Complexica Managing Director Matt Michalewicz has discussed the rise of artificial intelligence and its potential for the drinks industry at a Drinks Association webinar.
“For the liquor industry in particular, advances in Artificial Intelligence systems and Machine Learning algorithms can drive improvements in high-value areas such as trade spend and promotional planning, pricing, demand forecasting and inventory optimization, as well as multi-channel marketing and sales activities," Michalewicz (pictured above) said.
“The problem is that there has been so much technological development in the recent past, that most liquor industry participants are unaware of what’s now possible and the benefits that can be realised."
During the webinar, Michalewicz revealed how AI can help bridge the gap between “insights” and optimized decision making and gave examples of how AI can improve promotional planning, pricing, personalisation, and demand forecasting.
"If I'm in the retail environment and I'm a spirits category manager and I want to make some decisions around promoting vodka, I might ask whether Absolut is a good product to promote in December in South Australia at 25% off," he noted.
"To answer a question like that you have to predict the lift that the product will have at that price in that geography at that time of year.
"Secondly you have to predict cannibalisation - how many consumers will switch from another brand of vodka to this one that's on promotion. And in a retail environment you should also be predicting basket composition. Some products are better promotional items than others. Some products on promotion create a basket of shopping; other products, people just come in and buy a case and it cannibalises future margin until the next promotion."
In this environment, Michalewicz said digitalisation is the first step in removing cumbersome and error prone processes.
Once the process is digitalised, AI can take a plan that's been created and use algorithms to predict the performance of the plan in the market place.
Next, AI offers the ability to auto-generate a plan based on AI algorithms to find the best strategy, based on a company's objectives.
Michalewicz noted that companies are still "blind" once a process is digitalised -they don't have the ability to make predictions or create plans, unless they have an AI system to tell them how it thinks it will perform.
"Once you add AI, you increase your ability to make good decisions," he said.
He added that the goal of artificial intelligence is to learn, with users needing to feed back results from every decision and every event, so the system can build on the strength of its predictions and ensure better outcomes.
Michalewicz's latest book – The Rise of Artificial Intelligence: Real-world applications for revenue and margin growth – will be published early 2021.
All webinar attendees received the first three chapters of the book following the webinar.