When we talk about the most widely consumed goods in our everyday lives, we think of products like soap, detergent, etc. These goods have distinctive features and fall under the category of FMCG. FMCG stands for Fast Moving Consumer Goods, and it refers to the final goods that are consumed by households and not used in the production process of other goods. Consumption of these goods is defined as private consumption, and these are the products that are sold rapidly and at comparatively lower costs. Examples of such FMCGs are packaged foods, beverages, toiletries, over-the-counter drugs, and similar consumables. Usually, FMCGs have a short shelf-life span. Some FMCGs are highly perishable, such as meats, fruits, vegetables, dairy products, and baked goods. Other products, like toiletries, packaged foods, soft drinks, household products, etc., have high turnover rates. The revenue margin from FMCGs is relatively small, and these products are generally sold in bulk quantities to make considerable total earnings. Based on how fast the products are sold to the customers, consumer goods are also classified as Slow Moving Consumer Goods. SMCGs are those products which have a useful life of more than a year, including things such as domestic appliances, furniture, and house renovation products. These products have sluggish sales regularity and are not circling as quickly as FMCGs.

Changes in Consumer Behaviour towards FMCG Products over the Years

Consumer behaviour in recent times has switched towards convenience, which is different from the earlier days when many consumers heavily focused on opting for cheaper options. This also comes with greater emphasis on quality, value for money, flexible payment methods, and on-demand availability of products through quick delivery combined with unique shopping experiences. This is generally the case because of the rising income level of people in Bangladesh, with a boost in the rising middle-income group. Consumers are now demanding greater customisation as per their convenience. This is also backed by a greater choice of varieties as a result of globalisation. Globalisation also means that consumer lifestyle changes are now more prominent. People now generally lean more towards healthy products, which was not the case a few years back.

The situation is changing steadily as a result of these behavioural changes. The backend part of the process is where businesses offer convenience shopping, hygienic and more tailored-made products to suit the variable needs. In addition, the flexibility of payment methods, such as the increased use of debit and credit cards, has contributed to the change in behaviour. All such purchases, therefore, relating to convenience, take place through the provision of online services as consumers demand a more customised experience. This trend is expected to grow further in the upcoming years.

Key Success Factors for the Growth of the Industry:

Urban Population of the Country

The increasing urban population of the country has stimulated reasonable growth for food and consumer goods and has caused an increased need for related products. The growth of the urban population in the country has been remarkable over the years. At the end of 2021, it was 64,768,559, a 3.01% increase from 2020. According to the Bangladesh Bureau of Statistics (BBS), the urban population of the country will be 85.95 million within 2030 and 111.88 million within 2040.

Middle-Class Income Category

Urban middle-class people are expected to contribute to the growth of the fast-moving consumer goods industry. According to the Boston Consulting Group, 2 million Bangladeshis are joining the rank of the middle and affluent class per year. At present, the number of MAC is around 12 million, which is anticipated to be 34 million by the year 2025. Bangladesh Development Studies (BIDS) postulates that 20% of the total population in Bangladesh belongs to the middle-class income category, compared with 24.1% in neighbouring India. Researchers reckon that 25% of the total population will belong to the middle-class income category within 2025, and 33% will belong within 2030.

Labour Force and Participation Rate

The labour force is the total number of population who are currently employed plus the number of people who are unemployed and seeking employment. In Bangladesh, the labour force is increasing day by day. In Bangladesh, the labour force participation rate for 2021 was 39.38%, a 1.35% increase from 2020. The labour force participation rate of Bangladesh is clearly ahead of some other Asian countries. The labour force participation rate in Bangladesh was reported at 56.97% in 2021, according to the World Bank. The lifestyle of the employed population has changed, and consumption patterns too. This huge working population is a major driver of the growth of FMCGs.

production of livestock, rice, wheat, maise, sugarcane, fruits, and vegetables for FMCG companies. Moreover, the import of required raw materials not available in the local markets is cost-efficient for the geographical location of Bangladesh. Besides the availability of raw materials, low labour costs in Bangladesh are another driver of the growth of the FMCG industry. Due to low labour costs, a low cost of production is incurred, which makes Bangladesh a favourable investment destination for both foreign and local FMCG companies.

Impact of Covid-19 Pandemic on the FMCG Industry

The post-pandemic scene in Bangladesh for the FMCG industry saw many ups and downs. The industry had to face organizational issues after most companies laid off employees. However, sales situations favoured the hygiene and personal care sectors of the industry. As a result, the overall FMCG growth still increased in 2020 and 2021 even though the pandemic had massive impacts on the economic condition of Bangladesh. Even after the number of Covid-19 cases came down, the awareness it left in people still kept the sales of hygienic products up. The soap market itself grew from 2% to 35% in 2020. (7) Recent research shows that the annual demand for soaps — both for bathing and laundry—in Bangladesh is around 90,000 metric tonnes. The sales of hand sanitizers and liquid disinfectants reached beyond TK. 5000 crore. 

Along with sanitary products, the demand for basic grocery items such as rice, oil, flour etc. increased significantly during the pandemic. This is also a reason why the FMCG industry had seen a surge in growth during that period.

Impact of the Russia-Ukraine War on the Industry

 As the Russia-Ukraine scenario continues to obstruct international commerce in key items like wheat, vegetable oils, and pesticides, nations like Bangladesh are suffering substantial impacts. Players in the fastmoving consumer goods (FMCG) industry are taking precautions as a result of the crisis between Russia and Ukraine. So, the firms must battle inflation, otherwise the expenses will rise, which will reduce profit margins. Already some companies are facing this issue, however, industry experts assume this discrepancy will be normalized within 3 years. (6) But, now these challenges lead to rising FMCG prices and oil costs. Additionally, food costs have skyrocketed. Petroleum has been getting more expensive recently. The war has caused it to increase. In March 2021, the price of oil was USD 65.2 per barrel; now, that price is USD 95.8. (2) Bangladeshi consumers have to pay more for soybean oil as a result of the supply chain disruption caused by the global market. Given that the Black Sea area is where Bangladesh imports the majority of its wheat, the price of wheat flour increased dramatically. These two countries were responsible for more than half of the world’s wheat imports, according to the Observatory of Economic Complexity (OEC). For example, Bangladesh imported $1.28 billion worth of wheat in 2020, making up 2.65% of all imported consumables. (1) The majority, which cost $409 million and USD 295 million respectively, was imported, with 31.8 percent coming from Russia and 23 percent from Ukraine. (1) Likewise, imports of rapeseed, apples, pears, corn, onions, dry beans, and other agricultural products from those countries surged dramatically in 2020.

Digital Transformation of Supply Chain Management

Today’s supply chain is a series of steps that customers can take from the hands of marketing, product development, production, and distribution in the supply chain. Digital transformation breaks through those walls, and the chain becomes a fully integrated new ecosystem that is totally transparent to all. This integrated network relies on several key technologies such as integrated planning and execution systems,

logistics, autonomous logistics systems, smart procurement processes and digital inventory and spare parts management systems, and the use of advanced analytics. The result is that businesses can fully model their networks to create ‘what-if ’ scenarios and respond to supply chain disruptions and anticipate them by adapting their supply chains in real-time to changes in data.

The two biggest benefits obtained through the digital conversion of supply chain processes are increased speed and reduced costs. Raising operations to the next level of technology can significantly reduce the time it takes to make strategic decisions while improving operational efficiency and effectiveness as technological processes are built to adapt to continuously changing circumstances. The integration of supply chain processes thus enables all stakeholders at all stages of the process to access all data, which ultimately leads to more effective decision-making with the greater availability of real-time data.

Traditional supply chains rely on adding value sequentially at every stage of the value chain. In the digital supply chain model, advanced technologies such as the use of device-based intelligence, external big data sources, and intelligent supply chain software are used. This leads to an improved customer experience as deliveries can be tracked and made at the right time by preventing delays using intelligent logistics tracking. In return, the company is able to generate value and ultimately increase its profitability. An example of this is Daraz Bangladesh, which uses integrated supplier collaboration portals to provide customers’ deliveries right on time. With the advent of this new technology integration in the supply chain, the benefit to the supply chain is imminent regarding its operational efficiency and effective decision-making at the strategic level. The dynamics of the FMCG industry are always changing. The pace has become even faster with the advent of technology in this industry. It is likely to continue, resulting in exponential growth for those companies who can adapt to changing business models and thrive in an ever more volatile environment where technology will continue to play a vital role in their survival. With such changes inevitable, businesses in this industry need to use their existing resources to build better capabilities and, therefore, survive.