What: Retailers and CPG firms are leveraging AI to drive faster, more effective product innovation and gain a competitive edge through end-to-end transformation.

Why it is important: The trend highlights how digital-first brands and agile players are redefining competition by leveraging AI for speed, personalisation, and first-mover advantage.

AI and GenAI are rapidly transforming the landscape of product innovation in the consumer packaged goods and retail sectors. With three-quarters of new product launches failing annually, companies are increasingly turning to AI to accelerate the innovation cycle, expand the scope of ideas, and identify concepts most likely to resonate with customers. While many firms have focused on AI for productivity and cost-cutting, the real opportunity lies in using these technologies to stimulate demand and uncover actionable consumer insights from vast, unstructured data sources. This shift is particularly crucial as inflation and agile challenger brands intensify competition, making speed and adaptability essential. AI enables faster trend detection, virtual product testing, and optimised formulation, while also automating regulatory and marketing content. However, the greatest gains are realised when companies pursue end-to-end transformation, integrating AI across the value chain and prioritising workforce upskilling. The most successful organisations invest in people and processes, recognising that technology alone is insufficient. As AI capabilities evolve, the potential for breakthrough innovation and hyper-personalised customer experiences will only grow, setting new standards for the industry.

IADS Notes: The integration of AI and GenAI is fundamentally reshaping product innovation and operational models in retail and CPG, with recent industry data confirming both the opportunities and challenges outlined in the article. As highlighted in September 2025, GenAI is driving measurable gains in supplier negotiations, assortment planning, and operational efficiency, yet only a minority of companies have managed to scale these solutions across the value chain (BCG, Sep 2025). This aligns with findings from July 2025, which show that comprehensive, end-to-end AI transformation delivers a significant performance advantage, while piecemeal adoption falls short (BCG, Jul 2025). The competitive landscape is being redefined by digital-first brands and agile players leveraging AI to spot trends and achieve first-mover status, as seen in the rise of AI-powered ecommerce platforms and the use of digital avatars in marketing (SEC Fillings, Sep 2025; Financial Times, Sep 2025). However, the full potential of AI-driven innovation depends on people-centered strategies, with September 2025 research revealing that only 36% of retail workers feel prepared for AI-driven change, underscoring the urgent need for systematic upskilling and organizational redesign (BCG, Sep 2025; BCG, Jul 2025). These developments collectively demonstrate that the future of retail innovation will be shaped by those who successfully integrate technology, talent, and process transformation.
The role of AI in reshaping product innovation