October 26, 2018

Read time: 6min

Disruptors: the CPG challenge

Market Logic Team

In our ‘Disruptors’ webinar series, we look at industries undergoing major changes, inviting experts to explain key trends and what insights and intelligence professionals can do to tackle them. Here, we concentrate on the CPG industry.

From in-home deliveries to fast-growing “challenger brand” startups, the Consumer Packaged Goods industry is facing tremendous amounts of disruption. Market Logic’s webinar on disruption in CPG brought together industry experts Rob Hernandez, SVP Sector Lead for CPG, Ipsos Understanding; Patricia Orsini, Brand Strategist, formerly of eMarketer; and Martin Rückert, Chief AI Officer at Market Logic. Elizabeth P. Morgan, Cofounder and SVP Marketing at Market Logic, hosted the session.

Rob presented three key themes disrupting the CPG (Consumer Packaged Goods) industry: fewer barriers to entry, consumer centricity, and “all about earnings.”

1. Fewer barriers to entry

Barely two decades ago, shopping was overwhelmingly bricks and mortar, with mail-order holding a small piece of the market. Today, newcomers like Harry’s and Dollar Shave Club are thriving by using online retail channels to cut out middlemen and bring goods to market faster than traditional CPG companies.

2. Consumer Centricity

These days, consumers are at the centre of the universe for CPG marketers, especially Millennial and Generation Z segments. Rob said that these groups “crave personalization and customization: products need to feel ‘made for me’ instead of ‘made for everyone.’” Witness Coca-Cola’s hugely successful “share a Coke with…” campaign. Memories built on experiences can build loyalty and influence purchase decisions.

Transparency and authenticity are also in demand, especially when bad news travels so fast on social media. Rob noted a decline in trust for large institutions, which may be seen as out of touch with today’s consumers.

3. All about earnings

CPG has been around longer than most other industries and is over-saturated with powerful, well-known brands. Not surprisingly, these brands have shifted to a focus on earnings, short-term sales and cost-cutting to stay competitive.

There’s also lots of M&A activity going on, with smaller competitors being bought out. Gaining shares from the competition is the focus, and most companies are doing this through incremental innovation, making small tweaks to satisfy and increase their consumer base.

According to Rob, in today’s research world, it’s more about tactical research than broad foundational research. Cheap, agile methods and DIY research are also gaining prominence: more companies are doing in-house research rather than contracting agencies to do it for them. This is all about cost-cutting, and making better use of existing data instead of commissioning new research.

Digital disruption and the CPG industry

Next, Patty took us on a deep dive into digital disruption. She argued that devices and platforms are changing the path to purchase, despite low transaction levels: today, only 3% of U.S. internet users buy food and beverage products primarily online, but that number is growing rapidly (Amazon’s food and beverage category saw a 40% increase in sales from 2017 to 2018).

So, investing in e-commerce can be a tough call for global brands when actual purchase numbers are low. But brands should look at e-commerce for its marketing potential. Even if shoppers aren’t buying on e-commerce platforms, they’re still searching for products on Amazon, “completely bypassing Google and other search engines.”

This means brands need to treat e-commerce channels as marketing platforms, since this is where consumers discover, compare and share opinions about products.

Revenue and brand-building channels

Patty cited Jie Cheng, director of digital and e-commerce for Campbell Soup Company’s snack division, saying “E-commerce is a revenue channel, but it’s a brand-building channel as well. That redefines the role of e-commerce.” Kelly Creighton at McCormick & Company also said “Amazon is becoming an extension of our brand website. It’s the number one place where consumers go to research products.”

E-commerce is also a new source of insights for innovation. Patty talked about “challenger brands,” small upstarts that hunt for dissatisfaction with existing brands and create new products to fill these gaps.

Glossier, for example, is a cosmetics company founded by a makeup blogger who took the insights gained on product flaws from her followers and made them actionable.

But while challenger brands are able to quickly engage a market for quick growth, Patty said big brands aren’t going down without a fight.

Gilette, for example, recently used social media listening to identify a gap in their offerings, and created a new assisted razor for those who need help shaving.

Disruption vs technology

So how should insights professionals stay on top of all this disruption? Martin Rückert said that AI technology is “vital for faster speed to insight, to find and share the essentials from the data hosepipe.”

AI is used to bring all sources onto one platform and cut out the white noise, so professionals can get the insights that they need. Elizabeth then shared a live software demo to show how cognitive intelligence can answer complex questions by discovering new connections.

Finally, panellists discussed the impact of disruption on the daily lives of insights managers. There was a consensus that there’s more demand from stakeholders than ever before: researchers need to do more with less.

At the same time, new sources like e-commerce and online product reviews need to be used to get insight from all the chaos. Thankfully, AI technologies can support insights professionals in these tasks, cutting out both white noise and manual labour to help them be more effective.