Australia's consumer staples industry has recovered strongly from the COVID-19 pandemic and shown incredible resilience. Lockdowns and shifting consumer behavior initially caused some disruptions, but the industry was able to recover and gain momentum.
The primary drivers of the consumer staples industry are consumer spending, population and demographics, consumer behavior and preferences, product development and innovation, marketing and branding, economic conditions, regulatory framework, and competitive landscape. The growth and effectiveness of companies in the sector are impacted by these factors.
A growing number of consumers are looking for products that are additive-free, natural, organic, and health-conscious. In Australia, e-commerce is expanding quickly, and a lot of people are now buying necessities online. Businesses now have the chance to reach a wider audience and enter new markets thanks to this. There is a chance that other Australian consumer staples companies will follow suit as some are already active in foreign markets. Growth opportunities and access to new customers may result from this.
Let’s take a look at some of the 5 ASX consumers’ staple companies for 2024 in different sizes based on their market capitalization. These are as follows:
Note: The market cap and the share price of the selected ASX companies below are mentioned as of 24 January 2024.
Woolworths Group Limited (ASX: WOW)
Market cap: $44.29 billion
CMP: $36.26
Woolworths Group is positioned favorably as an investment opportunity due to its ability to maintain stable customer spending and effectively understand evolving consumer preferences, particularly among value-conscious customers. The business can boost growth and increase its market share by attending to customer needs and offering reasonably priced options. Woolworths Group's steadfast commitment to increasing customer satisfaction, ensuring value for money, and broadening product availability is indicative of its long-term success. The business can maintain revenue growth and cultivate client loyalty by consistently making improvements in these areas.
Coles Group Limited (ASX: COL)
Market cap: $21.07 billion
CMP: $15.74
COL is taking significant steps to address stock losses and enhance its digital footprint. Their top priority is addressing stock loss, with a strong focus on improving product availability to drive sales growth and enhance customer satisfaction.
In terms of expansion, their plans for FY2024 include opening around 15 new stores, closing six stores, and renewing 50 stores in supermarkets. Similarly, in Liquor, they aim to open approximately 20 new stores, close six stores, and renew over 100 stores. The launch of the second ADC is also on schedule.
Inghams Group Limited (ASX: ING)
Market cap: $1.59 billion
CMP: $4.28
Inghams Group has strategically positioned itself as the foremost vertically integrated poultry company, spanning both the Australian and New Zealand markets. This strategic positioning provides a significant advantage in a dynamic and diversified market landscape. The company has harnessed this advantageous position by aligning its investments with enduring industry trends and the robust demand within the poultry sector.
Treasury Wine Estates Limited (ASX: TWE)
Market cap: $8.30 billion
CMP: $10.235
The TWE has a strong determination to achieve sustainable, long-term financial goals. The company targets to maintain top-line growth, high single-digit average earnings growth, and an expected EBITS margin of over 25% and beyond, led by premiumization. The business's performance in the first quarter was in line with the company’s already-set target. Strong momentum is expected in the persistent going ahead for luxury wine and a specific category for premium wine all over. The company stands affirmed to deliver growth with continued EBITS margin expansion. The consolidated EBITS will be weighted to the second half of FY2024, reflecting the planned phasing of Penfolds shipments.
Metcash Limited (ASX: MTS)
Market cap: $3.49 billion
CMP: $3.57
The company experienced robust sales growth in the first seven weeks of FY2024, with all the pillars continuing to deliver excellent performance. Growth is expected in all pillars, despite the challenges faced on account of a higher interest rate and a higher standard of living that have impacted consumer confidence and customer behavior among some retail shoppers. The food and liquor pillars are performing well on account of strong competitiveness and a differentiated value proposition. Hardware continues to score better than the market and remains ideally positioned in the detached home and professional tools segments to capitalize on an improvement in consumer confidence and activity levels. Metcash Limited is standing on its strong footing, supported by strong fundamentals, and is poised to show future performance through the cycle. The company has a well-balanced portfolio that supports a strong retail network and has leading market positions.
Reference: *All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters
Frequently Asked Questions (F.A.Q)
What are the best ASX staple companies?
• Treasury Wine Estates Limited (ASX: TWE)
• Metcash Limited (ASX: MTS)
• Inghams Group Limited (ASX: ING)
• Coles Group Limited (ASX: COL)
• Woolworths Group Limited (ASX: WOW)
What are the key drivers for the consumer staple industry?
The primary drivers of the consumer staples industry are consumer spending, population and demographics, consumer behavior and preferences, product development and innovation, marketing and branding, economic conditions, regulatory framework, and competitive landscape. The growth and effectiveness of companies in the sector are impacted by these factors.
What is the fundamental view of Metcash Limited?
The debt level has been reduced significantly and maintained on a well-balanced debt-to-equity basis. The debt leverage ratio of 0.59x indicates a management calculative risk-taking approach to external fund usage. The operating cycle average values from year to year, such as receivable collection days, receivable turnover, payable turnover, and payable payment days, clearly demonstrate the strong capabilities of the management. On a relative valuation front, PE (TTM) multiples of 11.40x and ROEs of 24% offer an attractive value-buying proposition for the shareholders.
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