FMCG (Fast moving consumer goods) – what is it? This abbreviation is applied to the market of consumer goods, goods whose purchase frequency is quite high, in other words, to the market of everyday goods.
The market of food and beverages, household chemicals and cosmetics, footwear and clothing, the market of toys and children’s goods, etc. are all examples of FMCG markets. – these are all examples of FMCG markets.
For the FMCG market, fierce competition and market oversaturation are far from being the only features.
Creating successful brands and running profitable business activities in such a market is somewhat more complicated and requires a specialized approach and knowledge.
Peculiarities of FMCG market
The main features of the market include:
1. High turnover of goods;
2. Low level of net profit;
3. High demand;
4. Low consumer engagement;
5. Easy substitutability of goods.
High turnover of goods
Consumers purchase FMCG market goods quite often – daily or several times a week. As a result of frequent repetition of purchases, the consumer has an already formed consumption pattern.
Low level of net income
As a result of low margins on sales of goods, producers tend to have low net profits. In such a market, there are two scenarios: low sales volumes and high profits, or low profits with high sales volumes.
High demand
FMCG products have consistently high demand from target consumers, making it easy to achieve economies of scale.
Low consumer engagement
Routine and everyday purchases, which are purchases of FMCG market goods, gradually reduce the consumer’s attention, involvement and interest in the buying process itself. Every customer seeks to minimize the time of purchase and, as a rule, makes a purchase out of habit, buying a brand he has already chosen for a long time.
Easy interchangeability of goods
A large number of goods offered on the market, create the effect of market oversaturation, in connection with which the substitutability of one good for another (goods-substitutes) is quite easy.
Complexities of branding and doing business in the FMCG market
The FMCG sector is characterized by a number of “limiting” factors that create additional difficulties in conducting business activities. These factors include:
– Massiveness of the market, makes it necessary to orient the product to many completely different consumers, as well as to manage a wide range of goods;
– The product sales chain has a complex structure, it includes a large number of intermediaries. In addition, difficulties are created by the saturation of existing sales channels and high “entry fee” for a new product name;
– High sensitivity of the buyer to prices, as well as the ease of comparison of products on the market, which blurs the boundaries between comparable products;
– The need for branding products and the development of “selling” packaging design, so that the product can be distinguished by the consumer from others;
– A large number of purchases are made by the consumer under the influence of emotion
Strategies of leading FMCG brands
All FMCG brands can be divided into three main groups in terms of their product portfolio:
- Mono-product brands – a brand under the name of which one type of product or one category of products is presented on the market, for example, Coca-Cola – a brand of soft drinks.
- Focused on 2-3 types of products – these include, for example, such brands as Wimm Bill Dann, which produces dairy products and juices, or Cadbury Schweppes, which produces not only soft drinks but also confectionery.
- Multi-product – brands producing more than 3 types of products, for example, Nestle, Procter&Gambel, Unilever and others.
In this case, a product or commodity is a strategic business unit, in the form of a separate product case, within a single product category and a single marketing communications system.
What business operations strategies are applied by leading FMCG brands?
Searching for prospects in emerging markets
Over the last 5 years, brands in the global FMCG sector have been looking for new markets. First of all, they are emerging markets – they are massive and their growth rates are twice as high as in developed countries. If the population of these countries becomes more prosperous, it is possible not only to increase the frequency of consumption, but also to shift the demand towards more expensive products.
Absorption of leaders in profitable and attractive segments
Leader takeover and restructuring a brand’s product portfolio is one of the most common methods of increasing multi-brand sales.
Alliance with competitive brands
Coca-Cola, a well-known global brand, is one of the most famous companies in the field of alliances with competitors. Not so long ago, for example, Coca-Cola created a joint product with Nestle – chocolate drink “Choglit”, and also concluded an alliance with Danone brand – a direct competitor of Nestle. Turning your direct and indirect competitors into business partners is one of the most common and effective strategies in the FMCG market.
Effective innovation management
An important factor of success in the FMCG market is the ability to bring new products to the market. Innovation also has a huge impact on the success of a brand. That is why most of the multi-brands have turned all their energies to innovations to improve the quality of products offered.
Sales channel management
Sales is one of the main tasks of FMCG brands. As a rule, such markets have complex sales chains with a large number of intermediaries.
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