Consumer Staples_ Commodity Cost Tracker - September 2024

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the Consumer Staples sector in Europe, particularly analyzing the Commodity Cost Tracker for September 2024 [1][1]. Core Insights and Arguments - The Morgan Stanley Consumer Staples Commodity Cost Index increased by 9.2% year-over-year in September 2024, slightly down from 9.7% in August 2024 [1][1]. - The index remained broadly flat month-over-month, with price increases in US natural gas, coffee, and sugar offset by a moderation in cocoa prices [1][1]. - Excluding chocolate companies, the Staples Commodity Cost Index rose by 3% year-over-year and 1% month-over-month [1][1]. - Key commodity price changes included: - Coffee robusta: +96% - Cocoa: +77% - Palm kernel oil: +62% - Eggs: +52% - Coffee Arabica: +51% - On a month-over-month basis, significant price increases were noted for: - US Energy and natural gas: +14% - Coffee robusta and sugar: +13% - Ethylene: +9% - Palm kernel oil: +7% - Tea: +7% - Price declines were observed in: - Oil: -8% - European natural gas and propylene: -6% - Cocoa: -5% [1][1]. Cost Outlook - The cost outlook for the Staples sector in 2025 is expected to be benign, except for chocolate producers, with a projected -2% decline in input cost pressures in 2024 and a slight increase of +1% in 2025, excluding chocolate companies [1][1]. - For chocolate producers, cost pressures are expected to remain elevated due to high cocoa prices, with a forecast of +DD% headwinds next year [1][1]. - The cost tracker estimates indicate declines in input cost pressures for: - Brewers: -4.5% - Food (excluding chocolate): -3.5% - Household & Personal Care (HPC): -3% in 2024 [1][1]. - In 2025, spirits and brewers are expected to benefit from declining input costs, with estimates of -2% for spirits and -1% for brewers [1][1]. Additional Insights - The 2025 hedged inflation outlook for food producers has worsened by -100 basis points on average, including chocolate producers [2][2]. - The overall index is approximately 40-45% above the pre-COVID averages from 1, 5, and 10 years ago [1][1]. - The analysis includes a theoretical impact on margins from changes in commodity prices, ignoring FX effects, pricing, cost savings, or mix benefits [5][5]. Conclusion - The Consumer Staples sector in Europe is experiencing significant commodity price fluctuations, with a mixed outlook for cost pressures across different sub-sectors. The chocolate segment remains a concern due to elevated cocoa prices, while other areas like brewers and food producers (excluding chocolate) are positioned for recovery in 2024.