For the past several years, all reputable research firms and consulting groups have echoed the same piece of advice for CPG companies: Invest in emerging markets. The “forward-looking trends” compilations from these think tanks indicate that many consider investment in emerging markets the most critical pillar for revenue growth.
McKinsey reports that emerging markets will account for more than half of all CPG revenues by 2020. Deloitte finds that “global retail sales of packaged foods [are] expected to rise to over $3 trillion by 2020, with emerging markets being the primary factor.” It’s ubiquitous wisdom: a must-do for large brands and a must-consider for small-to-medium brands.
While all compasses point to emerging markets, what’s often missing for CPG brands is a detailed map to success. Unlike finance, telecom, and other service industries where customer insight is digitally tracked, many CPG companies are left in the dark when it comes to the final steps of their product journeys.
There is hope, however. The combination of advancements in image recognition technology and a growing global network of smartphone owners is shaping up to be a powerful duo for data intelligence abroad for CPG brands.
Accessing the Inaccessible with Image Recognition and Smartphones
Image recognition technology has hundreds of value applications in CPG and retail. Some innovative companies have already proven the worth of advanced photo recognition technology in practical applications. A couple of powerful examples include Houzz and Google’s work with the GDELT Project.
Houzz, a furniture and home décor online marketplace, developed a tool that matches 11 million inspirational home photos on Houzz to over 6 million products available for purchase on the company’s marketplace. “Visual Match” and “View in my Room” tools allow users to tap a product in a photo they love and then see that product in their own space before purchasing.
Google image recognition technology processed 20 million photographs crowdsourced from global news coverage via the GDELT Project. Not only did Google’s software return information on objects, activities, and logos in each image, but it was also able to identify the perceived emotion each image conveyed.
The CPG use-cases for this technology are exciting. Photos, automatically scanned and tagged for data points, combined with precise geo-location and timestamp information, present valuable insights to CPG brands while saving time and mitigating risk of human error.
At the same time, the prevalence of smartphones, the mechanism by which we collect photos in everyday life, is growing rapidly on a global scale and specifically in emerging markets. Fast-growing millennial populations and 3G coverage are creating a network of millions of on-the-ground photo and data collectors. When image recognition software is distributed globally through smartphones (and their operators) the potential for new data and insights becomes a game-changer in emerging markets.
Recipe for Success
According to McKinsey & Company, leading CPG companies prioritize the highest-growth channels (which include local convenience stores and markets) in high-growth markets (i.e., emerging markets) and systematically reallocate resources to these channels.
Traditionally, these small businesses in emerging markets have been invisible, with only 10% of emerging-market small businesses having a digital presence. Now, thanks to the combination of smartphones and image recognition technology, these small businesses will join the global digital ecosystem. In the process, the challenges CPG brands face in emerging markets will become more evident. These challenges include effective pricing and merchandising, adapting to “glocalization,” and a lack of logistical infrastructure.
The good news is that the same technological advances making these challenges more apparent can also help CPGs overcome them.
1) Pricing and Merchandising
Leading companies use granular data to optimize their pricing and merchandising strategies. Having a grasp on pricing trends for a product’s category at a local level helps brands stay competitive.
My company, dataPlor, recently ran a test on cola brands sold in bodegas in Mexico and Brazil. We were able to activate our on-demand local networks and gather pricing and placement information for Coca Cola and Pepsi products as well as the exact geolocation and contact information for the stores carrying them.
This sort of data could help a new beverage company looking to define its own pricing or positioning strategies. It could also benefit Pepsi and Coca Cola themselves when those companies plan promotions or revisit distribution plans.
2) Branding for “Glocalization”
“Glocalization” is the practice of conducting business according to both local and global considerations. It is becoming more imperative for multinational brands as nationalistic political movements bleed into consumer preferences. CPG brands must balance the imperative to expand with attention to local purchasing behaviors.
Gathering on-location photos at retail locations provides a holistic view of what brands need to do to conquer a given market. For instance, in one photo, a brand could obtain information about shelf-space distribution, brand prevalence, pricing, brand visual aesthetic, sizing and packaging information, etc. Collecting this insight globally could soon be feasible and would provide an unprecedented view of local branding and consumption.
3) Logistical Infrastructures
Many CPGs cite unstable supply chain infrastructure and sourcing conditions as a major challenge to research and distribution in emerging markets.
McKinsey reports that a global beverage company leveraged a local workforce and image collection software to adapt its route to market. The brand saw a growth opportunity in delivering a wider array of spirits to a growing middle class in Asia. However, an antiquated local infrastructure limited the brand’s access to neighborhoods and stores in which the company needed to distribute. By activating a local workforce with motorized scooters and image collection software, the company was able to access 500 to 700 remote stores per week and validate POS data, promotional displays, and perform price checks.
As emerging markets and localization gain momentum, CPG companies need to be focused, data-driven, and agile enough to re-allocate resources to the best opportunities for growth. Image recognition technology and localized networks of smartphone operators mean CPGs have access to more data than ever before from high-growth markets.
Some companies are starting to combine these technologies such as Go-Spot-Check, Premise Data, and dataPlor, but the market is still developing. CPGs should consider the potential benefits and brand-specific applications they can leverage to take advantage of the opportunities opened up by new data.