The Fast-Moving Consumer Goods (FMCG) sector features products that are frequently purchased and quickly sold out in supermarkets and hypermarkets. This industry is highly responsive to changes in disposable income, demonstrating substantial demand elasticity. Expected growth is driven by factors such as rising disposable incomes, beneficial demographic trends, and the expansion of organized retail in emerging markets. Additionally, the growing use of mobile internet is prompting FMCG companies to enhance their focus on e-commerce.
Sector-Specific Challenges
Poor Supply Chain Infrastructure
FMCG companies face significant challenges related to inadequate storage and transportation infrastructure, rising raw material and energy costs, and the need for efficient delivery systems. The perishable nature of many FMCG products demands regular restocking and specialized distribution solutions, underscoring the importance of a robust supply chain infrastructure.
Multiple Micro-Markets
The varying demands of different micro-markets result in diverse regional preferences. FMCG companies must effectively manage these regional differences while balancing market demands, customization requirements, and operational inefficiencies.
The Business Challenge and Journey
About the Client
The client is a global food manufacturer specializing in convenience foods and snacks, with operations across more than 15 countries.
Client Requirement
The client aimed to reduce operational costs in the Asia-Pacific region and gain insights into the latest FMCG trends. Confronted with rising premix prices due to currency fluctuations and adverse weather impacting raw materials, the client sought to optimize premix costs but lacked visibility into the primary cost drivers.
Solution Offered
To tackle these challenges, SpendEdge’s category management experts used a comprehensive research approach and engaged with key FMCG stakeholders. They collected data from proprietary sources, including industry databases, company presentations, and industry forums. This analysis allowed the client to develop effective negotiation strategies with the premix supplier and gain a deeper understanding of current FMCG trends.
Client Journey
Throughout the engagement, the FMCG client identified and analyzed critical cost drivers for premix, such as packaging, blending, transportation, wastage, quality control, and handling charges. The client also worked with the supplier to establish a mutually beneficial system for periodic reviews and price adjustments.
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Key Questions Addressed in This FMCG Category Management Engagement
- How is the market performing?
- What are the latest trends and developments?
- How is the market expected to evolve in the near and distant future?
- What are the key risks?
- What are the best procurement practices?
Results
With SpendEdge’s FMCG category management solution, the client achieved significant reductions in overhead costs through effective supplier negotiations. They also implemented a streamlined supply chain model that connected the premix manufacturer with its raw material supplier, leading to further cost savings. As a result, the client realized savings of over 5% in this category.