What is FMCG?
Bedrock Key Takeaways
- Fast-moving consumer goods are consumer products that tend to be sold quickly at a low cost.
- FMCG products tend to have low profit margins but they are sold at exceptionally high volumes, making them an ideal proving ground for new startups.
- Many customers prefer the convenience of buying FMCG products in-store, although e-commerce opportunities are rising globally.
Some CPG products are designed for occasional use, while others are intended for frequent use, even on a daily basis. Fresh food, candy, and even toiletries belong to the latter category — these are considered fast-moving consumer goods. These products often boast the highest sales velocity and reflect the highest growth prospects of any new product. That makes fast-moving consumer goods a major opportunity for CPG startups, if your brand can leverage sales data effectively.
What is FMCG?
Fast-moving consumer goods, or FMCG, is a category of retail products that are sold quickly, usually at low cost. The term can be applied across a variety of categories, but typically addresses consumables and non-durable household goods. Some common examples include packaged foods and beverages, toiletries, and over-the-counter drugs.
FMCGs typically have a short shelf life, due either to their high turnover or fast deterioration. For example, pre-packaged food, soft drinks, and toiletries are purchased frequently, thus increasing their sales velocity. Meanwhile, FMCGs like meats, fruits, vegetables, dairy, or baked items are perishable — they lose their freshness relatively quickly if unsold.
Where do FMCG products fit into the CPG market?
While FMCG products are part of the standard retail distribution market, there are practical distinctions that set them apart from general CPG categories. At their core, FMCG products will be used far more frequently than standard products — often daily. This is an important consideration because it enables FMCG brands to grow faster and accrue more value than other CPG brands.
As CPG experts have previously noted, FMCG markets are statistically distinct from other markets in terms of sales achievements. Let’s say that an FMCG brand sells $1 million in products that are used daily — such as perishable food or toiletries. That will have a higher impact on the brand’s long-term prospects than a CPG company selling $1 million in ingredients or condiments. This is because FMCG products are used at a faster rate than CPG items, which means customers will replace them more frequently.
What Makes for a Successful FMCG Brand?
Any successful FMCG product will typically be a low cost but high volume item. While the profit margins from such a product can be quite small, FMCGs lend themselves well to high sales velocity. If a brand can move enough volume, it can generate impressive overall profits. This makes FMCG markets an ideal proving ground for new brands and CPG startups — the low cost gives manufacturers room to experiment.
The drawback is that FMCGs tend to be highly competitive segments where the first impression is crucial. FMCG brands must have a rich understanding of their customers, category, and competition. This understanding will influence everything from promotional strategies — such as launch discounts and holiday sales — to A/B testing of attractive packaging.
What Can CPG Data Tell Us About FMCGs?
FMCG products are increasingly common among CPG retail markets. Approximately 84% of FMCG professionals feel more pressure to introduce new products than they did a decade ago. Unfortunately, these accelerated deadlines have the side effect of hindering product testing initiatives. However, this statistic, combined with evidence of the growth and diversification of CPG markets, suggests that the FMCG category holds more opportunities.
We also know that web technologies are changing the way FMCGs are promoted and marketed. Consumers commonly research FMCG products online, though most shoppers prefer the convenience of making actual purchases at brick-and-mortar stores. That still creates opportunities for brands to offer promotions through social media and other online channels.
That being said, the e-commerce potential for FMCGs could change in the near future. One Neilsen report predicts that by 2022, FMCG e-commerce growth will reach 18.4% compound annual growth rate (CAGR) while total global sales will hit $400 billion. Most of these benefits are expected to be leveraged in the developing world, while developed countries like the United States will continue to rely on a balance of in-person and online FMCG sales.
While FMCG products sell quickly, sometimes the supporting market can change just as rapidly. That’s why vendors should use visualization tools like Bedrock Analytics to gain the most valuable actionable insights from their syndicated and POS data sources. For more information, or to get a product demo, contact us today.
