CHAPTER 11Consumer Staples
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Businesses in the global consumer staples sector provide goods and services to consumers that are nondiscretionary in nature, meaning they are essential. These are items that consumers purchase regardless of economic conditions. Sales and profits for companies in the sector traditionally grow at the same rate as the underlying economy. The reason for this is that the main driver of growth is through increasing sales volumes, which is primarily driven by economic and population growth. Most of the goods and services these businesses supply are similar with close substitutes, and therefore the scale of production and brand recognition are particularly important factors for separating the winners from the losers. In fact, consumers often base their purchase decision on brand and are often reluctant to change their preferences. Industries within the consumer staple sector therefore do not usually experience sudden changes in market share between key competitors. In the beverage industry, for example, consumers usually prefer either Coca-Cola or Pepsi products and rarely switch between the two. Despite this, companies do emerge with products having unique characteristics that enable them to grow quickly for an extended period of time. Eventually, however, competitors will begin to offer comparable products at lower prices and thereby eliminate any short-term advantages.
In general, consumer ...
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