Moodys: US packaged foods will see improved profits

11 Dec 2015

The global consumer products, global beverages, US consumer durables and US packaged foods sectors will see improved operating profits in 2016, albeit with varying credit strengths and challenges, according to Moody's Investors Service.

Moodys: US packaged foods will see improved profits

The global consumer products, global beverages, US consumer durables and US packaged foods sectors will see improved operating profits in 2016, albeit with varying credit strengths and challenges, according to Moody's Investors Service. The rating agency has a positive outlook on US consumer durables and a stable outlook for the remaining three sectors.

"While key credit issues and supporting factors differ across the consumer sectors, we expect at least modest growth for all of them, led by particularly strong growth in US consumer durables," said Linda Montag, a Moody's Senior Vice President. "US consumer durables is benefiting from the continued US housing market recovery, the release of pent-up demand, and increased spending by middle-income consumers."

Meanwhile, the stable outlook on global consumer products reflects Moody's view that foreign exchange volatility will be somewhat offset by low oil prices and moderate commodity costs, and that cost reductions will boost re-investment capacity. However, the outlook also acknowledges challenges including increasing dividends and shareholder returns and the slowdown in developing markets, according to "Consumer Products, Durables, Foods and Beverages -- Global: 2016 Outlook -- Stable for most subsectors."

For global beverages, premium brands, especially spirits and wine, and craft and imported beers, remain strong. However, the sector is challenged by slower growth in emerging markets and moderate increases in commodity costs, Moodys said. A further test to this sector's strength is the decline in volumes of beer and carbonated soft drinks in some developed markets.

With respect to US packaged foods, as stronger consumer financial health is not expected to translate to higher spending, the sector will need to focus on cost cutting and share buybacks to boost shareholder returns.