What is Consumer Staples Sector?

Food and staple retailers, beverage, food products, tobacco, household and personal staple industries.

Consumer staples is a sector of the economy that includes companies that are supposedly part of a consumers needed monthly purchases. Also included here are retailers that specialize in selling such items including grocers and drug stores. The idea is that even if the economy falters, consumers will still need cleaning supplies, aspiring and the like. Because of this consumer staples stocks are supposed to outperform in periods where the economy shrinks.

The largest companies in the world in this sector are Procter and Gamble, Nestle and WalMart.

Food, beverage, and personal hygiene product company stocks are popular with investors. Investors are valuing their defensive attributes, as economic uncertainty remains elevated. Examples of consumer staples include food, drugs, beverages, tobacco, and basic household products. These are things that people are unlikely to reduce their demand for when times are tough because people see them as basic needs. People often go through consumer staples frequently; meaning they usually see a constant level of demand.

Since the frequent purchase of staples represents a relatively small portion of most consumers' annual income, demand tends to be fairly stable year-in and year-out. Thanks to this stability, sales and earnings growth in this sector tend to remain constant in good times and bad. After all, no one cuts back on purchases of food or dishwashing liquid, even during recessions. With this in mind, safe, defensive names in the consumer staples sector can provide investors with a great way to hedge their overall portfolio risk.