What are ASX consumer staples stocks?
We categorise companies that produce goods or services with non-cyclical demand as consumer staples stocks. These companies produce food and beverages, hygiene products, and household goods. Alcohol and tobacco also belong in the category.
Essentially, consumer staples are items people need rather than want, so they will continue to buy regardless of their financial situation.
In an economic downturn, people may stop buying new clothes and toys, but they'll keep buying food, drinks, soap, and the like. Demand for consumer staples stays relatively constant regardless of which point of the economic cycle we are at.
In fact, demand for certain consumer staples, such as alcohol, may even increase in a downturn.
Consumer staples differ from discretionary products, which meet people's wants rather than needs. Consumer discretionary products include luxury brands, high-end travel, expensive beauty products, and pricey toys.
Because they are non-cyclical, spending on consumer staples does not ebb and flow like expenditures for discretionary consumer goods and services. Consumer staples have a low price elasticity of demand because people will still buy these products and services even if the prices rise.
Why invest in them?
During a stock market downturn, consumer staples shares tend to fall less dramatically than others. This is because demand for products these companies sell does not typically decline as much, even during recessions. And because these businesses generate consistent revenue throughout the economic cycle, they are considered defensive stocks.
Consumer staples stocks attract investors with their steady cash flows and dividend yields. Because of their non-cyclical nature, consumer staples shares usually continue to pay dividends through recessions.
Consumer staples stocks also provide essential diversification benefits. Because they don't respond to changes in the economic cycle in the same way consumer discretionary shares do, they can help balance riskier stocks in a portfolio.
Top consumer staples stocks on the ASX
There are nearly 100 consumer staples companies listed on the ASX. These range from the big supermarket chains to food, grain, and crop producers to alcohol retailers. Here are three top consumer staples stocks ranked by market capitalisation from high to low.
| Company | Description |
| Woolworths Group Ltd (ASX: WOW) | Australia's largest retailer with more than 1,400 supermarkets, the Big W discount department stores, and a financial services division. It also operates more than 180 supermarkets across New Zealand under the Countdown brand. |
| Coles Group Ltd (ASX: COL) | One of Australia's largest retailers with more than 800 supermarkets nationally. It also operates liquor stores, and express fuel and convenience outlets. Its financial services arm provides insurance, credit cards, and personal loans. |
| Endeavour Group Ltd (ASX: EDV) | A retail beverages and hospitality business with 1,675 stores under brands including Dan Murphy's and BWS, and more than 300 hotels providing food and drinks, accommodation, entertainment, and gaming. |
Woolworths
Woolworths is Australia's largest retailer, operating Woolworths supermarkets and Big W discount department stores nationwide. The 2022-23 financial year marked a return to relative stability for Woolworths after several years of COVID-related disruptions. The impact of inflation, however, saw customers become more careful in their spending patterns, particularly in discretionary categories.
Nonetheless, sales increased 5.7% in FY23 to $64,294 million. This contributed to a 4.6% increase in net profit after tax (NPAT), which rose to $1,618 million. The strong profit result was attributable to the realisation of benefits from ongoing investment in recent years and a recovery from FY21 and FY22, which were impacted by material COVID-19 costs.
In FY24, Woolworths expects food inflation to moderate overall in Australia and New Zealand, although it will likely remain elevated in specific categories. Sales for the first quarter were up 5.3%, with demand resilient overall.
Coles
Coles is a leading Australian retailer, processing more than 20 million customer transactions each week. It operates more than 840 supermarkets and 950 liquor stores nationally. Its financial services arm provides insurance, credit cards, and personal loans.
In May 2023, Coles completed the sale of its fuel and convenience retailing network, Coles Express, to Viva Energy Group Ltd (ASX: VEA) for $300 million. Coles will continue to partner with Viva Energy concerning product supply arrangements and will provide transitional services for up to two years as Viva Energy establishes its internal capabilities.
Sales revenue grew 5.9% to $40.5 billion in FY23 as more than 300 stores were opened or refreshed. Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew 3.8% to $3,382, while NPAT grew 4.8% to $1,098 million. Sales rose in the first quarter of FY24, up 6.7%, with more customers looking to cook and entertain at home.
Endeavour
The Endeavour business finished FY23 with 266 Dan Murphy's stores, 1,435 BWS stores, more than 300 pubs, and eight wineries. Demerged from Woolworths in 2021, Endeavour has since focused on optimising its portfolio with strategic acquisitions.
In FY23, Endeavour experienced its first uninterrupted financial year of trading since FY19. It delivered strong financial results with sales of $11.9 billion, up 2.5%, and profits of $529 million, up 6.9%. Endeavour reported a return of retail sales momentum following a period of rebalancing post-pandemic. The hotel segment also performed strongly as live music and events resumed.
Disciplined cost management remains a focus in the face of inflationary pressures, with Endeavour reporting $90 million in incremental savings across the business since the demerger. It achieved $60 million of these savings in FY23.
The company expects customer demand to remain resilient in FY24 as it looks to drive earnings growth through a balance of sales growth, gross profit margin management, and cost control.
What to look for when buying consumer staples shares
Investors in ASX consumer staples shares are likely to prioritise dividends and steady growth ahead of the potential for accelerated capital growth.
Consumer staples shares tend to be steady performers and act as a hammock in market downturns. This is because consumer staples companies can continue to generate sales and profits during economic slowdowns.
Many big-name brands you buy daily are individual consumer staples stocks available to purchase on the ASX. Examples include Bega Cheese Ltd (ASX: BGA) and A2 Milk Company Ltd (ASX: A2M).
Investors can gain exposure to ASX consumer staples companies by buying shares in them directly or by investing in an exchange-traded fund (ETF) that focuses on the sector. Investors are not limited to Australian shares either – certain consumer staples ETFs offer global exposure.
Pros of investing in ASX consumer staples shares
Diversification: Consumer staples shares can provide significant diversification benefits to portfolios as they are not as susceptible as other types of shares to the vagaries of the economic cycle.
Dividends: Customer demand for the food and services offered by consumer staples companies is fairly consistent, so these companies tend to have consistent cash flows and are thus able to pay dividends even during periods of downturn.
Safe haven: The relatively constant demand for the products and services of a consumer staples company means they can act as a safe haven for investors during a bear market.
And the cons
Slow growth: Consumer staples shares tend to be slow and steady businesses, so they don't have the same potential for rapid share price increases as some other stocks on the market, such as tech companies.
Potentially slow to adapt: Size can be a weakness when there is a shift in customer demand. Large consumer staples companies may be slower to adapt to market changes than smaller competitors.
Are consumer staples stocks a good investment?
Whether these types of shares are a good investment for you will depend on your investment goals and financial situation.
ASX consumer shares can provide a share portfolio with protection during a recession. This is because consumer staples shares are non-cyclical, so changes in the economic cycle don't impact them as much as cyclical shares.
ASX consumer staples shares can also provide diversification benefits and balance to a portfolio. Not to mention dividends, which can be a tax-effective way of receiving investment returns if franking credits are attached to your shares.
An investor seeking rapid capital gains is unlikely to be attracted to consumer staples shares but should recognise the valuable contribution they can make to a portfolio. Take your time making your investment decision and seek professional advice, if necessary.
