital and AI innovations.

Although the industry had been slow to adopt digital technologies, the deluge of data and disruptions convinced leaders that digital transformation was crucial for future success. A study by Bain & Company showed that technology leadership is closely linked with business performance. Leading fast-moving consumer goods, FMCG, companies that invested heavily in technology over the past five years have seen higher share prices, revenue and profit growth.

The study showed that 25% of these companies are experimenting with AI-led design modeling and innovation, while 50% are deploying or piloting next-generation, data-driven sales execution. Using AI for pricing optimization and predictive revenue growth management, these companies spend significantly more on consumer, customer and innovation than their lower-performing counterparts.

The global generative AI market in FMCG is projected to grow from $7.9 billion in 2023 to nearly $57.7 billion by 2033, according to a Market.US report. By the end of 2024, 68% of global FMCG companies are expected to incorporate image recognition and gen AI solutions into their operations. AI-powered forecasting can reduce errors by 20% to 50% within supply chain networks, translating into a 65% reduction in lost sales due to out-of-stock scenarios and a 5% to 10% decrease in warehousing costs, McKinsey Digital reported.

As C-suites in the FMCG sector deepened their digital journey, understanding AI's true potential became imperative. Some global conglomerates adopted breakthrough innovations and developed strategic road maps for AI integration.

Procter & Gamble Leads With ChatPG

P&G is heavily investing in AI to integrate its business activities, from product innovation to distribution, manufacturing, and back-office operations. In 2023, the company developed an internal gen AI tool - called ChatPG - using the OpenAI API. P&G aimed to enhance both employee and customer experiences while ensuring data confidentiality through rigid security protocols.

Former CIO Vittorio Cretella outlined P&G's focus on becoming an "AI-first" business by aligning AI performance with business results, building organizational AI fluency through internal training programs and partnerships with Harvard Business School, and standardizing AI development through its "AI Factory."

P&G's commitment to AI extended across its entire operation. The company created a proprietary machine learning platform implemented across 80% of its global business. This platform supports various AI applications, including an AI-powered supply chain to optimize inventory management and reduce waste. A successful use case is Pampers' My Perfect Fit, an AI-based diaper recommendation tool with a 90% size accuracy rate.

Unilever Harnesses AI for Flavors, Fragrances and More

Unilever uses AI to assess product shelf life, taste, texture and consumer preferences. The technology helped launch new products such as Knorr Zero Salt Cube and Hellmann’s vegan mayonnaise. AI also powered Axe A.I. Body Spray and BeautyHub PRO, an AI-powered selfie tool offering personalized skincare and haircare advice, which led 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 gen AI. AI plays a crucial role in driving focused innovations globally, said Andy Hill, chief data officer, Unilever. The lab has already identified 15 focus areas, with immediate attention on three: forecasting, data modeling with graph technology, and generating insights on trends and patterns.

Unilever’s innovation strategy includes AI-driven tools to enhance product quality and customer satisfaction. Its AI-driven tools have improved the accuracy of demand forecasting, reducing inventory costs and ensuring that popular products are always in stock.

Nestle Rides on NesGPT to Boost Decision-Making

Nestle introduced NesGPT, its internal version of ChatGPT, to support productivity and decision-making across different functions such as sales, product innovation, marketing and legal. NesGPT helps in generating and testing product ideas quickly, with over 100 team members trained to use the tool within the company's innovation process, said Veeral Shah, chief digital and e-commerce officer, Nestle.

The company's use of AI extends to supply chain optimization, where predictive analytics helps anticipate disruptions and respond proactively. This capability ensures smoother operations and better service delivery, enhancing overall efficiency and customer satisfaction.

L'Oréal Innovates With Beauty Content Lab CREAITECH

L'Oréal's CREAITECH lab uses gen AI to scale brand-compliant and localized content creation across its 37 beauty brands. The company also offers ModiFace, an AI-powered virtual makeup try-on service, delivering photo-realistic results and automatic shade calibration.

L'Oréal's AI initiatives aim to make beauty products more personalized, inclusive and responsible. These AI-powered solutions extend to personalized skincare regimes, where AI analyzes skin types and recommends tailored products. This personalization enhances customer satisfaction and loyalty, driving growth in a competitive market.

Kraft Heinz Utilizes AI to Drive the Future of Food

Kraft Heinz utilized gen AI in its operations to drive innovation across its supply chain and product development. The company developed KraftGPT, an internal gen AI application that provides employees quick insights into multiple business aspects. The company aims to move to a "self-driven" supply chain, predicting production line failures and analyzing customer data for better forecasting. A dedicated team of data scientists supports these efforts, aligned with Kraft Heinz's AGILE@SCALE strategy.

Kraft Heinz’s AI initiatives included the development of new products based on consumer trends and preferences. This approach accelerated the innovation cycle, enabling the company to introduce new offerings that can meet evolving consumer demands swiftly.

These examples illustrate the transformative power of AI in the FMCG industry. The future of FMCG lies in harnessing the full potential of AI to drive growth, innovation and superior customer experiences.

About the Author

Rahul Neel Mani

Rahul Neel Mani

Founding Director of Grey Head Media and Vice President of Community Engagement and Editorial, ISMG

Neel Mani is responsible for building and nurturing communities in both technology and security domains for various ISMG brands. He has more than 25 years of experience in B2B technology and telecom journalism and has worked in various leadership editorial roles in the past, including incubating and successfully running Grey Head Media for 11 years. Prior to starting Grey Head Media, he worked with 9.9 Media, IDG India and Indian Express.

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