Fast Moving Consumer Goods sector explained

How companies in this sector earn

How do Fast Moving Consumer Goods companies make money?

• They sell large volumes of low-priced products through distributors to small shops, supermarkets and online stores.
• A known brand lets them charge more than unbranded rivals, so advertising is a major expense.
• Raw materials such as palm oil, wheat, milk, sugar and packaging are usually the biggest cost.
• When input costs rise, companies often raise prices or shrink pack sizes, which can slow volumes for a while.
• They usually need less factory investment per rupee of sales than heavy industries.

Who regulates it

Food Safety and Standards Authority of India (FSSAI) · Department of Consumer Affairs, for Legal Metrology rules on pack labels and weights · Central Drugs Standard Control Organisation (CDSCO), for cosmetics · GST Council, which sets tax rates on products

What moves results across the sector

• Prices of palm oil, wheat, milk, sugar and packaging materials.
• Rural spending, which depends on harvests, the monsoon and farm wages.
• Changes in GST rates on everyday products.

Words you'll meet

Key terms

Volume growth

Growth in the quantity of goods sold, with price increases taken out.

Price/mix

The part of revenue growth that came from higher prices or from selling costlier products.

Gross margin

Sales minus the cost of raw materials and packaging, as a share of sales.

General trade and modern trade

Sales through small local shops versus sales through supermarket chains and large retailers.

Direct reach

The number of shops a company's own distributors supply directly, without a wholesaler in between.