IBM Adds AI Solutions for CPG as Brands Combat Rising Costs

As consumer packaged goods brands look to manage cost inflation, IBM is seizing on the opportunity to drive sales with smarter supply chain solutions.

The tech giant announced Thursday (Jan. 11) a partnership with software company SAP on artificial intelligence solutions for CPG and retail industries focused on supply chain, operations and more. These include tools to improve store delivery routes, product portfolios, order settlement and more.

“Global and regional consumer industry organizations must manage various commerce applications and need advanced insights to provide proactive recommendations that help improve operations and meet customer expectations,” Luq Niazi, IBM Consulting’s global managing partner, industries and global consumer industry, said in a statement.

The move comes as CPG brands look for ways to boost efficiency amid rising costs. Take, for instance, industry behemoth Nestle. On the company’s most recent earnings call in October, CEO Mark Schneider noted “significant input cost inflation over the last two years.”

Similarly, Procter & Gamble Chief Financial Officer Andre Schulten noted on the major CPG company’s last call that the firm has had to make “productivity improvement in all areas of our operations” to “offset cost and currency challenges, expand margins and deliver strong cash generation.”

CPG inflation is even going so far as to bring brands’ relationships with retailers to a head. Take, Carrefour’s decision to drop PepsiCo due to excessive price increases (or PepsiCo’s decision to leave Carrefour over its being unwilling to pay those increases, depending on whom you ask).

As such, AI solutions that can reduce costs by boosting operational efficiency are highly in demand. Brands are already beginning to implement such capabilities.

“On the non-consumer-facing side, we implemented generative AI to improve access to insights, market data, research and trends,” Coca-Cola Chairman and CEO James Quincey told analysts on an earnings call in October. “…Initial pilot suggests that [B2B] customers who receive AI-written push notifications [would] be more likely to purchase recommended SKUs, resulting in incremental retail sales. And we’re just scratching the surface of what’s possible, but we’re investing in digital capabilities now to expand our potential down the road.”

A study highlighted in last month’s installment of PYMNTS’ “Generative AI Tracker®,” “What Generative AI Has in Store for the Retail Industry,” revealed that 78% of business leaders rank generative AI as the most impactful emerging technology over the next three to five years.

Another report highlighted in the Tracker® revealed that generative AI could increase the CPG industry’s productivity by up to 2% of annual revenues, amounting to an additional $660 billion.

“AI is going to be an imperative for every company, and what you do with AI is what will differentiate your products,” Heather Bellini, president and chief financial officer at InvestCloud, told PYMNTS in an interview posted in September.

“Functionally, it might get rid of a lot of the manual work people don’t want to do anyway and extract them up to a level where they can do more things that have a direct impact on the business,” she added.

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