Trends Fade, Brands Endure

Investment Research Analyst Kevin Gioia recently attended the 45th Annual Consumer Analyst Group of New York (CAGNY) Conference. CAGNY offers informative presentations from top-tier companies including the Beverage, Food, and Household/Personal Products Industries. Over the course of the conference, many interesting takeaways concerning the Consumer Staples Sector emerged.

Major 2015 Trends Continue

The major trends of the previous year are continuing as it relates to positioning existing products and developing new products. There is a still a strong push to: (1) enter emerging markets; (2) focus on healthier/natural foods; (3) include protein ingredients in products and product labeling; and (4) create more snack food items. Existing products have been repositioned to connect with these four major trends and/or companies have reinvented an older product line for new use (e.g. the release of a gluten-free cereal). Additionally, the entrance into emerging markets will continue to be made for long-term growth opportunities despite slowing results over the short term.

Operational Developments

Many Consumer Staples businesses have facilities that are outdated, with many announcing major reconstruction efforts to revamp automation or shutdown facilities completely. In addition to updating facilities, companies have been optimizing their portfolios and eliminating ineffective brands, with bigger players making acquisitions to accelerate growth. Pairing with product portfolio customization, marketing teams need to re-think their tactics and push spending to focus on campaigns that are proving effective. Analytics are being utilized to create smarter marketing strategies as there is evidence that these advanced techniques work.

Innovation vs. Renovation

Most of the presentations at CAGNY focused on innovation as the key to drive growth, not renovation. The main issue is that many businesses may claim “innovation,” but are simply just “renovating” a brand to react to current trends. Companies that innovate through their product stream should be able to generate growth.

Trend vs. Defensible Brand

Defensible brands within the sector have been supported by data-driven marketing campaigns. Through these initiatives, these brands seem to prevail no matter the market environment. Historically, Consumer Staples has been filled with trends that allow some companies to attain outstanding stock performance. However, few businesses are able to sustain these trends over the long term. Overall, defensible brands typically win over long periods of time and those that solely benefit from trends usually fade away.

Please see Fenimore disclosure. 

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