3 UK Consumer Staples Stocks With Pricing Power As Inflation Fears Return

Oil supply shocks, weaker UK growth projections and a possible return of higher inflation are pulling investors back to basics. Everyday essentials can sometimes hold up differently when households start cutting back, which turns attention to UK Defensive Consumer Staples and Essential Retailers. This article introduces three stocks from that screener that appear positively exposed to the current news backdrop and explains how each might fit into a resilient portfolio story.

The three stocks highlighted below are only a sample. The full screen surfaced 13 more UK Defensive Consumer Staples and Essential Retailers with equally compelling stories that are not covered here. To go beyond this short list, head straight into the UK Defensive Consumer Staples and Essential Retailers screener to identify, compare and analyze the companies that best fit your own defensive income and stability goals.

Reckitt Benckiser Group (LSE:RKT)

Reckitt Benckiser Group is a global consumer goods company behind everyday health, hygiene and nutrition products such as Dettol, Durex, Lysol, Finish and Enfamil. It generates most of its revenue from Core Reckitt in Emerging Markets at about £4.4b, followed by Europe at £3.4b, North America at £2.5b and around £2.1b from Mead Johnson Nutrition, with a smaller segment adjustment of £1.2b. The group is a large cap stock with a market value of roughly £33.6b.

Reckitt Benckiser Group can be viewed as a potential option when oil driven inflation and weaker UK growth push investors toward companies that sell essentials rather than luxuries. Its portfolio in cleaning, over the counter medicines and infant nutrition tends to sit high on household priority lists. Management has also been discussing pricing power and cost actions intended to help absorb supply chain shocks from the Middle East conflict. At the same time, investors need to weigh legal exposures, a meaningful debt load and an earnings path that is not clearly upward. When these factors are considered together with the dividend and ongoing buybacks, the investment case can appear more complex than a simple defensive staple label suggests.

Reckitt Benckiser Group’s mix of health, hygiene and infant nutrition brands can look like a shield when inflation worries build, but that shield comes with legal and balance sheet questions. Get the fuller story in the 4 key rewards and 3 important warning signs (1 is major!)

Build your own defensive staples shortlist

Reckitt Benckiser Group and the other two stocks in this article all came from a single screener, which shows how powerful it can be when you focus on essentials, cash flow strength and balance sheet quality. Use our flexible Screener to mix filters like valuation, future growth, risks and dividends, or lean on any of our curated Investing Ideas for ready made starting points.

Greencore Group (LSE:GNC)

Greencore Group manufactures sandwiches, salads, ready meals and other convenience foods for supermarkets, travel outlets, coffee chains and foodservice customers across the UK and Ireland. Its reported revenue of about £2.3b comes entirely from its Convenience Foods UK & Ireland segment, underlining how closely the business is tied to everyday food purchases. The stock sits in the mid cap bracket with a market value of roughly £2.1b.

Greencore Group sits at the intersection of everyday food spending and the UK growth slowdown story. Its convenience products often remain in shopping baskets even when households cut back elsewhere, and management has been working on operational excellence and technology programmes to improve efficiency and margins. At the same time, recent losses, very slim net margins and heavy use of external funding leave little room for error if cost pressures or contract changes move against the business. For investors who can handle those risks, the combination of earnings growth expectations and a sizeable discount to estimated fair value may make Greencore a candidate for closer consideration in a defensive staples watchlist.

Greencore Group sits at a crossroads of everyday spending, slim margins and a valuation that some investors may be underestimating. Step into the full analysis report for Greencore Group to see what might be hiding behind those contracts and costs

Tate & Lyle (LSE:TATE)

Tate & Lyle supplies sweeteners, fibres, stabilisers and speciality starches that go into everyday foods and drinks, from soft drinks and dairy to snacks and ready meals. It reports about £995 million of revenue from the Americas, £636 million from Europe, Middle East and Africa, and £375 million from Asia Pacific. The stock currently has a market value of roughly £2.4 billion.

Tate & Lyle sits in the sweet spot for this screener because it sells ingredients that flow into everyday food and beverage products, which often hold up better when growth slows and inflation re-accelerates. The planned £2.7 billion takeover by Ingredion, the expansion of higher margin speciality solutions through CP Kelco and strong recent earnings momentum have all helped frame a story of improving profitability and a large gap to estimated intrinsic value. Set against that are going concern flags from the auditor, reliance on external debt funding and a dividend that current earnings do not fully cover, which keep risk firmly on the table. For investors who can handle that mix, Tate & Lyle offers a complex but potentially rewarding twist on defensive consumer staples exposure.

Momentum around Tate & Lyle’s speciality ingredients story is building, yet the balance between earnings support, debt and that planned £2.7b deal is easy to miss at first glance. Get the fuller risk and reward picture in the 3 key rewards and 4 important warning signs (2 are major!)

Seeking Alternatives Before The Crowd Moves

Markets rotate quickly and some of the next breakout stories are still flying under the radar for now. Review these ideas before momentum builds and consider whether they fit your strategy.

• Identify stronger balance sheets before others notice by scanning the curated list of solid balance sheet and fundamentals (20 results) and focusing on companies that aim to keep funding risk under tighter control.
• Explore long term infrastructure themes while they are still under the radar with a targeted sweep of 36 power grid technology and infrastructure stocks that highlights essential network upgrades and suppliers.
• Monitor early movers in materials that support global industry shifts using the hand picked 9 top copper producer stocks to zero in on producers at the heart of demand trends.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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