Economic concerns make essential consumption the "backbone", Goldman Sachs Group, Inc supports Philip Morris International Inc. (PM.US), Monster Beverage Corporation (MNST.US), and Mondelez International Inc. (MDLZ.US).

Goldman Sachs Group, Inc. recently released a report on the consumer sector, analyzing the global economic situation to identify winners and losers in the essential consumer goods industry in the current environment, reiterating a buy rating on stocks of Philip Morris International Inc. (PM.US), Monster Beverage Corporation (MNST.US), and Mondelez International, Inc. Class A (MDLZ.US). The beginning of 2025 saw volatility, with growing concerns in the market about the US economy and consumer spending. Uncertainties surrounding tariffs and inflation prospects have dampened consumer confidence and expectations. Scanning data and comments from Consumer Packaged Goods (CPG) industry management show a slowdown in consumer trends so far this year. Additionally, slowing job growth and potential inflation from tariffs have led the bank's economists to lower household income expectations. Previously, the bank's economists had predicted that if President Trump's "tit-for-tat" tariff measures proposed in April were implemented, the US economy would fall into a recession, but the President has since suspended the measures for 90 days. Nevertheless, the bank's economists expect the fourth quarter GDP growth rate to be 0.5% in 2025, with the peak core Personal Consumption Expenditures (PCE) inflation rate at 3.5%, and a 45% probability of an economic recession this year. Overall, the outlook for the US macroeconomic environment remains bleak. Therefore, the bank has conducted a study using the 2008-2009 economic recession (Global Financial Crisis, GFC) as a case study to understand the dynamic mechanisms involved and determine which companies are better positioned during an economic downturn. Based on this, the bank believes that Philip Morris International Inc., Monster Beverage Corporation, and Mondelez International, Inc. Class A, with their strong sales growth prospects, are likely to maintain higher valuations during an economic recession. Therefore, the bank reiterates its buy rating on these three stocks. Overall, due to the stronger defensive nature of the essential consumer goods industry, the bank expects its performance to outperform the S&P 500 index. However, given the higher discretionary nature of the beverage and Home and Personal Care (HPC) industries compared to food and tobacco industries, they are likely to underperform the entire essential consumer goods sector. It is worth noting that similar industry performance differentials were seen by the bank during the Global Financial Crisis. In terms of relative valuations for the essential consumer goods industry, the bank found that valuations for the HPC industry deviate the most, while valuations for the beverage industry are relatively more reasonable and the food and tobacco industries are more attractive. At the company level, although there are risks for HPC and some food companies (such as Hershey Company) during an economic recession, Monster Beverage Corporation, Philip Morris International Inc., and Mondelez International, Inc. Class A currently have higher valuation premiums than during the Global Financial Crisis. Historical data shows that the consumption trends of essential consumer goods are generally synchronized with GDP growth. This means that during an economic downturn, consumption of food, beverages, and HPC products may come under pressure, resulting in longer purchase cycles and consumers possibly opting for cheaper alternatives (such as private label products). However, consumption of tobacco/nicotine products usually increases during economically difficult times. During the 2008-2009 economic recession, the market share of private label products increased, with the most significant growth in market share seen in the snack business of Mondelez International, Inc. Class A, PepsiCo, Inc., Kraft Heinz Company, and Clorox Company. On the other hand, Hershey Company, Colgate, and Church & Dwight were least affected in their respective categories. Low-income consumers are more likely to switch to private label products during an economic recession. Among the companies covered by the bank, excluding tobacco companies (which are less threatened by private label brands, but face the risk of consumers shifting to lower-priced cigarettes due to significant price differences), Keurig Dr Pepper, Conagra Brands, and PepsiCo, Inc. have the highest sales percentage to households with annual incomes below $50,000. The bank also emphasizes that Constellation Brands has the highest sales percentage to Hispanic consumers among the companies covered by the bank, followed by Colgate and Kimberly-Clark Corporation. Due to policy uncertainties and a weakening macroeconomic environment, consumption by Hispanic consumers may slow down, posing risks for these companies.