What is a Consumer Staples Company? How to invest in one?

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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. Market Cap is the sum of the market value of each company assigned to the applicable GICS sector or industry. Market value or capitalization is calculated by multiplying the number of common shares outstanding by the market price per share at the end of each trading day. Standard & Poor’s 500 (S&P 500) Index is an unmanaged market-weighted index of 500 of the nation’s largest stocks from a broad variety of industries.

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Companies that convert unfinished goods into finished durables used to manufacture other goods or provide services. Consumer staples stocks tend to pay solid dividends and keep paying them over the long term. In fact, they are well represented among the Dividend Aristocrats—firms that have increased their dividends annually for at least 25 consecutive years. Since being spun off, Philip Morris has grown its market cap to be higher than Altria’s, making it one of the biggest sin stocks in the world.

Thus, while consumer staple companies are stable and low-risk investments, there is no guarantee that consumer staple stocks will stay competitive in the next market trend. 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. So, while there is constant demand for the products and services, companies have to vie for sales by offering the cheapest goods. The demand for consumer staples in a bad economy was so high that stores either had to limit quantities or had empty shelves. Consumer cyclical companies on the other hand, suffered from restrictions on purchases, whether budget- or policy-related, and their sales went down as a result.

Real World Example of Consumer Staples

The consumer staples sector divides into multiple sub-sectors depending on the products the company produces. Here are some of the largest subdivisions of the consumer sector and some of the major players in each industry. To help you find the best consumer staples stocks, Forbes Advisor has profiled the 10 largest companies in this sector by market capitalization. JSI and Jiko Bank are not affiliated with Public Holdings, Inc. (“Public”) or any of its subsidiaries. There are a huge number of consumer staples stocks across the different sectors.

The consumer staples sector had middle-of-the-pack returns during the bull market discussed above. Stocks in the sector generally posted increased share prices and looked overvalued after a year and a half, but they did not have quite the same returns as consumer cyclicals. People buy staples in boom times and in bust times, which makes consumer staples stocks good performers no matter what’s happening in the broader economy. That’s why they’re often considered defensive safe havens during a recession.

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Both consumer cyclical and consumer staple sectors have places in every portfolio. Defensive stocks won’t go up as much as offensive holdings during up markets, but they can provide the necessary protection during down markets. Industries in the consumer discretionary sector include automobiles; apparel; consumer services such as hotels, entertainment, and restaurants; retailing; and residential construction. Because the goods are non-essential, consumer cyclical stocks generally move in tandem with the market. When buying individual stocks, it’s imperative to do due diligence and research the consumer discretionary stocks you’re interested in. Individual stock picking can be a very risky way of investing, and that means you should pursue this strategy with your eyes wide open.

It has a market capitalisation of $268 billion – as of November 2022 – and has produced a 10-year trailing return of 6.4%. Here are some of the largest and most popularly traded consumer staples for you to watch. Consumer staples companies have an excellent ability to withstand recessions, increase their dividends, and post consistent, incremental growth.

Best consumer staples stocks to buy in 2023

Indexes are unmanaged, statistical composites and their returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. For investors who prefer to take a contrarian approach, Unilever is working on a business turnaround. The negatives here, which include the failure to consummate a high-profile acquisition, have left the shares with a historically high dividend yield of about 4.2%. What’s most interesting, however, is that activist investor Nelson Peltz – who was instrumental in turning Procter & Gamble’s business around – has been added to Unilever’s board of directors. Additionally, cosmetics companies were hit harder by the COVID-19 pandemic than most consumer staples businesses because social distancing led to a decline in the demand for makeup and fragrances. P&G is currently developing innovative products, including the nontoxic insect repellent Zevo.

Consumer staples stocks provide goods and services that are essential for daily life. But if you lost your job or if the economy was declining, you might reduce or eliminate these items from your budget. Consumer staples are the basic goods that people buy to support their everyday lives. Companies in this industry manufacture, distribute and sell products like consumer staples meaning food, beverages and personal hygiene products, which are typically less sensitive to economic cycles. JSI uses funds from your Treasury Account to purchase T-bills in increments of $100 “par value” (the T-bill’s value at maturity). The value of T-bills fluctuate and investors may receive more or less than their original investments if sold prior to maturity.

All Consumer Staples investments from Fidelity

During an economic downturn, discretionary products usually experience a slow down of sales. There are about 100 publicly-traded consumer staples companies, with the majority of them priced above $100 per share. As these big companies ask for a higher cost per share, many people with low investment budgets usually don’t have enough money to invest in big companies flexibly.

• Industries within the consumer staple sector therefore do not usually experience sudden changes in market share between key competitors.
• 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.
• Follow news and updates from companies and ETFs you are interested in can help you stay up to date.
• They’re the opposite of consumer staples, as these companies produce daily necessities.

But these stocks make up for modest growth with low price volatility, reliable profits, dividends, and defensive positioning. Although there are no substitutes for consumer staples goods, consumers have a lot of options when shopping for the cheapest products. That makes the competition among suppliers very challenging in an environment where commodity prices are rising. To compete on price consumer staples producers must be able to keep their costs down by adopting new technologies and processes, or they must differentiate by introducing innovative products.