Fortune or Fiction? The Real Value of a Digital and AI Transformation in Consumer Packaged Goods
Overview
McKinsey's recent analysis quantifies the impact of digital and AI on consumer goods businesses, focusing on where executives should prioritize their efforts. The study reveals that while 71% of CPG leaders have adopted AI in at least one business function (up from 42% in 2023), no player has fully scaled AI capabilities.
Key Findings
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Adoption Rates: CPG leaders have adopted AI at a lower rate compared to other industries like advanced industries, technology, media, and telecommunications. This is partly due to uncertainty around the long-term value creation and concentration of value in the value chain.
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Impact of Gen AI: Gen AI use cases could increase the economic impact of traditional AI by 15 to 40%, unlocking an additional $160 billion to $270 billion annually in profit (measured by EBITDA) for CPG companies globally. However, traditional AI still holds greater potential, with impacts 2.5 to 7.0 times higher than gen AI.
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Value Streams:
- Consumer Insights and Demand Shaping: The greatest value for most CPG sectors is concentrated in this area.
- Customer and Channel Management: Significant value is also found here.
- Beauty Industry: Direct-to-consumer value stream is the primary focus, reflecting the unique relationship with consumers.
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Innovation Zones:
- Product and Innovation: Gen AI can significantly speed up product development and improve packaging design through automated testing and experimentation.
- Supply Chain Planning and Logistics: Enhanced through advanced analytics and data exchanges with ecosystem partners.
- Manufacturing and Operations: Improved through better inventory management and production efficiency.
- Customer and Channel Management: Enabled by leveraging digital technologies to enhance the consumer experience and e-commerce processes.
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Data Exchange: CPG companies need to invest in acquiring "zero party" and first-party data to deliver personalized messages effectively. Cloud technology can facilitate seamless data exchange among ecosystem partners.
Case Studies
- Food and Beverage: Can capitalize on customer and channel management opportunities to improve operational efficiency and customer engagement.
- Beauty: Focuses on direct-to-consumer strategies to leverage unique relationships with consumers and enhance the shopping experience.
Conclusion
The highest-impact investment areas vary depending on the specific subsector. By understanding the value at stake in each part of the CPG value chain, executives can make informed decisions to drive digital and AI transformations effectively.
