Snackmaker Mondelez Modernizes the Impulse Buy with Sensors, Analytics

October 11, 2013, 3:13 PM ET

Snackmaker Modernizes the Impulse Buy with Sensors, Analytics

By Clint Boulton

Snacks are the ultimate impulse buy. Mondelēz International Inc., maker of Cadbury chocolates, Trident gum and other items found next to the cashier or in the cookies aisle, is hoping to crack that impulse wide open with new displays pairing sensors with analytics. The company is building “smart shelves,” new display units located by checkout counters, that will use sensor technology to identify the age and sex of the would-be snacker, analytics to determine what type of guilty pleasure best appeals and a video display to deliver custom advertisements. “Knowing that a consumer is showing interest in the product gives us the opportunity to engage with them in real-time,” said Mondelēz CIO Mark Dajani said.This approach to personalizing with technology the impulse buy comes as the company continues to be challenged by the macroeconomic slowdown where potential snackers may cut down on non-necessary food items. The company has also faced sales execution issues in India, Russia and Brazil. The countries are part of a developing market segment that Mondelēz said accounts for more than 40% of the company’s sales.

The smart shelves represent the latest–and possibly tastiest–example of the so-called Internet of Things, where everyday objects, outfitted with sensors, can tell businesses more about their customers and how their products are being used.Gartner Inc. predicts that net revenue generated by the Internet of Things will top $1.9 trillion dollars in 2020.  Today sensors are found in everything from cars, to clothes and dumpsters.

When the smart shelf, now in prototype, goes public in 2015, the hope is that they will deepen the company’s understanding of the customer. “When people walk by, it’s a missed opportunity,” Mr. Dajani said. “We must know how the consumer behaves in the store.”

Here’s an example of how it could work. Sensors determine that a male teenager is standing in front of the shelf by analyzing facial structure and other characteristics used to determine age and gender. The sensors use this data to alert the display to feature something that a teenage boy is more likely to buy, such as gum or a chocolate bar. The shelves also use sensors based on Microsoft Corp.’s gesture-based Kinect for Windows technology and if the boy looks at the shelf long enough, the shelf’s display may play a video targeted for his demographic. Product weight sensors will know when and what product has been picked off of the shelf. If the boy has picked up Cadbury bar, the display could show a coupon to boost incentive.

The shelf will relay data in bulk to Mondelēz, whose engineers will analyze it with software. It isn’t clear what software will be used, although Mr. Dajani said it could be SAP AG’s Hana database.  The system will compose vast anonymous profiles of consumer interactions with products, using the aggregate data on age, gender and product choice. For example, the analytics may conclude whether teenage girls prefer certain brands of gum, or whether middle-aged men cotton to Triscuits. Mr. Dajani said that collecting this data can be a powerful indicator of brands that are well placed — or not — in stores. Ideally, this will help the retailer change product placement, remove products, and target in-store promotions. “Knowing that 500 people picked up the product helps determine if the smart shelf placement in-store is optimal to drive traffic,” he said.

A smart shelf that determines age and gender might sound a little creepy to some folks. Mr. Dajani said smart shelves will respect peoples’ privacy because it won’t capture photos, video or any personal information of people. In fact, it won’t take real images of people at all; rather, it will compose avatar-like models of a person’s face to determine age and gender. To ensure privacy, the smart shelf software cannot recognize individual faces and the company will not keep database to match faces against.

Alexia Howard, a financial analyst who tracks Mondelēz at Sanford Bernstein & Co. LLC, said smart shelves could boost consumer loyalty, reduce the instances of out-of-stock products and improve supply chain efficiency. “Being a first mover in such capabilities could provide a lasting strategic advantage, especially in winning over new consumers in these markets,” Ms. Howard said.

John Davison, a Gartner analyst who covers retail technologies, said that although smart shelves have been around for more than a decade, pairing shelf sensors with analytics to better understand consumer behavior data is novel, and should help Mondelēz and its retailer partners gain valuable insight about how to place products and boost sales. “It could influence how [they] sells their products,” he said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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