As indicated by typical sales data, the demand from products of companies in this sector seems to be very strong and growing in the past several years benefited from fast growth in demand from developing market and stable demand from developed markets.

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend

1. The demand for personal and home care products has been stable and strong in the past three years as indicated by the increase in both sale volume and price from the typical companies’ data.

2. The strong demand comes both from developed markets and developing market while consumers are quite price sensitive in developing markets.

3. Continuing strong US dollar has hurt those US-based companies’ profitability since a large portion of their sales is coming from developing markets.

4. Unfavourable retail industry climate has been seem to impact smaller brands in the industry but not larger brands, which apparently are on better position in controlling distribution due to large market share and brand awareness.

5. Among the all categories of products in this industry, we have seen the fastest growth in oral products category.

Causes behind the trend

1. Demand for products in this sector should have been driven by factors such as the general economic development, especially in developing countries, favourable demographic changes, and growth in household income.

   Slowing down store/mall traffic has influenced sales of companies in this sector that traditionally depend on more narrowed distribution and selling channels.

Industry Future

1. Those larger brands with larger market shares, which can diversify their selling channels, will benefit more from increasingly strong demand for personal and home care products.

General Financial Performance of Companies In the Sector

It seems that demand for products of companies in this sector has been very strong in the past three years as indicated by continuing increase in both sales volume and price for the typical companies ( sales volume growth rate : 0.8-1.5%; organic sales growth rate: 1.7%-3.3%). While sensitive to price, the developing markets contribute significantly to the growth in sales. However, those growths have not completely been reflected in companies’ performance as a result of unfavourable US dollars. We have seen strongest growth in demand in oral product category.

It seems that the distribution channels, probably determined by brands and market concentration, matter in the currently unfavourable retail industry environment. Sales decreased significantly for some less recognised brands, which usually have less control on distribution of their products.

Sales increase has resulted in improved margins according to some typical company’s data. The typical companies’ gross margin is about 51% in 2017.  With a slight increase in SG&A as percentage of sales (about 30% in 2017), the typical operating margin went up to about 21% in 2017.

The typical average stock price/cash flow ratio is about 23.

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