All About Consumer Products Industry: Key Segments, Value Chain, and Competitive Advantage

Consumer Products Industry manufactures and markets everything from food, beverages, toiletries, and small appliances. The manufacturers in this industry deal with acquisition of raw materials from suppliers, processing the raw materials to end products for the consumers, and marketing the products to the end customers, distributors, retailers, and wholesalers.

The consumer products industry is the foundation of the modern consumer economy. It is because the sector does not only generate portions of the gross domestic products but also pumps a substantial amount of funds into other industries such as the retail and advertising sector.

The consumer products sector is into four categories they include food, toiletries, cosmetics, and beverages.

Most firms in this sector will produce products that primarily fit into one of the four groups; however, a firm may have some bands that cut across the lines of the four categories. Success in the consumer products sector depends on the level of marketing a single product primarily through promoting the brand name.

The competition in the consumer products industry is for the shelf space; therefore firms strive to have a sophisticated package design, involving marketing, and satisfying customers. The challenges faced in the consumer products sector include; addressing the changing demands of customers, going through the consolidating market, and execution of strategies that are significant to profitable growth.

The sector produces two types of goods. They are durable and nondurable goods. The durable products are goods that have a long lifespan. Examples of durable goods include; electronics, cars, machines, and tools. The nondurable goods are those that do not last as long. They include; cosmetics, food, and clothing.

Both of the durable and nondurable goods are sold door to door, retail stores, online, and by mail order. Retail is a significant aspect of consumer products industry as they sell the products that manufacturers produce. The sector includes workers with a broad scope of skills and educational backgrounds.

Some of the career paths in the consumer products industry include those in administrative support, product development, sales, manufacturing, law, and marketing. The main activities in the consumer products sector include:

How to Select the Best Software for Consumer Products Industry

• Supply chain: It is an integral part of the industry as it helps in improving financial position, eliminating redundant steps, increasing the negotiating power between manufacturers and suppliers, providing a way of achieving competitive advantage without lowering your prices, and delivering of orders faster to customers.
• Products and services: They should be of better quality and achieve regulatory compliance. Identifying the market requirements under production planning is also a key to getting profits in the CP sector.
• Retailer (customer) operations: These operations are performed by individuals who are on the frontline of improving customer service in stores and driving transactions to ensure their basket sizes attract customers.
• Marketing: It is a necessity in the CP sector as it involves the tactics that a company can use to promote their brand in the market.

What are the Key Segments in Consumer Products Industry?

• Food and beverages : It comprises of manufacturers who produce, regulate, manage and distribute food and beverages.
• Household : It comprises of manufacturers who produce products used at homes
• Personal care : It comprises of manufacturers who produce products used for personal hygiene and beautification purposes.
• Wholesale distribution industry : It involves primary engagement between the selling merchandise, customers, and retailers.
• Agricultural industry : It involves cultivation of land, raising crops, breeding, raising livestock, and farming.

What are the Key Segments in Consumer Products Industry

What are the Consumer Products Value Chain?

• Optimized inbound: It is the first segment in the consumer products industry value chain that streamlines sourcing, movement of goods from the point of manufacture, packaging, and accessories.
• Sourcing and procurement: Firms in the consumer products industry should consider procuring raw materials that are of high standard and quality to produce quality end products that satisfy their customers.
• Product development and manufacturing: Involves implementing a strategical product development process and manufacturing to design new products, improve existing products that satisfy their customers, and have the chance of entering new markets and selling to more customers.
• Marketing and Sales: Involves all the activities that sell the company's products and services through advertising and determining the best methods to reach customers through creation of marketing campaigns, and confirming relationships with customers through sales campaign.
• Human resources: This segment of the value chain involves effective management of employees consisting of employee compensation and benefits that enable them to work effectively and contribute to the firm having solid returns from its investments.
• Returns management: It is the stage that deals with consumers and manages expectations from customers in an effort of improving overall customer experience as well as ensuring recovering from values from returns.
• Value recovery: The stage deals with the protection of the company's brands by increasing recovery of returned products through the use of environmentally responsible solutions.
• Management of aftersales: The step provides companies in the consumer products sector with relevant information they need in understanding the reverse supply chain process and identifying the reasons why some of their products are being returned and also know how they can improve the way their products perform in the market.
• Supply networks: The primary objective of supply networks is to ensure fulfilment of customer demands through having a well-designed distribution pattern, a balanced transportation method used and optimization of the supply network and manufacturer.
• Digitization: It involves aligning technology in the manufacturing process with an aim of creating and optimizing customer engagement and influencing consumer’s path to purchase.

What are the Consumer Products Value Chain

What are the Key Terms in Consumer Products Industry?

• Product sales: It refers to the act of selling a service or product in return for money or when a customer purchases a product or service to fulfil their needs and, therefore help to determine the amount of sold products and services in a given period of time.
• Earnings before interest, taxes, depreciation, and amortisation (EBITDA): It provides a way of evaluating the performance of the operations of a company without having to include tax environments, financing decisions, and accounting decisions.
• Gross profit margin (GPM): It is also known as gross margin and uses a financial metric in determining the health of the business, model of the business as well as revealing the amount of money left over from revenues after accounting for the cost of goods sold.
• Cost of goods sold (COGS): It comes from the direct costs of the production of goods sold and consists of the cost of the materials used in the creation of products along with costs of the direct labor employed in producing the product.
• Trade promotion: It is a type of market campaign directed at retailers or wholesalers rather than as the final consumer. In this case, wholesalers or retailers get special price discounts that often include the trade allowance, free or subsidised racks, gifts, or other incentives. It is a critical activity in the consumer products industry as it increases short-term sales by effectively decreasing the cost of a single item to the end customer. Some of the common types of trade promotion are corporate promotions and account or discretionary promotions. Also through trade promotion, marketers in the consumer products sector can identify the campaigns that provide the most return on their investment.
• Revenue by employee: It refers to the ratio derived from dividing the income of a company by the number of employees. Companies in the consumer products sector prefer a high revenue per employee as it provides a way of getting high productivity as well as achieving efficient use of resources of the company.
• Allowance: It comes in different context depending on the subject at hand. In the consumer products industry, it refers to the discount offered by producers to members in the distribution channel usually in a short-term promotional incentive. Allowance in the CP industry aims to have a lower retail price to stimulate sales. One should not believe that it is not the same as trade discount.
• Selling, general, and administrative (SG&A): In the CP industry it is used to determine the cost of production presented in an income statement.
• Category management: It refers to a strategic approach that organises the resources in procurement to focus on specific areas of needs. It enables companies to focus and conduct an in-depth analysis for leveraging the decisions of their acquisition for the whole company.
• Direct store delivery (DSD): It describes the delivery methods of products from the supplier directly to a retail store by going through the retailer's distribution center.
• Planogram: It refers to a diagram that describes the location of placing the retail products on the retail shelves to increase customer purchases.
• Private label: Refers to products manufactured by one company for offer under another company's brand.

What are the Competitive Advantage in Consumer Products Industry?

In an effort to maximize market share and profits, CP companies should consider the following key aspects that will enable them to remain competitive in the industry as well as grow profitably.

What are the Competitive Advantage in Consumer Products Industry

• Smarter consumer experience: In increasing the consumer experience, a company in the CP sector should understand the value in retaining customers and be able to generate real-time insights. The company should also think of business science as a way of identifying the programs and strategy that make their customers feel smart as well as satisfy their customers.
• Smarter channel collaboration: The channel collaboration is vital in making your company highly attractive in front of your sales partners. Sales partners in the consumer products sector include wholesale distributors, retailers, and raw material suppliers. Through excellent channel collaboration, the CP companies can execute their business functions effectively.
• Smarter supply networks: It marks the future of attaining growth in the CP industry. Intelligent supply networks enable CP companies to expand across the globe in finding excellent suppliers as well as reaching out to markets that drive both profit and sales.
• Smarter operations: Companies in the consumer products industry leverage more creative processes through having an agile approach to testing, development, and iterating innovative ideas compared to the old methods used in operations. Smart operations lead to increase in growth and a way of having bolder strategies.
• Globalization: CP companies should strive to have strategical capitalization on growth in emerging markets and seeking the opportunities of having partnerships with other companies to enable them access to customers, integrate new market solutions, and access new sources of raw material acquisition.