- What are consumer staples stocks?
- Top consumer staples stocks in Canada
- Top Canadian food stocks
- Top Canadian agricultural stocks
- Top Canadian beverages stocks
- Top Canadian household and personal care stocks
- Top U.S. consumer staples stocks
- Pros and cons of consumer staples stocks
- Pros
- Cons
- Should you invest in consumer staples stocks?
Consumer staples are the daily goods that buttress our livelihoods – food, beverages, paper towels, toilet paper, cosmetics, among others. If it’s a regular item on your grocery list, then it’s probably a consumer staple.
Because of how essential consumer staples are in our lives, these stocks tend to be less volatile than other sectors. Below we’ll look at some top opportunities in Canada’s consumer staples sector and see if these stocks have a place in your portfolio.
What are consumer staples stocks?
Consumer staples stocks are companies that produce and sell products we regularly need, like food and household products. They can also include companies that make tobacco products and fizzy beverages, like pop and sparkling water.
Since people buy consumer staples regardless of the economy’s health, this sector’s stocks tend to be less cyclical or volatile than others. For that reason, consumer staples stocks can play a defensive role in investors’ portfolios, providing stability and decent long-term returns when other sectors are weak.
Consumer staples stocks are often contrasted with the consumer discretionary sector, which makes products we don’t need but want, such as luxury apparel, restaurant dining, and furniture. Unlike consumer staples, this sector is vulnerable to economic changes and can swing wildly when the stock market is turbulent.
That said, consumer staples aren’t immune to recessions and volatility: you can still lose money on these stocks. When we say they’re safe or defensive, we mean they historically perform better than other market sectors during sluggish economic growth. But these companies often have narrow profit margins, and they can struggle to earn money when inflation raises operating costs faster than consumer product makers can raise prices on consumers.
In short, they’re safe stocks in the same way that an airbag makes a car safe to drive: there are exceptions to the rule, and you should proceed with caution, regardless of how stable they might seem.
Top consumer staples stocks in Canada
Many of Canada’s top consumer staples stocks are grocery and discount stores, like Alimentation Couche-Tard, Dollarama, and Loblaws. While Canada doesn’t have mega-cap consumer staples stocks on par with those found in the U.S. (like Walmart and Procter & Gamble), there are plenty of good opportunities on Canada’s home-turf exchanges.
Top Canadian food stocks
The food industry is arguably Canada’s strongest among consumer staples. These stocks have traditionally included legacy grocery and discount stores. But they can also include startups specializing in vegan and plant-based foods.
| Food stocks | Description |
| Alimentation Couche-Tard (TSX:ATD) | Operator of a global chain of convenience stores |
| Loblaws (TSX:L) | One of Canada’s largest grocery stores |
| Dollarama (TSX:DOL) | Large chain of discount retail stores |
| Metro (TSX:MRU) | Large grocery store chain found primarily in Quebec |
| Empire Company Limited (TSX:EMP.A) | Grocery conglomerate that operates Sobey and Safeway |
Top Canadian agricultural stocks
Agricultural stocks are companies that grow and raise the stuff we eat, like farms and ranches. They can also include companies that make fertilizer and farming machinery, as well as those that package food and deliver it to grocery stores.
| Agricultural stocks | Description |
| Nutrien (TSX: NTR) | World’s largest producer of fertilizer (by capacity) |
| Saputo (TSX: SAP) | One of Canada’s largest dairy producers |
| Maple Leaf Foods (TSX: MFI) | Producer and packager of meats and plant-based products |
Top Canadian beverages stocks
Beverages stocks are companies that make bottled and canned drinks, such as pop and bottled water. They can also be companies that make tea, coffee, beer, and spirits. Finally, many water stocks also fall under the broader category of beverage companies.
| Beverages stocks | Description |
| Molson Coors Canada (TSX: TPX.B) | Canadian-American global brewer of iconic beers, such as Coors Light, Miller Lite, and Blue Moon |
| Lassonde Industries (TSX:LAS.A) | Producer of ready-to-drink fruit and vegetable drinks |
| Corby Spirit and Wine (TSX: CSW.A) | Major manufacturer of spirits and wine in Canada and the U.S. |
Top Canadian household and personal care stocks
Household and personal care stocks sell cleaning products, soaps, detergents, cosmetics, and personal care products. They can also sell paper products, like paper towels and tissue.
| Household and personal care stocks | Description |
| MAV Beauty Brand (TSX: MAV) | Cosmetics company that makes products for hair, body, and beauty care |
| KP Tissue (TSX:KPT) | Producer of tissue products, like facial and bath tissue and napkins |
Top U.S. consumer staples stocks
Many of the largest consumer staples stocks in the world are headquartered in the U.S. If you’re interested in buying U.S. stocks, the following three companies might be a good place to start.
| U.S. consumer staples stocks | Description |
| Procter & Gamble (NYSE:PG) | Household and personal care company best known for its iconic brands, such as Tide, Crest, and Gillete |
| PepsiCo (NASDAQ: PEP) | Global beverage company and owner of Frito Lay and Quaker |
| Unilever (NYSE:UL) | One of the largest personal care companies in the world |
Pros and cons of consumer staples stocks
Pros
- Stability in turbulent markets. People buy consumer staples during good times and bad. This can make them defensive stocks in recessions or good buy-and-hold stocks when you’re nearing retirement.
- Established brand names with a loyal following. The companies in this sector typically enjoy a moat of brand loyalty: if you shop at Loblaws, you often continue shopping at Loblaws. This makes them more resistant to new competitors.
Cons
- Limited year-over-year growth. Companies in this sector have narrow profit margins. Even the best companies will grow only moderately, but not enough to match the explosive returns on certain tech stocks.
- Changes in consumer preferences. These companies might be stable, but they’re not immortal. If consumers change their habits – such as shopping online versus in-store – consumer staples can suffer losses.
Should you invest in consumer staples stocks?
Consumer staples stocks are well suited for investors with low-risk tolerances. Whether you’re approaching retirement or simply want more stability during volatile markets, consumer staples could anchor your portfolio and provide decent returns while other sectors are suffering.
Even if you have a high appetite for risk, exposing a portion of your holding to the consumer staples sector could defend your portfolio when the rest of the stock market is weak.
For broader exposure to this sector, you could also buy an exchange-traded fund (ETF) that tracks consumer staples stocks in Canada.