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Consumer Staples ETFs – How to profit from consumer staples

Demand for consumer staples remains strong even when the economy is struggling. This makes consumer staples ETFs an interesting investment! We took a closer look at what you can expect from consumer staples ETFs and when it’s worth getting in.

In brief

  • Consumer Staples are products such as food, beverages or hygiene products. They are always needed and are therefore hardly dependent on the economy.
  • An ETF for consumer staples is a sensible investment that performs particularly well in times of crisis.
  • These indices often include large, established brands, which significantly increases the security of a Consumer Staples ETF.
  • The expected return is solid and largely crisis-proof.

Why Consumer Staples?

The term ‘Consumer Staples’ typically refers to food, beverages, hygiene and drugstore items, household goods and similar everyday products.

We need them regularly and would have a hard time doing without them. That’s why they are a lucrative investment even in times of crisis: even if there is inflation, a stock market crash or a war in Ukraine, we still need to eat, drink and wash!

A Consumer Staples ETF does not fall into the category of cyclical investments, as it only follows economic trends to a limited extent. This is how such investment products differ from cyclical goods such as cars, travel or luxury items.

They are among the expenses that a household can usually defer without difficulty and therefore prefer to postpone them until the economy looks better again. As a result, such ‘consumer discretionary’ suffer more in difficult times.

In addition, with an ETF for consumer staples, we benefit from the quality of the companies it contains: the industry is characterised by established, often very large companies that are among the most well-known brands in the world. Coca-Cola, Pepsi, Nestlé, L’Oréal, Danone, Heineken and other stocks are an integral part of our daily lives.

In times of crisis, an ETF on Consumer Staples is worth its weight in gold.

Consumer Staples ETFs contain a large number of securities that are highly regarded by shareholders. The number of dividend aristocrats is also enormous and speaks to the quality of the industry.

Companies that have become established in this way have long since conquered their respective markets and are in a secure position. It cannot be ruled out that even such heavyweights will come under pressure from new competitors or experience economic difficulties – but the probability of this is extremely low.

The advantages of this stability and market power are particularly evident in times of crisis. A Consumer Staples ETF is an interesting investment, especially in an economic downturn, as such products usually perform better than other sector ETFs.

This is partly due to the high level of brand loyalty among most consumers. Even when money is tight, few customers switch from their favourite brands to cheaper alternatives.

These companies are therefore less affected by the economic cycle and continue to generate solid profits even in difficult times. As investors in an ETF for such consumer staples, we in turn benefit from precisely this stability.

future prospects of the industry

The consumer staples sector largely comprises consumables that we drink, eat or use up and then have to replace. As a result, demand seems assured for the foreseeable future.

A healthy dose of innovation also keeps consumers happy. Whether it’s new flavours or sustainable products, there are always ways to boost consumption.

Consumer Staples also include household items such as white goods (refrigerators, dishwashers, washing machines, etc.) and leisure items. Due to their limited life expectancy and regular innovations, demand for these items is also unabated.

However, the emerging markets are likely to have the greatest influence on the sector: sales figures in India, China and other countries are exploding for many manufacturers due to a new middle class that is establishing itself there and is looking for quality products. Investing in this area via an ETF for consumer staples allows investors to benefit from massive growth over the next few years.

Current problems, such as high inflation and consumer uncertainty due to wars, pandemics and supply bottlenecks, hardly affect Consumer Staples ETFs. The branded products included here are among the few goods for which consumers are willing to pay a higher price (due to inflation).

A psychological component plays a very important role in the purchase: the feeling of quality, familiarity and thus security resonates. Even if this impression is only subjective, it ensures consistently high sales figures.

If you are also interested in other future ETFs, then read the articles on ETFs for electric mobility, 3D printing ETFs, semiconductor ETFs or ETFs for renewable energy.

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These Consumer Staples ETFs are available

The range of ETFs that track consumer staples is solid. Investors can find products that focus on the US market, Europe or the entire world. However, a fund that tracks emerging markets separately is currently still unavailable.

Good to know:

Consumer Staples ETFs are, as the name suggests, investments in consumer staples. Consumer Discretionaries, on the other hand, are luxury goods, and the opposite in terms of crisis resistance.

1. Xtrackers MSCI World Consumer Staples UCITS

Xtrackers MSCI World Consumer Staples UCITS
ISIN: IE00BM67HN09
Size: 729 million euros
Total expense ratio (TER): 0.25 % p.a.
Start: 9 March 2016
Distribution: Distributing

Xtrackers MSCI World Consumer Staples UCITS is a very large ETF with more than €700 million in volume. It tracks the Consumer Staples market in developed markets, with US companies making up almost 60% of the index.

Over a longer period of time, its performance cannot keep up with the MSCI World as a benchmark index, as consumer goods often perform slightly worse in times of strong upturns. However, in times of crisis, this ETF for consumer goods performs well, as expected, and has often outperformed the MSCI World.

Xtrackers MSCI World Consumer Staples UCITS ETF Performance 3 years
Over three years, the comparison between the Xtrackers MSCI World Consumer Staples (blue) and the MSCI World Index (black) is in favour of the MSCI World. Source: Justetf.com
Xtrackers MSCI World Consumer Staples UCITS ETF performance over 6 months
In the turbulent last six months, the Xtrackers MSCI World Consumer Staples (blue) was able to prove its crisis resistance and often outperform the MSCI World (black). Source: Justetf.com

The Xtrackers MSCI World Consumer Staples has already proven its good performance in times of downturn and could therefore be a sensible investment. The coming recession will undoubtedly weigh heavily on other forms of investment, potentially sparing an ETF like this one for consumer goods.

2. SPDR MSCI Europe Consumer Staples UCITS ETF

SPDR MSCI Europe Consumer Staples UCITS ETF
ISIN: IE00BKWQ0D84
Size: 530 million euros
Total expense ratio (TER): 0.18 % p.a.
Start: 5 December 2014
Distribution: Accumulating

The SPDR MSCI Europe Consumer Staples UCITS ETF could be a good choice for those targeting the European consumer staples market. With a volume of 530 million euros, this is also a large ETF that, at just 0.18% per year, has a minimal impact on our returns.

The study covers companies in Europe that manufacture and market consumer staples. The United Kingdom accounts for the largest share (35%), followed by Switzerland (almost 30%) and France (14%).

The SPDR MSCI Europe Consumer Staples ETF is subject to one restriction: a maximum of 35% of the fund may be attributable to the largest company, and a maximum of 20% to any other. Nestlé currently occupies the top spot with 27%, while Unilever, in second place, accounts for just 9%. This means that the rule has no influence on the composition in practice at present.

If you compare this consumer staples ETF with the typical benchmark index, MSCI World, the picture is mixed: the general performance of the last few years has been rather poor; however, the SPDR MSCI Europe Consumer Staples was able to achieve better results, especially in difficult times like the ones we have recently experienced.

SPDR MSCI Europe Consumer Staples UCITS ETF Performance 3 years
The SPDR MSCI Europe Consumer Staples (blue) underperforms the MSCI World (black) over a 3-year period. Source: Justetf.com
SPDR MSCI Europe Consumer Staples UCITS ETF Performance 1 year
A look at the past year shows that the SPDR MSCI Europe Consumer Staples (blue) weathered the difficult times better than the MSCI World (black). Source: Justetf.com

3. SPDR S&P US Consumer Staples Select Sector UCITS

SPDR S&P US Consumer Staples Select Sector UCITS
ISIN: IE00BWBXM385
Size: 257 million euros
Total expense ratio (TER): 0.15 % p.a.
Start: 7 July 2015
Distribution: Accumulating

While the overweighting of US companies in many sector ETFs is viewed critically, in Consumer Staples it is welcomed by many investors. This is because the most important and best-known companies are in the United States! The SPDR S&P US Consumer Staples Select Sector UCITS takes advantage of this and offers investors access to the market.

And it’s a success story that’s worth taking a look at: as one of the few ETFs for consumer staples, the SPDR S&P US Consumer Staples Select Sector has even managed to keep up with the typical benchmark index, the MSCI World, over the long term.

SPDR S&P US Consumer Staples Select Sector UCITS Performance 3 Years
The SPDR S&P US Consumer Staples Select Sector (blue) even slightly outperforms the MSCI World (black) over a three-year period. Source: Justetf.com

The SPDR also shows its strengths when looking at the short term over the last few months, with their numerous ups and downs: while the MSCI World Index recorded a loss, the Consumer Staples ETF was able to post a gain of 17%!

SPDR S&P US Consumer Staples Select Sector UCITS Performance 1 Year
The SPDR S&P US Consumer Staples Select Sector ETF (blue) significantly outperformed the MSCI World (black) last year. Source: Justetf.com

If you prefer to invest in economically oriented ETFs, I recommend you read the article on financial sector ETFs and industry ETFs.

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Conclusion: a safe haven in times of crisis

Consumer Staples are particularly popular in times of crisis and have a reputation for weathering downturns better. The ETF’s results for consumer staples are an impressive demonstration that this reputation is well founded!

Although performance often cannot keep pace with a world index or other sector ETFs, especially during a strong upturn, these products make up for this fact in difficult times.

In the current recession, Consumer Staples ETFs have performed stably and often with attractive yields, while other investments have faltered. This, combined with the industry’s excellent future prospects, makes Consumer Staples a sensible investment.

Companies are profiting from customer loyalty to the brand, from the fact that demand remains almost undiminished even in times of crisis, and from the dramatic increases in sales figures in emerging markets.

For investors, the quality of the companies is also extremely interesting: in this industry, we find established, large companies that exert considerable market power. They hardly have to worry about their position and are therefore additional safe havens for our capital.

Last but not least, we benefit from the very low costs (even for an ETF) when it comes to Consumer Staples ETFs. Investment options that are considered crisis-proof often have comparatively high fees – but with a Consumer Staples ETF, investors can get through the next crisis cheaply.

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FAQ – Frequently asked questions about ETFs for Consumer Staples

About our author

Aleks Bleck is the face of Northern Finance and was already a shareholder, lender and ETF investor at the age of 18. His focus is on P2P loans and passive ETFs. Aleks founded Northern Finance in 2017 while studying business administration in Lu00fcneburg.

He built up the YouTube channel alongside his main job in investment and corporate banking before finally focusing full-time on Northern Finance.

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