The 2 Best Stocks to Invest in Consumer Staples

Many investors turn to the consumer staples sector for consistent, noncyclical growth. That's because consumer staples are essential goods such as food, beverages, and personal care items -- products for which demand tends to remain constant regardless of economic conditions. Stocks in this sector are therefore considered defensive in nature, as they generally hold up relatively well in market downturns.

Yet while there is certainly something to be said for slow and steady growth, the consumer staples sector also contains a select group of businesses with exciting growth prospects. These companies are enjoying strong increases in revenue and earnings even as many of the better-known consumer staple stocks such as Procter & Gamble (PG 0.60%) endure weak sales and sinking profits.

Two stocks stand out above the crowd in consumer staples in this regard: Hain Celestial (HAIN 2.83%) and WhiteWave Foods (WWAV), both of which offer investors the potential for strong revenue and profit growth in the years ahead.

Source: Hain Celestial.

Hain Celestial
A fundamental shift is occurring in the food industry as an ever-increasing number of people around the world are seeking out healthier foods. Hain Celestial, as a leading manufacturer and distributor of natural and organic foods, is in a prime position to profit from this global megatrend.

Hain Celestial owns a valuable collection of well-known brands, including its namesake Celestial Seasonings teas, Greek Gods yogurt, Earth's Best baby food, Terra snacks, and a host of other "better-for-you" food and beverage brands.

Sales of natural and organic foods are growing at a healthy rate, and Hain Celestial augments its organic growth with acquisitions. While there are inherent risks in a growth-through-acquisition strategy, Hain has a proven track record of successfully integrating its new businesses. It is able to plug these purchases into its increasingly global distribution network and quickly increase their sales.

Probably the best example of this is Earth's Best, which Hain acquired from Heinz in 1999. At the time, Earth's Best's annual sales were $14 million and declining -- they've since risen to more than $200 million. More recently, Hain acquired Greek Gods yogurt in 2010. The company's sales topped $10 million in 2009; by 2014, Greek Gods' annual revenue surpassed $100 million. 

In addition, Hain's far larger sales base allows it to better leverage these smaller businesses' costs, thereby improving profitability. This powerful combination -- rapidly expanding sales and steady increases in profit margin -- has led to impressive value-creation for Hain and its shareholders, and this is likely continue for the foreseeable future.

Source: WhiteWave Foods.

WhiteWave Foods
With the leading brands in organic and alternative dairy and produce, WhiteWave Foods has plenty of organic growth of its own. Excluding acquisitions, sales increased a solid 12% in 2014.

WhiteWave's Horizon brand helped pioneer the organic dairy movement and became the first company to supply organic milk nationwide. WhiteWave's Silk and Alpro brands provide plant-based alternative dairy products such as soy milk, almond milk, and coconut milk in North America and Europe. Coffee creamers and ready-to-drink beverages under the International Delight and Land O' Lakes brands help to round out WhiteWave's product lines.

Recent acquisitions have further broadened WhiteWave's offerings. In December 2013, WhiteWave purchased Earthbound Farm, at the time the largest organic produce brand in North America, which expanded WhiteWave's markets to include the high-growth areas of organic fruits, vegetables, and salads. In September 2014, WhiteWave acquired So Delicious Dairy Free to further strengthen its portfolio of plant-based dairy alternatives.

These acquisitions have turbocharged WhiteWave's growth; total revenue (including organic and acquisition-based sales) surged 35% in 2014. 

But WhiteWave isn't resting on its laurels.

Just days ago, WhiteWave announced its intention to acquire Vega and its broad range of market-leading plant-based nutrition products for $550 million. Vega generated sales of approximately $100 million in 2014 and grew by more than 30% over the last year. WhiteWave's management expects the acquisition to be accretive to the company's adjusted earnings by 2016. 

Combined with the intriguing potential of WhiteWave's nascent joint venture with Mengniu Dairy, one of China's leading milk and yogurt producers, the Vega deal should only add fuel to WhiteWave's already impressive growth. In fact, 2015 is already off to a good start, with first-quarter sales rising 10% and management increasing its earnings per share guidance thanks to "enduring consumer tailwinds driving continued growth in our categories," as stated by Chairman and CEO Gregg Engles.

With a treasure trove of market-leading brands in the premium and organic food and beverage segment, value-adding acquisitions, and promising partnerships in international markets, WhiteWave is well positioned to profit from the global trend toward healthier living in the years ahead.