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

Consumer Staples Are Often Overlooked, But They’re Always Reliable

Investors don’t often see the consumer goods industry’s immediate value and dismiss it as a non-factor in their portfolios. Perhaps the 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, consumer staples are always in demand, and the CPG market (consumer product goods) can help you build a more robust portfolio.

In fact, more investors now see consumer goods as a way to earn big returns. Consumer trends are changing fast due to technology, social awareness, and new industries. So, the consumer goods industry is an exciting one to consider. Below, we’ll outline three reasons why you should consider adding consumer goods companies to  your portfolio.

Consumer Goods Offer More Stability

Even during economic downturns, the demand for consumer goods does not decrease or swing dramatically like in other areas. While consumers may avoid purchasing a high-ticket item like a new car during a recession, they still have to buy their essentials. Some consumer goods that remain stable include personal health care products, cosmetics, and alcohol. This may be a bit dull for some investors, but stability doesn’t have to equate to boredom when it comes to investing. During a down-turn, it isn’t uncommon to see unexpected consumer goods gain popularity. Changes in everyday habits can also create new trends, especially in fashion.

In general, consumer staple stocks have moderate returns over time with little volatility and regular dividends. Over the past ten years, the S&P 500 Consumer Staples index has yielded 6.58% annualized returns despite economic downturns and overall market volatility. This makes the consumer goods industry a good choice for those seeking stable, regular income.

Consumer Staples Are Easier to Understand

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

When it comes to CPG companies, investors can also add the company’s overall brand recognition to the due diligence process. There is an advantage to being able to walk into a store and see a company’s product on the shelves or 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 daily, and people understand these products and what they do. There’s also a great deal of data readily available to 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 CPG companies appeals to investors, making it easier for them to understand all aspects of the business and feel more confident in their investments.

Investment Opportunities Are on the Rise

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

Crowdfunding attracts new investors with 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 choose which companies they want to back selectively.

Even without crowdfunding platforms, many sub-categories within the consumer goods industry exist 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 examples of consumer goods that have recently boomed. It’s up to investors to take note of what the next ample 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 CPG market for years because it’s easier to understand and offers a low correlation to the overall market. Whether it is food, beverages, or household items, take a closer look at consumer goods when investing. You might be pleasantly surprised by the results.

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[Editors’ Note: To learn more about this and related topics, you may want to attend the following on-demand webinars (which you can listen to at your leisure, and each includes a comprehensive customer PowerPoint about the topic):

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This is an updated version of an article originally published on July 30, 2021. This article was most recently updated by the Financial Poise Editors.]

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