Brazil and Russia to slow; India and China continue to grow
* A US$5 trn industry with a 6% CAGR…
Consumer staples is a US$5 trn global industry with a global profit pool of US$600 bn (2013). We forecast industry growth of 6% pa to 2020 (vs 5% CAGR 2001-11) with faster profit pool growth due to further consolidation and efficiency initiatives.
* …undergoing structural change…
Emerging markets remain the principal driver of growth (82% of global value growth to 2020E). However, the traditional concept of emerging markets offering growth for all is now obsolete – understanding category and country exposure is key to mapping future growth for staples.
* …as emerging markets mature
Growth slows as countries/categories mature and many growth markets are now approaching developed market levels of consumption per capita, meaning later-stage countries (Brazil, Turkey, Russia, South Africa) are likely to see much slower growth for more mature categories (tobacco, beer, carbonates). Understanding how growth rates are changing is key for asset turn.
* Brazil, Russia to slow; China, India to grow
We expect 95% of staples categories to slow in Russia vs 90% in Brazil, 43% in China and 10% in India for 2011-20 vs 2001-11. China remains the largest contributor to global staples growth (16% of total), followed by Russia (6%), the US (6%), Brazil (6%) and India (5%). Globally we expect 59% of category/country combinations to slow; however, we forecast overall global staples growth to accelerate by 60 bp as the weight of Growth markets increases. HPC accelerates the most while tobacco is the only category to slow.
* Ingredients, tobacco, CSDs are advantaged
The GS Competitive Positioning (CP) Framework for Global Consumer Staples ranks 154 companies to assess competitive advantage and finds that ingredients, tobacco and CSDs are the most advantaged subsectors. All benefit from industry concentration, a key driver of margins. Our global top picks all appear mispriced for growth/returns and benefit from the evolving industry context: Japan Tobacco, Imperial Tobacco, L’Oreal, Souza Cruz, Pernod, SABMiller, CCE, Coca-Cola Femsa.