What is Fast-Moving Consumer Goods ?
1690 reads · Last updated: December 5, 2024
Fast-moving consumer goods (FMCGs) are products that sell quickly at relatively low cost. FMCGs have a short shelf life because of high consumer demand (e.g., soft drinks and confections) or because they are perishable (e.g., meat, dairy products, and baked goods).They are bought often, consumed rapidly, priced low, and sold in large quantities. They also have a high turnover on store shelves. The largest FMCG companies by revenue are among the best known, such as Nestle SA. (NSRGY) ($99.32 billion in 2023 earnings) and PepsiCo Inc. (PEP) ($91.47 billion). From the 1980s up to the early 2010s, the FMCG sector was a paradigm of stable and impressive growth; annual revenue was consistently around 9% in the first decade of this century, with returns on invested capital (ROIC) at 22%.
Definition
Fast-moving consumer goods (FMCGs) are products that are sold quickly and at a relatively low cost. Due to high consumer demand (such as soft drinks and candies) or because they are perishable (such as meat, dairy products, and baked goods), FMCGs have a short shelf life.
Origin
The concept of fast-moving consumer goods originated in the 20th century, with the rise of industrialization and urbanization increasing the demand for everyday consumer products. From the 1980s to the early 21st century, the FMCG industry experienced significant growth, becoming a model of stable economic expansion.
Categories and Features
FMCGs are primarily categorized into food and beverages, personal care, and household cleaning products. Their features include frequent purchases, rapid consumption, low prices, high sales volume, and high turnover rates on store shelves. FMCG products typically have a short shelf life and need to be sold quickly to avoid losses.
Case Studies
Nestle SA is one of the largest FMCG companies globally, with 2023 revenues of $99.32 billion. Its success lies in its diverse product line and extensive global market coverage. PepsiCo Inc. is also a leader in the FMCG sector, with 2023 revenues of $91.47 billion, leveraging its strong brand and innovation capabilities to maintain a significant market position.
Common Issues
Common issues investors face in the FMCG industry include intense market competition, low profit margins, and rapid changes in consumer preferences. Understanding market trends and consumer behavior is key to successful investment.
