Consumer Goods Sector

The consumer goods sector is a category of stocks and companies that relate to items purchased by individuals and households rather than by manufacturers and industries. These companies make and sell products that are intended for direct use by the buyers for their own use and enjoyment. This sector includes companies involved with food production, packaged goods, clothing, beverages, automobiles, and electronics. Nestle, Procter & Gamble, and Pepsico are some of the world’s largest consumer goods companies in the world.

Given below are the important characteristics of the consumer goods sector:

Companies under this sector manufacture and sell products for consumer use
Companies need to focus on Marketing, advertising, and brand differentiation
Technological trends are changing the industry landscape
Performance in the consumer goods sector depends heavily on consumer behavior
Developing new flavors, fashions, and styles and marketing them to consumers is a priority

Understanding the Consumer

A consumer is a person or group of people that are the final users of products and or services generated within a social system. A consumer may be a person or group, such as a household. The concept of a consumer may vary significantly by context but here in this section, we will discuss both durable and non-durable goods.

The ancient man moved from place to place to hunt for food. He ate whatever he could find, such as fruits, nuts, vegetables, sweet-roots, and flesh of animals. He made use of wood and dry leaves from forests to make a fire to keep him warm and also to tenderize the meat he hunted.

Today man has evolved into a seasoned producer and consumer of a large variety of goods and services. At present some people produce the goods and provide services required by others in exchange for money in a well-developed market system. Thus, the concept of a person buying a product or obtaining services from the market for his own use or consumption comes into practice.

A consumer is defined as a person who buys goods and services and makes use of public utilities as well as natural resources like air and water. In its most basic sense, it refers to those who buy for their own wants thus excluding buyers who purchase for manufacturing purposes or for resale. It does not include a person who obtains such goods for resale or for any commercial purpose.

The main characteristics of the definition of the consumer can be stated as follows:

A consumer is one who consumes either goods or hires or avails of any services.
One who buys any goods for a consideration
One who uses such goods with the approval of the buyer
One who hires any service or services for consideration.
One who is the beneficiary of such service
Only a person who buys goods for private use or conception only is a consumer

Consumer Goods

Also known as final goods, consumer goods are products bought for consumption by the average consumer. Entrepreneurs and businesses combine capital goods (such as machinery in a factory), labor from workers, and raw materials (such as land and basic metals), to produce consumer goods for sale. Goods that are used in these production processes, but not themselves sold to consumers are known as producer goods.

Consumer goods are the end result of production and manufacturing
These goods are what a consumer will see stocked on the store shelf.
Sold to consumers for their own use or enjoyment
These goods are not meant for resale or for further economic production activity
They are called end product because they are the ultimate output of a productive process that occurs over time

Examples of Consumer Goods

Basic or raw materials, such as copper, are not considered consumer goods because they must be transformed into usable products. Clothing, food, and jewelry are all examples of consumer goods. Let's consider a few items you could easily purchase: milk, television, and lumber. You would most likely want to immediately consume milk; therefore, it is a consumer good. For the Wine industry, the grapes are input to making the wine; therefore in this example, the wine will be the consumer good while the grapes would be a producer good.

Consumer Buying Motives

A number of factors influence the purchase behavior of a consumer. Generally, a consumer is not a rational choice maker because of various pressurizing and persuading factors. Besides factors pertaining to the need and behavior of consumers in making choices, there are a number of influences that affect buyers' decisions about the products and services they select. These are income, age, sex, family size, social status, employment status, mobility habits, educational status, and environment.

There are many influences internal and external which affect buying decisions cost, availability, season, demand, environment influences, habit, hobbies, etc. In the modem day market, one of the most influencing factors is advertising. Business spends huge amounts of money on advertising their products and services projecting for a life.

Thus producers are able to use tool influence the motives and creating demand for not consumers.

Consumer Goods Industry

Consumer goods have been around since the earliest days of civilization and have now evolved into high-tech factories addressing a large portfolio of consumer products. This industry produces goods that the public wants or needs and could be durable and nondurable. Consumer products ranging from daily use goods such as shoes and pens and pencils to cutting-edge technology such as iPads and smartphones. The companies producing these goods are located in every state and throughout the world. Manufacturers range from massive, multinational corporations to small firms. This industry has close relationships with other industries, including transportation, packaging, agriculture, chemicals, plastics, rubber; metal, stone, ceramics, and petroleum for raw products or for marketing or transportation of final output.

The growth of this industry depends largely on the strength of the economy. If the economy is good people tend to spend money on high-end consumer goods such as cars and high-end electronics. A strong economy drives purchases in every category.