… and how does the consumer goods industry benefit from master data management?
One of the most common questions that come up in conversation at conferences or in business meetings is: “What is the difference between CPG and FMCG?” The short answer is that CPG is the acronym for consumer-packaged goods and these products encompass the most common and frequently purchased items by consumers. FMCG is a subset of CPG that is focused on the fastest moving items, i.e., fast-moving consumer goods. Below we will further detail the key industry terms and explain the importance of data and master data management for CPG companies.
What is CPG?
Consumer-packaged goods are the products that are purchased frequently by most households. CPG products are bought many times in a year and need to be continuously replenished. Commonly purchase categories include food, beverage, health care, beauty care and household cleaning. In contrast, durable goods (like ovens and bicycles) have lengthier usage lifespans of months or years while CPG products typically last days or weeks. Furthermore, CPG companies are the manufacturers that procure, develop, produce, market and supply products to retailers and through other sales channels.
Key elements of CPG products from Universal Marketing Dictionary:
- Sold in smaller packages
- Carry a lower unit price
- Distributed through food and drug retailers
- Are heavily promoted
- Bought and consumed frequently
What is FMCG?
FMCG is an acronym for fast-moving consumer goods. These products are a subset of the CPG products. FMCG products sell very fast at retail and need frequent replenishment and restocking. These products may have a lower cost than CPG products. Products in this category are either perishable such as packaged salad, popular beer or wine and move very quickly. A common measure in the industry is Days of Supply which describes the inventory units held on shelf relative to the units sold per day. For example, certain categories such as beer cases or specific snack categories such as potato chips may have less than one day of supply demonstrating the sales velocity and making these some of the best examples of FMCG products.
Categories that fall under FMCG definition (not exhaustive):
- Beverages: wine, beer, water, juice, soft drinks
- Health & beauty: dental care, hand and body lotion, vitamins and supplements
- Snacks: salty snacks, cookies, crackers
- Dairy: milk, eggs, cheese
The role of data at CPG companies has evolved
Traditionally, CPGs have a very linear approach to production, marketing, and sales in partnership with retailers to gain store distribution for the end consumer. The focus has been on launching new products, supply chain optimization, category, and consumer knowledge and, finally, catering to the needs of key retailers. Most of the effort on data has been in understanding the consumer and the evolving market and melding that information to deliver insights to the retail partners. For years, the CPGs’ data backroom, including master data management (MDM) and product information management (PIM), and digital asset management (images, videos, brochures) have been a lower priority.
With the consumer adoption of digital buying behavior and increase in ecommerce, marketplaces and other digital channels – it is has become necessary for CPGs to transform their business and develop an integrated data model on their most important business data. Master data management can provide key strategic benefits that encompass both increased efficiency and business transformation to capture growth opportunities. With MDM, leading CPGs can continue to deliver the market and consumer insights to retailers but also gain the capacity to be a trusted data-sharing partner to help retailers succeed across channels.
The role of data and the benefits provided by a master data management strategy transcend the difference between CPG and FMCG. In any case, business agility is crucial to accommodate quickly shifting consumer behavior, as well as compliance demands and supply chain disruptions. The ability to adapt relies on the availability of trusted data.
While there are nuanced differences between CPG and FMCG products, the way that organizations approach them in terms of data management is the same. Whether it is CPG or FMCG products, master data management plays a central role in acquiring ingredient and supplier information, managing and enriching data and finally provides the agility to share data internally and with retail partners.
Five ways that CPGs (incl. FMCG) can benefit from master data management
1. Time to market
Being first to market in CPG means that you gain digital and physical distribution, and you gain the first adoption of the product by consumers, setting you up for continued success. Master data management helps orchestrate the data to ensure that it is complete and of high quality. Using a data syndication tool ensures that product data reaches key retail partners and digital channels with rich and accurate data on time.
2. Digital transformation
With data becoming more of a driver for value and competitive advantage, most CPG companies are undergoing a digital transformation. Ensuring your business data has a solid foundation and is of high quality and trustworthy is important to encourage greater data use. With an MDM solution, companies can establish ongoing processes and data workflows to help increase data value and support digital transformation strategies.
3. D2C commerce
As more consumers have adopted digital activities as part of their purchase behavior loyalty is more tenuous because it is easier for switching to other brands or other retailers. Many CPGs have launched a direct-to-consumer (D2C) channel to gain more insight into rapidly changing behaviors and to build stronger bonds and brand communities. This channel requires a new set of capabilities and technical knowhow. An MDM solution provides the data capabilities and agility needed to meet the demands of D2C while ensuring governance and efficient processes.
4. Supply chain optimization
CPGs and retailers have faced supply chain challenges over the past two years and are looking to build resiliency and manage data better to minimize future disruption. It is important to gain a single and complete view of suppliers for the product development team, finance, accounting, customer relationship managers and the rest of the organization. MDM can help you build a 360-degree view of suppliers, develop redundancy in key inputs and assist in establishing more complete information about suppliers to be shared with retail partners and end-consumers.
Consumers have gained a greater awareness of climate change and sustainability living and have taken a more purpose-driven approach to shopping. With this interest in sustainability is a deeper need for information on all aspect of the products that is purchase including, source of materials, recyclability of packaging, organic, fair-trade and even quantified carbon footprint. More and deeper consumer interest in product and supplier information requires better data management and agility. Multidomain master data management provides the structure to add relevant attributes by category and provide end-to-end transparency