| The Characteristics of Different Kinds of Goods | |||||
|---|---|---|---|---|---|
| Characteristic | Fast-Moving Consumer Goods (FMCG) | Slow-Moving Consumer Goods (SMCG) | Consumer Packaged Goods (CPG) | Consumer Durables | Consumer Nondurables |
| Life span | Short (days, weeks) | Varies (longer than FMCG) | Varies (days to years) | Long (3+ years) | Short (under 3 years) |
| Purchase Frequency | High | Low | Medium-High | Low | Medium |
| Prices | Low | Varies (often higher than FMCG) | Varies | High | Varies |
| Profit Margin per Unit | Low | May be higher to compensate for slower sales | Varies | High | Varies |
| Sales Volume | High | Low | Medium-High | Low | Medium |
| Examples | Packaged foods, beverages, toiletries | Specialty food items, luxury goods, furniture, seasonal items | Appliances, electronics, clothing | Furniture, cars, appliances | Food, clothing, gasoline |
Durable goods have a shelf life of three years or more, while nondurable goods have a shelf life of less than three years. 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.
Everyone uses FMCGs daily. They are the small-scale consumer purchases we make at the produce stand, grocery store, supermarket, or the local CVS on the way home. Examples include milk, gum, fruit and vegetables, toilet paper, soda, beer, and over-the-counter medications like aspirin.
Nondurable goods, including FMCGs, account for more than half of all consumer spending but 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
FMCGs include several subcategories:
- 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, and nuts
- Medicines: Aspirin, pain relievers, and other medications 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
Slow-moving consumer goods, which have a longer shelf life and are purchased over time, include items like furniture and appliances.
10 Largest Fast-Moving Consumer Goods Companies By Revenue
The 10 largest FMCG companies in the world are the following (all figures in U.S. dollars, as of mid-2024):
- Nestlé: A Swiss multinational company that focuses on food and drink processing. It makes a variety of products, including candy, infant formula, bottled water, dairy products, and cereals. The company has a market capitalization of $279 billion in mid-2024 and had 2023 revenue of $99.32 billion.
- PepsiCo: An American food company that produces soft drinks and snack foods. Its market capitalization is $228 billion, and it had 2023 revenue of $91.47 billion.
- Proctor and Gamble Company (PG): Proctor and Gamble is an American consumer goods company that makes a variety of health, personal care, and hygiene products, such as soaps, fabrics, and beauty products. The company has a market capitalization of $395.32 billion and had 2023 revenue of $84.06 billion.
- JBS Foods (JBSAY): JBS Foods is a Brazilian meat processing business that sells beef, chicken, salmon, pork, as well as meat byproducts. It has a market capitalization of $11.85 billion and had 2023 revenue of $72.92 billion.
- Unilever plc (UL): Unilever is a British FMCG company that makes beauty products, cereals, energy drinks, healthcare products, and other products used daily. It has a market capitalization of $142.40 billion and had 2023 revenue of about $63.91 billion.
- Anheuser-Busch InBev SA (BUD): AB InBev is a Belgian beer company. It's the largest brewer in the world, including Budweiser. It has a market capitalization of $107.38 billion and had 2023 revenues of $59.40 billion.
- Tyson Foods Inc. (TSN): Tyson Foods is an American meat processing company that produces chicken, pork, and beef. It's behind major brands such as Jimmy Dean and Hillshire Farms. Its market capitalization is $19.43 billion, and it had $52.88 billion in revenue in 2023.
- Coca-Cola Co. (KO): Coca-Cola is an American drinks company that produces soda, sports drinks, and other beverages. It has a market capitalization of $273.94 billion and made $45.75 billion in revenue in 2023.
- L'Oréal Co. (LRLCY): A French business that makes cosmetics, including skincare, makeup, perfume, hair coloring, and hair care products. It has a market capitalization of $239.84 billion and produced revenues of $44.57 billion in 2023.
- British American Tobacco (BTI): British American Tobacco is a British company focused on cigarettes and other products that include nicotine. It has a market capitalization of $68.52 billion and produced revenues of $34.80 billion in 2023.
FMCGs, Ecommerce, and Changing Consumer Habits
In the past, popular goods for online purchase were 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 delivery logistics efficiency and shorten delivery times. Thus, the FMCG industry has been significantly influenced by the rapid growth of ecommerce and evolving consumer habits. The widespread adoption of online shopping has transformed how consumers buy their daily necessities, leading to a shift in the traditional retail landscape. Ecommerce platforms have supplied consumers with the convenience of 24/7 shopping, vast product choices, and competitive prices, forcing FMCG companies to adapt their strategies.
While nonconsumable categories will likelycontinue to lead consumable products in sheer volume for online shopping, efficiency gains in logistics have increased the use of ecommerce channels to buy FMCGs. The continuing rise in online shopping has prompted FMCG companies to invest heavily in their digital presence, including developing user-friendly websites, mobile apps, and partnerships with leading ecommerce platforms. FMCG companies have also had to rethink their supply chain and logistics networks to ensure prompt delivery of products to consumers via the main online retailers.
In addition, changing consumer habits have driven FMCG companies to diversify their products. Today's consumers are increasingly health-conscious, environmentally aware, and socially responsible, leading to a growing demand for organic, natural, and sustainable products. In response, FMCG companies have launched new product lines that cater to these preferences, such as plant-based alternatives and eco-friendly packaging.
As ecommerce continues to grow and consumer habits evolve, FMCG companies must remain agile to stay competitive in the market. This involves investing in digital technologies, such as AI and big data analytics, so that companies can dig deeper into consumer behavior and preferences. Further, companies are at least advertising how they prioritize sustainability and social responsibility to align with the values of their customers. Here are some other challenges in this area of the economy:
- Slowdown in sales growth, especially in rural areas: This can be attributed to inflation, changing consumer preferences, and increased competition from local and regional players.
- Rise of challenger brands and product personalization: New, niche brands are shifting the market by offering personalized products, catering to specific consumer preferences, and challenging established FMCG giants.
- Intensifying competition from private labels and retail consolidation: The growth of private-label brands and the consolidation of retail chains have increased competition for market share and shelf space.
- Evolving consumer preferences across different age groups: FMCG companies are having to cater to diverging preferences among other age groups, with younger consumers favoring more personalized products, while older consumers often still prefer traditional offerings.
What Are Consumer Packaged Goods?
Consumer packaged goods are the same as fast-moving consumer goods. They are items with high turnover rates, low prices, or short shelf lives. Fast-moving consumer goods are characterized by low profit margins and large sales quantities. Some products that fall within this group include soft drinks, toilet paper, and dairy products.
What Are 3 Types of Consumer Goods?
The three main consumer goods categories are durable goods, nondurable goods, and services. Durable goods, such as furniture or cars, last at least three years. Often, economists watch durable goods spending to track the economy's health. Nondurable goods are items with a shelf life of under three years and are consumed rapidly. Fast-moving consumer goods fall within this category. Finally, services include intangible services or products, such as haircuts or car washes.
What Is Return on Invested Capital (ROIC)?
It's a financial metric used to assess how effectively a company uses its funds to generate profits. It measures the returns earned on the total capital invested in the business, which includes both equity and debt.
A high ROIC indicates that the company is efficiently using its resources to produce profits, which can signal strong management and a potentially profitable investment. Meanwhile, a low ROIC may suggest inefficiencies and a weaker ability to create value.
The Bottom Line
FMCG are products that are sold quickly, consumed regularly, and typically have a short shelf life. These products are the staples of our daily lives, including food, beverages, toiletries, over-the-counter drugs, and cleaning products. FMCG are generally low-cost, high-volume products sold through various retail channels, such as supermarkets, convenience stores, and online platforms. The FMCG industry is characterized by fierce competition. Companies in this sector invest heavily in marketing and product development to build strong brand recognition and foster customer loyalty.
The sector has faced challenges in recent years because of shifting consumer preferences, market consolidation, and pandemic-era disruptions. The industry's traditional recipe for success—building strong brands, expanding with growing markets, and managing costs—has been tested by slowing population growth, changing consumer behaviors, and inflation. Yet, it maintains standout ROIC, which is why the industry has long been an investor favorite.
