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Zacks Industry Outlook Highlights: Procter & Gamble, Molson Coors Brewing, Kellogg, General Mills and Kimberly-Clark

CHICAGO, Feb. 19, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Consumer Staples, including Procter & Gamble (NYSE:PG-Free Report), Molson Coors Brewing Co (NYSE:TAP-Free Report), Kellogg Company (NYSE:K-Free Report), General Mills Inc (NYSE:GIS-Free Report) and Kimberly-Clark Corp (NYSE:KMB-Free Report).

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Industry: Consumer Staples 

Link: http://www.zacks.com/commentary/31352/consumer-staples-stock-outlook---feb- 2014

The operating backdrop for the consumer staples sector was more or less weak in 2013, as it was in 2012 due to a difficult consumer spending environment. Middle-class consumers have struggled to cope with rising gas prices, delayed income tax refunds and higher payroll taxes. In addition, difficult operating conditions in Europe and a slowdown in some Asian countries, like China, also weighed on the sector's outlook. Consumer staple stocks have also underperformed the S&P 500 as a whole in the past one year.

Unlike discretionary items, demand for consumer staples remain relatively stable across the economic cycle. But consumer staple companies are witnessing sluggish growth in the developed markets, due to market saturation, which along with consumers' stagnant disposable incomes and increased competitive activities have added to the companies' woes.

Thus, many of the companies have been looking to the faster growing emerging markets. That's a good strategy in the long run, but the near-term outlook for many of these markets remains uncertain. The ongoing emerging currency turmoil is particularly problematic, as a stronger dollar reduces the value of outside-U.S. sales and in turn limits growth.

This uncertain macro environment is a big reason why many companies in the sector have lowered guidance for 2014. With top-line growth hard to come by, many companies have been focused on cost controls, acquisitions and share buybacks.

Innovations

In a crowded and competitive space, consumer product companies need to regularly innovate and upgrade their brands to create differentiated value propositions for their customers and to remain successful.

For the consumer product giant Procter & Gamble (NYSE:PG-Free Report), innovation has been a strong tradition and the company has introduced many new products in most of its categories. While global brewer Molson Coors Brewing Co (NYSE:TAP-Free Report) plans to bring new variety in brands like Coors Light, Carling, Staropramen and Blue Moon to drive top line growth, cereal makers Kellogg Company (NYSE:K-Free Report) and General Mills Inc (NYSE:GIS-Free Report) plans to roll out more nutritious products in 2014. Consumer products giant Kimberly-Clark Corp's (NYSE:KMB-Free Report) innovation would include diaper and feminine care upgrades in Brazil, China and Russia. The company also has an innovative pipeline in North America that includes activity on Huggies diapers and baby wipes, the GoodNites youth pants, Depend briefs and Viva towels.

The companies are also shifting focus to make healthier and nutritious products in view of increasing health consciousness and rising obesity concerns and growing regulatory pressures.

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