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6 Consumer Goods Companies In-Line With Consumer Trends

By Dan Moskowitz – Mar 13, 2014 at 1:46PM

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Nielsen is a reliable source for consumer trends. Its recent studies indicate some important information that investors should consider.

If you're not familiar with Nielsen, here's how the company describes itself: "A leading global information and measurement company, provides market research, insights [and] data about what people watch [and] what people buy." 

According to Nielsen, global consumer confidence increased 3 points versus 2012. However, despite the increased consumer confidence, Nielsen predicts flat global retail sales for 2014. The good news is that global dollar sales are expected to improve by 1.8%.

This will not be a broad-based consumer recovery. In fact, conditions will worsen for many consumers due to a lack of wage growth. While this is a sad and unfortunate event, you're likely just looking for ways to profit from positive trends. Several high-potential opportunities exist.

Healthy consumer
Do you remember the days when drinking one or two sodas per day was considered normal and harmless? If you're 30 or older, then the answer is probably yes, but you will never see those days again.

While soda is still in high demand, its growth is slowing considerably. This has a lot to do with the Internet and the massive amount of information that's now available to consumers. This information hasn't just led to consumers shying away from soda, but has also resulted in consumers seeking healthier food and drink options. According to Nielsen, health and food prices are now toward the top of consumers' list of concerns. This is a major shift from 2011, when consumers were most concerned about fuel prices and work/life balance.

In addition to desiring improved health and fair food prices, today's consumers want their food fast and fresh. What companies immediately come to mind?


Answer: Chipotle Mexican Grill (CMG 0.62%), Panera Bread (PNRA), and Subway. Another company that might not immediately come to mind, but offers "healthy living for less" in a grocery-store format, is Sprouts Farmers Market (SFM 1.33%). More on these companies soon. There are two other trends to potentially profit from.

Online growth and caffeine
The following stat is somewhat amazing. According to Nielsen, approximately 33% of people who use the Internet in the United States visit (AMZN 0.01%) at least once per month. To make that stat even more incredible, e-commerce only represents approximately 4% of overall U.S. retail sales right now. Therefore, Amazon could still be in its early growth stages.

Nielsen expects e-commerce sales to reach 5% of overall U.S. retail sales by 2015. This represents steady e-commerce growth. More importantly, it indicates that there's still a long way to go.

It's a given that e-commerce will continue to grow in the future, and Amazon is the largest online retailer by far. Therefore, if you exclude Wall Street expectations and focus only on the underlying business, Amazon has high odds of future success.

As far as caffeine goes, Nielsen's studies have determined that 20% of global consumers desire an energy boost. This relates to today's fast-paced working environment. The most common way for people to boost their energy is via caffeine in coffee. This trend benefits Starbucks (SBUX -0.71%) and Dunkin' Brands.

Growth and valuation
It's not likely that you're going to consider an investment in all the aforementioned companies. That being the case, let's break it down in the simplest way possible. Then you can determine which company you'd like to research further.

Over the past year, each one of these companies has shown significant top-line growth:

SBUX Revenue (TTM) Chart

Starbucks revenue (trailing-12 months) data by YCharts

Dunkin' Brands isn't on that chart, but it grew its top line 8.5% over the past year.

Concerning valuation, you're going to find some high multiples. Sprouts Farmers Market, Amazon, Chipotle, Panera, and Starbucks are trading at 105, 617, 56, 27, and 465 times earnings, respectively.

If you're looking for one company that's offering exceptional value versus the others based on top-line growth versus valuation, you're not going to find it. If you choose to invest in one of these companies, then it will simply be expensive. However, given the fact that all these companies are in-line with consumer trends, they're all capable of meeting or exceeding expectations in the future.

For the record, Dunkin' Brands is trading at 38 times earnings. Also, Starbucks and Dunkin' Brands are the only two to offer dividend yields: 1.5% and 1.8%, respectively.

The Foolish takeaway
All companies mentioned above are likely to remain in-line with consumer trends. Therefore, they have a good chance of outperforming the majority of consumer- goods companies going forward. That said, valuations are high, which leads to increased risk. Please do your own research prior to making any investment decisions.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends, Chipotle Mexican Grill, Panera Bread, and Starbucks. The Motley Fool owns shares of, Chipotle Mexican Grill, Panera Bread, and Starbucks. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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