The state of IoT adoption in the consumer packaged goods (CPG) industry

CPG organizations are learning how to consistently innovate and deploy new ideas faster by optimizing supply channels, identifying consumer trends, and utilizing various marketing and product positioning strategies at retail locations. This responsive approach to the market has helped to increase market share, consumer traction, and profitability for numerous brands and products.

In today’s market, the number of direct-to-consumer channels, disintermediation in distribution, supply issues, and attention given to a company’s environmental impact is expanding rapidly. In response, CPGs are now innovating and improving responsiveness directly within their manufacturing and distribution processes in order to ensure product availability in supply channels, minimize production disruption, lower costs and environmental impact, and optimize quality control for product safety requirements.

CPG companies are innovating with Internet of Things (IoT) technologies as well. IoT adoption has been rising for CPG orgs recently as they make, move, and market their products to end consumers, all the while redefining the clichéd perception of hypercommodified private labels and maintaining market share against emerging product brands in the market. For instance, many consumers now prioritize convenience and accessibility over brand loyalty, with roughly switching brands or retailers due to lack of product availability.

To predict and manage future disruptions, CPG firms are building more efficient supply chains by optimizing every element of the process—from planning and forecasting to distribution and beyond.

• CPGs need to drive cost efficiencies and economies of scale in their manufacturing process. Today, 54% of consumers consider themselves to be more cost-conscious than before the pandemic and 29% of shoppers report increased budget brands purchases.
• Consumers are willing to pay a 20% premium on personalized products or services. Companies can improve the brand experience by helping consumers find or customize the right product for them and by creating engaging interactions with smart, connected devices or apps.

Many CPG companies are buying and configuring IoT cloud solutions to build great brands, accelerate their organizational response to market opportunities, and drive operational efficiency with proven industry-specific innovations and solutions.

Why IoT Matters In CPG

IoT appears ready to transform the CPG industry by unlocking exponential value for brands and helping them future-proof their business. But the benefits of IoT go far beyond operational savings and cash flow. IoT provides companies with smarter operations that unify business ecosystems while creating environmentally conscious products that consumers love.

Adopting IoT technologies in the supply chain, production, and distribution is a high priority for the CIOs of CPGs around the world and their supply chain and operations peers. Our survey aims to uncover the state of adoption today, industry-wide key priorities, and the level of investment from organizations.

IoT also helps CPGs reach their Environmental, Social, and Governance (ESG) goals. As consumer trends continue to focus on sustainability, there’s never been a more important time to demonstrate environmental credentials as a CPG company.

According to McKinsey research on US consumers, around half are concerned about what product packaging does to the environment. As a result, they are willing to pay more for green products.  Furthermore, customers will continue shopping with a chosen brand if a wider range of sustainably packaged products are available. In the UK, approximately one third of shoppers have chosen a brand based on its environmental practices or stopped buying from a brand altogether because of poor environmental or ethical practices.

As our research shows, some of the biggest value areas of IoT technology are not just about environmental targets, but also targets for efficiency and output. It’s thought that operation optimization and human productivity could comprise as much as 56% of IoT economic value by 2030.

For manufacturing and CPG brands, this outlook changes everything. From data-driven coolers for intelligently managing beverage shipments to sensor-carrying packaging that tracks inventory and organizes supply chains, the next few years will be a time of serious opportunity for businesses looking to improve their operations. The market for smart packaging alone is set to be worth $61.91 billion (USD) in less than five years—for reference, that’s a CAGR of 5.87% from 2021.

From here, we could keep going on. Instead, check out the full 31-page report. It provides additional information on strategic initiatives for IoT technologies from more than 300 CPG organizations and provides insight into various segments and processes utilizing these components.

This joint DXC-AWS research report dives deep into supply chain, manufacturing, and IoT processes and solutions. Download the report here.