Consumer (3 of 6)

Consumer goods (FMCG)

About 8 minutes to read in full, or 1 minute for the short version belowFacts checked 30 September 2026

In one minute

Consumer goods companies make the branded food, drinks, soap, shampoo and other everyday products people buy often, and sell them through shops and distributors.

The big idea: A consumer goods company rarely sells to the person who uses its product. It sells to retailers and distributors, pays them heavily in discounts, promotions and shelf fees (trade spend), and wins by building brands shoppers choose and getting them onto as many shelves as possible. Strong brands give pricing power, which is why brand owners earn far higher margins than the grocers that sell their products.

One unit, in numbers: One case of snacks sold to a retailer, list price USD 100: USD 100 comes in, and USD 16 (16%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: 10 to 22 percent for large brand ownersRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: MediumA fair amount of money is tied up, in things like stores, stock or equipment. More on capital intensity
The number to watch: Volume, price and mixGrowth split into more units sold, higher prices, and a shift toward pricier products; always split growth this way first.

Ask this first in a case

Who is the customer (the retailer or distributor) and who is the consumer, and whose behaviour changed?

Words used above (2)

Trade spend:: Discounts, promotion funding and shelf fees a brand gives retailers and distributors.
Volume, price and mix:: The three parts of sales growth: more units, higher prices, pricier products.

The industry's other words are explained in Words to know (13).

On this page (17 sections)

How money is made

Sell branded products to retailers and distributors at a list price, minus discounts and promotion funding (trade spend).
Earn a gross margin well above what shops earn, because shoppers pay extra for a brand they trust.
Grow in three ways: volume (more units), price (higher prices) and mix (selling more of the pricier products).
Widen distribution: get more shops to stock the product, and sell more units a week in each shop.
Launch new products and pack sizes, including small low-price packs (sachets) for shoppers who buy daily with little cash.
Buy brands that can grow and sell or separate slower ones.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One case of snacks sold to a retailer, list price USD 100, in USD. Illustrative, rounded figures.
Line	Amount	ShareShare of revenue
Gross sales: the list price of one case	USD 100	100%
Minus Trade spend: discount on the invoice	USD 10	10%
Minus Trade spend: promotion funding	USD 8	8%
Minus Trade spend: listing and display fees	USD 4	4%
Minus Cost of goods: materials, packaging, factory	USD 40	40%
Minus Advertising and promotion to consumers (A&P)	USD 12	12%
Minus Overheads and distribution	USD 10	10%
What is left (contribution)	USD 16	16%

Check: USD 100 minus USD 84 of costs leaves USD 16.

So what: After USD 22 of trade spend the brand books net sales of USD 78, and it keeps USD 16 of operating profit, about 20.5 percent of net sales. Trade spend is bigger than the profit and almost twice the advertising budget, so testing the return on every promotion and fee is often the biggest profit lever.

Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Volume, price and mix
Growth split into more units sold, higher prices, and a shift toward pricier products; always split growth this way first.
Typical: Nestlé 2025: organic growth 3.5 percent, of which pricing 2.8 percent and real internal growth (volume and mix) 0.8 percent[1]
Trade spend as a share of gross sales
How much of the list price is given back to retailers and distributors.
Typical: Roughly 15 to 25 percent in many markets
A&P as a share of net sales
Advertising and promotion aimed at consumers, as a share of revenue.
Typical: About 8 to 15 percent; higher in beauty, lower in basic foods
Market share by value and by volume
The brand's share of category sales, measured from store scanner data and shopper panels.
Numeric distribution
The share of shops that stock the product. Glossary: Numeric distribution
Weighted distribution
The share of the category's sales made in shops that stock the product, so big shops count more. Glossary: Weighted distribution
Household penetration
The share of households that bought the product at least once in a year.
Rate of sale
Units sold per shop per week where the product is stocked. Glossary: Rate of sale

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

Who is the customer (the retailer or distributor) and who is the consumer, and whose behaviour changed?
Split the change into volume, price and mix: which one moved?
Which channel and region: modern trade, general trade, e-commerce or quick commerce?
How have trade spend and input costs (raw materials, packaging, currency) moved?
How do our distribution and share compare with competitors and with own brands?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Sourcing raw materials and packaging
Thin margin
Farmers, commodity traders and processors (wheat, palm oil, milk, sugar), packaging makers
Prices move with commodity markets and currencies.
Step 2: Manufacturing
Medium margin
The brand owner's own factories or contract manufacturers
Scale lowers the cost per unit; some brands also make retailers' own brands to fill their factories.
Step 3: Brand building and marketing
Fat margin
The brand owner (Nestlé, Unilever, Procter & Gamble) with advertising agencies
This is where pricing power, and so most of the margin, is created.
Step 4: Route to market: distributors and wholesalers
Thin margin
Distributors that hold local stock and send salespeople and vans to small shops on fixed routes
In the lesson's illustrative Indian shampoo pack, the distributor keeps INR 5 of an INR 100 price.
Step 5: Retailers: modern trade and general trade
Thin margin
Supermarkets, e-commerce and quick commerce apps (modern trade); small independent shops such as kiranas (general trade)
Grocers earn about 2 to 5 percent operating margin; the small shop in the lesson example keeps INR 12 of INR 100.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

Most of the profit in the chain sits with brand owners: large ones earn operating margins of about 10 to 22 percent, against about 2 to 5 percent for grocers and a few percent for distributors. The margin comes from brands shoppers will pay extra for, not from factories. When brands weaken, retailers take profit back through own brands and tougher trade terms.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Trade spend: discounts, promotions and shelf fees (taken off gross sales before net sales): 15 to 25 percent of gross sales
Cost of goods sold: raw materials, packaging, factory labour, energy: 40 to 60 percent of net sales
Advertising and promotion to consumers (A&P): 8 to 15 percent of net sales
Selling and distribution: sales teams, warehouses, trucks: 5 to 10 percent of net sales
Overheads: head office, IT, research and development: 5 to 10 percent of net sales

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

Operating margin, large global brand owners: About 10 to 22 percent of net salesApproximate range from the lesson; smaller firms are often lower.
Nestlé underlying trading operating profit margin, 2025: About 16.1 percent, down 1.1 points, on sales of about CHF 89.5 billion[1]
Hindustan Unilever, FY26 (year to March 2026): EBITDA margin about 23.6 percent on turnover of about INR 63,763 crore, with 4 percent underlying volume growth[2]
Operating margin, US household products companies: About 18.6 percent (gross margin about 51 percent)[3]
Operating margin, US soft drink companies: About 20.5 percent (gross margin about 55 percent)[3]
Own brands (private label) share of grocery value, 17 European countries: About 38.7 percent in the 12 months to early October 2025[4]

Typical cases(8)

Case prompts you might hear in this industry.

A biscuit brand in India is losing market share. Why, and what should it do?
Profits of a soft drinks company in Egypt fell last year. Find out why.
Should a shampoo brand launch in Nigeria?
Our client spends a fifth of its gross sales on trade promotions. Is that money working?
Should a global snack company buy a fast-growing healthy snack brand?
A grocer's own-brand detergent is taking share from our brand in Spain. How should we respond?
India cut the tax on our products. Should we lower the printed price, add more product per pack, or keep the gain?
Estimate the yearly market for toothpaste in Indonesia.

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Treating the shopper and the customer (the retailer or distributor) as the same person. Instead, check what each wants: the shopper wants value, the retailer wants margin and traffic.
Reporting the extra volume from a promotion without the profit. Instead, compare contribution with and without it: in the lesson's example a price cut that halved the unit margin needed volume to double just to break even.
Forgetting trade spend when explaining a margin fall. Instead, walk from gross sales to net sales first.
Ignoring cannibalization by a new launch. Instead, estimate how much of the new product's sales are new to the brand, not taken from its other products.
Assuming one route to market works everywhere. Instead, ask how shops are served in that country: chains, distributors, or both.

What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Portfolio reshaping: Mars completed its purchase of Kellanova (Pringles, Cheez-It, international Kellogg's cereals) on 11 December 2025. Big groups buy brands they think can grow.[5]
Unilever completed the demerger of The Magnum Ice Cream Company in December 2025, separating a business that needs frozen storage and transport all the way to the shop (a cold chain), so its costs work very differently.[6]
Growth came mostly from price, not volume: Nestlé's 2025 organic growth of 3.5 percent was 2.8 percent pricing and only 0.8 percent real internal growth. Cases now ask how to win back volume.[1]
Own brands keep gaining in Europe: about 38.7 percent of grocery value across 17 countries in the 12 months to early October 2025, slightly up on a year earlier.[4]
India cut GST (its sales tax) to 5 percent on many everyday goods from 22 September 2025: from 18 percent on soap, shampoo and toothpaste, and from 12 percent on some foods such as butter and ghee. Brands cut printed prices or added more product per pack.[7]
Quick commerce became a separate channel in India (Blinkit's order value rose about 95 percent in a year), so brands now plan packs, promotions and supply for these apps.[8]

Players by region(7)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Nestlé (Switzerland)
Procter & Gamble (US)
Unilever (UK)
PepsiCo and Coca-Cola (US)
Mars (US; bought Kellanova, maker of Pringles, in December 2025)
Mondelez (US)
L'Oréal (France, beauty)
Europe: Nestlé
Unilever
Danone (France, dairy and water)
Ferrero (Italy)
The Magnum Ice Cream Company (separated from Unilever in December 2025)
Middle East: Almarai (Saudi Arabia, dairy and bakery)
Agthia (UAE, water and food)
Savola (Saudi Arabia, cooking oils and food)
Global brands sold through local distributors
India: Hindustan Unilever
ITC
Nestlé India
Dabur
Britannia (biscuits)
Marico
Tata Consumer Products
Southeast Asia: Unilever Indonesia
Indofood (Indonesia, Indomie noodles)
Vinamilk (Vietnam, dairy)
Thai Beverage (Thailand)
Wilmar (Singapore, cooking oils)
United States: Procter & Gamble
PepsiCo
Coca-Cola
Kraft Heinz
General Mills
Africa: Tiger Brands (South Africa)
Global brands plus many regional firms, sold through distributors and open markets

Words to know(13)

Linked words have a fuller entry in the glossary.

FMCG or CPG: Fast-moving consumer goods or consumer packaged goods: everyday products bought often and used up quickly.
Trade spend (glossary entry): Discounts, promotion funding and shelf fees a brand gives retailers and distributors.
Gross sales and net sales: Sales at list price, and sales after trade spend (the revenue in the accounts).
A&P: Advertising and promotion aimed at consumers.
Modern trade (glossary entry): Organised chains: supermarkets, hypermarkets, convenience chains and online grocers.
General trade (glossary entry): Small independent shops, such as kiranas in India or spaza shops in South Africa.
Numeric distribution (glossary entry): The share of shops that stock a product.
Weighted distribution (glossary entry): The share of category sales made in shops that stock a product.
Rate of sale (glossary entry): Units sold per shop per week where the product is stocked.
Household penetration: The share of households that bought a product at least once in a year.
MRP (maximum retail price) (glossary entry): In India, the legal price ceiling printed on the pack, including tax.
Volume, price and mix: The three parts of sales growth: more units, higher prices, pricier products.
EBITDA margin: Earnings before interest, tax, depreciation and amortization, as a share of sales: a rough measure of operating cash profit.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Brand premium

Sources(8)

Facts checked on 30 September 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

Practise it

Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.