In early June, major consumer goods companies traditionally present their results to investors in Paris - and 2026 was no exception. At this conference, which is closely watched by the industry, executives have the opportunity to brief investors on the latest demand trends and innovations. This year, however, caution was the prevailing theme. The ongoing war in Iran, higher gas prices, and an increase in corporate bankruptcies are dampening consumer sentiment. Many consumers are turning to cheaper store brands to stretch their budgets. This is particularly evident among lower-income groups. Higher-income earners have not yet had to significantly cut back on their spending, partly because they have benefited from the strong performance of their stock investments.
Cleaning Products Under Pressure, Cosmetics Remain More Resilient
When it comes to sales and earnings trends, most cleaning product manufacturers expressed particular caution. In addition to increased competition from store brands, they are facing rising raw material and packaging costs, which are, among other things, a consequence of the Middle East conflict. The cosmetics industry, on the other hand, is looking to the future with significantly greater confidence. While manufacturers of beauty products are also suffering from higher packaging costs, they generally find it easier to offset these burdens through price adjustments and changes in their product mix. Furthermore, given the higher price positioning of premium cosmetics, their share of total costs is lower to begin with. A more favorable customer base also helps in this regard. The customer base of leading cosmetics brands includes both older, more affluent consumers and younger, fashion-conscious buyers. It is therefore not surprising that the online segment has become a key growth driver in the cosmetics industry. For example, one of the market leaders in the beauty sector now generates more than 30 percent of its revenue through e-commerce channels such as major social media platforms, online marketplaces, specialized beauty platforms, and Chinese live-streaming services.
As a result, the group not only outperforms many competitors online but also impresses with its innovative strength. With annual investments of more than 1.3 billion euros in research and development, the company is able to maintain a high number of product launches and, in some cases, increase them further. Topics such as longevity and skin diagnostics are just two of many building blocks in this strategy. Accordingly, management expects to outperform the overall market again in 2026.
Energy drinks remain a growth driver
The soft drink industry, particularly the energy drink segment, is also demonstrating strong resilience in the current challenging consumer environment. On the one hand, attractive price positioning is supporting demand. This applies not only to established markets in the U.S. and Europe but also to many emerging markets. Leading energy drink providers, for example, are focusing on more affordable secondary brands that are now also accessible to income groups with tighter budgets. Close distribution partnerships with various bottling partners further support the rollout of these brands in emerging markets.
Another factor underpinning the resilience of the beverage category is the ongoing expansion into new customer segments. Providers are increasingly tailoring their portfolios to lifestyle consumers who seek functional beverages without calories or sugar. The focus here is on fruity varieties that contain additional ingredients - such as collagen and immune-boosting vitamins - in addition to caffeine.
Beverage manufacturers are better protected today
In light of higher raw material and packaging costs - including for aluminum - it is notable that most beverage manufacturers have apparently learned lessons from the COVID-19 pandemic and are now significantly better protected against rising raw material prices than they were back then. However, should the Middle East crisis persist well into the coming year, even these advantageous hedging contracts are likely to lose their effectiveness.
The fashion industry will feel the cost surge later
A similar picture emerges in the textile industry. Since the start of the war in Iran, direct costs for textile manufacturers in South and Southeast Asia - including Bangladesh, India, and Vietnam - have risen by 20 to 30 percent. Prices for synthetic fibers such as polyester, in particular, rose significantly as a result of the temporary oil shortage. Cotton prices also rose in the wake of the Middle East crisis. However, Asian producers are generally only able to pass on these higher costs starting in the fall, as part of renegotiations for the Spring 2027 collection. This means that local fashion consumers and the local fashion industry will not feel the impact of these price increases until much later.
The extent to which prices will need to be adjusted also depends on the suppliers’ production structures. Companies that source a larger share of their supplies from North Africa and Eastern Europe are likely to be significantly less affected by the turmoil than more price-aggressive retail chains. Rising freight costs are nevertheless expected to dampen gross margin growth later in the year.
Secondary brands are also continuing to gain importance in the fashion sector. For example, one of the European market leaders is steadily gaining market share in many countries with a secondary brand specializing in high-quality sports and leisure wear.
Off-price retailers are benefiting from the pressure to save money
The so-called “off-price” segment is also considered crisis-proof in the retail landscape. Since price-conscious consumers actively seek out discounts when budgets are tight, “off-price” retailers are able to report solid revenue growth even in these challenging times.
Off-price retailers purchase remaining inventory and surplus luxury goods at very low prices and then offer them to their own customers. Another advantage of this highly agile purchasing strategy is that the retailer is not directly affected by significant increases in production costs in Asia. Simply by focusing on an optimized price differential compared to regular retailers, the retailer gains numerous opportunities to increase its own gross profit margin.
In the consumer sector, the right selection matters
Given the rather challenging environment, stock selection remains crucial in the consumer sector. Against the backdrop of what may seem like astronomical valuations for some technology stocks, some investors are likely to seek diversification opportunities. The consumer sector offers several promising opportunities in this regard. From a risk perspective, however, careful stock selection is more important than ever. The focus should clearly be on segments that can withstand inflation-driven weakness in consumer spending. Should a sustainable solution to the Middle East crisis emerge, consumer stocks also offer some potential for recovery.
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