Return on Innovation: How the CPG Industry is Using AI to Drive Meaningful Growth

Data-Driven Innovation in CPG: The ROI of AI

Walk into any grocery or retail store, and you’ll see an ever-expanding variety of consumer packaged goods (CPG) brands competing for attention and shelf space. From food and beverage to personal care to household products, this industry has long been a powerhouse of innovation — working continuously to stay ahead of shifting consumer preferences and market conditions.

For decades, CPG brands have sought consumer insights through surveys, focus groups, and large-scale research. As digital-first companies became the norm, advanced analytics enabled on-demand insights that fine-tuned product development with greater speed and precision. Today, AI is once again redefining the R&D landscape, giving leaders new tools to accelerate innovation.

The AI Advantage

AI is transforming how CPG companies conceive, test, and launch products. From optimizing ingredient formulations to predicting consumer reactions to marketing claims, brands are using data-driven insights to deliver products that resonate. This isn’t just about speed; it’s about redesigning the entire process of product development.

By training sophisticated models on diverse data sources — while keeping humans in the loop — CPG companies can streamline R&D, improve quality, accelerate time to market, and incorporate critical factors like sustainability. The result is smarter decision-making that drives both business value and consumer loyalty.

ROI vs. ROI²: Return on Innovation

Leading brands such as Coca-Cola, Mondelēz, and L’Oréal are at the forefront of data-driven product development. For years, they have relied on diverse data sources — including market reports, social media, and trend research — to understand consumer preferences. Now, AI enables them to synthesize this information, combining data science with marketing intelligence to reveal more predictive and nuanced insights.

But the big question remains: what’s the return on AI investment? At a recent industry conference, PepsiCo’s Chief Strategy & Transformation Officer, Dr. Athina Kanioura, captured the challenge: “If there is no ROI, skip it.”

Traditionally, leaders measure ROI narrowly as a direct financial return. With AI, however, that perspective is shortsighted. AI is not a single bet but an iterative process of experimentation. Instead of focusing only on immediate financial gains, companies should embrace a broader metric: Return on Innovation.

This broader view recognizes that while some AI initiatives may fail, others create exponential value. Long-term business growth and consumer value aren’t mutually exclusive. When approached strategically, AI becomes a powerful tool for measuring success not just in revenue but in resilience, consumer loyalty, and brand differentiation.

Five Steps to Maximize Return on Innovation

While every company’s journey is unique, CPG leaders can take structured steps to unlock AI’s full potential.

1. Invest in Data Collection and Prioritize Change Management
   AI is only as good as the data that powers it. Brands must integrate diverse sources — from transactions and loyalty programs to social media and surveys — into unified datasets. This foundational work is critical, especially as AI adoption accelerates: a 2024 McKinsey survey found that 71% of CPG leaders had adopted AI in at least one function, up from 42% the year before. Equally important is the human side of adoption. Employees need education, transparency, and redefined workflows to build trust and confidence in AI-enabled processes.
   
   
2. Practice Analytical Rigor and Challenge Outcomes
   AI can generate insights at speed, but not all outputs are accurate or aligned with brand values. Teams must “trust, but verify,” validating results against business reality. This is especially crucial as agentic AI — systems making decisions through machine-to-machine interactions — becomes more common. Human oversight ensures alignment with ethical standards and consumer trust.
   
   
3. Engage Functional Leaders and Break Down Data Silos
   Data fragmentation hinders AI-driven value creation. In an Informatica survey, CPG executives cited “breaking down data silos” as their top challenge. By engaging cross-functional leaders from the start and creating robust data management strategies, brands can unlock the power of connected insights across R&D, marketing, and supply chain.
   
   
4. Foster a Culture of Curiosity and Continuous Experimentation
   Curiosity fuels innovation. Research from Deloitte confirms this, finding that 73% of companies connect a curious culture with improved performance and better decisions. As AI handles more routine analysis, the value of human ingenuity only grows. By encouraging rapid experimentation and model iteration, brands can adapt quickly to evolving consumer preferences and build a sustainable competitive advantage.
   
   
5. Fail Fast, Learn Fast
   Not every experiment succeeds — and that’s okay. Harvard Business School Professor Amy Edmondson calls these “intelligent failures,” the natural outcome of thoughtful experiments in new territory. By embracing lessons from setbacks, companies can refine strategies and accelerate learning cycles. In the fast-moving world of CPG, agility matters more than perfection.

The Broader Context: Consumers in Flux

We’re all navigating an era of rapid economic, technological, and cultural change. Consumer behavior and preferences are shifting constantly, creating both challenges and opportunities. For CPG companies, the ability to respond in real time is becoming a differentiator.

AI can help brands stay close to the consumer, anticipate demand, and personalize experiences at scale. It also empowers companies to align innovation with sustainability and long-term business goals. By constantly testing, learning, and adapting, CPG leaders can build products that not only succeed in-market but also strengthen consumer trust.

A Future Built on Innovation

The promise of AI in CPG is not just faster insights or improved efficiency; it is the ability to fundamentally reshape the innovation process. By adopting a mindset of continuous learning and aligning AI with both business goals and consumer value, brands can achieve a true Return on Innovation.

The winners will be those who see AI as more than a tool. They’ll treat it as a catalyst for collaboration across functions, a driver of cultural change, and a foundation for long-term growth.

In this new era, CPG brands are not just creating products. They’re shaping experiences, building trust, and driving loyalty, powered by the fusion of human imagination and AI.