The Fast-moving consumer goods (FMCGs) industry was once leading every single other industry in the market. However, we have seen the industry slowly fade away as consumers have replaced the FMCG dominance with the internet. As always, the consumer is the key to changing market trends, and the FMCG sector has suffered as a result. Hence, most FMCG companies have had to change their approach, adapting to changing consumer demands. Let us take a look at what exactly these companies do, and what the future holds for them.
What are consumer goods?
A consumer good is any commodity that is used by a consumer to satisfy their needs or wants. However, those commodities used to make other goods are known as capital goods. Food, clothes, and other final goods are good examples of consumer goods. Anything that a consumer may use to fulfill their needs or wants can be categorized into consumer goods. However, some consumer goods like food, can not be reused. On the other hand, capital goods are used repeatedly to produced further goods, and may even decrease in value over the years.
What are Fast moving Consumer Goods?
Fast-moving consumer goods (FMCG), also known as consumer packaged goods (CPG), are products that are sold quickly and at a relatively low cost. Hence, these goods have low shelf-life. By this, we mean that they require routine replacement and replenishment. Examples of FMCGs include food, beverages, clothes, tobacco, makeup, and household products.
Famous FMCG Companies
There are several famous FMCGs around the globe. Many of them are multinationals, operating in several countries at one time. Here some famous examples:
Procter and Gamble
In the following figure, we can clearly see that a few top FMCG companies like Nestle were dominating the industry as of 2018. They, along with Procter & Gamble and Pepsico remain dominant forces in the FMCG Industry.
Large FMCG companies have seen their revenue growth and operating profit growth hampered significantly in the past years. The sector faces numerous problems, as the e-commerce boom continues to eat into the profits of traditional retailers across the global market. Moreover, currencies fluctuate dramatically while geopolitical instability threatens to hit imports and exports with tariffs. As a result, while the consumer goods segment can expect global demand to rise, key developing markets have undergone periods of slower than expected growth.
The FMCG Industry and its trends
As seen by sales decline in the figure above, FMCG companies are going out of fashion. They have been replace by fast-paced e-commerce companies taking advantage of the internet and globalization. However, we are seeing certain trends developing that may lead FMCGs to return to their former glory. Here are a few:
The Importance of Digitization
In this era dominated by the internet, digitizing your business is essential. This makes your work more efficient and saves time and money. Those companies that do not adapt to the new online model tend to suffer. Moreover, digitization allows for better data collection, something that can be used in this day and age to attain a competitive advantage. This is because the collection of this data allows companies to understand consumer behaviour, predict market trends, and make strategies accordingly.
Global warming is a serious issue plaguing the world. Many individuals parry the weight of the blame towards large multinationals like these companies for their environmentally unfriendly practices. They claim that the majority of the production processes in these companies produce unnecessary waste into the environment, with problems such as dumping a serious issue. Hence, companies like Unilever and P&G are coming up with environmentally friendly policies and campaigns. They are making sure every step in their supply chain is environmentally friendly. Moreover, more companies are making a conscious effort to promote Sustainability.
Every change in market trend is brought on by the consumer. Hence, with consumers becoming more health conscious, FMCG companies have been forced to adapt. Companies producing food or beverages have been moved towards rethinking their products. It is because of this trend that products like “Coke Zero” and “Diet Coke” were introduced. There will be further changes and newer health conscious products in the future as consumers shift towards a healthier lifestyle.
Consumer convenience is key
The main reason why consumers are shifting away from FMCGs is due to the emergence of the internet. Consumers shifted there due to its convenience and accessibility. Hence, FMCG companies are adapting and taking advantage of these online platforms to make purchasing easier for customers.
What do you think the future holds for FMCG companies? Let us know in the comments below!