December 10, 2020

Can I Get Your Input? The Use of Technology with Data & Analysis

By David A. Oksenhorn, Senior Manager, Tax & Business Services

Can I Get Your Input? The Use of Technology with Data & Analysis Food & Beverage

The food and beverage industry has always been and continues to be very alluring yet very competitive. Food and beverage companies need every advantage if they want not only to be successful but to survive. One of the ways they can obtain a strategic advantage is through technology.

Significant value is derived when food and beverage (F&B) companies successfully leverage technology to obtain better visibility and, more specifically, for their product offerings relative to their competitors. Advances in quantitative analysis of large primary and secondary data sets provides industry operators the ability to innovate at a faster cadence than previously possible. As a result, F&B companies are able to invest research and development dollars more effectively in their quest to identify new consumer preferences, and develop products that meet demand.

So, how do F&B companies realize this capability? The good news is that technology is the easy part, as solutions have become far more affordable, even for smaller operators in the space. The cost of technology to support complex data analysis has transitioned from a fixed to a variable expense as the result of software as a service licensing models and cloud-based infrastructure. The more sobering news, and in fact the true heavy lifting of a successful data analytics effort, is that it requires focus and discipline on the part of managers in rethinking the decision-making process and evaluating their approach to investment capital allocation.

Although the cost of technology has come down, accomplishing change within an organization is still difficult. As such, implementing new internal systems needed to capture the primary transaction data required for effective analytics caries hidden costs. To mitigate the costs related to change, it is vital that large technology initiatives be sponsored and driven at the highest levels of management, that implementation projects be well-managed, and that objectives be well socialized throughout the organization.

Despite more affordable technology, the cost of secondary data remains high. Syndicated data providers like AC Nielsen and IRI charge F&B companies for the point-of-sale data and composite metrics they provide. Depending on the granularity of the data needed, costs can be exorbitant and out of reach for smaller F&B companies. Despite the high cost of proprietary syndicated data, F&B companies have options for gleaning consumer insight from secondary data. Point-of-Sale (POS) consumption data is available to F&B manufacturers from their retail customers, often for free. Walmart, for example, encourages its vendors to utilize the vast trove of consumption data it collects through the company’s Retail Link portal. POS data obtained from retailers is limited to the products sold by the F&B vendor however, and as a result, is not sufficient for a holistic analysis of a category comprised of multiple competing brands. Although the cost of change management and market data can be high, its importance to effective decision support in the F&B industry should not be ignored by managers.

In the hyper-competitive F&B industry, companies need to evaluate their strategic objectives in the context of their ability to make data-driven decisions. If a company has an extremely loyal consumer base, is content with modest growth and produces a niche product with little competition, investment in technology should probably be low priority. F&B companies with modest goals are rare, however, and managers will need to continue to make hard decisions about the resources they allocate to technology investments and their approach to decision-making.

Related Industry

Food & Beverage