Consumer Staples：Commodity Cost Tracker~ July 2024

Investment Rating - The investment rating for the Consumer Staples sector in Europe is "In-Line" across various sub-sectors including Food Producers, Household & Personal Care Products, and Beverages [1][1][1]. Core Insights - The MS Consumer Staples Commodity Cost Index increased by +9.3% year-over-year (y/y) in July 2024, down from +11.3% y/y in June 2024, with a month-over-month (m/m) decline of -2.4% primarily due to moderation in cocoa and energy prices [1][1][1]. - Excluding chocolate companies, the Staples Commodity Cost Index showed a +1% increase y/y and remained flat m/m [1][1]. - The sector's cost outlook for 2024 and 2025 appears more benign, except for chocolate producers, with an estimated -2% decline in input cost pressures in 2024 for the Staples sector, excluding chocolate [1][1][1]. Summary by Category Commodity Price Changes - Significant y/y price increases were noted for cocoa (+115%), eggs (+98%), and coffee robusta (+68%), while other commodities like energy and grains remain below prior year levels [1][1]. - On a m/m basis, palm kernel oil (+6%) and coffee robusta (+5%) saw the most notable price increases, while US natural gas and energy prices declined by -18% [1][1]. Sector Performance - Brewers, Food (excluding chocolate), and Household & Personal Care (HPC) are positioned well for recovery in 2024, while Spirits and Brewers are expected to benefit from commodity tailwinds in 2025 [1][1]. - The cost tracker estimates declines in input cost pressures for brewers (-4.5%), food (-3.5%), and HPC (-3%) in 2024, with spirits and brewers projected to benefit from declining input costs in 2025 [1][1]. Company-Specific Insights - The report includes detailed estimates of the year-over-year inflation impact on input costs for various companies, highlighting the expected margin impacts based on commodity price changes [4][4][4]. - The analysis assumes a two-quarter lag for Food & HPC companies and a four-quarter lag for Beverages companies, reflecting the timing impact of forward buying and hedging contracts [4][4].