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BW Businessworld

The Stasis In FMCG

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The well-entrenched never cause a revolution. They prefer status quo instead. Such as the world's largest fast-moving consumer goods (FMCG) companies that make products of daily use — soaps, detergents, toothpaste and physical hygiene products. They are currently so innovation-challenged that the stasis has left the field wide open for disruptive companies to take them on.

Only, it is not happening. Either because of the financial strength FMCG companies wield or because a Google or a Facebook of FMCG is yet to be born. Traditionally considered hotbeds of product innovation, distribution, marketing and brand building, FMCG majors now rarely create life-changing products. Instead, they are doing more of the same.Cola companies are introducing more kinds of carbonated beverages, in more flavours and pack sizes. Detergent companies are launching more detergents in more varieties, and oral care companies are launching different kinds of toothpastes and brushes. Humanity has not been delivered a wow- product by FMCG giants in decades.

Safety razor was invented in 1901 by King Camp Gillette. Since then, it has been more of the same. Twin-edged blades became twin-blade razors that became, three, four and five blade razors. Electric shaver was patented by Jacob Schick in 1928 and epilators came into the market in 1986. Liquid soaps were invented in 1865 and soap bars 30 years later in 1895. Soft drinks came in 1885. Detergent was invented in 1913. Colgate has been marketing toothpaste since 1873 and toothbrushes have been sold since 1885.

Innovative ways of shaving such as electric shavers are being brought, not by the world's largest razor maker Gillette, but by industry outsiders Braun, Philips and several others. While the world's best cigarette companies could only go as far as thinking of low nicotine cigarettes, smokeless e-cigarettes were not invented by a British-American Tobacco company or a Philip Morris, they came from Chinese inventor Hon Lik in 2004. The vitamin water category — considered one of the biggest innovations in beverages  in a long time — was not introduced by Pepsi, Coca-Cola or Nestle, but by a non-descript company, Glaceau, in the US, which Coca-Cola later acquired.
Comparatively, in consumer durables, an industry very similar to FMCG in behavioural pattern and consumer connect, display technologies such as plasma and LCD have come in and gone out of vogue in 15 years, giving way to power-efficient LEDs. Today's mobile phones could put the earliest mobile phones, produced as recently as little more than a decade ago, to shame. Today's automobiles make the earliest automobiles look pedestrian and today's aircraft fly at 35 times the speed of the earliest aircraft. But the same cannot be said of what the FMCG industry produces today.

Sure, there is better material being used. Decades of use and research have allowed less harmful chemicals to be used and soaps, detergents and shampoos smell much better. But the FMCG innovation hubs seem busy —to give an analogy — developing new kinds of shampoos and soaps rather than researching new ways of cleaning hair or body.

It is not as if the science of chemistry is not delivering. In its 237th year since French chemist Antoine Lavoisier's heroics created modern chemistry, it continues to innovate for sectors such as chemicals, materials and pharmaceuticals. New materials and their widely different usages have enabled the unthinkable, such as a transparent submarine (now being tested). The root of the FMCG problem may be that the biggest players are too secure. Their rivals have either been killed, bought out, or smothered globally. P&G-owned Gillette, for instance, has a global market share of nearly 70 per cent.

FMCG companies' over-dependence on one or two brands or products is coming in the way of wild experimentation. Their state of lassitude also comes from their resignation to the fate of low or no growth. Western economies, where most FMCG giants are headquartered, are experiencing between negative and 3 per cent growth. There is also an issue of blissful ignorance of ground reality in target markets. The western majors did not think of products such as mosquito repellant vaporisers because they do not face such mosquito menace. Even so, the mosquito rackets were not invented by FMCG, but by an unknown Chinese inventor.

But an industry, which is still to touch at least half of human beings on the globe, giving up on innovation this early is not just surprising, but also leaves a big question mark over who will meet the future needs of humanity.

rajeevdubey (at) abp(dot)in

(This story was published in Businessworld Issue Dated 09-05-2011)