Trading consumer staples stocks is a popular play during inflationary environments, due to consistent demand keeping their prices comparatively stable. Learn what consumer staples are and how you can speculate on their share prices.
What is the consumer staple industry?
The consumer staple industry is comprised of companies that provide essential goods and services to the public. As this makes up a huge portion of gross national product (GNP), the industry usually sees consistent demand between quarters, even during periods of economic decline.
There is a lot of competition in the consumer staples industry. So, while there is constant demand for the products and services, companies have to vie for sales by offering the cheapest goods.
This challenge has been exacerbated by rising inflation caused by increasing commodity costs – companies either have to pass on price rises to consumers or take the hit themselves. But due to the essential nature of the goods being sold by consumer staples, price rises have little impact on consumer demand.
The consumer staples industry usually experiences slower, but more stable, growth than other industries – such as tech.
What are consumer staple stocks?
Consumer staple stocks are the shares of companies in non-cyclical sectors that can be bought and sold by investors and traders. Examples of consumer staples stocks include:
- Food and beverage producers
- Household product manufacturers
- Personal product manufacturers
- Tobacco companies
- Retailers of essential goods, such as supermarkets
5 consumer staples stocks to watch
There are a huge number of consumer staples stocks across the different sectors. Your decision over which to trade will depend on current trends and your research on whether to buy or sell the shares at any given time.
Here are some of the largest and most popularly traded consumer staples for you to watch.
- Procter & Gamble (NYSE:PG)
- Nestle (SWX:NESN)
- Coca-Cola (NYSE:KO)
- Philip Morris International (NYSE:PM)
- Unilever (NYSE:UL)
Procter & Gamble (NYSE:PG)
Procter & Gamble, more commonly known as P&G, is a manufacturer and marketer of consumer personal care and hygiene products. Its products include conditioners, shampoos, male and female blades and razors, toothbrushes, toothpaste, dishwashing liquids, detergents, surface cleaners and air fresheners.
P&G’s portfolio holds 65 brands, including popular names such as Crest, Charmin, Tide, Oral-B and Bounty. In 2021, the company made $78 billion in revenue, up from $73 billion in 2020.
P&G shares are listed on the New York Stock Exchange (NYSE). The company has a market capitalisation of approximately $342 billion – as of November 2022 – and has produced 10-year average returns of 8.4%.
Nestle is the largest manufacturer and marketer of food products and beverages by sales, generating more than $95 billion in annual revenue. It’s most well-known for making chocolate, but its product portfolio also contains baby foods, bottled water, beverages, nutrition and health science, pet care and ice cream.
It operates under a number of popular brands, such as Nescafe, KitKat, Purina, Toll House and S.Pellegrino. Nestle is also one of the largest shareholders in L’Oreal, another consumer staple company.
Nestle shares trade on the SIX Swiss Exchange. It has a market capitalisation of approximately $308 billion – as of November 2022 – and has produced 10-year average annualised returns of 7.2%.
Coca-Cola is a soft drink supergiant, which sells beverages across 200 countries and territories. It’s most well-known for its flagship drink, Coca-Cola, but the company also produces 500 brands including Sprite, Fanta, smartwater, Powerade and innocent smoothies.
It’s estimated that Coca-Cola’s total daily servings have hit 1.6 billion worldwide. Its sales brought in $38.65 billion in revenue for 2021, an increase from 2020.
Coca-Cola shares trade on the NYSE. It has a market capitalisation of $268 billion – as of November 2022 – and has produced a 10-year trailing return of 6.4%.
Philip Morris International (NYSE:PM)
Philip Morris International is an international manufacturer of cigarettes and other tobacco products. The group sells cigarettes in more than 180 countries and has a 12% share of the global tobacco market as of 2020.
It’s probably most well-known for Marlboro – the world’s best-selling cigarette brand – but operates under other brands too, including Merit, Virginian Slim and Red & White. With the shift toward smoke-free products, Philip Morris International has also released a number of alternate brands such as HEETS and Marlboro Dimensions.
In 2021 the company made revenues of $82.22 billion, an increase over its 2020 revenue of $76.04 billion.
Philip Morris International shares are listed on the NYSE. It has a market capitalisation of over $150 billion, as of November 2022, with a 10-year average annualised return of 3.5%.
Unilever is a consumer goods multinational. It’s the largest producer of soap in the world, but its product portfolio includes over 400 brand names.
In 2021, the Unilever Group had global revenues of €52.44 billion. Of its brands, 11 are ‘billion-euro brands’, each making annual sales in excess of €1 billion: personal care brands Axe, Dove, Lux, Rexona and Sunsilk; food and refreshments brands Knorr, Hellmann’s, Magnum and Lipton; and home care brands Dirt is Good (Omo and Persil) and Surf.
Unilever shares are listed on the NYSE. As of November 2022, the company has a market capitalisation of $103.96 billion and a 10-year average annualised return of 5.1%.
Consumer staples ETFs
Consumer staples are also commonly traded via exchange traded funds (ETFs) as a way of getting a much larger exposure to the sector than trading individual company shares.
Consumer staples ETFs typically hold a basket of different companies in the industry, but can have different weightings, geographical focuses and risk exposure.
Examples include the:
- Consumer Staples Select Sector SPDR – the ETF corresponds generally to the price and performance of the Consumer Staples Select Sector Index, which tracks consumer staples on the S&P 500. Its top holdings include Procter & Gamble, PepsiCo, Coca-Cola and Costco
- UK Consumer Non-Cyclicals – this ETF is designed to capture the large and mid-cap segments of consumer staples on the UK stock market. Top holdings include Unilever, Diageo, British American Tobacco and Reckitt Benckiser Group
How to trade consumer staples stocks
You can go long or short on consumer staples, and thousands of other shares, with City Index. To get started just:
- Open a City Index account, or log in if you’re already a customer
- Search for the company you want to trade in our award-winning platform
- Choose your position and size, and your stop and limit levels
- Place the trade
Alternatively, you can practise trading consumer staple stocks risk free in our demo account.
Consumer staples FAQs
What’s the difference between consumer discretionary vs consumer staples?
Consumer discretionary companies are those that make goods and products that are non-essential and deemed luxuries to spend spare income on. Examples include automobile, apparel, interior design, travel, hotel and leisure, restaurant and household durable goods companies.
Consumers tend to buy more discretionary products in periods of economic growth, or when interest rates rise, which are characterised by higher disposable income. They’re the opposite of consumer staples, as these companies produce daily necessities.
Learn more about stocks that rise with interest rates.
Are defensive stocks the same as consumer staples?
Consumer staples are considered defensive stocks, as they’re frequently used to protect a portfolio during periods of economic decline. There is a range of other defensive stocks available too, such as utilities, defence and healthcare, because they also see consistent demand.
Learn about other types of defensive stocks.
Are consumer staples a good investment?
Consumer staples are considered a good investment due to their consistent growth, solid dividends and low volatility.
Historically, they tend to produce greater returns over the long term, due to the steady demand for their goods. The average annual return of the S&P Consumer Staples Select Sector index was 13.76% from 2011 to 2022. Over the same period, the S&P 500 (US 500) returned 11.60%.
But ultimately, it depends on what your strategy is and how risk-averse you are. The slower growth makes these stocks less exciting for day traders looking for volatility but makes the sector a safe haven during economic crises.
Learn about trading in a recession.