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Notes from IRI's Reinventing CPG Summit 2004

SAN DIEGO -- The extent to which the rapid rate of change has affected the consumer packaged goods business and the retailers that it serves was best displayed in a presentation by 7-Eleven CEO Jim Keyes, in which he described how his company has become extremely proactive in the creation, development, and even manufacturing of new products that reflect his company’s view of consumer needs.

Keyes told the Reinventing CPG Summit, hosted here by Information Resources Inc., that while 7-Eleven has dramatically improved its data gathering capabilities, "leveraging the power of technology for store operators," the company's real goal is to "leverage our strengths for cutting-edge, best, first, and only products."

Remarkably, Keyes said it wasn't just being able to analyze historical data, but also being able to "make hypotheses about the future." He said that just such a case could be seen in the low-carb business, which 7-Eleven saw coming some two years ago. Keyes said that he pushed beer companies and health bar manufacturers to come up with new products that were focused on this growing trend, and while he got some resistance, these companies came around - and that the benefits are clearly seen today.

A similar example, he said, was the creation of a Diet Pepsi Slurpee, which nobody outside the company thought was a good idea. But 7-Eleven kept track of how many kids came in and bought traditional Slurpees while their moms bought diet soft drinks…and made the leap to the notion that a diet Slurpee could be a big idea. Which it has proven to be.

However, Keyes was careful to emphasize that these were collaborative efforts with manufacturers - and that the ability to analyze real time date while at the same time making the occasional leap of faith was critical to long-term success.

This was a point made from a different angle by IRI chairman Dr. Romesh Wadhwani, who said that in the current environment, CPG companies "need to build lifelong relationships with consumers." Manufacturers, he said, must shift "from treating the consumer like a transaction to treating the consumer like a relationship." And that, he said, means that CPG companies have to start thinking like retailers.
KC's View:
It also means, of course, that retailers have to start thinking like consumers…which is hardly a done deal.

One of the things that struck us during the first day of this Summit is how much technology is driving the business…even in ways that were perhaps unintended.

One of the more anticipated speakers was Ron Moser, RFID Strategy Analyst at Wal-Mart, who explained to the group what his company's commitment is to RFID technology and how it will create "total supply chain visibility."

But what caught us up short was the fact that everyone in the room was wearing a name badge equipped with an RFID tag, and that our names were being flashed on the screen as we entered the room at the beginning of the day's session.

We didn't know that this tag was on our badge…and we couldn’t help but think that this parlor trick actually illustrated one of the major concerns raised by privacy advocates about RFID. (We talked to a number of people who felt the same way; this isn't just us going all "Number Six' on you here.)

There's no doubt that RFID provides enormous benefits for the industry. But when technology drives change - as opposed to being the method by which effective consumer change can be implemented - that's when we believe that the industry risks getting itself into trouble.