ECONOMICS PROJECT

N A M E – S Y E D S A M E E R C L A S S – X A

R O L L N O . – 2 7

WHAT IS FMCG ?

Fast Moving Consumer Goods (FMCG) – or Consumer Packaged Goods (CPG) – are products that are

• sold quickly and • at relatively low cost. Examples include non-durable goods such as soft drinks,

toiletries, and grocery items. Though the absolute profit made on FMCG products is relatively small, they generally sell in large quantities, so the cumulative profit on such products can be substantial. Hence the profit in FMCG goods always translates to the number of good sold .ITC Limited, Procter & Gamble and Unilever are the three biggest consumer goods company that operate across the globe.

The term FMCGs refers to those retail goods that are generally replaced or fully used up over a short period of days, weeks, or months, and within one year. This is either because of the high consumer demand or because they tend to deteriorate rapidly.

CHARACTERISTICS OF FMCG FROM CONSUMER’S VIEW POINT

Frequent purchaseLow involvement (little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule)Low price

CHARACTERISTICS FROM THE PRODUCER’S VIEWPOINT

High volumesLow contribution marginsExtensive distribution networksHigh stock turnover

ADVANTAGES

• Cumulative Profits• For a retailer's bottom line, the key benefit of CPGs/FMCGs is the

cumulative profit they provide. CPGs/FMCGs have low profit margins, which means that a small percentage of each each unit sale represents profit. However, CPGs/FMCGs also sell in very high quantities. This means that those small profits add up and can form a significant portion of a retailer's total profits for a fiscal period. This profit serve any number of financial purposes in the business.

• Cross Merchandising Opportunities• Retailers thrive when customers buy multiple items on each

visit. CPGs/FMCGs provide opportunities for cross merchandising, which occurs when a business places two products from different categories close to one another in a strategic arrangement. For example, an electronics retailer may sell remote controls that have high profit margins but don't fall into the CPG/FMCG category. A shelf of batteries (which are CPGs/FMCGs) next to those remotes provides a chance to boost sales and earn profit on two items when customers choose to buy the batteries they will need to operate their new remotes at the same time.

• Brand Appeal• When a retailer offers CPGs/FMCGs, it can rely on the brand

appeal that they generate to drive sales. Most CPGs/FMCGs come from brands that advertise heavily. This means that when customers see CPGs/FMCGs on store shelves they have pre-existing emotional relationships with those brands, which may not be true of the other items that the retailer sells. Seeing recognizable brands may build trust between the customer and retailer or lead to an additional purchase based on brand awareness, with no special effort from the retailer.

• Diversification• Selling CPGs/FMCGs spreads a retailer's revenue sources over a

broader spectrum of goods. The profits can help offset slow sales for other products during seasonal dips in demand or periods of reduced consumer confidence. In the category of CPGs/FMCGs, retailers can choose from among an almost unlimited range of product types including pharmaceuticals, food items, beverages, household products and disposable items. The range is so broad that some retailers, such as grocery stores and convenience markets, stay in business selling them exclusively.

DISADVANTAGES

Basically there are only three disadvantages of the fmcg :

• Since these goods are cheap in nature that is they have a low price , they are not capable of provididng immediate profit result . To obtain results a long period of time is required and the profits are cumulative in nature

• A lot of money is spent on advertizing and making the brand name popular in order to avail huge profits . This increase the cost price considerably .

• It is not possible to store these goods for future supply because these are homogenous good and are a part of the perfect competition market . Thus it is not possible to hoard these goods in expectation of higher profits in future becauese both the sellers and buyers are generally the price takers.

MARKET SHARE OF MAJOR PLAYERS

Company Hindustan Unilever ltd.

Indian Tobacco company

Nestle Britania Dabur others

Market Share

36.4 % 30 % 8.2 % 6 % 4.3 % 15.1 %

HUL ltd .ITCNestleBritaniaDaburOthers

NESTL’E- A SWISS PRODUCT

INTRODUCTION

Nestlé’s products include baby food, bottled water, breakfast cereals, coffee and tea, confectionery, dairy products, ice cream, frozen food, pet foods, and snacks. Twenty-nine of Nestlé’s brands have annual sales of over CHF1 billion (about US$1.1 billion),[7] including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stuffer’s, Vittel, and Maggi. Nestlé has 447 factories, operates in 194 countries, and employs around 339,000 people.[1] It is one of the main shareholders of L’Oreal, the world’s largest cosmetics company.[8]

HISTORY

Our history begins back in 1866, when the first European condensed milk factory was opened in Cham, Switzerland, by the Anglo-Swiss Condensed Milk Company

TAG LINES / SLOGANS

• GOOD FOOD.GOOD LIFE

GROWTH INCOME

• NESTLE markets hundreds of brands in approximately 200 countries and territories around the world . The customers have spent an estimated of 107 billion US $ on the products of the same .

• NESTLE has megabrands that generate $ 1 billion or more each year in annual retail sales. It’s economic reach is deep and sustainable .

NESTLE AS AN FMCG PRODUCT from consumer’s view point :

– it is frequently purchased– Consumer has low involvement in its purchase

(little or no effort to choose the item – products with strong brand loyalty are exceptions to this rule)

– Low price

FACTORS THAT DETERMINE IT’S DEMAND ARE:

• Brand name : nestle is a very popular brand name and trusted among most of the people. This influences its demand on a huge scale.

• Quality product : nestle is a product of standard quality having registered itself with the indian health standards and thus is trusted by all .

• Taste and preferences : the taste and preferences of a consumer affects the demand of a product hugely . Since the nestle products come in a huge variety of flavors it covers the demand of a huge percentage of the population

• Chocapic-nestle cereals just like kellogs• Magic masala/or maggi• nescafe• nestea• Panna{water}

• Price : nestle has a nominal price and thus is affordable by a huge range of people . It also follows the law of demand because of which it’s demand is more since it’s price is less.

• Population : nestle is a form of swiss tasty products which is consumed by the people of all ages , be it senior citizens or students.

• Government policy : there are no government restrictions imposed on nestle as such because of which it can produce in order to meet the demands.

• Advertisements : of all the factors mentioned advertisements are the most important determinant.