Fast-Moving Consumer Goods (FMCG) Industry: Definition, Types, and Profitability

What Are Fast-Moving Consumer Goods (FMCG)?

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

Understanding Fast-Moving Consumer Goods (FMCG)

Consumer goods are products purchased for consumption by the average consumer. They are divided into three different categories: durable goods, nondurable goods, and services. Durable goods have a shelf life of three years or more while nondurable goods have a shelf life of less than one year. 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.

Nearly everyone in the world uses fast-moving consumer goods (FMCG) every day. They are the small-scale consumer purchases we make at the produce stand, grocery store, supermarket, and warehouse outlet. Examples include milk, gum, fruit and vegetables, toilet paper, soda, beer, and over-the-counter drugs like aspirin.

FMCGs account for more than half of all consumer spending, but they tend to be low-involvement purchases. Consumers are more likely to show off a durable good such as a new car or beautifully designed smartphone than a new energy drink they picked up for $2.50 at the convenience store.

Types of Fast-Moving Consumer Goods

As mentioned above, fast-moving consumer goods are nondurable goods, or goods that have a short lifespan, and are consumed at a fast pace.

FMCGs can be divided into several different categories, including:

• Processed foods: Cheese products, cereals, and boxed pasta
• Prepared meals: Ready-to-eat meals
• Beverages: Bottled water, energy drinks, and juices
• Baked goods: Cookies, croissants, and bagels
• Fresh foods, frozen foods, and dry goods: Fruits, vegetables, frozen peas and carrots, and raisins and nuts
• Medicines: Aspirin, pain relievers, and other medication that can be purchased without a prescription
• Cleaning products: Baking soda, oven cleaner, and window and glass cleaner
• Cosmetics and toiletries: Hair care products, concealers, toothpaste, and soap
• Office supplies: Pens, pencils, and markers

The Fast-Moving Consumer Goods Industry

Because fast-moving consumer goods have such a high turnover rate, the market is not only very large, it is also very competitive. Some of the world's largest companies compete for market share in this industry including Tyson Foods, Coca-Cola, Unilever, Procter & Gamble, Nestlé, PepsiCo, and Danone. 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 as well.

As investments, FMCG stocks generally promise low growth but are safe bets with predictable margins, stable returns, and regular dividends.

Special Considerations

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.

According to a 2018 report by Nielsen, the most popular goods for online purchase are 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 the efficiency of delivery logistics and shorten their 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 FMCGs.