Consumer Goods Companies Are Gunning for Better Shelf Intelligence

As we celebrate 25 years of investing education at The Motley Fool, we're looking ahead to the next quarter century to understand key trends which will shape the fortunes of publicly-traded companies.

In the following segment, the Motley Fool Industry Focus team dives into bespoke tech services which help the biggest beverage and packaged-foods companies gain real-time insight into grocery aisle trends.

A full transcript follows the video.

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This video was recorded on June 26, 2018.

Vincent Shen: I'm going to change directions now and pivot us a little bit toward retail, both operationally and also in terms of the consumer experience. One company that you brought up, Asit, that you wanted to talk about was called Trax, which is private. Can you tell us a little bit about that?

Asit Sharma: Trax is a company which uses data science to help consumer packaged goods companies compete more effectively in the grocery market. If you've invested in companies that are beverage providers or packaged goods providers -- just to name a few, Coca-Cola, Procter & Gamble, Campbell Soup -- if you invest in these very staid and venerable names, you already know that these stocks have either flat-lined or perhaps have lost some value. The reason is that retail on the grocery shelf has become disrupted by online commerce. When I order my groceries online and then drive up and pick them up and take them away, I'm not even going into the store, so I don't see what's happening in the store. This makes it a lot harder for the big companies to compete with newer brands that are popping up and grabbing shelf space.

Now, if you are a company like Coca-Cola, you need a tool to help you understand how you need to position your products, and even replace the old manual audit process. This is the process where a field representative walks in with a clipboard -- nowadays, OK, maybe they have a tablet -- and they mark off what the inventory looks like on the shelves, they look at competitors' positioning on the shelves, they look at what's happening around the beverage space to see where the snack is on the endpoints on the shelves. All of this manual collection of data is quickly becoming a thing of the past.

Trax helps companies by using a process which is extremely interesting. A field rep now goes in and takes a picture. That picture is uploaded to a server, which then pummels the image and related images with a lot of data and provides analytics to a company like Coke to say, "Hey, not only does your order point need to be adjusted, but we noticed that this salty snack has come pretty close by in many grocery stores. Our data tells us that putting a sweeter drink on the shelf close-by might help." It provides all kinds of intelligence that the big consumer packaged goods companies haven't had access to.

Therefore, it's going to help these companies get somewhat of their edge back. In the longer-term picture -- we can talk about this on a subsequent show -- it's still sort of difficult. But, this is another, again, company using data science and analytics to help forward consumer goods.

Shen: I think this is a shield, it's a shield for these companies to navigate the fact that a lot of consumer preferences are changing. I really like this idea. It's a very elegant solution to the kind of problem that, even as a longtime follower of companies like Coca-Cola, I did not realize that they struggled with some of this reporting and inspection, for example, of the shelving for their products. Then, you find out that it can take a long time for the company to get feedback on the presentation on the shelf, how that performs at the store with the displays. These companies are very cognizant of their packaging and labels and everything, and how that changes the consumers' interaction and experience with the brand. The more immediate feedback that a company Trax can offer, that can pretty substantially impact the sales for the areas where things are optimized. It can affect growth. So, really interesting overall.

Asit Sharma has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.