With the digital revolution riding to the rescue during the COVID-19 pandemic, the consumer goods industry has been successful in undertaking a substantial transformation to capitalize on the e-buying imperative. And even with the ongoing vaccination drive, increasing at-home consumption of packaged products and a surge in sales of hygiene products are likely to continue this year. Hence, analysts recommend buying fundamentally stable consumer goods company The Procter & Gamble (PG). However, the unimpressive recent financials of Unilever (NYSE:) are a concern and analysts recommend avoiding it now. Let’s discuss.The consumer goods industry experienced an unprecedented demand amid the COVID-19 pandemic, bolstered by a spike in e-commerce buying. Furthermore, the lingering fear of shortages led to the stocking up (hoarding) of essential items. And even as the vaccinated percentage of the population rises each day, this trend is likely to continue given accelerating digital dependency and shifting consumer preferences.
The increasing demand for personal care items, such as hand sanitizers and disinfectants, coupled with significant at-home consumption of packaged products, should keep driving the industry’s growth. The industry has been enjoying favorable investor sentiment, which is evident in the iShares U.S. Consumer Goods ETF (IYK) 51.9% returns over the past year, compared to SPDR S&P 500’s (SPY) 45.7% gains over this period.
The global fast-moving consumer goods (FMCG) market is expected to grow at a CAGR of around 5.6% over the next six years to reach $16781.5 billion by 2027. With the recovery of the economy from pandemic-led damages and improving standards of living as federal recovery checks and rising employment come to bear, consumer goods stocks should keep performing well. Analysts expect The Procter & Gamble Company (PG) to deliver stellar returns in the coming months, given its strong fundamentals. However, they recommend avoiding Unilever PLC (UL) now, as the company has reported lower earnings compared to its peers.
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