Fast Moving Consumer Goods

Fast moving consumer goods are products that sell quickly at relatively
low cost. These goods are also called consumer packaged goods.
FMCGs have a short shelf life because of high consumer demand (e.g.,
soft drinks and confections) or because they are perishable (e.g., dairy
products, and baked goods).

These goods are purchased frequently, consumed rapidly, priced low, and sold in
large quantities. They also have a high turnover when they're on the shelf at the store.

KEY TAKEAWAYS
• Fast-moving consumer goods are nondurable products that sell quickly at
relatively low costs.
• FMCGs have low profit margins and high-volume sales.
• Examples of FMCGs include milk, gum, fruit and vegetables, toilet paper,
soda, soft drinks and over-the-counter medicine like aspirin.
Understanding Fast-Moving Consumer Goods (FMCG)
Consumer goods are products purchased for consumption by the average consumer. They are
divided into three categories: durable, nondurable, and services.
Durable goods have a shelf life of three years or more, while nondurable goods have a shelf life
of less than three years. Fast-moving consumer goods are the largest segment of consumer
goods. They fall into the nondurable category, as they are consumed immediately and have a
short shelf life.
FMCG industry is the fourth largest sector in the Indian economy.[1] Household and personal
care products accounts for 50% of the sales in the industry, healthcare accounts for 31-32% and
food and beverage accounts for the remaining 18-19%.
Most commonly sold FMCGs
• Toiletries
• Cosmetics
• Household products
• Electronic goods
• Packaged food
Characteristics
Technology
Since the emergence of the internet, people have adopted the research online,
purchase offline (ROPO) method. As a result, FMCG companies have installed
advantaged manufacturing machines for better quality purpose and have decreased
their profit margin to match with their competitors.

Marketing drive and research

Indian customers prioritise getting the best deals possible and as a result are less likely to stay
loyal to a brand. Thus, FMCG companies are constantly trying to influence customers with their
promotional deals and many firms offer combo deals to attract customers to buy their product.

Low capital intensity

Most of the companies operating in FMCG require relatively less capital for
investments in manufacturing plants, machinery, equipment and other fixed assets.
The turnover is typically about five to eight times the invested capital at a fully
upgraded manufacturing plant. Companies have low capital intensity as
transactions in businesses are still carried out on credit and cash basis.
High initial launch cost
Unlike FMCG industry in the US which is dominated by few big companies,
India’s industry is highly fragmented. Increasing the market share for companies is
getting more challenging due to increase in number of competitors. Promotions
and advertisements, cost of product development, testing market compatibility,
market research and mainly, the launch of the product to create awareness requires
high initial costs

Increase in number of government initiatives

In the past few years, there are increasing number of initiatives like farm
loan waivers, Direct Benefit Transfer (DBT) and development of
infrastructure in rural areas. Under the Union budget 2019-2020, the focus
has been shifting towards education, agriculture, healthcare, infrastructure,
tax rebate and micro, small and medium enterprises (Ministry of Micro,
Small and Medium Enterprises). These initiatives are projected to have an
impact by increasing the minimum wages of common people, especially in
rural areas. Thus, any increment in income will be directly proportional to
demand in FMCG products.

Trend towards Natural Products

The premium end of the market is shifting towards natural products, which are
produced entirely from naturally occurring ingredients.

Rising advertisement cost by FMCG companies

FMCG companies in India have increased their expenditure cost for sales
promotions and advertisements by 10-20%. Every year, these companies invest
more and more in advertisement to establish a strong customer base and also as a
strategy to reduce market competition.

Change in Lifestyle and Culture

Change in lifestyle and traditional culture is also having a positive impact on the
FMCG industry. The population in urban areas are diverging towards premium
products as opposed to essential goods because of rise in income of the middle
class people. This has also led to FMCG companies to rethink strategies as people
as willingly to pay high prices for premium products.
Fast Moving Consumer Goods Business
Because fast-moving consumer goods have such a high turnover rate, the market
is not only very large, it is very competitive. Some of the world's largest
companies compete for market share in this industry including Coca-
Cola, Unilever, Procter & Gamble, Nestlé, PepsiCo, and ITC. Companies like
these need to focus their efforts on marketing fast-moving consumer goods to
entice and attract consumers to buy their products.
That’s why packaging is a very important factor in the production process. The
logistics and distribution systems often require secondary and tertiary packaging to
maximize efficiency. The unit pack or primary package is critical for product
protection and shelf life, and also provides information and sales incentives to
consumers.
FMCGs are sold in large quantities, so they are considered a reliable source of
revenue. This high volume of sales also offsets the low profit margins on
individual sales.

Fast-Moving Consumer Goods and Ecommerce

Shoppers across the globe increasingly purchase things they need online because it
offers certain conveniences—from delivering orders right to the door to broad
selection and low prices—that brick-and-mortar stores can’t.
In the past, popular goods for online purchase were related to travel,
entertainment, or durable goods, such as fashion and electronics. However, the
online market for groceries and other consumable products is growing as
companies redefine delivery logistics efficiency and shorten delivery times.
While non-consumable categories may continue to lead consumable products in
sheer volume, gains in logistics efficiency have increased the use of ecommerce
channels for acquiring goods, including FMCGs.