Demand for fast moving consumer goods (FMCG), especially in the arena of snacks went up strikingly during the pandemic-induced lockdown earlier this year. Thanks to consumers’ preference for products such as instant coffee, biscuits and chocolates while being stuck at home for months, investors have a solid reason to look at FMCG stocks from an investment perspective.
In addition, as the number of COVID-19 cases has surged over the past few days and more states are considering taking a step back in terms of reopening their economies, this trend of snacking more frequently and thus purchasing more confectionary products could be here to stay for a while.
Change in Snacking Habits is Pushing FMCG Stocks
A CNBC report released last week stated a survey by FMCG Gurus, which asked 23,000 consumers across 18 countries about their snacking habits during the stay-at-home orders. About 60% said they purchased more comfort food, which comprised confectionary products. Half of the surveyed customers stated that they consumed more snacks in May, up from 38% who admitted the same in April.
Snacking more frequently induced a sense of normalcy among people, thus helping them relieve themselves off the stress of being isolated. Second, snacking more during the night and at irregular hours of the day also rose among consumers, habits that largely rose from having to stay at home all the time.
In addition, certain trends on social media such as making Dalgona Coffee, baking banana bread and cooking more food from scratch and posting them online led to an increase in demand for snacks-oriented food products.
In fact, taking a look at how the consumers staples sector did over the past three months, one finds that the Consumer Staples Select Sector SPDR Fund (XLP) gained 6.3% during the said timeframe, indicative of the steady gains incurred by the sector.
Some States Pause Reopening Plans
As many as 12 U.S. states have stalled their plans to reopen the economy over the past few days, as coronavirus cases around the country surged sharply. The total number of confirmed COVID-19 cases in the United States crossed 2.5 million on Jun 28, with Florida, Arizona and Texas emerging as the new epicenters of the disease.
The three states reported a record number of new infections of coronavirus for weeks at a stretch. The number of patients testing positive and hospitalized for the disease also increased. On Jun 28, Arizona and Georgia hit new one-day case highs with 3,857 and 2,225 cases respectively.
There’s a major reason behind stalling the reopening plans apart from the rising number of infections across states. With July 4 just days away, officials are trying their best not to repeat the happenings of Memorial Day, when thousands of consumers made their way to parties, bars, pubs and beaches.
According to the Johns Hopkins University, 31 states witnessed a spike in new COVID-19 cases as compared to the previous week. These include Alaska, Arizona, Arkansas, California, North Carolina, Ohio, Pennsylvania, South Carolina and Wisconsin.
About 15 states such as Hawaii, South Dakota, Tennessee, Virginia, Nebraska, New Jersey and New York are witnessing a steady rise in the number of cases. Only four out of the 50 states witnessed a decline. These were Connecticut, Delaware, Rhode Island and New Hampshire.
So How Does The Current Situation Impact Demand For Snacks?
As mentioned above, the emerging snacking trends during the lockdown have left a lasting impact on consumer habits. Given that some of the states are actually urging people to not visit crowded places and stay home instead, demand for comfort food has a good chance of spiking ahead. This would mean that FMCG stocks stand a fair chance to witness an uptick in the near future.
3 Top FMCG Stocks to Buy
We have, therefore, chosen three stocks of FMCG companies that could benefit from this trend. The stocks of these companies have demonstrated good price performance over the past three months. All these stocks carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
B&G Foods, Inc. BGS is a manufacturer and marketer of shelf-stable and frozen foods. B&G Foods has an expected earnings growth of 31.1% for the current year. Shares of the company, which belongs to the Zacks Food - Miscellaneous industry, have gained 44.2% over the past three months compared to the industry’s growth of 8.9% during the same period. The Zacks Consensus Estimate for the company’s current-year earnings has moved 28.7% north in the past 60 days.
United Natural Foods, Inc. UNFI is a distributor of items such as natural, organic, specialty, produce and conventional grocery. United Natural Foods has an expected earnings growth of 20.2% for the current year. Shares of the company, which belongs to the Zacks Food - Miscellaneous industry, have gained more than 100% over the past three months. The Zacks Consensus Estimate for the company’s current-year earnings has moved 93.8% north in the past 60 days.
MGP Ingredients, Inc. MGPI is a producer and supplier of products such as distilled spirits, specialty wheat proteins and starch food ingredients. MGP Ingredients has an expected earnings growth of 6.6% for the current year. Shares of the company, which belongs to the Zacks Food - Miscellaneous industry, have gained 30.6% over the past three months. The Zacks Consensus Estimate for the company’s current-year earnings has moved 19.2% north in the past 90 days.
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Click to get this free report United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report BG Foods, Inc. (BGS) : Free Stock Analysis Report MGP Ingredients, Inc. (MGPI) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research