Financial Poise
investing in consumer packaged goods

Three Reasons the Consumer Goods Industry Should Be On Every Investor’s Radar

CPG is Often Overlooked and Undervalued

Investors don’t often see the immediate value of the consumer goods industry and dismiss the industry as a non-factor in their portfolios. Perhaps the overall perception that consumer goods grow slowly and steadily is not as exciting as the ups and downs of investing in real estate or startups.

However, the tide is turning, and more and more investors are starting to take a hard look at consumer goods as a viable option that can lead to significant returns. Consumer trends are changing rapidly due to technology, social consciousness and emerging industries, making the consumer goods industry an exciting one to consider.

If consumer goods companies have never been on your radar, perhaps it’s time to dive into the research on new consumer goods examples and trends.. Here are three reasons you should consider adding consumer goods companies to diversify your portfolio:

Consumer Goods Offer More Stability

Even during economic downturns, the demand for consumer goods does not decrease or swing dramatically like other investment areas. In fact, some consumer staples even see an increased demand during recessions and tend to fluctuate in a more structured way.

Studies and headlines from recessions throughout American (and global) history have always commented on the trends in lipstick or hem-lengths in women’s fashion. Even the 2008 recession saw a trend in high heel sales. And not just any high heels, but the sky-high variety. During a recession, it isn’t uncommon to see unexpected consumer goods gain popularity, or for changes in everyday habits to open the space for new consumer trends, especially in fashion.

While a consumer may avoid purchasing a high-ticket item like a new car during a recession, they still have to buy their essentials. Some consumer goods examples that remain stable include:

  • Toothpaste, shampoo, soaps and other toiletries
  • Snack foods
  • Inexpensive alcoholic beverages
  • Cosmetics

This may be a bit on the dull side for some investors, but stability doesn’t have to equate to boredom when it comes to investing. The consumer goods industry offers steadier returns and less volatility, making these companies a viable addition to your portfolio.

Consumer Goods are Easier to Understand

A smart investor will always conduct due diligence before investing in a company in order to better understand key data such as financials, legal issues, products and markets. These data are critical before making a decision to invest in a company.

When it comes to consumer goods, investors can also add the company’s overall brand recognition to the due diligence process. There is definitely an advantage of being able to walk into a store and see a company’s product on the shelves, or to talk to your friends about a company they are likely to know. Imagine having the same conversation with your friends regarding an investment opportunity with an obscure, high-tech startup company—would they understand the concept as easily?

With consumer goods, there’s no need to rely solely on the advice of industry experts. Consumer goods are purchased by the public every day, and people understand these products and what they do. There’s also a great deal of sales and performance data readily available that can help investors track the performance of a consumer goods company they are interested in.

A wise investor would never invest in a business he or she does not truly understand. This is why the transparency of consumer goods companies is appealing to investors, making it easier for them to understand all aspects of the business and feel more confident in their investment.

Consumer Goods Investment Opportunities are On the Rise

Thanks to equity crowdfunding platforms like Circle Up, SeedInvest, Fundable and others that specialize in consumer goods, accredited investors have more access than ever before to investment opportunities in this sector.

Crowdfunding is attracting new investors who have a wider range of knowledge and expertise that can bring value to consumer goods companies. In addition, the crowdfunding model doesn’t require a huge amount of capital from investors to take part. Therefore, these platforms can offer more selection, allowing investors to selectively choose which companies they want to back.

Even without crowdfunding platforms, there are still many sub-categories within the consumer goods industry for investors to explore through more traditional investment channels.  There has also been an influx of new consumer goods entering the business world. Lab-grown burgers, hemp and cannabis products and global e-commerce brands are among the many consumer goods examples that have recently boomed.  It’s up to investors to take note as the next big investment opportunity could be in this industry.

Consumer goods are often overlooked when it comes to building a diverse portfolio. However, savvy investors have already been tapping into the consumer goods industry for years, because it’s easier to understand and offers low correlation to the overall market. Whether it is food, beverages or household items, take a closer look at the consumer goods industry when it comes to investing. You might be pleasantly surprised by the results.

[Editor’s Note: Check out these related webinars, which can be taken for Continuing Legal Education (CLE) credit, or simply for practical and entertaining education for business owners, Accredited Investors, and their legal and financial advisors: Basic Investment Principles 101: From Asset Allocations to Zero Coupon Bonds, Crowdfunding from the Investor’s Perspective, and Alternative Assets Part 2: Investing in Real Estate and Other “Hard” Assets.]

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About Lior Lavy

Co-Founder & COO of artizone.

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