The UK’s fast-moving consumer goods (FMCG) sector, which refers to items that consumers buy regularly such as bread, milk, toiletries and cosmetics, is worth more than £130 million each year, and the average UK household spends more than £70 each week on FMCG goods [1]. So, how can businesses succeed in this fiercely competitive industry?
FMCG in the UK
FMCG goods have a short shelf life, high demand, and are sold at low cost. The sector thrives on efficient supply chains and fierce retail competition and, with high consumer demand, is integral to the UK economy.
Moreover, the rise of online shopping over the last 10 to 15 years has also shaped the FMCG industry considerably. This is because it offers consumers greater convenience, and wider product selection and enables companies to develop data-driven marketing strategies to personalise customer experiences.
What is considered an FMCG business?
In the UK, you can think of FMCG businesses in three ways. Firstly, explains Ananda Ryan, Senior Vice President of Growth Strategies at consulting group Circana, there are large FMCG brands such as Dettol, Cadbury’s or Pampers, which may in turn be owned by international conglomerates.
Secondly, some FMCG businesses are in-store or private companies, which are not branded and provided by retailers. Their products might include meat, fish or ready meals at a supermarket. Lastly, some FMCG business in the UK belongs to small and medium-sized brands.
Understanding the different types of FMCG businesses is essential for informed decision-making in the consumer goods industry. It sheds light on market dynamics, consumer behaviour, supply chain complexities, competition, retailer relationships, market entry strategies, and investment considerations.
Examples of fast-moving consumer goods (FMCG)
Broadly speaking, Ryan says FMCG products can be split into two categories, edible and non-edible. The former includes all foods, whether chilled, fresh or ambient, while the latter includes consumer healthcare, pet food and toiletries.
Understanding the FMCG journey
The FMCG journey encompasses market research, production, distribution to retailers, consumer purchase and use, feedback, and replenishment. It involves supply chain management, marketing, regulatory compliance, and sustainability efforts. Brands also have to continually innovate to expand.
A typical FMCG journey might look a bit like the following:
- Market Research: Begin with thorough market research to inform product development and marketing strategies.
- Production: Move to production, ensuring quality control and optimising processes for efficiency.
- Distribution: Distribute goods efficiently to various retailers.
- Consumer engagement: Influence consumer choices and create brand loyalty through effective marketing.
- Feedback: Collect and analyse valuable consumer feedback for product improvement.
- Replenishment: Restock retailers with fresh inventory to meet ongoing demand.
- Supply Chain Management: Manage suppliers, transportation, warehousing, and inventory for a smooth flow of goods.
- Marketing: Implement advertising, promotion, packaging, and brand positioning throughout the journey.
- Compliance: Adhere to local and international regulations for safety and quality.
- Innovation: Continuously innovate to stay relevant and meet changing consumer preferences.
Growing a successful FMCG business
The first step in creating a successful FMCG business is understanding the possible market, says Ryan. Not only this, but for SMEs it might be more important to evaluate their own ability to deliver to the market. “Most SMEs are limited by what they can produce and sell, so it’s not only about forecasting the market opportunity but also understanding how to segment that market and identify the specific area where your business can sell and make a profit.”
Oato is a UK-based business that makes and sells a range of non-dairy milk products. In the early days of the business, they did not target the entire non-dairy market, but instead focused on a small segment of the market, explains Carl Hopwood, the company’s founder and managing director. “We started by trialling the product with 1,000 customers to understand the potential market demand and gather customer feedback, and then we focused on selling in our local area, around Lancaster,” explains Hopwood.
If you want to grow a successful FMCG business, one of the biggest challenges to overcome is understanding what your business can produce, and how you will balance packaging, distribution and sales to ensure that you sell what you produce.
“As an SME you don’t want to be stuck with stock – you need to sell what you make. So it’s vital that the business knows how and where the goods you produce will be sold,” says Ryan. When speed matters, using your American Express® Business Gold Card can help provide fast access to packaging, shipping and distribution services by allowing you to make upfront payments for suppliers and vendors with up to 54-day payment terms, putting more flexibility in your cash flow management¹.
Business owners must also consider how they will stand out against larger competitors to ensure that consumers see their products. Ryan offers companies the following tips to help build a successful FMCG business:
Build partnerships
One of the big challenges for businesses selling consumer goods is forecasting demand and ensuring that the business can meet demand. “Consider joining industry associations and forming partnerships so you can get access to data and reports that otherwise might be too expensive or difficult for an SME to access,” Ryan says.
Plan for distribution
Most businesses have to work hard to get their products into mainstream retailers and the best way to do this is to work on having a product that is clearly differentiated from your competitors. Focus on one or two products to begin with.
In the case of Oato, the company has avoided working with retailers, instead building partnerships with the new generation of ‘milk round’ services which has allowed the business to gradually build distribution across the UK and avoid the expense of creating its own distribution and supply chain. “The milk rounds like that we provide glass bottles and that they can clean those and reuse them, and it means we haven’t had to try and compete head to head with the major brands you’ll find in supermarkets, but we have distribution from Aberdeen down to Devon,” says Hopwood.
Have a smart marketing strategy
Businesses will not usually be able to compete with major brands with million-pound marketing budgets, but the good news is that online marketing and social media have made it easier for a young FMCG manufacturer to reach potential customers.
“If you are selling through supermarkets, they have the data that will let you run intelligent promotions for consumer goods, like discounts targeting high-net-worth shoppers or young families,” says Ryan. “Alongside that, you can use social media and online advertising to target the right market segments and locations that will drive profits."
1. The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.
Sources:
[1] UK Government, Fast Moving Consumer Goods (FMCG), 2023
