Consumer staples expected to hurt customers' wallets in 2024
Volatility and economic headwinds have affected all aspects of the economy, including consumer staples. Some categories, like candy and sugar, have been hit with price increases, while others, like eggs, were able to recover. What will 2024 hold for these categories? Yahoo Finance Senior Reporter Brooke DiPalma joins the Live show to give insight into how consumer staples will shape out next year for another installment of Yahoo Finance's Investor Guide 2024.
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Video Transcript
JULIE HYMAN: Inflation is cooling and the Fed is predicted to cut rates in the new year, which should be good for consumers. But recent data from the USDA estimates that wallets will still be hit further when it comes to food prices. To break down why this is the case and what it could mean for your portfolio, let's get to Yahoo Finance's Brooke DiPalma here with our consumer staples investor guide for 2024. Take it away, Brooke.
BROOKE DIPALMA: Good afternoon, Julie. Well, according to the US Department of Agriculture, food prices are expected to increase 2.9% in 2024. Now that's almost half of the 5.8% increase in food prices seen in 2023. And this means we continue to see deflation, but not necessarily a decrease in prices.
And there are a few items that have been quite volatile in 2023. We've seen eggs, sugar, and cocoa prices be quite volatile. In the latest CPI report, egg prices came down 22.3% as of November or compared to November of last year, while sugar and candy has seen mid to high single digit upticks, as you can see right here.
So what exactly is causing that? Well, a weather pattern known as El Niño has taken a toll on sugar and cocoa prices. On top of that, packaging costs have gone up, and trucking prices have gone down. So a bit of give and take there. But sugar outlook has now improved in countries like Brazil, India, and even here in the US. While cocoa production in India, well, it's basically shut down. And other international countries will likely be short, causing futures to skyrocket most recently.
But egg prices jumped earlier this year because of that bird flu. And now the top producer here in the US Cal-maine reported a case in one of its Kansas facilities of the bird flu just last week. So as this is the investor guide, I have been chatting with some analysts about tickers to keep an eye on and some to be wary of in terms of the pricing power that we could see in 2024.
So starting with Hershey's. Well, year-to-date shares of Hershey's are down roughly 22%. And it hit a new two-year low just this week. This follows a report back in October, their third fiscal third quarter report, where we saw a 1% decrease in volume but an 11.1% jump in prices. And one analyst told Yahoo Finance that a lot of the bad news is priced into the stock already as investors brace for a tougher top line in 2024, while another analyst said consumer tradedowns are another concern.
And Hershey's isn't alone. Shares of General Mills are also under pressure. They're down roughly 24% year-to-date and General Mills CFO Jeff Harmening said something similar on the call.
JEFF HARMENING: Well, many factors have evolved in line with our expectations. We are seeing consumers continue to display stronger-than-anticipated value-seeking behaviors across our key markets.
BROOKE DIPALMA: And if you take a look at some of the major food producers together, well, Mondelez is coming out of the year positive. One analyst telling me he likes its international exposure. Another analyst saying that the brand has been able to win over consumers with innovation. And innovation will be a key strategy that we want to watch out for in the new year, Julie.
JOSH LIPTON: Brooke, I'll take it from here. Thank you so much.
