Ernst & Young LLP (EY US) announced the release of its inaugural Consumer Products and Retail Executive Pulse, which shows that amid “ongoing economic pressures, CPG and retail leaders alike are planning to invest in artificial intelligence (AI), supply chain and industry convergence to tap new areas of growth and better meet consumer needs.”
The poll, which surveyed over 250 executives “in the retail and CPG industries, found that 53% of leaders feel that economic and inflationary pressures, as well as keeping pace with constantly changing consumer preferences, are among their top three pressures keeping them up at night.”
Another 51% say profitability and margin pressures “are a key source of anxiety.”
As a result, leaders are seeking ways to create more value “across the business, with an overwhelming 99.6% of executives saying they are experimenting with GenAI in some capacity and 91% planning investments in alternative revenue streams.”
Kathy Gramling, EY Americas Consumer Industry Markets Leader, said:
“The last year has been challenging for consumer leaders, but in 2024, I think we’re going to see a swing from cost to value. Brands and retailers will look to make smart, strategic investments in areas where value is created — with many expecting it to come from transformation in finance (27%), technology (26%), supply chain (26%) and customer experience (25%).”
From new rules and regulations to “ongoing retail shrink and economic uncertainty, CPG and retail executives are going into 2024 feeling pressure to create profitable workstreams while simultaneously meeting evolving consumer expectations.”
Nearly half of executives (48%) say “the current economic environment has changed their business strategy, placing an increased focus on internal cost optimization and revenue growth management.”
Moreso, 51% are turning to AI and machine learning (ML) to “automate processes that will drive efficiencies due to the current economic environment.”
Value drivers: 2024 outlook for retailers and brands
Emerging technologies take center stage
Technology — specifically GenAI and ML — is playing “a key role in executives’ 2024 agenda. More than 2 in 5 leaders (41%) say their company is implementing AI into the consumer experience through employee virtual assistants, with 32% implementing the technology for product purchase reminders. Of the companies experimenting with GenAI, 29% are doing so to remain on the cutting edge of innovation.”
Looking at technology holistically, 90% of CPG and retail executives “say their company has plans to increase its investment in IT or emerging technologies over the next year, with AI and ML or GenAI (31%), digital supply chain (21%) and cybersecurity (20%) of the highest priority.”
Building the capability in-house: 64% retail vs. 54% CPG
M&A: 55% retail vs. 52% CPG
Partnerships: 46% CPG vs. 35% retail
Among the adjacent industries most attractive “are manufacturing (29%) and media and entertainment (27%) for retailers, and direct-to-consumer (32%) and financial services (29%) for consumer products companies.”
Supply chain will continue to bring value in 2024
It’s clear that the supply chain is “a key source of value, and companies plan to put their money where their mouth is. In response to significant shift to online shopping in the last several years, 40% of retail and CPG leaders say creating a more efficient supply chain is a core part of their business strategy, only second behind direct-to consumer/omnichannel (42%).”
Another 35% rank supply chain resilience “in their top three areas to invest most in the next year. Finally, where technology is concerned, 21% say digital supply chain is where they plan to increase investment, ranking only behind AI/ML (31%).”
Survey methodology
Ernst & Young LLP commissioned Atomik Research “to conduct an online survey of 255 executives from Fortune 1000+ CPG and retail companies throughout the US. All executives surveyed hold a title of vice president or higher at their organization.”
Fieldwork took place “between November 22 and December 6, 2023. The margin of error is +/- 6 percentage points, with a confidence level of 95%.”
For more details and insights, check here.