Beneath the sector surface: the hidden forces driving change in global consumer goods

In this article, we’ll explore the indicators that deserve your attention, including:

• Pricing power
• Margin stability
• Evolving consumer behaviour

Read on to discover which opportunities align with your trading strategy and what new opportunities may be on the horizon.

Pricing power

The ability of a company to raise prices without expecting a corresponding drop in demand will always appeal to investors. Brands that define their category, like Coca-Cola; brands with intense levels of loyalty, like Apple; and brands whose customers tend not to be price sensitive, like Gucci, all enjoy high levels of pricing power.

When companies don’t possess meaningful pricing power, they’re more vulnerable to economic anxiety. This causes consumers to switch to cheaper options, delay purchases or buy less, regardless of income. This has been happening in Europe among Gen Z consumers.

Luxury stocks like Kering and LVMH traditionally enjoy low price elasticity of demand and high pricing power. That might be about to change. It’ll be interesting to see what comes from Chinese manufacturers trying to attract consumers away from the European market—the spiritual home of luxury—to domestically produced alternatives.

As pricing power relates to trading strategy, keep in mind that non-discretionary categories traditionally withstand economic turbulence better than discretionary and semi-discretionary categories.

So, consumer staples that enjoy both high pricing power and inelastic demand, like food, medications, cleaning and hygiene products, should be attracting interest from anyone in the market for defensive stocks with reliable dividends.

Those with an even more conservative approach may look to corporate bonds for stability: Costco, Walmart, British American Tobacco, Proctor & Gamble and Coca-Cola all offer them.

Margin stability

A good predictor of pricing power is margin stability. Investors should be asking how well a company can protect gross profits and profit margins from cyclical fluctuations.

Historically, iconic, trusted consumer brands like Apple, Nike and Budweiser enjoy high-margin stability. In fact, back in March, Anheuser-Busch, owners of the Budweiser brand, reported increased revenues on lower sales volumes, proving that they can withstand an array of market headwinds as well as self-inflicted marketing challenges.

Midcap consumer companies typically have less margin stability and may be prone to higher levels of price volatility. Indian FMCG company Honassa Consumer, for example, saw its share price hit a 52-week low in the first week of April 2025, despite annual growth in sales and profit.

This sort of volatility presents opportunities for ambitious traders who are prepared to carefully plan their entries and exits. Caution is the key. Buy-stop orders can provide some downside protection for traders hedging short positions. Our in-depth guide covers buy-stop orders in more detail.

Evolving consumer behaviour

The consumer sector is becoming harder to predict and showing more significant regional disparities in consumer sentiment.

Broadly speaking, these disparities are linked to local dynamics influencing consumer optimism: domestic demand for goods in China is high, European discretionary spending is broadly flat as consumers remain concerned about inflation and Russia, while political changes in the United States continue to constrain consumer optimism.

These disparities may encourage a degree of regional portfolio rebalancing.

We can see some other trends worth noting, too.

Social commerce, especially on TikTok, is growing and opening up direct-to-consumer channels. AI is influencing how people discover and choose products, affecting brand loyalty. Combined, these technologies are beginning to drive a shift in global retail strategy.

Chinese manufacturers have been flooding TikTok with videos claiming that the iconic luxury products we know and love, like the Hermès Birkin bag, are made in China.

It’s not true, but does that actually matter?

This aggressive disinformation campaign has already achieved three important things: it creates doubt about the provenance of traditional luxury brands, demonstrates China’s admittedly impressive ability to create high quality replicas, and raises the profile of direct-to-consumer retail channels.

The latter has the potential to devalue the ‘experiential’ aspects of luxury in the minds of consumers. That said, the trend could be short-lived. If America’s reported plan to pressure trading partners to constrain Chinese shipping capacity, direct-to-consumer ‘luxury’ could be more pain than its worth for consumers.

For investors feeling optimistic about the evolving retail landscape, allocating capital to consumer discretionary ETFs might help capture the long-term growth of companies with strong social commerce performance.

Another trend worth paying attention to is the growing adoption of GLP-1 weight loss drugs. The likes of Wegovy and Ozempic are having a tangible impact on the consumer discretionary sector. Put plainly, higher use of GLP-1s may lead to lower consumption of alcohol, soda, fast food and convenience food. Analysts estimate that almost a third of GLP-1 users are already spending less on groceries.

Shorting stocks in less resilient categories will be attractive to traders anticipating falling stock prices in shaky consumer goods companies.

The bottom line

How we buy may be rapidly evolving, but what we buy isn’t necessarily following suit.

People will always need food, medicine and toothpaste. And there’s little evidence to suggest big box retailers are losing their grip on this market.

When it comes to discretionary and luxury categories, buying behaviours and channel preference may be more salient.

Opportunities could therefore lie in the underlying payment and fulfilment technology supporting the social commerce ecosystem. Sophisticated traders will continue to shop for undervalued growth stocks.

To join them, look for companies with strong ecommerce performance and corresponding margin stability.