Consumer Staples Sector Outlook: 3 Major Shifts Anticipated in 2024


  • Pricing power is a growth driver that should remain intact in the year ahead.
  • Volume growth could return in 2024. 
  • Companies will use the increased cash flow to pay down debt. 


consumer staples trends - Consumer Staples Sector Outlook: 3 Major Shifts Anticipated in 2024

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Regarding consumer staples trends in 2024, the biggest request from investors is a better year in the markets.  

Consumer staples stocks had a terrible 2023. According to Yardeni Research, the consumer staples stocks in the S&P 500 are down 2.3% year to date (YTD) through Dec. 27. That is the third-worst performing index behind only energy (-3.2%) and utilities (-10.7%). 

Investing solely in the 2023 index, you would’ve beaten consumer staples stocks by 26.8 percentage points on a relative basis. The only worst performance from consumer staples stocks in the past decade was in 2018. That was the time they lost more than 8%.  

So, Wall Street professionals will see a rebound for consumer staples stocks as part of their sector outlook for 2024. 

In the meantime, investors can expect three trends from consumer staples stocks in 2024. 

Pricing Power Remains an Important Growth Driver

In 2023, food and beverage companies like PepsiCo (NASDAQ:PEP) and General Mills (NYSE:GIS) increased prices as input costs fell. In turn, this helped boost profits over the past year. 

Fidelity Sector Portfolio Manager Ben Shuleva reported about the year ahead for consumer staples stocks in mid-December. He had some specific recommendations about pricing power

“I believe that companies with attractive valuations and strong pricing power may offer the strongest returns potential for 2024. Companies that can raise prices or hold them steady may be more likely to meet their profit-margin forecasts,” Shuleva wrote.

PepsiCo reported its Q3 2023 results in October. It was the seventh consecutive quarter that they had increased its prices by 10% or more. It marks nearly two straight years of raising prices by the maker of Pepsi beverages and Frito Lay chips. 

No wonder its operating cash flow through the first nine months of 2023 increased by 21%. It went to $7.63 billion from $6.31 billion a year earlier.

In 2024, PepsiCo sees prices increasing in lockstep with inflation. Meanwhile, the company had a volume decline of 2.5% in the third quarter. This was partly due to reduced package sizes providing customers with convenience and portion control. 

However, some call it shrinkflation. 

Volumes Will Rebound

The biggest problem in 2023 for consumer staples companies was the volume reduction. While PepsiCo was raising prices by double digits, customers were buying less. Through the first nine months of 2023, its net revenue increased by 12%, led by a 14% price increase offset by a 3% decline in volume. 

Over at General Mills, its volume through the six months of 2024 fell 3%, offset by a 4% increase in prices, for a net increase in revenue of 1%. The company believes that volume recovery in 2024 won’t be as brisk as previously estimated. On Dec. 20, it lowered its net sales growth to 1% to flat for 2024, down from 3.5% growth at the midpoint of its previous guidance. 

However, in November, Bloomberg Senior Credit Analyst Julie Hung said that consumer staples companies should be well positioned in 2024 to benefit from the year ahead. 

“Food and beverage companies expect price increases to moderate and food inflation to moderate as well. We expect to see better volumes after three consecutive years of volume declines. Lower pace of price increases and a more stable macro environment should help volume performance,” Hung stated in her Nov. 20 webinar on the credit outlook for consumer staples companies in 2024. 

Should volumes increase in 2024, companies like PepsiCo would feel less need to roll back price increases, leading to higher profit margins.      

Debt Reduction Across the Sector

Without a doubt, debt became a big issue in corporate America in 2023. In 2024, non-financial companies in the S&P 500 have $108 billion in debt maturing at an average interest rate of 2.8%, Bloomberg reported in November. Refinancing this debt would add more than $3 billion in annual interest expense due to higher interest rates. 

Hung pointed out in her webinar that the balance sheet will be a big focus of consumer staples companies in 2024. Almost all of them intend to lower their debt in the year ahead. Companies with net debt to EBITDA higher than historical norms include Post Holdings (NYSE:POST) at 4.8x, double its target of 2.3x. 

“Balance sheet health continues to be a top focus. Consumer companies have been focusing on reducing debt, generating cash flow, and improving EBITDA to help reach net leverage targets.” Hung said. “Shareholder returns have been done within the parameters of a balanced capital allocation policy to provide flexibility in credit rating and financial profile. We would expect this approach to remain consistent in 2024.”          

PepsiCo and General Mills used much of their free cash flow in 2023 to repurchase stock and pay dividends. Expect both to step up debt repayment in 2024. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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