It has been a significant period since the advent of ChatGPT and other generative AI tools, which have transformed the landscape of AI usage across various industries. In the chemical industry specifically, McKinsey experts estimate that gen AI has accelerated human performance by a decade on average. No industry remains untouched by gen AI, yet adoption levels vary. The chemical industry, while cautious, holds significant untapped potential using generative technologies.

Unlock the Power of Gen AI in the Chemical Sector

Chemicals and AI: An Overview

The chemical industry is crucial in the global economy, facing market forces that demand new thinking. "Gen AI" processes diverse data to aid synthesis and content generation. It complements traditional AI and has the potential to transform the industry, reducing entry barriers and reshaping competitive landscapes. However, risks such as accuracy and security must be accounted for.

Amazon's significant investment in technology contrasts with the relatively lower spending of the US chemical industry. The industry's slow innovation is due to its asset-heavy nature and regulatory considerations. But gen AI offers a leap forward, making insights and creative processes more accessible.

The AI Opportunity in Chemicals

Innovation in the chemical industry has been sluggish. Gen AI presents a substantial opportunity by enabling new ways of generating hypotheses and enhancing operations. It helps companies, especially those with below-average performance, and is reshaping competitive landscapes. The 11 use cases across three chemical domains have significant near-term impact potential.

For example, in commercial functions, gen AI can reduce time for new applications, increase new customer growth, and enhance strategic account management. In R&D, it accelerates molecule discovery and formulation, and in operations, it improves maintenance and productivity.

Commercial

The chemical commercial cycle ranges from customer identification to repeat purchases. Gen AI has various use cases, such as new applications discovery, new customer acquisition, and strategic account management.

For new applications, gen AI analyzes vast data to identify potential markets and reduce time. In customer acquisition, it streamlines the process and refines customer profiles. In strategic account management, it provides broader business context and specific opportunities.

Research and Development

Today, R&D in chemicals takes a long time and requires significant funding. Gen AI tools promise to accelerate the innovation cycle through faster discovery and formulation.

Foundation models in R&D can be data-efficient and optimize research. For example, a chemical company used gen AI to identify new coating molecules and reduce customization costs. Gen AI also enhances knowledge extraction and collaboration among scientists.

Operations

Chemical manufacturing processes generate vast data that are difficult to analyze. AI-powered models can improve maintenance, productivity, and supply chain optimization.

For predictive and efficient maintenance, gen AI combines internal and public data to create FMEA and identify anomalies. In operational productivity and throughput, real-time process optimizers and control room copilots enhance decision-making. In supply chain optimization, AI generates insights and automates processes.

Harnessing the Potential: How to Capture Value from AI in Chemicals

Many chemical companies are in the early stages of their AI journeys. They need to act quickly, plan with key players, and transform across multiple dimensions.

This includes developing a strategic road map, managing talent, optimizing the operational model, building technology infrastructure, establishing a data foundation, and implementing change management. The companies that benefit most will be those with data and those leveraging AI to close the gap.

The chemical industry plays a critical role in various products and processes. The alignment of digitalization, technical capabilities, and scientific expertise with AI application will lead to significant value creation. Those that act quickly will gain an edge in the near and long term.

Latin America's grocery retail sector has witnessed a remarkable turnaround after a period of volatility. From battling the COVID-19 pandemic to dealing with inflation and rising joblessness, the sector is now showing signs of stability. However, challenges persist, and our latest report highlights four key trends that grocery retailers across the region must address. In this article, we will explore these trends and how leading retailers are responding to them.

Unlock the Future of Latin America's Grocery Retail

Trend 1: The Persistence of Value Seeking

Since 2020, consumer purchasing power in Latin America has declined by approximately 25%. Inflation has been on the rise at a compound annual growth rate (CAGR) of 6%, while GDP has grown only 1% annually. As a result, consumers have become more savvy shoppers, using a combination of channels and seeking better value. They are prioritizing essentials like food and beverages over discretionary items. Interestingly, consumers are also shifting their spending within categories. While reducing spending on "mainstream" brands (with a price index between 80% and 120% of the category average), they are increasing spending on private-label, economy, and premium brands (with prices above 120% of the category average). This indicates that consumers are being cautious but also willing to splurge selectively, presenting an opportunity for consumer goods brands to find new consumption occasions and build customer loyalty.

For example, in a survey conducted across various Latin American countries, it was found that 60% of consumers are now more likely to compare prices across different channels before making a purchase. This shows their increased focus on getting the best value for their money.

Trend 2: The Drive for Value and Convenience in Channel Transformation

Consumer demand for value and convenience is gradually transforming the preferred retail channels in Latin America. Modern channels, including supermarkets, hypermarkets, discounters, wholesalers, and health and beauty stores, are becoming the primary choice for household consumption in most countries, accounting for more than 50% of value share. Although traditional channels still dominate in some countries like Bolivia, Honduras, and Peru, the share of small stores in household spending has decreased by 1.5 percentage points from 2022 to 2023, while modern channels' share has increased by 1.8 percentage points during the same period. E-commerce's share has remained relatively stable, but online sales have increased in six out of the 14 countries analyzed.

One notable example is in Brazil, where discounters have seen a significant increase in market penetration. In regions where discounters' market penetration exceeds 75%, their share of total spending has accelerated to more than 25%, compared to just 3 to 7% in areas with lower penetration. This shows the growing importance of discounters in the Latin American grocery retail landscape.

Trend 3: The Continued Growth of Private-Label Brands

Private-label brands are also benefiting from consumers' ongoing search for value. As the perception of their quality improves and they become more widely available, shoppers are expanding their purchases beyond traditional home-care items to include nonperishable food, dairy, and personal care items. The progress of private-label share varies by country. Colombia and Mexico are the largest private-label brand markets in terms of sales value, and spending on private-label brands has almost tripled in Ecuador between 2019 and 2023. However, in Brazil, sales have decreased, likely due to slower discounter expansion and the presence of a large number of wholesalers offering leading brands at lower prices.

In a study of grocery stores in several Latin American countries, it was found that private-label brands now account for an average of 25.9% of sales in discount stores. In Colombia and Ecuador, private-label brands are becoming dominant in all categories at discounters, suggesting potential for further growth in other countries.

Trend 4: The Resurgence of the Digital Channel

While modern channels are gaining prominence and traditional channels remain widespread, e-commerce's share in total home consumption is still relatively small at just 1% in 2023. However, this masks significant underlying growth. Digital sales have rebounded in 2023 and have quadrupled in size over the past five years. Personal care has the highest online share and growth, followed by nonperishable foods and beverages and dairy products and home-care items.

In Brazil, for instance, e-commerce sales reached $762 million in 2023, driving a 21% increase in regional sales value. This growth is being driven by the expansion of e-retailers and their platforms, which are providing more convenient shopping options for consumers.

How Leading Grocery Retailers are Responding

Top-performing grocery retailers are taking proactive measures to address these shifts in consumer behavior. Their actions focus on three key dimensions: evolving strategic positioning, transforming the core of their business through digitalization and technology adoption, and expanding into adjacent businesses to diversify revenue sources.

For example, retailers are modifying store formats to offer essential items in high-traffic areas with a limited assortment. They are also developing private-label brands to compete with discounters and leveraging data and AI across the retail value chain to increase sales and margins. Additionally, they are building ecosystems to enter new businesses and expand the range of goods and services available to customers.

In conclusion, while the region's economic stabilization provides an opportunity for retailers to catch their breath, they must continuously adapt to the four trends driving grocery retail in Latin America. By leveraging the power of data and taking strategic actions, retailers can not only survive but also thrive in this new era.