Mhlnews 3892 Cpg
Mhlnews 3892 Cpg
Mhlnews 3892 Cpg
Mhlnews 3892 Cpg
Mhlnews 3892 Cpg

Logistics for CPG Industry Varies Globally

July 2, 2015
Between the developed world and emerging markets the main differences are the sophistication of logistics services available, the costs and limitations inherent in those services and the disparity in growth rates.

In order to best serve the global consumer packaged goods (CPG) industry, which is valued at over $550 billion, logistic providers need to take into consideration the particular needs of each geographic area.

Within the developed world there is a marked difference between the CPG sector in North America and Europe, according to Ti’s latest research report. Channels of consumption have become increasingly important in determining the logistics cost and nature of CPG supply chains and that this now accounts for the difference between Europe and North America. In fact Ti’s research shows that the CPG sector in North America spends just 6.8% of revenue on logistics, in Europe logistics spend is up at 10.5%, largely because of Europe’s stronger disposition towards e-commerce.

Between the developed world and emerging markets the main differences are the sophistication of logistics services available, the costs and limitations inherent in those services and the disparity in growth rates.

The developed world’s long standing middle class has for decades demanded immediate access to CPG, leading to long term moderate growth after the initial boom. In contrast the emerging middle class in developing nations is only now beginning to find its appetite for CPG. As this trend continues Ti expects it to constitute one of the major drivers of growth in the global CPG sector and consequently in demand for complex logistics services.

Demographic projections suggest that by 2030 emerging markets will account for some 90% of the global middle class and therefore much of the demand for CPG and associated logistics services.

There are also gulfs between different emerging markets. This is clearest when looking at the scale and buying power of the middle classes in China and South East Asia, which massively outstrips their counterparts in India and Brazil, the report points out These differences in demand are also reflected in the disparity in the sophistication of logistics services between developing markets. For instance service offerings of LSPs in emerging markets showed significantly more complex solutions on offer in China than in Brazil or India.

Key findings of the report include:

  • Markets in the emerging economies have much higher cost bases- possibly twice that or the U.S.
  • Perception that the CPG sector in developed economies offers little growth however some companies continue to grow at pace.
  • Not all emerging economies have the same market needs- requirements for products in China vary to those required in Brazil
  • One obstacle to growth of CPG in emerging markets is the poor efficiency of logistics. Transport is often expensive and high quality warehousing can be scarce.
  • Growth of CPG in emerging markets is a major opportunity for those with the capital to acquire large and complex distribution centers.