Unstapled: Size Does Not Equal Safety

Consumer staples have underperformed the MSCI All Country World Index (ACWI)[1] by nearly 50 percentage points over the past five years and 30 percentage points over the last two years, while their index weight fell by 2.1 and 1.4 percentage points, respectively.

While rising interest rates typically pressure stable, low-growth sectors such as consumer staples, the more notable phenomenon has been persistent earnings downgrades, which have materially increased the forecast error rate for earnings forecasts.

For fiscal years 2025 and 2026, earnings expectations for the MSCI ACWI consumer staples sector have now been cut by more than 10 percentage points, with growth forecasts for fiscal 2025 now halved. In contrast, MSCI ACWI earnings have remained broadly unchanged for fiscal years 2026 and 2027, with only a modest 3-percentage-point downgrade for fiscal 2025.

The explanation goes beyond macro factors. What we’re seeing is a structural unravelling of the traditional consumer staples model. Legacy advantages (think predictable earnings, scale-driven moats, and defensible market share) are being chipped away by shifting consumer preferences and a surge of nimble new entrants.

Competitive Dynamics Are Changing

In our view, earnings for consumer staples companies have come under increasing pressure over the past few years, driven by not only input cost inflation and a more budget-constrained consumer, but also shifting market share dynamics across the industry.

According to Euromonitor, over 82,000 new products were launched between January 2022 and April 2024, with nearly 75% still on the shelves at the end of this 28-month period.[2] While few individual products move the needle, the cumulative effect is meaningful: between 2020 and 2024, large manufacturers lost 1.3 percentage points of market share to private labels and smaller brands.[3]

Historical Barriers to Entry Are Eroding

A few decades ago, large brands in the fast-moving consumer goods sector (FMCG)—this includes companies that produce low-cost, high-volume products with short shelf lives and frequent purchase cycles such as food, beverages, personal care products, etc.—were protected by three key barriers to entry:

1. High manufacturing costs and regulatory hurdles, which deterred smaller entrants.
2. Expensive national advertising campaigns, affordable only to incumbents.
3. Exclusive retail partnerships, which conferred privileged shelf space and distribution scale.

Sector growth was largely tied to population trends, wage inflation, premiumization, and evolving health consciousness, all factors underpinned by stability more than competition. This allowed incumbents to rely on scale, legacy infrastructure, and predictable demand to sustain earnings.

Yet today, these barriers have eroded through flexible manufacturing, digital advertising, and e-commerce.

Thus, the industry has entered a new phase. Smaller brands are now able to compete more effectively, and the traditional playbook for growth is being rewritten. With FMCG companies’ profitability dependent on volume growth, margins may be at risk once volume growth slows or reverses.

The traditional playbook for growth is being rewritten.

Barrier One: Factories

The rise of flexible and asset-light manufacturing has transformed the economics of FMCG product development, levelling the playing field for challenger brands.

Traditionally, launching a new product required significant capital investment, long lead times, and access to large-scale production infrastructure. But today, flexible systems have enabled small-batch production, allowing brands to test, iterate, and scale with minimal upfront investment.

Furthermore, globalization and contract manufacturing hubs have democratized access to high-quality production. We believe emerging brands no longer need to own facilities.

Artificial intelligence-enabled R&D platforms, modular pilot plants, and digital quality control systems have complemented this shift, which have helped lower technical and financial barriers, accelerated time-to-market, and increased innovation.

In parallel, business-to-business (B2B) platforms such as Wondda and Agilery help startups efficiently source, formulate, and launch new products, creating a new infrastructure layer that decouples innovation from factory ownership. As far back as 1996, Harvard Business Review noted that while private-label brands could gain share, profitability was limited by manufacturing complexity and inventory costs.[4]

Today, that thinking has changed: McKinsey estimates private-label margins for some retailers are now twice those of branded equivalents, a shift enabled by the transformation in manufacturing economics.[5]

Globalization and contract manufacturing hubs have democratized access to high-quality production.

Barrier Two: National TV Ads

Historically, consumer brand awareness was built via mass-market TV campaigns, with the average cost of a national TV campaign hitting approximately $30 million before the mid-2000s, according to Bernstein Research.

But a 30-second Super Bowl slot, for example, now costs $7 million to $8 million (and up to $12 million for premium placements), compared with just $37,500 in the 1960s and about $1 million in the mid-1990s.

Even when adjusted for inflation, this represents extraordinary growth. While the high cost has been largely driven by the unique scale of events such as the Super Bowl (which still offers rare access to tens of millions of viewers at once), the advertising landscape has fundamentally changed.

Today, consumers now spend more time on digital platforms such as YouTube, TikTok, Instagram, and Netflix, where hyper-targeted advertising delivers superior return on investment. According to Nielsen, streaming surpassed broadcast and cable viewership in the United States in June 2025, with traditional channels now accounting for just 44% total viewership.[6]

In addition, YouTube Shorts alone registered 70 billion daily views in 2024,[7] while users spent 39 minutes per day watching YouTube at home in the United Kingdom.[8]

Today, emerging brands can achieve measurable, targeted reach for a few cents per click, with real-time feedback, A/B testing, and iterative messaging. We believe the scale advantage in advertising is no longer a moat.

Barrier Three: Shelf Space

E-commerce and social commerce have dismantled barriers to entry. Platforms such as Amazon, Shopify, and Instacart allow brands to reach consumers directly—without the need to secure shelf space at national retail giants such as Walmart or Target.

And with the growth of TikTok Shop, Instagram Checkout, and YouTube Shopping, commerce has converged with content and community.

The upshot: brands can now build audience, engagement, and conversion without ever appearing on a supermarket shelf. While legacy shelf space remains valuable, its monopoly power appears to be fading.

Brands can now build audience, engagement, and conversion without ever appearing on a supermarket shelf.

Investment Implications

While the new competitive landscape for consumer staples does not mark the end of “Big Food” or home and personal care companies, we believe the tide is turning.

In such environments, we believe stock picking and active management have become even more essential. We currently see a handful of idiosyncratic opportunities:

• We believe scale still matters, albeit less than before, as large FMCG companies continue to generate strong cash flows that can be reinvested into acquiring disruptors. However, the competitive advantage from scale appears to be narrowing as smaller players gain ground.
• We favor business models that we believe can offer win-win outcomes for consumers, providing affordable value without overreliance on a single brand. Diversified operators such as 3i, Dollarama, and Walmart continue to demonstrate resilience through flexible pricing and broad reach.
• We remain cautious on companies exposed to evolving consumption patterns, particularly amid the adoption of glucagon-like peptide (GLP)-1 weight loss drugs, which may reshape demand for indulgent or high-calorie products.
• We prefer to avoid concentrated food and brand risk, instead leaning into distribution enablers such as bottlers; idiosyncratic turnarounds such as Unilever, a multinational consumer goods company; or premium share gainers such as Lindt, a Swiss chocolatier.

Daria Fomina is a  research analyst on William Blair’s global equity team.

[1] The MSCI ACWI captures large- and mid-cap representation across 23 developed markets and 24 emerging markets. [2] Source: Euromonitor. [3] Source: Boston Consulting Group. [4] Source: Harvard Business Review. [5] Source: McKinsey. [6] Source: Nielsen. [7] Source: Business of Apps. [8] Source: Ofcom.