PODCAST: COVID 19 | Redefining Digital Enterprises
Episode 11: The Impact of COVID-19 on Consumer Packaged Goods
Listening time: 12 minutes
The Impact of COVID-19 on Consumer Packaged Goods Industry
In this episode of the AI to Impact podcast, Consumer Packaged Goods (CPG) expert and industry veteran, Mukesh Saharan, discusses the aftereffects of COVID-19 on the industry. He explains the major challenges faced by the suppliers and retailers, and the need for digital transformation. The rise in e-commerce, omnichannel integration of supply chains, and the growing role of AI and analytics underscore the importance of integrated business planning, which can be a game-changer for the CPG industry.
Melita: Hi, Everyone. You’re listening to AI to Impact by BRIDGEi2i, a podcast on AI for the digital enterprise. My name is Melita Menezes, and I’m a consultant at BRIDGEi2i. I have been collaborating with multiple stakeholders across many global CPG companies, enabling high impact business transformation strategies and guiding them in their analytics journey.
Over the past couple of weeks, on our AI to Impact podcast, we have been chatting with reputed AI and Analytics leaders, digital transformation advisors and BRIDGEi2i business heads to gather their point of view on the current crisis, the challenges enterprises are facing and some strategies to maneuver the COVID-19 crisis.
And today, we have with us an industry leader and CPG veteran, Mukesh Saharan. He has extensive experience in developing Integrated Business Programs and leading enterprise-level initiatives on different frontiers like sales, marketing, operations, and supply chain analytics. He has delivered multiple analytics projects that have been scaled across the globe to impact measurements of more than $10Billion across his clients. Thank you, Mukesh, for making the time.
Mukesh: It’s my pleasure, Melita.
Melita: So Mukesh, right now, we are in the COVID-19 outbreak event, which is one of the most unprecedented events of our time, and it has impacted all of us. What are the top changes that the CPG industry is going through right now?
Mukesh: Thank you, Melita. So, I think it is a Black Swan event, and you know it has got all the businesses unprepared. It has impacted people in 200 countries. And I think what really is mind-boggling for me is the speed at which the infection is spreading. Coming back to your questions on the changes that CPG companies are going through. I’ll divide the problem and answer it in two pieces, one is the demand side and other, the supply side.
So, from a demand-side perspective, Melita, I think we are seeing that consumers are significantly buying more on e-commerce platforms. For a company that I have partnered with, they used to have only 1-2% of e-commerce sales earlier, and suddenly in the month of March, they were noticing almost around 10% sales. That’s a big change they’re noticing. Second, there is a low human touch food that is preferred to by consumers, and you would imagine in these times. Products like sandwiches, butter, and jelly, are, you know, having an extremely high demand. And that brings me to my third point, which is hygiene and cleaning products are extremely high in demand right now, almost stocked out for all of my customers that I partnered with.
In fact, one of the studies outlined that demand for hygiene and cleaning products was almost 600 percent higher versus last year in the month of March. While it might not remain at that level, I believe we will see the base increase in the sales for some of these companies up to even 20-25 percent, which is huge. Now, also, from a consumer’s perspective. I think you’re noticing that in these times, people tend to buy only essential products and that, too, at a lower price. These are some of the changes in the demand side.
Now coming to the supply side, we are noticing that our customers are facing challenges in terms of the non-availability of raw material. They’re also trying to hedge their dependencies on countries like China, so therefore trying to procure products localized. While raw material is difficult to get, I think getting the labor is also becoming a challenge. And on top of that, because of lockdowns, etc., travel and logistics is a challenge these days.
Now, those were some of the impacts from a manufacturing perspective, but from a supply-side to be able to supply to retailers, I think retailers are also demanding that products should be fulfilled a lot more faster and frequently. For example, in today’s world, the Amazons of the world are able to deliver in two days for consumers. Retailers are asking for deliveries within one or one and a half days. Therefore, together, from a supply-side perspective, it is becoming extremely difficult for CPG companies to forecast and plan.
Melita: So, Mukesh, I see a very interesting interplay between demand and supply. And I see that consumer behavior is changing, from what you just said. On that note, how would the current situation impact the digital transformation journey for these enterprises? And what would their focus be upon? Could you share some light on that?
Mukesh: Absolutely. So, I spoke about the changes in the consumer side, as well as the changes in the supply side. I think all these organizations are going through significant changes. I think one of the big changes is they are expanding their distribution channel. They are partnering with local partners like alcohol delivery partners, or some of the CPG companies are partnering with pizza delivery companies. I think that’s a huge change for the TG. Also, they’re realizing that there is going to be a huge demand for housing and cleaning production. Some of the CPG companies are coming with newer products in these categories. However, they’re also realizing that innovating new products are not going to move fast. In fact, one of the studies from Deloitte Global Consumer Tracker says 66 percent of the consumers are likely to buy known brands. So, therefore, either you continue to sell your known brand, or if you want to innovate, you just innovate on hygiene. Also, Melita, planning, and forecasting, as I spoke about this earlier, is becoming a huge challenge. So, most of these companies are taking that significantly more seriously because there’s not enough data, so you need to be able to have a better learning algorithm incorporated, which can work with smaller data.
And on top of that, when you are forecasting, I think creating the consistency of the information across the organization is very critical. You want to make sure all your business units are connected well. I think, and that’s what I was saying earlier, I think integrated business planning solutions are going to be the key. However, from its data perspective, I think there’s a higher collaboration between CPG and retailers, is something, which is visible. I think these are some of the changes that I’m noticing.
Melita: Absolutely, Mukesh. I think you touched upon three key areas of consistency, collaboration, and limitation of data that might affect the CPG industry. How would then AI and analytics play a role in helping these companies navigate through this huge shift? Are there some use cases that you can talk about?
Mukesh: Absolutely. My belief is that with AI and analytics, where it is today, it is going to play a very critical role, not if you’re able to use your internal data as well as the data provided by Nielsen’s of the word, or IRIs of the word. And on top of that, automated data provided by, let’s say, Google mobility data, the data provided by John Hopkins – All of these can actually together give you very interesting insights about how much is the category growth expected as well as internally, how do you optimize your resources. Also, analytics will significantly play a higher role, not only for higher brand engagement – people are spending more time in the house, but also reaching out to the consumers when there are newer distribution channels. I think, therefore, together, if you notice, companies would need, companies which will actually use data as well as analytics together, a lot more, will be able to sail through it much faster and probably become stronger.
Melita: Absolutely, Mukesh. And what do you think are the best ways to cope with the uncertain times waiting ahead? Are you hearing something from our customers?
Mukesh: I think a great question, Melita. I think as governments are supporting us and trying to flatten the curve by lockdowns, effort, as well as the companies are going to work from home, my belief is that there will be multiple ripples in the next one to one and half years. And I think the vaccine is also looking far away.
Therefore, some of these consumer behaviors that I was talking about are going to be probably long term changes that we will notice. And therefore, any piecemeal approach for CPG companies might not create enough value for them.
And I think my belief is that now is the time for digital transformation programs to create a collected ecosystem, as you would imagine that you create different functions having the same information coming out of the system is paramount – it’s very, very important to have. I think, as you would imagine, online channels are seeing higher demand, but there is cannibalization from offline retailers. Also, in a few categories, we are able to see higher demand, but also in other Categories, lower demand. Therefore, the ability to create better predictability and optimization of resources across the system, and create more connected ecosystems will altogether create better preparedness for CPG companies to tackle COVID-19.
Melita: Very well put, Mukesh. Like you mentioned, I think the company’s ability to leverage AI/ML given the limited data constraints across organizations is going to be a critical role, and it will give them a competitive advantage. On that note, Mukesh, this has been absolutely amazing. Thank you so much for being with us.
Mukesh: My pleasure, Melita.
Melita: And thank you so much for listening to this episode of AI to Impact podcast. That was a very interesting conversation with Mukesh, CPG veteran and advanced analytics leader. If you found this interesting, do subscribe as we will continue the conversations with business experts and thought leaders in our upcoming episodes. They will be discussing the business impact of COVID-19 on various industries and how this journey looks for them in the future. Once again, thank you so much for tuning in. Stay home. Stay Safe. Bye, Bye.
2020 will long be remembered for the pandemic that wreaked havoc on the global economy and disrupted communities and businesses in unprecedented ways. In our latest podcast series: COVID19 | Redefining Digital Enterprises, we will be interacting with several thought leaders, BRIDGEi2i Business Heads, Domain Experts, and reputed AI and analytics leaders to understand the various challenges emerging out of this crisis and the way forward for enterprises in the new world order. Tune in to know more!
Mukesh Saharan – CPG Industry Veteran
Mukesh Saharan has partnered with many CPG companies globally and has immense expertise in developing Integrated Business Programs and leading enterprise-level initiatives on sales analytics, marketing analytics, operations analytics, and supply chain analytics.
He has worked with several companies such as Tejas Networks, TEG Analytics, and BRIDGEi2i to name a few Mukesh has an MBA from the Schulich School of Business, Toronto, and a B.Tech from NIT, Tiruchirappalli.