FMCG stands for fast-moving consumer goods and refers to products that sell quickly at a relatively low cost. These goods are also called consumer packaged goods. 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). These goods are purchased frequently, are consumed rapidly, are priced low, and are sold in large quantities. They also have a high turnover when they’re on the shelf at the store.
Consumer goods are products purchased for consumption by the average consumer. They are divided into three different categories: durable, nondurable goods, and services. Durable goods have a shelf life of three years or more while nondurable goods have a shelf life of less than one year. 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.
FMCGs account for more than half of all consumer spending, but they 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 190/- at the supermarket.
Trends in the African Market
Africa represents a huge market for Fast Moving Consumer Goods (FMCG) as a new middle class emerges with more disposable incomes. The FMCG sector in Africa also has significant scope to expand as food and other necessities dominate consumer budgets, especially in Sub-Saharan Africa. As a result, the food sub-sector of FMCG has a very large market to cater for.
Despite Africa having a population of around one billion, the continent remains relatively under-served by FMCG companies. The density of the population is another important point to consider. FMCG retailers need a steady flow of consumers purchasing their products on a daily basis, so they have to operate in a local market with a large enough size.
In 2015, there were approximately 60 urban agglomerations in Africa with a population of one million or more, of which three had a population of five million or more. By 2025, the UN expects there to be 93 agglomerations in Africa of at least one million, of which 12 are forecast to have a population of five million or more. Nigeria accounts for around a quarter of these (in terms of the number of agglomerations, not the population size).
The agricultural and manufacturing sectors are key for a country’s FMCG sector, as it is important to have a predictable and trustworthy distribution channel. This is also why many foodstuff importers in Africa and retailers opt for vertical integration, and this is particularly relevant for African countries, where distribution channels are generally weak. Secondly, Since FMCG retailers generally sell products that can be classified as necessities, income per person is a less important consideration than for retailers of luxury or durable products. The trend in income levels is however still important in order to establish what types of FMCG products can be offered to a specific market.
Overall, as it stands, informal markets dominate many FMCG sales at present. This should slowly start to change as the number of shopping malls rise, and consumers increasingly prefer the convenience that is offered by one-stop shopping at supermarkets.
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