Fast-Moving Consumer Goods
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 relatively low cost. Due to high consumer demand (e.g., soft drinks and candies) or perishability (e.g., meat, dairy products, and baked goods), FMCGs have a short shelf life. These products are frequently purchased, quickly consumed, low-priced, and have high sales volumes. They also have a high turnover rate on store shelves.
Origin: The concept of FMCGs originated in the early 20th century, as industrialization and urbanization accelerated, leading to a significant increase in consumer demand for daily necessities. From the 1980s to the early 21st century, the FMCG industry experienced remarkable growth, becoming a crucial part of the global economy.
Categories and Characteristics: FMCGs can be categorized into the following types:
- Food and Beverages: Such as soft drinks, candies, meat, dairy products, and baked goods. These products typically have a short shelf life and high demand.
- Personal Care Products: Such as toothpaste, soap, and shampoo. These products are frequently purchased and relatively low-priced.
- Household Cleaning Products: Such as laundry detergent and cleaning agents. These products are used frequently and have stable market demand.
Comparison with Similar Concepts: FMCGs are contrasted with durable goods, which are products with a longer lifespan and lower purchase frequency, such as appliances and furniture. The main difference lies in the usage cycle and purchase frequency.
Specific Cases:
- Nestle SA: As one of the world's largest food and beverage companies, Nestle's products range from baby food to coffee and bottled water. In 2023, Nestle's revenue reached $99.32 billion, demonstrating its strong competitiveness in the FMCG market.
- PepsiCo Inc.: PepsiCo not only produces soft drinks but also engages in snacks and cereal foods. In 2023, PepsiCo's revenue was $91.47 billion, proving its leadership in the FMCG market.
Common Questions:
- Why do FMCGs have a short shelf life?
FMCGs have a short shelf life mainly because they are perishable or in high consumer demand, necessitating quick sales and consumption. - What are the risks of investing in the FMCG industry?
Although the FMCG industry is generally stable, it faces risks such as raw material price fluctuations, intense market competition, and changes in consumer preferences.
