Consumer staples sector: Investing in stocks that provide the basics for living

What is the consumer staples sector?

• Food and staples retailing: Includes retail and big-box stores, drugstores, and food distributors
• Beverages: Soft drink makers, brewers, distillers, and winemakers
• Food products: Companies that produce packaged food and meats, and agricultural products like fruits and vegetables
• Tobacco: Products such as cigarettes, smokeless tobacco, and specialty nicotine products
• Household products: Items like laundry supplies, cleaning tools, and disposable tableware
• Personal products: All personal products, including for your hair, skin, teeth, and cosmetics

Key characteristics of consumer staples

• Essential goods. Companies in this sector make products that are necessary for daily living—like food, household cleaning, and personal care.
• Stable revenue streams. The companies selling these staple products typically have predictable income streams.
• Noncyclical demand. Demand for essential products typically isn’t cyclical—meaning that demand doesn’t fluctuate with changing economic conditions.
• Inelastic demand. Demand for consumer staples is also typically inelastic—it stays generally the same even if product prices fluctuate.
• Low price volatility. Stocks of consumer staples companies typically have stable prices, keeping price volatility consistently low.
• Slow growth. Don’t expect stock prices of consumer staples companies to increase rapidly. Slow and steady is the typical growth pattern for these companies.
• Dividend-paying stocks. The stability of consumer staples companies enables many to pay reliable dividends.
• Defensive investments. Many investors classify consumer staples companies as defensive investments because they retain value even during economic downturns and recessions.

Household names in consumer staples

• Costco Wholesale Corporation (COST): A big box store with products spanning multiple consumer staples categories, Costco is a diversified bulk retailer of many essential goods.
• Walmart, Inc. (WMT): Another retailer that sells essentially everything, Walmart sells staples ranging from food and beverages to tobacco, household products, and personal care items.

• The Coca-Cola Company (KO): Among the top household names, Coca-Cola is the ubiquitous soft drink known for its iconic logo. Coca-Cola’s other brands of sodas and beverages include Sprite, Fanta, Powerade, Minute Maid, Smartwater, and more.
• Anheuser-Busch InBev SA/NV (BUD): Anheuser-Busch InBev is among the largest brewers in the world, known for beer brands like Budweiser, Corona, and Stella Artois.

• WK Kellogg Co (KLG): Kellogg is a famous name in breakfast cereals—they’re great!—but the namesake company that traded for years under the ticker symbol K was rechristened Kellanova in 2023 and now oversees the cracker, frozen breakfast, and meat lines, including Pringles, Eggo, and MorningStar Farms brands. Meanwhile, WK Kellogg, named after company founder W.K. Kellogg, assumed Frosted Flakes, Froot Loops, and the remainder of the cereal business.
• PepsiCo, Inc. (PEP): Famous for its Pepsi cola soft drink, a rival to Coca-Cola, PepsiCo also produces a variety of food products under Frito-Lay, Quaker Oats, and Doritos brands, among others.

• Altria Group, Inc. (MO): This tobacco company owns Philip Morris USA, the maker of Marlboro cigarettes. Altria also produces smokeless tobacco, cigars, e-cigarettes, and oral nicotine products.
• British American Tobacco PLC (BTI): British American Tobacco, which owns the Reynolds American tobacco company, produces a variety of tobacco products under brands including Newport, Camel, and Lucky Strike.

• The Procter & Gamble Company (PG): Among the largest consumer staples companies, you probably know this manufacturer for brands like Tide, Mr. Clean, Gillette, Old Spice, and Febreze.
• The Clorox Company (CLX): To many consumers, the name Clorox means bleach, but the company also produces household products under the Pine-Sol, Lestoil, and Glad brands, among many others.

• Kimberly-Clark Corporation (KMB): Maker of essentials such as Huggies diapers, Kotex feminine products, Kleenex tissues, and numerous other personal care products.
• The Estée Lauder Companies Inc. (EL): You might know Estée Lauder for its namesake cosmetics, but the company also owns Clinique, Aveda, La Mer, M·A·C, and several other personal care brands.

Investing in consumer staples

• Buy stock. You can add stocks of specific consumer staples companies to your portfolio.
• Buy bonds. Almost every consumer staples company participates in the bond market, giving you plenty of choices to add bonds to your investment portfolio.
• Invest in an ETF. If you’d rather get exposure to a bundle of consumer staples companies, then buying shares in an exchange-traded fund (ETF) is a viable option. Funds like the Vanguard Consumer Staples Index Fund ETF (VDC) or Invesco Food & Beverage ETF (PBJ) provide targeted sector exposure.
• Buy shares in a mutual fund. If you’d prefer to invest in a fund that’s actively managed, then a mutual fund focused on consumer staples may be an attractive option, such as the Fidelity Select Consumer Staples Portfolio (FDFAX) or T. Rowe Price Global Consumer (PGLOX).

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