Consumer staples in general in Europe have struggled from a lot of volume headwinds recently. We- have seen this across categories – in food, in beer, in spirits – and in some non-discretionary areas of HPC (Home & Personal Care) in particular.

What has caused this? It has been partly a post-COVID unwind. Destocking has been a post-COVID issue for so many different sectors. It has been an impact of strong pricing as well; these subsectors have taken a lot of pricing, especially things like spirits, over the past few years, and that has had a knock-on impact on volumes, which have eventually weakened. That is what we are seeing.

So where do we see this? We see this across the board. Food producers, HPC companies, food retailers as well, food ingredients businesses … so really the entire value chain. What we have tried to do is focus on the sub-categories within staples, where there is some more obvious strength in the volumes, that really counter that volume weakness we are seeing in the wider market.

So what are the areas? So firstly, dermatological skincare – that’s one area of strength. To put some numbers and context around it, derma is growing at 20% compounded at the moment – 20% year-on-year, versus more mass market categories growing at 5-6%. So L’Oréal, for example, is the big bellwether for this sector. L’Oréal has done about 15 quarters in a row of double-digit growth in derma.

So that’s one area we are focused on. Another one has been fragrance. So, again, a very niche part of the overall consumer market. But again, fragrance has been growing at double-digit levels, about 10% year-on-year growth at the moment.

So, the big question at the moment is: “Does this strength last”? The staples sector tends to see these multi-year trends in various different areas; that you see very strong growth in for a number of years and then it peters out. So there is a risk, obviously, that this might happen here. We see that in makeup, in general skincare over the last decade or so.

But there are a few reasons here to suggest that this derma and fragrance trend can continue. We can see some structural drivers. Within fragrance, we have rising penetration in Asia. That’s a big factor here. So use of fragrance in Asia – China in particular – has been very low compared to western markets like France or the US.

So that is one factor. As penetration increases, that should drive structural growth. There’s a younger cohort effect; the young use fragrance more than the old, and as that young cohort moves through the demographics, that again boosts growth. That should be something that is sustainable. And there’s also the rise of this niche fragrance brands that is quite a powerful force of growth in the sector.

Within the derma area, we’re seeing innovation-led growth; the correlation with luxury. We have increasing consumer awareness of health and wellbeing. Just generally, consumers are increasingly demanding safe, efficacious products that are either prescribed or endorsed by doctors. So there’s some powerful growth drivers for those two areas.

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Destocking: A reduction in the level of inventory held by a business, which can be caused by a range of factors.

Sectors: Stock market sectors are broad classifications of businesses to help group them as operating in a similar part of the economy, such as financials, energy, consumer staples or healthcare. They can be broken down into various constituent groups, known as sub-sectors.