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Consumer Staples Get Jammed

31st kellogs clorox

Image source: Pixfiction, Roop-Dey, LMIMAGES, winuturn, Tom Gowanlock - Shutterstock

What's going on?

It was a rough hump day for household names Clorox and Kellogg’s – the companies saw their share prices fall by 2% and 7% respectively, following flakey quarterly results (tweet this).

What does this mean?

Clorox – owner of Pine-Sol and Burt’s Bees – said that although its profit topped expectations last quarter, it was anticipating lower numbers going forward thanks to the strong US dollar and higher costs for materials like oil. The company is trying to raise prices, but it’s extra hard for consumer staples companies (that sell things people need rather than want) to do so at the moment.

Kellogg’s, meanwhile, was a not-so-Special K: sales in its two biggest businesses, breakfast cereals and snacks, declined – and it said it expects things to get even crunchier next quarter.

Why should I care?

For markets: Consumer staples are having to change tack.

Once upon a time, a good spot on the supermarket shelf and a killer commercial was all it took to get into consumers’ baskets. But with Amazon and ecommerce only getting bigger, it’s now easier for rival brands to target potential customers. Old-school companies are having to up their ad spend to stay front and center, as Kellogg’s is doing now. But with lots of different products to shift, that can get expensive.

The bigger picture: Beauty’s more Infallible.

The beauty industry is looking rosy – people are generally willing to spend to look good, plus beauty products tend to be more fun to buy than, say, bleach. L’Oréal reported dazzling third-quarter results late on Tuesday – and on Wednesday, its stock shot up 7%. That was largely thanks to China, where strong demand for its high-end brands more than made up for any trade war blemishes. The more “premium” staples appear, the less they risk having to fight for consumers’ attention. And with sales growth in consumer staples stagnant for some time now, more eyeballs can only be a good thing.

Originally posted as part of the Finimize daily email.

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