Fast-moving consumer goods (FMCG)
Fast-moving consumer goods (FMCG) refer to essential items that people frequently use, often characterized by their perishable nature and limited shelf life. Common examples include everyday products like food items, household detergents, over-the-counter drugs, and personal care goods. Collectively, FMCG represents a significant portion of consumer spending, exceeding 50% of total expenditures. These goods typically feature low prices and high sales volume, resulting in lower profit margins but consistent profitability due to rapid turnover. The FMCG industry is home to major global corporations such as Procter & Gamble, Nestlé, and Coca-Cola, which rely on continuous innovation in products and marketing to maintain competitiveness. Branding and strategic marketing play key roles in influencing consumer choices, as companies strive to differentiate their products in a crowded marketplace. With an industry valuation surpassing $570 billion in 2015, FMCG remains resilient even during economic downturns, making it an essential sector for both manufacturers and retailers. Packaging, especially for perishable goods, is increasingly focused on sustainability, with a shift towards eco-friendly materials, while automation and technology are being leveraged to optimize production and reduce waste.
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Fast-moving consumer goods (FMCG)
Fast-moving consumer goods (FMCG) are essential items that people use every day, especially perishable goods with a limited shelf life, such as produce and milk, and high-turnover items, such as detergents, over-the-counter drugs, and personal care goods. They are also sometimes called consumer packaged goods (CPG). FMCG accounts for more than 50 percent of all consumer spending.
FMCG tend to be low-cost and high-volume sales items. They tend to have a low profit margin, or the amount the seller keeps, but are reliably profitable because turnover and sales volume are high. They are regarded as low-involvement purchases, which are things people use often. Consumers do not think much about the items, nor do they devote much time to sharing information about their purchases with others, as they would a new high-involvement item such as a smartphone, vehicle, or similar durable goods.
FMCG is a specialty industry. It includes some of the world's largest companies, including Procter & Gamble, Johnson & Johnson, Kraft, Nestlé, Unilever, JBS Foods, the Coca-Cola Co., PepsiCo, General Mills, British American Tobacco, L'Oréal Co., Anheuser-Busch, and Dole Foods Co. The industry relies on continuous reinvention, such as new products, marketing, and packaging, to attract consumers.
Background
Branding and marketing became important to the FMCG industries early on. For example, Coca-Cola was a powerhouse soft drink brand in the early twentieth century. Through a series of business strategies, it had bottling plants across North America, and during World War II (1939–1945), it established bottling plants around the world to meet the demands of American service members. Eventually, the company could not sell more because the market was saturated. During the late 1940s, Pepsi began making inroads in the US soft drink market by winning over some Coca-Cola customers. Pepsi sold a larger bottle of soda for the same price as Coca-Cola, cornering the market among value-conscious customers. In 1954, Coca-Cola saw an 8 percent drop in sales, while Pepsi experienced a big sales boost. Coca-Cola reacted by adding several sizes of bottles, including a 26-ounce bottle meant to appeal to the growing number of households with refrigerators. The company hired a new advertising agency to freshen the marketing of the cola. In 1960, Coca-Cola expanded from one brand when it bought the Minute Maid Company. It introduced other brands, such as Hi-C fruit drinks, instant coffee and tea, Fanta, and Sprite. It also ventured into the diet cola category, which previously had failed because the sweeteners available had a horrible aftertaste. Coca-Cola introduced Tab, a completely new brand, rather than risk the Coca-Cola brand if the diet soft drink was a disaster. In 1966, it launched Fresca, a grapefruit-flavored, calorie-free soft drink. The company finally had a big hit in the diet soft drink category. In 1967, Coca-Cola was once again the top-selling carbonated beverage manufacturer. It continued to innovate, adding products and changing packaging, such as the pop-top can. Coca-Cola's tactics turned the company's sales around.
Similar growth and innovation are evident in the evolution of soap and toiletry giants such as Colgate, Palmolive, and Procter & Gamble. For example, Colgate started selling soap and candles and added toothpaste to its product line in 1873. Seventeen years after launching Colgate toothpaste in a jar, it introduced the collapsible tube. Oral hygiene was not a priority for many people before the twentieth century. The company sent millions of tubes of toothpaste and brushes to American schools, with hygienists to demonstrate to students how to brush their teeth. This new packaging and public outreach boosted sales as more people began to brush their teeth regularly. At the start of the twentieth century, Procter & Gamble (Ivory) and BJ Johnson Soap Company (Palmolive) were heavily competing for dominance in the soap market. Ivory had a head start and was very successful, so BJ Johnson owner Caleb Johnson turned to creatively marketing his innovative soap bars made using palm and olive oils. His advertising team created an entirely new category, luxury soap, to sell Palmolive. The company sold its luxury soaps with promotions such as buy two, get one free to gain customers on tight budgets. The product's phenomenal success led BJ Johnson to change its name to the Palmolive Company in 1917.
Overview
The FMCG industry market size is valued at more than $110 billion. Because people need and use many of these items, such as toilet paper and soap, every day, the industry does not lose much business even during economic downturns. Manufacturing and retail jobs associated with FMCG also are fairly steady.
To increase sales, brands often compete with one another for the steady pool of available customers. For example, the amount of toilet paper needed in a country varies very little, so to sell more of its product, a company must gain customers who have been buying other brands. This underscores the importance of marketing and brand reimaging. Marketers must convince consumers that a brand is better than other nearly identical brands. The company may emphasize value, quality, image, or other aspects of the product to appeal to consumers.
Manufacturers and retailers employ a variety of methods to boost sales of FMCG. These may include securing prime product placement on shelves, offering coupons, or advertising special sales. Packaging is an important consideration, especially for produce, which must be kept clean and safe for consumption. It must also appeal to the consumer. In modern times, producers have recognized the importance of packaging to consumers. Many have introduced greener packaging, such as recyclable materials or less plastic.
Another way producers gain customers is through pricing. The ability to produce a quality product for less allows the producer to sell it at a lower price. Companies that process fresh foods, such as produce and meats, are increasingly turning to automation to lower production costs. Improved technology ensures fruit, for example, is handled gently and cradled in its packaging so it is not damaged to reduce waste. On-site packaging, such as mobile canning facilities, allow producers to preserve foods before they spoil and get products to market rapidly.
Manufacturers may also gain customers when they target emerging and foreign markets. Trade negotiations, for example, often help a company gain a foothold in another country. Soft drink companies have vigorously pursued customers in emerging markets, such as Russia, China, India, and various countries in Africa. Soap manufacturers have purchased foreign manufacturers and converted their production to the new product, often selling them under existing foreign brand names.
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