Summary

FMCG is considered a unique business model that requires competitive advantages in areas such as manufacturing, branding, advertising, and logistics. The key growth drivers for the consumer goods industry are the changing lifestyles, ease of access, and rapidly changing consumer habits. Consumers expect a wide array of products to be always available in local stores and online. To achieve this, consumer goods companies tie up with global supply chains that are highly efficient, agile, and sustainable. FMCG manufacturers are adopting collaborative logistics solutions that deliver products to stores faster and more cost-effectively.
The recent ecommerce boom has also been a blessing for the FMCG industry. From traditional storekeeping, purchasing, materials management, and integrated materials management, the industry is entering a new era of supply chain management. The logistics operations in FMCG businesses are typically operated on a hub-and-spoke model type with distribution hubs in major towns and cities serve both the wholesalers and retailers. Consumers are expecting fast order fulfillment through multiple channels. To make this possible, consumer goods companies outsource their logistics operations to bridge the gap between sales planning and operational processes, to improve forecasting, to streamline inventory, and to speed up delivery times.
FMCG players are expected to rely more on logistics service providers (LSPs) to meet demand from new consumption patterns. Investment in supply chain automation, expansion of exisitng manufacturing facilities, and the emergence of warehouse hubs are an essential area of focus in the current market studied. Distribution facilities and locations, along with a strong supply chain strategy, will play a critical role in the success of FMCG operators soon. To maintain a better competitive position and access key demand demographics, businesses will need to consider the location strategically to meet the growing demand.


Key Market Trends

Growing Penetration of E-commerce Demands Efficient Logistics Operations

E-commerce is reshaping the global retail market. Till date, the e-commerce boom has favored the travel sector, as well as apparel and electronics retailers. E-commerce currently contributes less than 7% of the global fast-moving consumer goods (FMCG) market. One of the key reasons for the slower uptake of online FMCG has been the logistical challenges associated with ensuring fresh and perishable products arrive at the consumer in top condition. Additionally, in advanced markets, especially those with dense populations such as Germany, many FMCG products are readily available in close proximity to consumers at brick-and-mortar stores. However, with increasing consumer demand for convenience, and better technology and other enabling conditions, online FMCG growth is accelerating across the globe. FMCG online growth will continue to outpace offline growth, and most retailers and manufacturers need Omnichannel strategies to ensure future success. Online FMCG sales are set to double globally over the next few years and will grow twice as fast in developing markets than in developed markets. The Asia region is expected to provide some of the biggest growth opportunities for online FMCG over the next five years.

The current online marketplace offers visibility of inventory status and expected delivery time and a variety of shipping options including free tracking options and easy returns. To provide free shipping, retailers need to get low-cost solutions from their logistics providers. Equally, to propose fast, including same-day delivery options to their consumers, retailers need high-priority and entirely reliable logistics services.

Asia-Pacific Registers Highest Growth Rates in the Market

As per the industry analysis, the Asia-pacific region is expected to be the fastest growing region in the current market studied. The sector has been enjoying healthy growth, driven by higher spending power among the middle-income class and declining cost of production which was a result of commoditization. The brick-and-mortar retail sector has been facing enormous competition from online shopping. While online shopping is gaining acceptance as an alternative to brick-and-mortar stores, there is a need for retailers to focus on bringing the digital experience to their physical stores. There is a good projection for the contract logistics market in China. The projection of rapid growth for the higher-end services in China and emerging markets suggests deeper changes in those economies, including greater demand for pricier consumer goods and perishable foods that require logistics management that includes better security and handling.

Southeast Asia (SEA) is rapidly becoming a choice destination for growth opportunities in the consumer goods market. In 2018 alone, SEA registered sales value growth of 3.3% as compared to 2017, and this growth is nearly double of that for the previous year. The investments are increasing in this region, consisting of a growing middle class with increased spending power. Indonesia is the largest market in the region, while the Philippines is the fastest-growing one. Due to the growing FMCG sector and positive outlook, there is huge number of opportunities for the logistics companies in terms of signing contracts with consumer goods companies to manage the latter’s supply chain. FM Logistic, headquartered in France, began construction of a new USD 30 million warehouse and distribution center in the Northern Province of Bac Ninh, 20km from Vietnam’s capital, Hanoi in April 2019. The facility is designed with the ability to store temperature-sensitive products, fast-moving consumer goods, electronic appliances, spare parts and hazardous products. The distribution center will support the development of food, retail, FMCG, industrial and cosmetics companies in the booming Vietnamese market. Similarly, back in 2018, Rhenus Logistics Vietnam signed a three-year contract with ConCung, Vietnam’s leading mother and baby products retail chain, for warehousing services and nationwide distribution. Rhenus facility offers services such as handling, storing, order picking, and dispatching. Rhenus also provide quality control monitoring on selected products, special handling and labelling, as well as providing fulfilment for the company's e-commerce business.

Competitive Landscape

The FMCG logistics market is fairly fragmented in nature with the presence of large global players and small and medium sized local players with quite a few players who occupy the market share. Most of the global logistics players has a retail and consumer goods logistics division to meet the market needs and demand. Additionally, local players are increasingly enhancing their capabilities in terms of inventory handling, service offerings, products handled, and technology. Third=party Logistics (3PL) service providers in the market compete intensely based on delivery speed, price, reliability, and supply chain capacity. By offering value-added services, companies would differentiate their service offerings. The growing e-commerce sales are creating opportunities as well as challenges to the logistics firms in terms of speed, delivery, etc. Global companies who have high assets and capital can invest in advanced storage spaces and fulfilment centers and can benefit from the above mentioned scenario. On the other hand, regional and local players are showing up with better sector solutions to support the needs of the manufacturers as well as retailers.

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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