FAST MOVING CONSUMER GOODS (FMCG)Fast-moving consumer goods(FMCG) orconsumer packaged goods(CPG) are products that are sold quickly and at relativelylow cost. Examples include non-durable goods such assoft drinks,toiletries,over-the-counter drugs,toys,processed foodsand many other consumables. In contrast, durable goods or major appliances such as kitchen appliances are generally replaced over a period of several years. The term was coined byNeil H. Bordenin 'The Concept of the Marketing Mix' in 1965.FMCG have a shortshelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Some FMCGs such as meat, fruits and vegetables, dairy products, and baked goods are highly perishable. Other goods such as alcohol, toiletries, pre-packaged foods,soft drinks, and cleaning products have highturnoverrates.Though the profit margin made on FMCG products is relatively small (more so for retailers than the producers/suppliers), they are generally sold in large quantities; thus, the cumulative profit on such products can be substantial. FMCG is probably the most classic case of low margin and high volume business.The FMCG industry includes food and non-food everyday consumer products. They are usually purchased as an outcome of small-scale consumer decision so they are heavily supported (advertising, promotion) by the manufacturers. Typical purchasing of these goods occurs at grocery stores, supermarkets, hypermarkets etc. The manufacturers are always exploring new outlets and sales locations while the traditional retailers have introduced private label brands to capture additional profit. Every one of us uses fast moving consumer products every day.This business is based on building powerful brands and achieving a high level of distribution.Global power brands are the choice of multinational companies. Local brands can compliment these. Achieving superior distribution thorough a powerful supply chain and making sure the products are available wherever someone might want or need it. The FMCG Supply Chain is the interrelated collection of processes and associated resources It includes suppliers, manufacturers, logistics service providers, warehouses, distributors, wholesalers and all other entities that lead up to delivery to the final customer. Followed in the market through sales force activity it can help gain a high level of distribution. Market Research, consumer research, segmentation and product positioning is the compulsory homework of any company in this industry. Advertising and promotions, POS activities drive brand awareness, trial purchase and is a core activity. While TV advertising is most common new solutions are also used including internet advertisements. High budgets, creativity and detailed planning are needed.Fast Moving Consumer Goods is a classification that refers to a wide range of frequently purchased consumer products including: toiletries, soaps, cosmetics, teeth cleaning products, shaving products, detergents, and other non-durables such as glassware, bulbs, batteries, paper products andplastic goods, such as buckets. Fast Moving is in opposition to consumer durables such as kitchen appliances that are generally replaced less than once a year. The categorymay include pharmaceuticals, consumer electronics and packaged food products and drinks, although these are often categorized separately. The term Consumer Packaged Goods (CPG) is used interchangeably with Fast Moving Consumer Goods (FMCG).The largest and best known examples of Fast Moving Consumer Goods companies are Coca-cola, Unilever and Procter & Gamble. Examples of FMCGs are soft drinks, tissue paper, and chocolate bars. Examples of FMCG brands are Coca-Cola, Kleenex, Pepsi and Believe.The FMCG sector represents consumer goods required for daily or frequent use. The main segments of this sector are personal care (oral care, hair care, soaps, cosmetics, and toiletries), household care (fabric wash and household cleaners), branded and packaged food, beverages (health beverages, soft drinks, staples, cereals, dairy products, chocolates, bakery products) and tobacco.Marketing fast-moving consumer goods (FMCG) is one of the purest and most sophisticated forms of selling there is. The great FMCG-selling companies, such as Procter &Gamble and Coca-Cola, invented mass marketing almost single-handedly and grew to become multinational giants in the process. FMCG played a major rolein the rise ofconsumerism during the twentieth century and drove the development of the media from the days ofthe sponsored radio show of the 1920s. Selling FMCG provided the funds for themushrooming growth of television and the establishment of advertising agencies as a vast, lucrative industry. In the West, and now increasingly in the restof the world, almost everyone's lives are touched by FMCG.

Definition:Definitions of FMCG vary, but generally the termis used to mean brandedproducts that are: used at least once amonth; used directly by the end-consumer; non-durable; and Sold in packaged form.The main FMCG segments are Personal care toothpaste,hair-care, skincare, soap, cosmetics, and paperproducts such as tissues and sanitary towels; household care fabric wash (laundry soapsand synthetic detergents) and household cleaners (such as dish/utensil cleaners, air-fresheners and insecticides); branded and packaged food and beverages soft drinks, cereals, biscuits, snack food, chocolates, ice cream, tea, coffee,vegetables, meat, bottled water, etc.; and spirits and tobaccoCharacteristics:The following are the main characteristics of FMCGs: From the consumers' perspective: Frequent purchase Low involvement (little or no effort to choose the item) Low price From the marketers' angle: High volumes Lowcontribution margins Extensivedistributionnetworks Highstock turnover The factors which customer focuseswhile purchasing FMCG products are Price Availability Brand name Quantity Quality Packing Advertisement ReferenceWHAT SHOULD THE FMCG PLAYERS DO NOW?They should not only price their products competitively, but also offertheir ruralprospects maximum value for money spent.Theonly way out for FMCG players: putinplace an aggressive cost structure that would enable themto offer low-price and value-for-money products. But then, FMCG is a low-margin businesswith a high cost of raw materials. DISTRIBUTIONOne of the age-old problems that FMCGhas been facing globally is that of distribution. Integrating operations with your distributors and channel partners is a Herculean task. Few waysto reduce pain involved in this link: Reducing supply chain costs by reducing intermediaries -Organized retail chains have set up systemsfor inventory management and quickservicing, thereby offering the opportunity for a company/supplier to reduce distribution cost by reducing intermediaries such as wholesalers/distributors and supplying directly to the warehouse of retail chain. Increasing sales by driving channel width -The relative share of grocers to FMCG sales has dropped from over 50% in the early 90's to 35% in the late 90's. On the other hand thecontribution of chemist outlets and paan outlets has been increasing. This has beena result of both SKU's (sachets) and hardware (mini dispensers) being specifically designed to facilitate entry to these outlets and increase consumerinterface.BRAND MANAGERS TO BUSINESS MANAGERSTough market situations and a more awareand savvier demanding consumer have necessitated that yesterday's Brand Managers be transformed into Business Managers who understand consumers and can innovate and be flexible tomove with the consumer. Gone are the dayswhen brands could be made to fly with a big budget media plan, a generous dose ofbelow-the-line and above-the-line activities and constant promotions and schemes in the market.Consumers who have become demanding yet inscrutable in terms ofattitudes, outlook, moods andbehavior have rendered conventional BrandManagement tools obsolete.STRUCTURAL ANALYSIS OF FMCG INDUSTRYTypically, a consumer buys these goods at leastonce a month. The sector coversa wide gamut of products such asdetergents, toilet soaps, toothpaste, shampoos, creams, powders, food products, confectioneries, beverages, and cigarettes. Typical characteristics of FMCG products are: - The products often cater to 3 very distinct but usually wanted for aspects -necessity, comfort, luxury. They meet the demandsof the entire cross section of population. Price and income elasticity of demand variesacrossproducts and consumers. Individual items are of small value (small SKU's) although all FMCGproducts put together account for a significant partof the consumer's budget. The consumer spends little time on the purchase decision. He seldom everlooks at the technical specifications. Brand loyalties or recommendations ofreliable retailer/ dealer drive purchase decisions. Limited inventory of these products (many of which are perishable) are keptby consumer and prefers topurchase them frequently, as and when required. Brand switching is often induced by heavy advertisement, recommendation of the retailer or word of mouth.DESIGN ANDMANUFACTURINGLow Capital Intensity:Most product categories in FMCG require relatively minor investment in plan and machinery and otherfixed assets. Also, the business has low working capital intensity as bulkof sales from manufacturing take place on a cash basis.Technology:Basic technology for manufacturing is easily available. Also, technology for most products has been fairlystable. Modifications and improvements rarely change the basic process.Third-party Manufacturing:Manufacturing of products by third party vendors is quite common. Benefits associated with third partymanufacturing include (1) flexibility in production and inventory planning; (2) flexibility in controlling labor costs; and (3) logistics -sometimes its essential to get certain products manufactured near the marketMARKETING AND DISTRIBUTIONMarketing function is sacrosanct in case ofFMCG companies. Major features of the marketing function include the following: -High Initial Launch Cost:New products require a large front-ended investment in product development, market research, test marketing and launch. Creating awareness and develop franchise for anew brand requires enormous initial expenditure on launch advertisements, free samples andproduct promotions. Launch costs are as high as50-100% of revenue in the first year. For established brands, advertisement expenditure varies from 5 -12% depending on the categories.Limited Mass Media Options:The challenge associated with the launched /or brand-building initiatives is that few no mass media options. TV reaches 67% of urban consumers and 35% of rural consumers. Alternatives like wall paintings, theatres, video vehicles, special packaging and consumerpromotions become an expensive but required activity associated with a successful FMCG.Huge Distribution Network:FMCG require huge distribution network .This makes logisticsparticularly for new players extremely difficult.ENVIRONMENTAL ANALYSIS OF FMCG INDUSTRY1. Macro Environmental AnalysisDemographic Environment: Population growth has a positive impact on FMCG industry as it creates more and more demand for FMCG industry products. On the basis of world economy in terms of population there are many opportunities for FMCG products.Population Age Mix: The population age mix has impact on the variety of products that FMCG companies can provide.FMCG companies can diversify their products according to the population of age mix of market.Most of the population of the world comprises of young people with diversified income groups hence there are more opportunities for Personal Care and packaged Food Environment Expansion.Economic Environment: Increase in purchasing power of people has a positive impact on FMCG Industry; Pakistan is one of the largest economies in the world in terms of purchasing power with a strong middle class base. In Pakistan, there is no problem regarding the choice of appropriate market segment because of rapid urbanization increase in demand, presence of large number of urban population as a result of which large number of opportunities are available.But as the purchasing power of people increases the company has to create more and more innovative products.Technological Environment: Basic Technology for manufacturing is easily available. Also technology for most products has been fairly stable. Modifications and improvement rarely change the basic process but use of new and better chemicals can improve the quality if the products.Political And Legal: Government policies and legal laws has an affect on FMCG sector.Pakistan Governments policies of lifting of the quantitative restrictions reductions in excise duties and automatic foreign investment has fostered FMVG growth. Removal of the regulatory framework has allowed industry to explore every product and segment without constraints on production capacity.2. Micro EnvironmentCompetitors: Most products categories in FMCG require minor investment in plant and machinery and other fixed assets. Also, the business has low working capital intensity as bulk of sales from manufacturing takes place on cash basis as there are large numbers of competitors. There is a major threat from small scale industries in rural sector.Unilever and Procter & Gamble both are competitors of each other as the Coca-cola and pepsi.Suppliers: The bargaining power of suppliers of raw materials and intermediate goods is not very high. There is ample number of substitute suppliers available and raw materials are easily available in the marketed and most of the raw materials are homogeneous. There is no monopoly situation in the supplier side because the suppliers are also competing themselves. Consumers: As there is increase in purchasing power and knowledge of consumers demand for more wide variety of products. Consumers want more variety in personal care, packaged foods. They want different packaging prices. As a result FMCG companies have introduced wide variety of products range.Distribution Channels: For an FMCG company distribution network should be very wide. FMCG companies should provide their products in each and every big retail store to local grocery shop. Then only it can create more consumers and can maintain current consumers.Demand & Supply: Currently, only a small percentage of the raw materials are processed into value added products even as the demand for processed and convenience food is on the rise. In the personal care segment, the low penetration rate in both the rural and urban areas indicates a market potential.Conclusion:It's not hard to seejust how deeply they penetrate our domestic lives. In the post-modern West, attitudes towards FMCG are changing along with consumer behavior, and numerous lobby groups pressurize large corporations as part of ageneral attempt to foster many kinds ofsocial reform. FMCG firms are easy targets of consumer boycotts, and must pay closer attention to notions of corporate responsibility than ever before.Green issues, health issues, and fearsabout biotechnology are just a few matters that companies cannot afford to ignore. Inmuch of the developing world, however, FMCG are still welcomed as asymbol of progress towardsprosperity. Many people in Russia and China, for instance, want as much FMCG as they can get. For leading brand manufacturers, the real opportunities for growth lie in these newer markets.In the West, power has shifted from the manufacturers to the retailers, and competition has intensified. It's often a bitter struggle, as salespeople forsupermarket suppliers battle for space on theshelves and are trapped in a cycle of wasteful trade promotions that they cannot control.For the salesperson in the field, it can be difficult to get acoherent overview of what is really happening. Selling into stores haslittle to do with personal selling skills, and is focused on getting a small edge in anendless, probably unwinnable, war. That small edge, however, can translate into hefty profits for a while