| Just to add some points/clarity. The industry being discussed is called FMCG, abr. of Fast Moving Consumer Goods. FMCG industry is characterised by few major players, controlling most of the market leading brands. Such control is achieved through (1) marketing, (2) distribution and (3) mergers and acquisitions (M&A). The simplified explanation:- 1. Marketing. To win the consumer market, the brands shall win over the general population by delivering brand message/advertising through channels that reach the most of the population. Last 10-15 years such channel was TV. TV advertising is very expensive. The cost of launching new brand varies (country, market, etc) from $ 3-5M (small brand, one country) to several hundred $M (global launch, major market, etc). To maintain the market share, brand ad spending shall more or less match such spending of the competing brands. The annual marketing budget of FMCG company can reach 15%-20% of revenue, with appr. half going to TV. So a company with annual sales of $10B would spent annually on marketing $1-1.5B. As a specific example, 10 years ago Coca-Cola was spending on marketing in excess of $1B. Therefore, new entrants/smaller companies can not match such spending either for new launches or for sustaining the market share for their own brands. 2. Distribution. Most of the big players, like P&G, Coke, Pepsi, etc do direct sales/delivery and own fleet of vehicles to deliver goods to both chains and individual stores. Such fleet may cost tens of millions of $. Without such fleet in place [and existing relationships/clout with retail], new entrants can not ensure proper distribution/availability of their products. So even if they find money to spend on marketing campaign, when the customers will go to stores, they will not find the advertised brands and will buy what's available. 3. M & A. Those companies/brands that find a way to break in through - clever strategy - by playing in new and emerging market segments (Gatorade, etc) - catching a trend (BodyShop, etc) are acquired by Big Co after they become clear winner and catch with consumers, but before they reach critical mass. |