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Fast Moving Consumer Goods (FMCG)

​What Are Fast-Moving Consumer Goods (FMCG)?

Fast-moving consumer goods (FMCGs) are products that sell quickly at relatively low cost. 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).

They are bought often, consumed rapidly, priced low, and sold in large quantities. They also have a high turnover on store shelves. The largest FMCG companies by revenue are among the best known, such as Nestle SA. (NSRGY) ($99.32 billion in 2023 earnings) and PepsiCo Inc. (PEP) ($91.47 billion). From the 1980s up to the early 2010s, the FMCG sector was a paradigm of stable and impressive growth; annual revenue was consistently around 9% in the first decade of this century, with returns on invested capital (ROIC) at 22%.

Key Takeaways

Fast-moving consumer goods are nondurable products that sell quickly at relatively low costs.

The FMCG sector contains some of the world's best-known brands and has consistently posted returns on invested capital of over 20% for decades.

Examples of FMCGs include milk, gum, fruit and vegetables, toilet paper, soda, beer, and over-the-counter drugs like aspirin.

The FMCG industry is massive, ever-evolving, and characterized by fierce market competition, high volumes, and heavy investments in marketing.

The industry's success has been attributed to its tried-and-true formula of building strong brands, expanding into and with new markets and consumer channels, and avidly managing costs while cultivating worldwide brands. The past few years have seen the first declines in memory in the sector's sales growth—a contraction blamed (depending on the source) on post-pandemic supply-chain issues, inflation, competitive pressures (including online retail), the rise of private labels, and, perhaps most long-term, changes in consumer tastes. In 2023, for example, American consumers spent 10% more on groceries but bought 4% fewer items. That said, the industry still posted a remarkable 27% average ROIC.

The industry's success has been attributed to its tried-and-true formula of building strong brands, expanding into and with new markets and consumer channels, and avidly managing costs while cultivating worldwide brands. The past few years have seen the first declines in memory in the sector's sales growth—a contraction blamed (depending on the source) on post-pandemic supply-chain issues, inflation, competitive pressures (including online retail), the rise of private labels, and, perhaps most long-term, changes in consumer tastes. In 2023, for example, American consumers spent 10% more on groceries but bought 4% fewer items. That said, the industry still posted a remarkable 27% average ROIC.234Below we take you through this most recognizable of industries, how it works, and who the big players are.