OVERVIEW OF THE INDUSTRY: FAST MOVING CONSUMER GOODS (FMCG)

Fast moving consumer goods (FMCG) refer to packaged consumer goods sold at low costs through strong
retail networks. The term fast moving depicts the quick turnover which are characteristic of products
classified as FMCG. The common globally accepted sub-classification of FMCGs according to product
type include: Food and beverages, personal care (hair, cosmetics, shaving products etc), health care (OTC
drugs, supplements etc) and home care products. Popular FMCG across the world include: Pepsi, Procter
& Gamble, Unilever, coca cola, Nestle SA, Heineken and SAB Miller among others. A few of the dominant
FMCG companies with operating presence in Nigeria include: Procter & Gamble, Unilever, coca cola,
Dangote flour mills, Nigerian breweries etc.

Market segments within FMCGs are usually highly competitive, with several producers often offering
similar products. As a result of the lack of differentiation, firms within the FMCG space offer competitive
prices in order to trade higher volumes and capture large market share. Hence the market of FMCGs is
described as a low margin - high volume market.

Globally, FMCGs represent a dominant and fast growing industry in most economies. As at 2017, the global
FMCG market was valued at $10 trillion. Analysts projected that the global FMCG market would grow by
a CAGR 5.4% for the period 2018 – 2025, with the value amounting to $15 trillion by 2025 (Allied Market
Research). The Asian pacific region currently represents the largest region in terms of FMCG market. This
is mainly buoyed by the increases in working population. Population growth is a major driver of growth in
the FMCG market. Increase in population, especially working population, spurs demand for FMCGs. The
increase in demand is further facilitated by development of strong distribution networks and accessibility
through e-commerce. Similarly, increase in disposable income drives demand for FMCG. Other drivers of
growth in FMCG market includes: effective advertising, improved economic policies especially with
regards to trade, internet penetration and changes in consumer lifestyle among others.

With a buoyant population to back up the consumption of FMCGs, Nigeria represents one of the largest
FMCG markets, rife with opportunities for further development. A survey on global consumption by the
World Bank in 2010 which samples 29 African countries, estimates consumption on FMCGs in Nigeria to
be the highest in Africa at about $41 bn. This is majorly attributable to the large population present in the
country, being the most populous black nation in the world. The united nation projects that the population
of Nigeria to be over 300 million by 2050. This large population represents a huge potential in terms of
market for FMCG investors to tap into, although not void of significant risks.

The FMCG scene in Nigeria is dominated by flour milling, sugar, beverage, alcohol and home care
companies. Contribution of FMCG industry to the GDP has remained relatively the same over the decade,
showing little improvement from a 4.36% contribution to 4.38% in 2018. This is attributable to stifling
macroeconomic environment noted in the country in terms of declining purchasing power, unemployment,
poor infrastructure etc. Although the country has a large population, the noticeable absence of other factors
that would drive growth in the economy such as good road networks and increase in disposable income
among others as led to the stagnation of the sector. A review of performance of major players in the industry
for the year 2018, noted a decline in revenue, profitability or both.

Table 1: Revenue of some major FMCG globally and in Nigeria

SN Key players in the FMGC industry Revenue Revenue %
(2018) (2017) Change
Players in the Nigerian industry
1. Flour mills Nigeria plc. N400.6 bn N427.5 bn (6)
2. Nigerian Breweries plc. N324.4 bn N344.5 bn (6)
3. Dangote Sugar refinery plc. N150.4 bn N204.4 bn (26)
Players in the global industry
1 Nestle CHF91.4 bn CHF89.6 bn 2
2 Procter & Gamble $66.8 bn $65.1 bn 3
3 Unilever €50.98 bn €53.72 bn (5)

The introduction of large supermarkets such as Shoprite and Spar, helped transform the structure of the
retailing network. These large supermarkets opened up malls to cater to demand for FMCG goods in
commercial areas of Nigeria such as Lagos, Abuja and Port-Harcourt. However the retailing scene for
FMCGs in Nigeria is still dominated by small convenience stores which support access to rural networks.

In terms of KPIs, FMCG players majorly look out for market share, with the dominant players controlling
a sizeable portion of the market. This is because of the competitive pricing that exists within the industry.
As a result growth in revenue, can only be pursued by increase in volume, consequently market share.
Market share is defined as the sales of a company relative to the sales of an entire industry. Another
important KPI for FMCG companies are health and safety indicators such as the number of safety related
incidents that occur within a period. FMCG companies operate a number of manufacturing plants and are
usually subjected to labor laws and HSE policies within the countries they operate. In other to avoid large
lawsuits and sanctions, they need to monitor this KPI. Other KPIs in the industry include: average time to
sell, which is an important metric useful in inventory management of a company and production efficiency
metrics in terms of managing and reducing costs.