Are the days of syndicated data numbered? - Focus

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Syndicated data - nearly all of us use it, and those that do rely on it for an accurate picture of the beverage industry. But, just how reliable is it, especially in a retail sector undergoing significant consumer changes?

Data companies are working on models that try to predict future performance with increasing accuracy

Data companies are working on models that try to predict future performance with increasing accuracy

That was the question thrown up last week by PepsiCo CEO Indra Nooyi. In a talk with analysts after her company's half-year results, Nooyi spoke out about the challenges facing syndicated data companies as e-commerce and home delivery increasingly elbow out brick-and-mortar sales.

This change is being led by consumer shopping habits, which, Nooyi said, are "rapidly adapting to evolving and new retail formats". From a scanner data point of view, it means that consumers are disappearing off the radar as they scurry down untracked retail holes. The industry, Nooyi concludes, is "beginning to see the limitations of syndicated data".

But, it's not just the suppliers. Analysts, too, are questioning just how complete data coverage is these days. Stifel's Mark Swartzberg tells just-drinks he agrees that data is "becoming less reliable as an indicator of beverage trends". Meanwhile, Bonnie Herzog at Wells Fargo says: "Given the changing retail landscape and the evolution of consumer behaviour in terms of where they shop and what they buy, Nielsen-tracked channel data has become less relevant today since it is not capturing several channels where volume has shifted, especially online."

So, just how bad is it? Before you cancel your subscriptions, remember that the tracking companies have been here before. Nielsen, for example, has been analysing market data for more than 90 years, so shifting consumer trends are nothing new for a company founded before the age of the supermarket.

Furthermore, they appear to be doing something about it. According to Herzog, Nielsen is "aware of the shifting consumer landscape and is adding additional channels/online to its database".

In March, Nielsen launched a dedicated e-commerce global tracker that tracks purchases delivered to homes and those that are bought online then picked up in store. According to Nielsen, this new platform gives the company 90% coverage of the US online channel.

In alcohol, Nielsen has plugged more holes in its on-premise coverage, traditionally a less-covered area of the industry due to the sheer number and smaller size of outlets in the channel. Last year, the company rolled out its first on-premise measurements for alcohol while, in the same year, it split its restaurant tracker into five sub-categories to offer a better picture of the licensed dining channel in the US.

A spokesperson for Nielsen told just-drinks: "We continue to make investments that enhance and expand our capabilities and coverage. Our focus is clear: We strive to provide total consumer measurement that presents a holistic view of the marketplace so that brands and retailers understand what is being purchased across all channels - in-store, at home and online."

The holy grail

Fellow data company IRI believes the challenge facing companies such as PepsiCo is not a lack of data - it is the headache of having too much. Speaking to just-drinks, IRI's UK MD, Dan Finke, maintains that all channels can be tracked accurately. What is important is having the right tools to read the data and make the correct decisions off the back of it, and quickly.

Technology, Finke explains, is reaching the point where it is possible to get "fast insight from lots of data, even data from multiple sources". And, we're not talking just sales data - Finke highlights input from retailers, from macro-economic factors and even from the weather. The idea is to have all of that fat data squeezed through computer analysis programmes to predict as closely as possible what will happen in the future.

"It no longer becomes a major data integration exercise," Finke says, "but about analytics and predictive modelling."

It's similar to what's already happening with the giants of industry, where companies such as Tetra Pak are starting to use cloud computing and data modelling to predict - to within 95% accuracy - when their packing machines will break down.

Focus the same technology on sales data, and the results could help transform beverage insight from one that previously studied past habits into a more forward-looking exercise.

"This is the holy grail for manufacturers and retailers," Finke says. "As such, it is an opportunity rather than a threat."

Just two weeks ago, Nielsen took its first foray into this new world. The Nielsen Connected System aims to sync as much FMCG data as possible into one platform, storing input from a range of sources on its cloud-based service. The company calls it the "next generation of interconnectivity" and, at its launch, COO Steve Hasker said it gives subscribers the ability to spot emerging trends, diagnose performance gaps and "act on opportunities to confidently move from what's happening to why to what's next".

The system represents, Hasker says, a "direct response" to the changes and shifts happening in the FMCG and retail industry. "The future is here," he adds.

The blame game

We are heading for big changes in the way the beverage industry studies data. Will it be enough to please the likes of Indra Nooyi? Possibly not, and here's why.

Scanner data has long played the role of convenient whipping boy for directors keen to pass the buck for poor results. Indeed, it was likely no coincidence that the quarterly results Nooyi was presenting when she took aim at scanner data were far from PepsiCo's finest hour.

As Stifel's Swartzberg puts it, managers can play up the increasing unreliability of scanner data, "because it allows them to obscure the ever-present question of how much disappointment is due to share trends rather than category trends".

But, as the data companies explore new boundaries and improve accuracy, will managers be forced to take the blame for their own business decisions?

You don't have to look at the numbers to know the answer to that one.

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