CPG Marketing Embraces New Business Models for Digital Transformation

The tidal wave of artificial intelligence (AI) that has hit the payments, commerce and financial services industries has created the need for a new definition. Because AI is enabling and accelerating momentum from analog and manual processes to automated, digital processes, AI and digital transformation belong in the same sentence. And one of the industries that has been in the forefront of embracing this newest round of transformation is consumer packed goods (CPG).

As brands navigate this new terrain, the strategies that once defined the sector are being reshaped by the capabilities and insights provided by digital tools and platforms. This transformation has not only changed how products are marketed but has also redefined consumer engagement, data analytics, and the overall marketing mix for CPG brands. AI in the CPG business is part of — not all of — digital transformation.

“AI and ML [machine learning] are revolutionizing many aspects of our business, from supply chain management to personalized marketing,” said Kellanova chief digital and information officer Lesley Salmon.

“Machine learning algorithms help us analyze vast amounts of data to optimize inventory management, demand forecasting, and production planning. We are also using generative AI to enhance customer engagement through personalized recommendations based on consumer behavior and preferences.”

If the brand Kellanova sounds unfamiliar, it’s because it’s the recently spun-off global snack brand from Kellogg’s including Pringles, Cheez-Its and Nutri-Grain. In a recent interview, Salmon detailed the complete array of digital tools the brand is using for everything from employee collaboration to personalized offers driven by data analytics to improving eCommerce conversions.

She was careful to point out that AI has added new capabilities to data analytics and has provided a continuum for the brand as it develops research on eating habits and continues to look for direct-to-customer (D2C) opportunities. According to Harvard Business Review, 24% of brands in all categories added a D2C channel in 2023; 55% of those were in the CPG category.

Salmon is just one of several CPG executives who are looking to add some spice back to the D2C market. Mondelez, Coca-Cola and Colgate-Palmolive are among those joining her, all with the stated understanding that digital transformation and the data gleaned from digital marketing efforts continues to change strategies and tactics.

“The move to D2C, underpinned by data-driven insights, heralds a significant transformation,” says analytics firm Quantzig. “Liberated from the confines of traditional supply chains and intermediaries, CPG businesses now harness the power of data analytics and AI to establish direct connections with consumers. This transition is not just about adapting to digitalization; it’s about revolutionizing customer experiences, product offerings, and market strategies. In this age of transformed CPG digital, the company is charting a course through uncharted territory, redefining consumption, production, and customer relationships in profound ways.”

While digital transformation offers opportunities for CPG marketing, it also presents challenges. The digital landscape is highly competitive, with that competition shifting from pricing and product to algorithms, consumer preferences, and technological advancements. Brands must stay agile, continuously adapting their strategies to remain relevant and engaging.

For example, Mondelez’s use of AI is centered around enhancing data to inform consumer engagement, overall business decisioning and adding insights to promotions and loyalty programs.

“In the end, our approach to AI in marketing should deliver significantly higher marketing ROIs for a fraction of the cost of traditional creation,” said Gustavo Valle, Mondelez’s president for North America. “We are also building capabilities with AI models to act as brains and transform and adjust our marketing more broadly across various dimensions.”

Valle’s approach was echoed at several other brands. At Coca-Cola, CFO John Murphy says data is a “never ending optimization” to refresh marketing and marketplace intelligence.

Colgate-Palmolive Chief Analytics and Digital Officer Diana Schildhouse talks about building a “data culture” at the company. Unilever is using AI-driven data and digital processes to change everything from product design to marketing to the supply chain. It’s combining R&D and supply chain data with manufacturing simulations to respond to real-time trends and market changes more quickly, scaling innovations faster than the analog world would allow.

“I firmly believe that science and technology will play a central role in helping innovate for a better future,” says Alberto Prado, Unilever’s Head of R&D Digital & Partnerships. “The combination of digital and leading-edge science is empowering our teams to progress their fields not by years, but by decades.”